Posted on 08/27/2007 11:02:48 AM PDT by Hydroshock
Bill Gross, the Pimco bond guru, is like the old E.F. Hutton: When he talks, people listen.
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The question right now is whether his words always match his reputation.
Last week, Gross grabbed the headlines by warning that the housing slump could lead to devastating economic consequences. He argued that a 10% fall in prices nationwide could set off price deflation of a kind not seen since the Great Depression, while waves of mortgage defaults could undermine confidence in the financial system here and abroad.
Gross concluded by urging President Bush to launch an emergency, New Deal-style federal bailout of distressed homeowners to forestall disaster.
For an alternative view, you could talk to a less well-known bond guy, like Tom Atteberry. He's the co-manager of the $1.75 billion First Pacific Advisors New Income (FPNIX) fund. His offices, in Los Angeles, are a short drive from Gross' suite in Newport Beach.
Atteberry certainly doesn't question the depth or scale of the housing slump. He believes the market could keep falling well through next year. He successfully kept his fund clear of risky mortgage-backed paper, and he warns that it is still "too early" to start bargain-hunting.
The history of past crises leads him to believe that that moment may not come until later this fall, some time between October and December.
(Excerpt) Read more at thestreet.com ...
Your thoughts.
How do you even attempt to bail out only the “good guys” without also bailing out “the bad guys”?
This is a call for a bankers bail out plain and simple.
We can’t and should not bail out everyone.
Agreed.
We should not bail out *ANY*one. All it does is encourage the same, bad, irresponsible behaviour. Free market will sort it out. Those that were irresponsible will be out of business, replaced with responsible folks. And irresponsible homeowners will be replaced by responsible ones.
I see no negatives here whatsoever in letting the chips fall where the may.
The only people who are getting burned are those who stupidly bought more house than they needed because they could get a subprime ARM and those who bought houses at artificially inflated prices hoping to flip them for twice the money in 6 months. I have little pity for either.
I’ll look later.
I actually have LOANS to work on. ;-)
Yes, they’re all “normal” ones. ;-)
Good, glad to hear it. You know I am seeing a down turn in the economy, not hoping for it, but dreading it.
In most part yes.
More accurately, if you look at Pimco’s holding of MBS’s, much of it flirting with sub-prime or in areas where RE valuations will be impacted by sub-prime meltdowns, Gross is asking for a bailout of Pimco.
Trouble is, state legislators in places like NJ and California are talking about exactly this sort of bailout.
Sadly I know, but as a Texan, if NJ and CA want to wreck their states economies for the next decade the I can not stop them.
My thought is, if other people don't have to pay their mortgages, why should I have to?
I've got other stuff to spend the money on, and if Congress is paying off, I want to get in line.
I have heard that thought involving this a few times.
Note that Bill Gross’s PIMCO total return fund is heavily, very heavily, invested in mortgage backed securities as well as Fannie May and Freddy Mac. His return has been worse than a savings account. Now he wants his fund bailed out.
Basically.
There was though a large chunk of people who got contracts that were not understandable by the new standards of contract law. Judges have been negating some loan contracts in SOME cases for reasonable reasons.
It’s a one case at a time, but there should be no free buy outs.
I know how to prevent deflation. Cut those rates.
The sun shines on the just and the unjust alike.
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