Odd Lots - Bill Gross on the End of the Great Bond Bull Market

Episode Date: September 13, 2023

Bill Gross became known as the Bond King during his legendary, multi-decade run at Pimco, eventually growing the company to manage trillions of dollars. Of course, that success coincided with a remarkable bond bull market -- a bull market that came to a screeching halt over the course of the last two years. So what does Gross think of markets today? And could there ever be a new bond king in this environment? During a live episode of the Odd Lots podcast, taped at the Future Proof conference in Huntington Beach, California, Gross talked about the state of the market, reflected on his career, discussed the things that make him happy today, and addressed old rivals and competitors.See omnystudio.com/listener for privacy information.

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Saturdays and Sundays starting at 7 a.m. Eastern. Make us part of your weekend routine on Bloomberg television, radio, and wherever you get your podcasts. Hello and welcome to another episode of the Odd Thoughts podcast. I'm Tracy Allaway. And I'm Joe Wisenthal. Joe, we are at the Future Proof Conference in the glorious Huntington Beach and we have a very, very special guest. This is something that we recorded live on stage, on a beach. We've never done that before. Never on a beach before. Truly extraordinary moment. Beautiful Huntington Beach. It really is kind of like a festival here. And this was a really fun conversation to do.

Yeah. So we are speaking with Bill Gross, the Bond King himself. Obviously, he has a lot of thoughts on the state of the bond market now. But we're also going to talk to him about his career and how investing and trading debt has actually changed over the decades. Yeah. Really fun conversation. Take a listen. Bill, you brought out the sunglasses, huh? I did. It's been 10 years. Last time it didn't work too well, but, uh, try it again. It'll be good this time. I want to start out with, you know, we're in the midst of what seems like another interest rate cycle of some sort. No one really knows how long it's going to last. There aren't that many people around nowadays who have lived through different interest rate cycles. And you actually started your career in the 1970s in an era

of stagflation, in an era where the Fed was hiking. We didn't have. derivatives to hedge duration risk. We didn't have Bloomberg terminals. We had quotrons. What was that like? Well, it was much different. You know, bare markets are not as much fun as bull markets, depending upon your position. But, you know, interest rates got 15% and 81, 82, somewhere in there. And the interesting thing is, is that they were almost self-hedging, because the duration of a 30-year treasury at 15% was about four and a half to five years. It was like a five-year today or close to it. And so at 15% with a very short duration, it meant that interest rates could go up to 18%

and you still wouldn't lose money. It was a golden opportunity. When you think back, and obviously, as Tracy mentioned, you started at PIMCO in the early seven days. And so there were several years of bond bear market before the Great Bowl market, which we'll talk about. What did you learn then about, like, surviving in a bare market for an asset class? Well, you know, it depends on who you're investing for. If you're looking for a client and trying to go a business, then you have to be aware that relative performance is important. but if it's a significant bear market,

that absolute performance is crucial as well. Investors and clients will just leave, no matter how good you were relative to the market. So I think that was key back then, relative performance, and then, you know, stepping on the accelerator in 81, 82, and buying a secular bull market, and it was a bull market. So nowadays, we kind of take for granted that people actively trade bonds. You buy and sell them.

But when you started out, that wasn't the case at all. Walk us through the thought process and the opportunity that you saw in trading bonds. Right. Well, there were no real computers, no clearinghouse overnight types of trades. As a matter of fact, a PIMCO, which was owned by. Pacific Mutual downtown LA, we had a billion dollars in a vault and I was hired not for PIMCO but really for private placements and one of my jobs 25% of the $11,000 I made each year was to go down into the vault and to actually clip coupons.

You've heard a coupon clipping. I did a lot of that. And back in the day, because the bonds were in the vault, it was pretty hard to get them to New York. It took two or three days to get them to New York. Like I say, there were IBM 360s, but nothing in terms of connectivity. And so, you know, the physical trading of bonds and stocks was very difficult and allowed for ill-liquid markets. Talk to us more about, you know, you mentioned 81 and then you like press down the accelerator and rode this incredible wave, right? This incredible, roughly, I guess, 40 years basically, bull market in bonds.

But talk to us, you know, if you look at your career and you think, the bond king, like talk to about the role of timing and how crucial that was. And when you think about the success that you had at PIMCO, et cetera, like just being there at the right time and the role of, I guess, a little bit of luck. Right. Well, the key at Pimpco for us at Pimco, it wasn't just me. We had a lot of smart people and more and more as time went on. But the key was really a book that, I forget who wrote it,

it was called Investing for the Long Term. It was about stocks. But I mentioned the long term, the secular movement of, financial instruments as opposed to cyclical, as opposed to short-term trading. And it seemed to me that the bane of an investor is emotion, and I'm the same way. I never thought of myself as a good trader. I mean, if Nvidia hits 500, I'm just as likely to buy it as to sell it and then regret it the next day. But in any case, if you take a longer-term view and not go to sleep,

but if you take a longer-term view and know that forces in the economy, inflation, demographics, globalization, if you know that those are working in the favor of either a bull or a bear, then sticking with what we called a three-to-five-year forecast as opposed to a three to five day forecast was the key. And does it hurt mentally when you're long and you should be short for a short period of time? Yeah, it does.

But you just, you have to stay with that mind frame of a longer-term secular market. How did the way you trade it actually change as PIMCO grew larger? Because I imagine, you know, at one point PIMCO has hundreds of billions of dollars under management, trillions even. And there are pros and cons to that, right? Like you get first allocation of debt,

but maybe it's hard to hug your benchmark because you are gigantic. And that's true. So, you know, as we grew larger and larger clients would always say, well, how can you keep doing this at 100 billion or 200 billion or 500 billion? And because your size is prohibitive in terms of liquidity, it wasn't because we found the futures market.

We found the foreign markets. We found markets that added liquidity. Actually, we'd stay in this trading room. And this is not a good joke for now, but I'll tell it anyway. the client would say, how can you do it? And then we'd tell them how we did it. And then we'd go back in the trading room and look at each other and they say,

you know how we do it? We just add a zero to the ticket. Yeah, it's simple. Just add a zero to the ticket. I mean, I know we're going to talk, we're going to, you know, at some point, like talk about this current market a little bit. But maybe it's like a sort of saying, you know, obviously there were a lot of in the, inflation of the late 70s and early 80s, there were a lot of false dawns, right?

Where they thought they had defeated inflation and the Fed was like, okay, we're going to like, we're going to be able to bring rates down and then inflation shot up and it took them a long time before they like, it was good for good. Does it feel today when like similar to that or do you feel like, does it feel like the late 70s this inflation or does it feel like substantively different what we've experienced over the last few years? Well, the late 70s is influenced by 71, 72. when Nixon went off the gold standard,

and it was easier and then easy for central banks to print money. There was also OPEC, and once they got going, it was hard to stop. You know, I think the Fed and other central bankers are more aware now. Hopefully they are. They weren't two years ago, so it's hard to make that claim. But it's a market these days that can be controlled to some extent with higher interest rates, but not necessarily, not necessarily. And we're seeing that right now because the real five-year note,

the real five-year note in terms of interest rates was bottomed at minus 200, basis points, it's now a plus 250. It's gone up 450 basis points in the last year and a half, which is incredible. And to my way of thinking, when we start talking about stocks, it's definitely a negative influence in terms of valuations and PEs, but the market doesn't seem to recognize it. Wait, when you say the economy can't be controlled through interest rates as much as it once maybe could be, can you expound on that? Why is that thing? case? Well, you've got foreign markets, which didn't exist really in size back then, and they have an influence on the treasure market, although it's usually the other way around and pretty

decent size. And you've got demographics that are important now with the boomers, myself and others that are spending their savings and that has a significant effect in terms of supply relative to demand. You didn't have that demographic influence back then. And then, you know, globalization crept up in the last 10 years or so, made for higher productivity, and now it's going the other way. So there are just other forces to think about. And that's what Powell is doing.

He's trying to gauge the appropriate real interest rate that will produce 2% inflation, which I think is a dream. But that's what he says he's going to do. And that's what he tries to do. And that's why Fed funds are five and a quarter to five and a half. We'll see what happens. You can get the news whenever you want it with Bloomberg News Now. I'm Amy Morris. And I'm Karen Moscow here to tell you about our new on-demand news report delivered right to your podcast feed.

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So you're always getting the latest stories and developments. Get the reporting and the context from Bloomberg's 3,000 journalists and analysts we're all over the world. Listen to the latest from Bloomberg News Now on Apple, Spotify, or anywhere you listen. A lot of people think that rate cuts. are coming, that we're in some, like, abnormally high level of interest rates. And it's only a matter of time before, like, the Fed is able to normalize. And by normalize, what they mean is cut to something that maybe would be more familiar in the, you know, not go back to ZERP, but something

that may be more familiar several years ago. Do you see that in the cards? Like, do you think like the Fed is going to be able to cut sometime soon and rates are going to come back down? Yeah, I don't think so unless recession comes with a capital R, and it doesn't seem to be doing that. Let me give you my valuation metric for the 10 year, the 10 year at 4 and a quarter for treasuries. So Powell wants to get Fed funds down to two. Let's say it's successful. Let's say Powell is successful, which would be seemingly very bullish for the market. And if Fed funds are at two and then the R-star, as they call it, you know, the real Fed funds rate would be a two and a half. But then there's a term premium, Joe.

A term premium that historically has been about 130 basis points over Fed funds, and we're talking about the term premium of the 10 versus the short-term rate. And why is there a premium for a 10 versus a short-term rate? Because it's riskier, because it goes up and down and you can lose money, whereas you can't with a bill. So let's just say that Powell is successful to get to two R-star, as a two and a half term premium, three and a half, close to four. I mean, at four and a quarter, we're basically anticipating the Fed being successful

and containing inflation at a 2% level. And if he doesn't, then we certainly haven't got a bull market, and we certainly don't have a context where Powell and the Fed are likely to cut interest rates. I just don't see it. It's not that I'm significantly bearish, although we can talk about that in a second. But four and a quarter is not a bad level for now as long as inflation keeps going down. If it doesn't, then no, no. I'm going to take you up on the bearishness offer in a second.

But since you mentioned the term premium, when you look at the yield curve right now, the fact that it's inverted, what do you see? What's that telling you? Because I feel like there's a group of people who will say this time definitely isn't different. It's a traditional indicator of recession. And then there are a lot of people who will say times have changed. The term premium is a lot lower than it used to be. Maybe that's what's causing the inversion. Well, I think it is.

That's another way of saying that the term premium, which appears to be close to zero, is wrong. but I've been baffled by the you know the length and the extent of the negative curve I mean we had we had one in 79 80 81

and it seemed to work for Volker doesn't seem to be working that well now and I think perhaps one of the reasons is that fiscal policy has been so expansive I mean we're looking at a

$2 trillion deficit this year. Last year it was three, three and a half during COVID. And so, you know, when you have fiscal policy in such a deficit and people spending money, it's like Bernanke. Remember Bernanke with a helicopter? I'll be damned, but that's what we did. We threw money out of a helicopter. We threw trillions of dollars out of a helicopter. And so the last of that is just now being spent. And I think the reason why term premiums are so low is that the economy is good, and people have money to invest.

All right, I'm gonna jump. What do you, you hinted, or maybe that there's something that you're bearish on. What do you bearish on? You mean in terms of markets? I don't know, you said not bearish, like, I'll get back to that. Oh, well, in terms of bonds, so we have a deficit of close to $2 trillion.

The outstanding treasury market is about $33 trillion. I've read on Bloomberg and other... Very reputable outlet. Thank you. Thanks for the plug. And other sources that basically say about 30% of the existing outstanding treasuries, that's 33 trillion, so 10 trillion have to be rolled over in the next 12 months, including the 2 trillion that's new.

So that's $12 trillion where the treasuries have to be financed over the next 12 months. And who's going to buy them at these levels? Well, some people are buying them, but it just seems to be a lot of money. And when you add on to that, that Powell is doing quantitative tightening. as you know, and that theoretically is a trillion dollars worth of reduced, well, a trillion dollars worth of added supply, I guess. And so it just seems like a very dangerous time based on supply, even if inflation does come down.

So I wouldn't necessarily be bearish because I think the Fed talks a good game, even though they don't play a good game. They talk a good game and they seem to have convinced investors that interest rates will come down once we get close to 2%. I think that's a stretch. You know, given that deluge of supply and the fact that you are going to need a lot more buyers to take that up at exactly the time when it seems like a lot of traditional foreign buyers of U.S. debt have stepped away. Do you think financial repression comes back into play? We're already seeing the Fed talk about higher capital rules for some of the banks, things like that. Is that a risk in your mind? I remember you talking about this way back in 2011, 2012.

Well, I think it is. All of the new rules, in terms of the intermediate banks, which followed on from Silicon Valley Bank, the new rules. And Schwab, by the way, not to, if Schwab's out there, Chuck and I play golf once in a while, so sorry about that. The banks have gone overboard in terms of duration. I mean, Schwab basically takes all their money market instruments, and not all, sorry, but a lot, and puts it into long-term bonds, and that's how they've gotten caught,

and that's how Silicon Valley got caught. And so, you know, the repression, you know, hasn't necessarily, in terms of what I read, come in the form of duration, but it's come in the form of increased capital and increased debt. A lot of these intermediate banks have been ordered or will be ordered to issue $6 or $7 billion

worth of debt in order to absorb, you know, what happened to six to 12 months ago. So I think that. that's an effect of what we have. We have a financial system that's dependent upon asset prices going up. If you remember anything I said today, we have an economy that's based on asset prices going up. If they don't go up, there are problems. There are problems because there's so much.

debt and there's such high expectations in terms of PE ratios and the like that if this asset based economy, which depends upon higher stock prices, depends upon higher or relatively high bond prices, it's precarious at some point. Not, I'm not saying get out. I'm just saying that assets have to go up or else the economy will not do well. Since you mentioned duration, how would you manage or hedge duration risk right now? And you can't just say that you wouldn't take it on. If I gave you $100 to invest in bonds, how would you hedge that duration risk? You know, PIMCO was always successful. Most people didn't realize it until the books came out. PIMCO was always a great believer in selling volatility. Selling volatility has an alpha, pretty consistent alpha over time, momentum. It doesn't always

work obviously when black swans appear, but momentum is like an insurance company. And so that's the way Buffett works. Buffett doesn't say that's the way it works, but that's the way it works. He takes that float and he sells volatility by investing in longer term stock options, et cetera, etc. I would, and what have I done? I would sell a put and a call on a, say, a 10-year treasury. The TY contract, TY Z-C-3, trades at around 109. You know, I just sell 108 put, 110 call, you know, for 30 days, and the volatility is decent, not as high as it has been, but it's decent. And you just bring those premiums down to the bottom line as long as the market doesn't take off like a firecracker one way or the other. So Tracy posed this hypothetical to you. It's like, okay, how do you, how would you hedge this

duration? But listening to like, I'm just wondering like, why should anyone buy a bond? And the reason that, you know, as you said, like at the long end is almost already priced in a sort of success from the Fed, like already pricing in a sort of good scenario. There's upside risk. There's this deluge of issuance. And unlike, say, for the last, at least the last 15 years going up until 2021 and longer, like, we're not even getting these sort of like inverse correlation to equities in the portfolio. So you no longer get that sort of like beautiful 60, 40 portfolio where something in your portfolio is green on the day and green on the quarter. So is why on a bond? Well, that's a good question. So say you buy a 10 year Apple or 10 year Amazon, you know, at 5 and a quarter,

plus or minus. And this is, you know, I've been in this business a long time, and I've been tax sensitive, but I haven't, I'm not a real estate guy. All my buddies at the country club are in real estate, and they've never paid a tax in their life. And they think you're a fool for having paid taxes. So I'm thinking about this, and so I paid a lot of taxes. So say you earned five and a half from an Amazon tenure, and say you live in California or New York, just say. So that's a 15% hook right there, and the federal is probably 40% plus or minus, depending upon what your bracket is.

So take it up to 55. So the government takes 55 of the 550, and 55 times 550, 55, 55, 55, 55, 55, 5. five, it's probably like six, well, 55 times 55 is, it's like 625, whatever. You start to lose it when you're 79. Anyway, so the government's taking like 55% right away, and say you're trying to build an estate, lead something for your grandkids, and yeah, you can set up a trust, et cetera, et cetera, but that costs money too. But the estate tax is 40%.

And so if you got 45 left and you got 40% on the estate tax, that's 16, 17%. And so you're basically up to 70% that the government takes. The government takes 70% of your money and you get 30%. And so why would you risk 100% of your money for a 30% payoff at 5.5%? It doesn't make any sense. And it didn't make, it certainly didn't make any sense two years ago or a year and a half ago when interstates were zero. So you've got to beat the tax man in one form or another. I'm not a pro at that.

You know, go buy an office building in New York, I guess. I heard they have their own problems. The office buildings in New York. Just a few. Bill, you kind of alluded to this, but you're managing your own money now. and you're invested in a lot of different things. So stocks, bonds, MLPs. What's your favorite thing to trade now?

Well, the best idea, unfortunately, you know, oil is at a cyclical peak. Maybe it goes higher. I hope it does. But there's master limited partnerships, mainly in the oil and gas pipeline areas. At some point, 10, 15 years ago, Congress, somebody paid off a congressman and he inserted it into a bill. And so MLPs, you know, basically our partnerships, just like real estate. It's a way to get even with your real estate golf buddies. And so what it is is that you don't pay any taxes until you sell it.

Okay, just like real estate. They don't pay any taxes. Even when real estate guys sell it, they transfer it to another property. They don't pay any taxes. They don't pay taxes ever. Anyway, so these MLPs, and they're about six or seven or eight of them, they trade pretty frequently. The largest one is called energy transfer. It's E.T.

It's the biggest in the country. It yields 9 percent. And is that safe? It's been pretty steady. And is it dependent upon oil prices? Yeah, the price of the stock is. affected to some extent of oil goes down. So I've got an MLP with energy transfer at a 9% yield that I don't pay taxes on until I sell it or it pops into an estate and I don't think you even

get taxed then. And all of these MLPs are like 8, 8.5%, 9%. And, you know, that suggests that there's a lot of risk there. And I suppose there is. They've gone down and they'll go down again. But from a tax standpoint, I really like them, and about 40% of my portfolios are in oil and gas MLPs. Other symbols would be MMP, Magellan, MPLX, NS, New Star. There's like eight of them. Just get your Bloomberg and hit RV for relative value, and it'll show you everything you should invest in. We asked Bill to give you tips on terminal functions. No, I love, so I love, like, you know the exact price of the part of the Treasury futures futures curve where it's trading right now.

It varies tickers in their yields of MLPs. So you're still, like, you're getting up at 5.30 every day still and just as active as ever? Yeah, and I know that's sort of stupid, and people say smell the roses. And I think I do. My wife, Amy, and I play golf in the afternoon, that that's smelling the roses. but in the morning, what else would I do? I'm not going to watch the morning talk shows. And so, yeah, I get up and I watch the market, and it's fun.

You know, I told you this backstage, but there's a good definition of happiness. It's not the only definition. You've got plenty, I'm sure. But one definition says you need someone to love, that's for sure. You need something to do and something to look forward to. And so for me, the market is something to do in the morning and something to look forward to. I look forward to Envidia and the earnings announcement. I'm hanging at 1 o'clock Pacific time just waiting for that announcement.

And I go, what are you doing? Why is this so important to you? But I guess it is. I love that of the three things you need to be having. The market is two of them for you. All right. Well, on a related note, I remember in one of your very famous investment outlooks, you said that you didn't consider yourself a good trader. So fast forward many years. Do you think you're a good trader now? Have you gotten better? No, I'm not a good trader. I'm most emotional as

everybody else. And that's the, you can't be emotional. And so, you know, take Buffett. Buffett's not emotional. He's funny. He's a great personality, but I don't see him as an emotional person. He's just dried, dried in terms of how he looks at markets and the timing he looks at markets going forward. And so it kicks the emotion out of there. Yes, he's got to be right. If he thinks the market's going up or going down, he's got to be right on a long term,

but the emotion's out of there. And so, you know, I found for myself I'm very emotional. If I make a trade during a day and it closes lower than where I bought, I'm not in a good mood. Amy Nosa. Sorry. But I'm not a good trader. I am a good long-term secular investor. I have a good sense of what makes for markets in the long-term. I'm Francine Lacqua, an award-winning journalist, and I've got a new podcast, leaders with Francine Lacqua from Bloomberg Podcasts. I've interviewed everyone from heads of state to fashion icons, about the news of the moment.

But I've always been curious, who are these people as leaders? I don't think there's one right way to be a leader. Make decisions. A poor decision is always better than no decision. Listen to new episodes every other Monday. Follow leaders with Francine Lacroix wherever you get your podcasts. You mentioned, do you say 40% by the way of what you,

in the MOPs these days? What are the other big? Or what's the other 60%? Like what are the other long-term things that you want to bet on right now? Well, you know, there's a lot of not totally safe arbitrage situations that yield 10 to 20%. I mean, you all know the Microsoft Activision deal that probably in two weeks will be approved by the UK. It trades at 92. They're going to pay 95.

That's three points for a month. I think it's a month. And that's a 36% annualized return. There are others. There's a new one called Capri, which is, Amy told me about this, because they sell Jimmy Chews. I'm sure some of the women know Jimmy Chooze. Versace and there's one other company.

Anyway, they're being acquired by a person. private entity. You know, there's a 10 to 15% discount in a relatively safe industry. It's not a high-tech industry. And there's quite a few others where a 5, 10, 15% return relative safety can be achieved. And so I look for those. And, you know, it's better than 5% treasures, but certainly riskier as well. I don't know if anyone's ever asked you this before, but are you ever tempted by private credit? It seems to be all the rage at the moment. I've heard one person describe it as bonds without the liquidity issues of publicly traded debt. Is that something that interests you? Well, no. I think I'd think you'd be, most of you would be surprised.

I'm not well connected. I never was well connected. I came into Newport. I sat up my desk. I had my investment committee. I had great people working. with me, but I didn't know many people in New York or Chicago, and I don't know many people now. I wouldn't, if I wanted to invest in private equity, I wouldn't know where to go. So I'd say no. Extremely plugged in to random merger arbitrage opportunities, but don't know all the fancy people with their private deals. Let's talk about a few other topics that are sort of in the news.

a lot of interest these days in China and whether there's like an end be sustained slowdown there. But I feel like, you know, there are certain things that people talk about like every 10 years and people have been warning that their model is going to implode and it's like a permanent thing. Having followed these things for years, does it feel like there's something different going on globally or in China in particular? Yeah, certainly in China. You know, at Pemke, long ago, we were on to this long ago, 15 years too early but

China has during their stretch of success been successful because of investment not because of consumption they don't consume 70% of the economy like we do in the U.S. is probably more like 40, 45 and the trick for China has been

to increase that to be more like Western economies and certainly the U.S. where they've gone wrong is that they've reached sort of a dead end with their investment in housing and construction. They've built bridges to nowhere just to keep on building and to keep on investing and keep jobs plentiful.

And so it seems, like I say, at PIMCO, we were talking about this 15 years ago and never happened, but it seems to be happening now. And so the Chinese miracle of 6% growth, I mean, we would wonder, how could that happen? How could that keep on happening with such a large economy? How could they grow at 6 or 7 every year? And, of course, they did because they kept on building condos and apartments that are now vacant. So I think China's got a problem.

They've got a debt problem like most countries, like the U.S. has a debt problem. Japan has a huge debt problem, but they've got a debt problem that they're going to have to figure out. And it always seemed to me that, and this has been disproven, because China has grown and grown and grown successfully and become not just a economic force, but a geopolitical force. So they've grown and grown and grown, but at some point it seems you just can't grow at 6% anymore. And as we know, much of the world is dependent upon China and not just their imports, but their exports as well. So I would think the Chinese situation is a serious one and should be factored into market expectations. but it isn't really.

I mean, people, investors, once you get on the AI train, and that's okay, I'm a believer in that. I don't know much about it, but I have a sense that it will improve productivity by a half or maybe 1% a year. That's big time stuff. But once you get on the AI train, you know, you're looking for 20, 30, 40% hits,

you know, what Peter Lynch used to say, five bangers or 10 bangers, I never liked Peter Lynch. Mainly because I thought he got out too early and people were always calling me the Peter Lynch of Bonds. And I said, that sucks. Okay. All right, we did China.

We did AI. We did Peter Lynch. Shall I just throw out some more topics? You did private credit. Yeah, you could just opine on them. The fitch downgrade of the U.S. credit rating. Well, I think it reflects a certain reality, not that the U.S. could ever default in terms of not being able to cover its bills. The Treasury just hands it off to the Fed and the Fed prints money.

They have Fed like the helicopter that Bernanke talked about. So I don't think that's realistic, but it is. The interruptions are potentially. realistic as we know every time you know it comes up for approval there's there's something that takes place and so i think from the standpoint of a downgrade at uh double a plus it's probably appropriate but it doesn't there's no default ahead it just maybe it affects the the cds spread a little bit sorry i know throwing out topic going back to bonds though for a second and speaking to the bond king Could there be another bond king in a bond bear market?

Could there, like, or do you, or if you're in bonds and it's like, or does it just mean you're going to have to, like, move somewhere else? Could there be a great bond manager at a time if we don't have a great bond bowl market? See, I sort of wrote this as I was leaving, which is a little, I don't know what the right adjective for that is, but I shouldn't have said it. But I don't, I think to be a, I don't think there could be another bond king because my reputation as a bond king was, first of all, made by fortune. But they printed a four-page article with me standing on my head doing yoga. And I was supposedly the bond king.

And that was good because it sold tickets, but I never read. never really believed it. The minute you start believing it, you're cooked. The minute you start, you're at the three point line, you think you can't miss. You miss. And so I never really believed it, but, you know, it was the function of a bull market for 30 years that was growing and Pimpco was doing well. And there were, there are too many names I could mention of Pimpco that helped me along. But, you know, today could there be a Bon King? I, I, that, you know, The bond kings and queens now are at the Fed. They rule.

They determine, for the most part, which way interest rates are going, sometimes not so well. So they're in charge. And there was a time where, yeah, PIMCO was pretty much in it in 2009 and 8. And those were my most proud moments where PIMCO was called upon by this. the Treasury and by Warren Buffett to help save the economy. And we did that because we were sizable. We had a reputation, and the government let us support them in the mortgage market.

And we made money at the same time. But I don't think so. And certainly, so I nailed Peter Lynch. So I'll nail Jeff Gunlock because he nailed me. When I was leaving Pimpco, I went up to his house and said, know, maybe I could work with you. We could be two Bon Kings, and he, he trashed me for the next 12 months, you know, in the press and so on. Just, just terrible. And I'm a sensitive guy. We'll get you both on stage if you get out. A lot of folks catching strays in this interview.

Anyway, but so, so if Jeff Gunluck is a bond, first of all, to be a Bond King or Queen, you need a kingdom. You need a kingdom. Okay. Pimco had two. trillion dollars okay double lines got like 55 billion come on come on that's no kingdom that's like Latvia or Estonia whatever okay and then is then look at his record for the last five six seven years how does 60th percentile smack of a bond king it doesn't there I got you back Jeff. Wow. Okay.

Keep going. I'm trying to think where to take the conversation next. All right. I want to ask a kind of serious question because we only have a few minutes left. But you've been very modest and humble, except for that last answer. What? Except for that last answer. You've sort of rejected parts of the Bond King story.

You've attributed a lot of your success to the Bull Run and Bonds. You still think you're not. great trader. How do you want people to think of your legacy? When people think Bill Gross, what do you want them to think about? And I realize, you know, you've written your own book on yourself. Someone else has also written a book about you. Like, what is, what is the legacy that you want? Hmm. Well, I think Pimpco was, and they're still close to two trillion, So there's still an important factor in the marketplace. But the growing of PIMCO from nothing,

I mean, you talk about careers where you're assisted by this and by that and by that and by parents and whatever. You know, I had nothing. And PIMCO had nothing. And so to go from nothing to $2 trillion, you know, we not only did something right, but we did something for our clients. I mean, the PIMCO mantra was the client comes first. And that sounds like bullshit, but it wasn't.

We traded for clients, not for ourselves. And we knew, or we thought, as it turned out, that if we traded for clients, that that would redound to our own benefit. And so I'm proud of the growth. I'm proud of our, like I say, the financial crisis and how we helped to salvage the economy during those days. I'm not so proud of, you know, the aftermath with, you know, PIMCO firing me.

I still don't, I have no idea. I have no idea why a company, a $2 trillion would fire a person. and the next week they would lose $500 billion. I have no idea from a business standpoint why that would happen. But for some reason, they thought my time was over and I guess it was. But I'm certainly proud of not just the growth, but the importance of PIMCO in the capital markets. And helping people along, I mean, people come up to me. I don't know how they still recognize me at 79.

I look in a mirror and I can't recognize myself. But they come up and they say, you know, you really help me. That total return fund, it made my portfolio. And so those are the plaudits and the compliments that I really treasure the most. Bill Gross, incredible to chat with you here on the beach. And really appreciate you doing this interview with us. This was a blast. Thank you.

And I was going to say, like on the, the U.S. Open. We're at one o'clock in the morning where Joe Kovic or Coco or whatever they say. And thanks for staying so late. Thank you. Well, that was our conversation with Bill Gross, the Bon King, recorded live at the Futureproof conference on Huntington Beach. I'm Tracy Alloway. You can follow me at Tracy Allaway. And I'm Joe Wisenthall. You can follow me at the stalwart. Follow Bill at real underscore Bill underscore gross. Follow our producers, Carmen Rodriguez at Carmen Armin and

Dashel Bennett at Dashbot. And check out all of our podcasts at Bloomberg under the handle at podcasts. And for more Oddlots content, go to Bloomberg.com slash oddlots with a blog, post transcripts, and we have a weekly newsletter, and chat with fellow listeners 24-7

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