Bill Gross Throws in the Towel

I had to remove a trusted advisor from my list yesterday. For over five years I have read the commentary and analysis of Bill Gross of Pimco (one of the largest bond fund managers in the world with close to $1 Trillion under management). I was dissapointed yesterday to see him advocate for a massive federal government bailout of the mortgage industry and indirectly as a result the holders of mortgage backed securities and homeowners.

Maybe I am not on the frontlines enough to understand the implications of what is going on or I am naive as to the potential repercussions of the housing bust for all Americans. Still I feel that we have to experience somewhat of the real estate bust and subsequent recession to allow the correct reallocation of capital and resources to productive sectors of the economy. This type of transition of the workforce and capital out of real estate and into a more productive use such as capital spending for productive business will take years not months.

I guess if anything I am not surprised, but dissappointed. With someone as knowledgeable and as informed as Bill Gross, I felt that he sacrificed a lot of his reputation and integrity for a short term goal. Still I realize my view may be the short-sighted one. Even if the bailout was to be a huge deficit spending subsidy for the wrong speculative actors in the economy it could also prevent a severe recession that could take years to end. The world is complicated sometimes. But we can now put Gross clearly in the pro-bailout camp along with the rest of Wall Street, realtors, mortgage lenders, homeowners, and banks. That is a pretty powerful lobbying group.

Expectation: We will see several more steps and progressions in the bailout before the end of this year.

-BG