FYI: Bill Gross, founder of Pimco, and its chief investment officer for the past 40 or so years, resigned last week. Rumor has it that he was but two steps ahead of a mutinous gang, swords out, planning to make him walk the plank. Gross was too quick and before the mutineers could force him, he jumped ship -- and landed at Janus Capital. There, we surmise, he was given a slug of equity and a free hand to run a smaller, more nimble fund.
Regards,
Ted
http://www.bloombergview.com/articles/2014-10-03/bill-gross-s-investor-outlook-on-palace-coups

To me the key is that the manger's investments be consistent with the fund's stated goal that caused us to invest in it in the first place. BB repeatedly says his first rule is not lose money. Digging a huge hole every couple of years and then taking big risks to get out of it is not consistent with his first rule

@ValueSeeker, you have a very good point about BB's emphasis of his first rule. And his second rule is don't forget the first rule. .

Wasn't that Buffett's "rule". Not sure I ever heard/read Berkowitz say it. Berkowitz's thing has always been "ignoring the crowd" (sometimes the crowd is right) and lately, he seems to have taken to anything resembling something TBTF.

To me the key is that the manger's investments be consistent with the fund's stated goal that caused us to invest in it in the first place. BB repeatedly says his first rule is not lose money. Digging a huge hole every couple of years and then taking big risks to get out of it is not consistent with his first rule

@ValueSeeker, you have a very good point about BB's emphasis of his first rule. And his second rule is don't forget the first rule. He needs to scrap that, and tell shareholders that FAIRX is an aggressive, risk taking fund whose goal is to hit a home run. And not act like this is a fund whose primary goal is not to lose money, like some Warren Buffett or more like a Benjamin Graham investment.
You had good reason to sell, as you stated, "What he is doing with a number of positions feels to me like gambling and not value investing". He should change his value investing/don't lose money mantra. Many FAIRX shareholders are not happy to be in a position where a court ruling so affects their investment. That's not the BB that long time shareholders came to trust. He appears to have changed a lot from those earlier days, taking risks that seem out of character with what shareholders thought he was like.

What Vintage Freak said. There were plenty of signs for years now that BB's funds are risky -- if you weren't up for risk and holding on for the long term, you should never have invested with him.

@bee, I think you're exactly right! Easy monetary policy in Japan and a weaker currency will help stocks there just like it has sent stocks on a great ride for the last 5+ years in the U.S. I don't buy the idea that the U.S. is at risk of sliding into deflation although Europe is having more difficulty with that.
@Mona, I don't see anything on Matthews site or M* that suggests they've hedged currency exposure for MAPIX (I didn't check MACSX). I also believe the tax that's coming into effect in Japan in another month or two will hurt the economic numbers at the end of this year and into next year, which will either mean the BOJ will have to further ease to help the economy (sending the currency lower) or the currency will fall because the economy is worse.
I'm going to write a note to Matthews about currency hedging and I'll post whatever answer I get here but my experience with them has been that it takes a day or two for them to answer my emails.

Bloomberg TV had a small segment regarding the Japanese automakers today. Due to the new tax, they are slowing production in Japan and increasing production overseas.
If this is happening in the other sectors that sounds a bit ominous for the Japan markets.
@Mona, Yes I think those Matthews funds would be affected. For how long? That would require a crystal ball. I don't have one. If Abe's schemes don't work, he will be out in short order and Japan would have a new prime minister, the umpteenth one in so many years.

I do think active management can be valuable and has a place. For example FPACX and VWELX have given us market like returns with lower volatility. I also like PAAIX for its equity like returns, lower volatility in times of stress and inflation protection using multiple asst classes. To me the key is that the manger's investments be consistent with the fund's stated goal that caused us to invest in it in the first place. BB repeatedly says his first rule is not lose money. Digging a huge hole every couple of years and then taking big risks to get out of it is not consistent with his first rule

That is the argument of indexers. It is indeed hard to find active fund managers who can beat the index over long term. Those who take the most risk would have greater
standard deviations in their returns, which means they may appear to be much better than everyone in some years. Having said that I do own active funds, but keep a close eye. The only funds which I have owned for a long time (around 10 years) are FPACX, OAKBX and MACSX. More and more of my portfolio (started off with about 40%, but it has increased to about 50% because it did better than the rest) is in ETFs. There does seem to be some short term persistence in performance which I try to exploit.

I am a long time FAIRX investor and I sold everything today. this is looking like a replay of 2011 when BB was down over 30% in an up market. I held off selling before because of the tax hiT on my gains over the years but finally decided just to take the hit. What he is doing with a number of positions feels to me like gambling and not value investing

c'mon junkster! you should take it less personal! you promised to keep out and enjoy your daily positive hy muni performance -- so the rest of us, classically diversified, could just sit there green with envy!
yes, the vanguard guy who advised rjb was wrong. yes, you have dozens of years of experience, and some of us are in the industry, but rjb decided to doubt us, even if the cursory understanding of asset class and spreads would give him a clue. be kind to him; he also invested with berkowitz and that didn't quite work in the last couple of days. some people pick up very sophisticated -- hedge fund like - strategies without a clue as to what they invest in and how market, credit events, or interest rates affect their investments. the cure for this is to either relax and trust the manager, or index the hell out of your investments. alternatively, get an education. but who would listen? so people go from board to board, broker to broker, and ask questions of random strangers without capacity to evaluate the answers. oh, well.
fa

I'm not even gone for a day and someone e-mails about this thread. Robert, seriously, you need to get your act together. I discussed as did fundalarm the two ways bond funds pay their dividends. We described how funds like the one you keep harping on pay their monthly dividends and we also described how others, the majority in open end bondland such as PONDX pay out theirs. With just about every bond fund I ever traded or invested in the dividends accrued daily and you were paid end of month for however long you were in the fund. Fundalarm and I never said that the one you keep harping on that the dividends accrued daily!!! My comments below from this thread! If you are going to accuse someone of being incorrect, at least get your facts straight!!! Edit: you also might want to list the symbol of whatever you are harping on. BND and VBMFX both Vanguard total bond index funds pay out their dividends differently.

it wasn't... bond funds accrue daily dividends in their NAV, not like stock funds. the decline you saw was a market decline - movements in spreads -- see my previous explanation.

Some bond funds (like PIMCO's) do that. Others, like RPHYX, declare monthly, while a few even declare quarterly (Loomis Sayles used to do that until they switched to a monthly calendar a few years ago).
As always, read the prospectus. The PIMCO bond fund prospectus says that its funds covered in that prospectus (with a couple of exceptions) declare daily.

agree that no one, but some retail will follow Gross to Janus. No institution would do it without sufficient due diligence which takes three years for any consultant or fiduciary.
in term of working the phones and imposing himself on doubleline and then janus (thanks to a former colleague), it is curious to say the least. not to mention that janus, after the era of scandals, took great pains to shed the 'star manager' approach and craft a careful corporate investment management culture -- which was totally destroyed on friday.
why can't a 70 year old billionaire negotiate a graceful leave and quietly retire? in a year or so, if restless, he would do something else. this looks like action of desperation. he has not been a 'true' manager for years - he's been a 'talking head' and a decent economist, but not truly a PM. he should have handled this more like an adult...

While I realize there will be individuals and some institutions who will follow Mr. Gross, his sauce was not secret any more. There are numerous other fixed-income options available to investors that do not have a so-called star manager in charge, that have managers who actually put a premium on running their fund (and not getting in front of every camera they can find) and providing shareholders with real value. For every Bill Gross and Jeff Gundlach there are multiple Carl Karufmans, Dan Fusses, Michael Hasenstabs, Dan Ivascyns, and Jason Bradys, to name a few.
The curious thing for me is that he has hooked up with Janus. Personally I would not invest a dime of my own or my clients money with Janus, given their past history of executive illegal actions that resulted in the firm almost collapsing. There was never any real corporate action that enumerated how they would re-build investor trust, let alone much of an apology for the crappy things that happened. I can only look at this as a way for Janus to gain a huge influx of dollars under management. They went from being one of the top no-load fund companies to a struggling group that offers more share classes of their funds than almost anyone else, whatever works to make the sale. And as for Mr. Gross hooking up with Janus, like most everything else in this world, follow the money. Perhaps this is a case of the two parties being made for each other.

@msf, a good piece of detective work you did. Good to know. I bet most of the shareholders in Harbor Bond and Harbor Unconstrained Bond invested there because of Gross. I recall many years ago, M* recommended people investing in Harbor Bond as a cheaper way to get access to Bill Gross' investing skills than Pimco Total Return.

I don't grasp why institutional groups would bail out of PTTRX at this point. If they were acting on their fiduciary responsibilities, they would have bailed 2-3 years ago. That is when bad calls and blooey commentary really started to affect the fund. And my guess is that very few of these fiduciaries could enumerate the derivative trading that Mr. Gross used. They simply accepted it. Perhaps the proper response would be to put the fund on watch for 6 months.
The real test will be if these so-called fiduciaries follow Mr. Gross to Janus. How will they explain/justify moving to a company with a former history of corruption. At least PIMCO has been pretty clean in that regard.
It has always amazed me that so many of our client's employer 401k plans have had PTTRX as the ONLY fixed-income option. DUH!

I not only disagree with this Josh Brown, some of what he is saying is total BS. Take a look at the chart of PTTRX right after Gross made the call. There is a marked difference away from the aggregate bond index, but following that a marked difference toward the index. What about all the correct calls Gross made for so many years?
Everyone is an "expert". They know the "one thing" that caused Gross' downfall. Assets went down from 290B to 220B, right? WTF made assets go up to 290B in first place? Gross had nothing to do with it?
Let's be honest here. Gross may not have been Puss N Boots, but no one had any trouble with him as long as PTTRX assets, if not its performance were in an upward trajectory. I would hardly call Gross an underdog, but I'm starting to think he was not the only "problem" at PIMCO. They can't say "we were already contributing to the investment decisions" AND then also blame Gross completely for his "bad call" on treasuries. This is the same as capitalizing profits and socializing losses. Not to mention, all individual investors are idiots for chasing performance, but when institutions do it after Gross's "bad call", there is no focus on it.
I'm sticking with Robert Arnott for PAUDX in the IRA. I've already reduced my PTTRX stake to 50% of what it was in the 401k. I'm putting my PGMDX stake in IRA on notice. El Erian didn't do diddly here because he was allegedly cleaning up Gross' s*** that he was tired of doing, instead of cleaning his own. Now that I learn Mihir Worah is a nuclear physicist, it might be prudent to look for manager with PhD in finance. Not to say I have anything against physicists, but I typically don't hire them to manage my money.

What am I missing? Why are people so enamored with Gross opening a new fund? Isn't this the same guy who has guided the PIMCO Total Return fund to mediocrity with some pretty bad calls in the last 5 years? Per M*, 65% of all intermediate-bond funds have outperformed his flagship fund.

I'm not seeing that 65% of all intermediate bond funds have outperformed his flagship fund. Looks to me like Gross outperformed his category nicely, in all time periods longer than one year. Am I reading this incorrectly?

As a Janus investor with "D" shares for years, I used to be able to make exchanges on-line for little as $100.00 into new non-taxable accounts. I logged into my account to make a small exchange from one of my other accounts on-line into the unconstrained bond fund only to "flagged" by the on-line system. Now you can open an account (at least non-taxable in my case) for little as $500.00 with a minimum $50.00 subsequent monthly investment or a minimum of $1,000.00 to start.

PIMCO is, and has been for a few years, MUCH more than Bill Gross. They already have, and have had, a team approach on the investment committee that sets the macro outlook for the firm's funds, a top-notch analyst staff, and a solid group of fund managers whose initials aren't BG. .

I don't disagree with you. However, I've seen two people from Pimco in the media: El-Erian and Gross and moreso the latter. The lack of an apparent attempt to groom a new public face for the company makes me think that there was little planning for the eventuality of a Pimco without Gross. Along the same lines, I think it's Pimco's fault for focusing so much on Gross that it made the company reliant upon him and the public perception that Gross IS (well, was) Pimco.

PIMCO is, and has been for a few years, MUCH more than Bill Gross. They already have, and have had, a team approach on the investment committee that sets the macro outlook for the firm's funds, a top-notch analyst staff, and a solid group of fund managers whose initials aren't BG. I think there's WAY too much of the heroic-CEO-uber-alles POV being expressed in the financial media and here at MFO about Gross's move out. It's a GOOD thing for PIMCO, maybe not for the TR fund and etf for now, but for the firm as a whole.

Still no wage growth as skilled-worker shortage complaints rise
http://blogs.marketwatch.com/capitolreport/2014/09/29/still-no-wage-growth-as-skilled-worker-shortage-complaints-rise/
This is another piece of the puzzle for me and that inflation will not be an issue for awhile - years?
Wages aren't rising, yet food and energy prices are high. This is the opposite of the wealth effect (people spend because that feel good). People are fearful and are sucking up price increases - either from savings or debt.