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Dear Bill Gross, Please stop crowdsourcing emotional support and making open-ended calls of doom

Your recent writings and media interviews are still infected by your PIMCO dethroning but find a new outlet for venting about that

Tuesday, January 13, 2015 – 7:10 PM by Brooke Southall
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To Bill: There was a time when every time you spoke to the media, it took PIMCO higher and your standing with the media went higher still. Talk about credit creation.

Brooke’s Note: I decided to write this piece in letter form. When it comes to Bill Gross, everything seems personal. He makes it that way and we do, too. I’ll make one disclosure in being so boldly presumptuous as to write a letter like this one. Mr. Gross has mostly never given me or RIABiz the time of day. I really don’t hold it against him and I see why it makes more sense for him to use his precious time to talk to Bloomberg or the Wall Street Journal than a smaller, perhaps more skeptical, publication. But it would be reasonable for a reader to believe it might rankle me to be so ignored. A returned phone call from Bill Gross almost certainly gives an article newsworthiness and a reporter the standing that comes with a scoop. But freed of the shackles of Gross attention, I can blow a whistle on what I believe is a Gross-to-media relationship that amounts to an unholy symbiosis that degrades both sides. I delve into that dynamic and thoughts that I incubated for years related to the ex-Bond King.

Dear Bill,

I allow for the possibility that your conspicuously gloomy outlook on the stock and bond market is right. I am also willing to believe that assigning no deadline for when this admittedly inevitable swoon will occur will all make sense when the bottom finally falls out, even if right now it comes across as showing a lack of conviction on your part. I can even ignore the fact that you have made this prediction for years years and years.

As for your own fortunes, I accept the possibility that you meant it when you said in Monday’s interview with Barry Ritholtz on BloombergView: “I had no idea that an executive committee could fire a founder and the titular leader of the company.” You aren’t a lawyer after all. I can see how you might think that PIMCO threw you a knuckleball.

I can also accept that last June when journalists, bond experts and your former PIMCO colleagues began to shove back on the presumption of Grossian infallibility that you experienced pain and shock on such a scale that spreading that distress among all who consumed the Morningstar conference was arguably an act of self-preservation. See: Bill Gross’s stage antics leave Morningstar conference-goers gobsmacked.

I’ll concede that your sycophantic public — and especially we in the journalistic corps — owed you that much sharing of pain. A king can’t sit as high on his throne as you did without copious pandering by his subjects. I admit it. We (though it wasn’t me; you didn’t return my calls) rather selfishly egged you on. Every earthworm we dangled off a fishhook looked like a meal to you, especially if a Large Media Outlet was doing the dangling. We knew that. That must have made the atmospheric reentry perilous and painful.

Journalistic 'fess up

Financial journalists are incorrigible and you should be wary of us in much the way a frog should be wary of a scorpion asking for a lift across a pond. We always build newsworthiness into our algorithm and you are newsworthy. Like the greater society, we lack heroes and we lack sources that our readers regard as knowledgeable in something as unknowable as the direction in which the markets are headed.

We greedily soak up your viewpoint and build headlines around it. Such cloying genuflection on our part can only have a boomerang effect on you. You ain’t perfect and our implied regard for your clairvoyance sets you up to fail. See: The Grossian formula for PR: Why Bill’s press is good press, even when it’s bad.

You became addicted to our attention. The fall from a multiyear media high can be quite a tumble and one that can seemingly only be salved by yet more media attention. Media attention for its own sake is like pain pills that cause pain. You can see how this circle is not virtuous and how it might even affect your legendary judgment.

But this cycle can be broken. You were on the right track when you kept quiet as you grew into your new position at Janus. But boom, boom I have seen two big public communications from you in the past week suggesting that this could all go down a bad road again. Dig deep, take a 12-step program or seek a counselor — and not some L.A. ego-stroker. See: How RIAs are managing the Bill Gross problem — from firing his old PIMCO fund, to detailed letters to clients to taking a good look at Janus.

Credit creation

One line of yours from the Janus-Gross investment outlook you released last week jumped out at me, and prompted this letter:

“Central banks with their historical models do not yet comprehend the impotence of credit creation on the real economy at the zero bound. Increasingly, however, it is becoming obvious that as yields move closer and closer to zero, credit increasingly behaves like cash and loses its multiplicative power of monetary expansion for which the fractional reserve system was designed.”

I allow (and not facetiously) that you may be right in this assertion that a market comeuppance is nigh. But I also believe that credit creation may have lost its potency long ago, making yours a low-potency statement rendered in stimulating words. But because of what I have seen play out in your career arc, I can’t help but wonder if this isn’t an example of psychological backwash. Are you crying wolf?

Truly, there was a time when every time you spoke to the media, it took PIMCO higher and with it your standing with the media climbed higher still. Talk about credit creation. But your attempts at attaining multiplicative power through media interaction have plateaued and your pronouncements are no longer the elixir they once were.

I might say the same for Alan Greenspan’s legacy of continuously lowering interest rates. It seemed so simple and so ingenious at the time. Now the garden-path aspects are more evident. See: Bill Gross’ commentary should be taken with a bigger grain of salt in this market.

One direction

Here’s your other recent statement on Bloomberg View with Barry Ritholtz that jumped out at me in your interview. He asked a question related to your tenure at PIMCO and what led to people not liking you enough to keep you around.

You said: “A leader has to be tough. If you sit around a table and you congenially look for a consensus-type of outcome, you’re in trouble. You can’t manage money that way. At some point somebody has to step in and say, 'We are going in this direction,’ and I viewed that as my job and I think I did it well.”

Again, you may be right. But we probably didn’t need to hear it from you. You don’t need to explain. We are looking for signs that you have moved on, not signs that you are still fighting this battle internally and obsessing about what brought about such a monumental insurrection. See: How RIAs are managing the Bill Gross problem — from firing his old PIMCO fund, to detailed letters to clients to taking a good look at Janus.

New start

Janus Capital is a company with a proud heritage, on its own comeback run, and it strikes me that its chief executive, Richard Weil, has afforded you a remarkable opportunity — to move on, to show and not tell what is right, and give you the support to make it happen. He lets you work from your hometown office. See: How Janus CEO Richard Weil’s Bill Gross hire completes the PIMCO-ization of the Denver equity shop.

But Weil may feel awkward about giving you the one piece of advice that so many of us have received in the wake of a crisis. See: Your public relations horror story: It’s not as grim as you think.

So here’s my take: Rethink your current course of being a curmudgeonly doomster. Rethink placing blame beyond yourself. If you carry your own burden, it will produce two good effects: You won’t feel nearly the need to express your frustrations publicly and you’ll start rebuild your professional bearing. Your focus on what you are so good at will intensify, thus deflecting some of the psychic overflow that your public has had to absorb during your post-regnum.

If you need to vent, vent to a designated absorber of such expostulation, namely a trained counselor, wife, friend, rabbi or priest.

The world of RIAs and other independent advisors like fellow entrepreneurs. We all like a Lazarus. You were a Goliath. Revel in being David. But for a while, just be Bill. That worked perfectly fine until “Bill” became a “bond king” turning your inner introvert inside out and causing quite a mess.

Sincerely yours,

Brooke


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Ryan Andrews

Ryan Andrews

January 13, 2015 — 10:30 PM

Good thoughts, Brooke. I worked at PIMCO for four years, I wouldn’t personally say anything poor about Bill, we only met a couple of times, but there was always a very pessimistic investment culture there.

Jeffrey McClure

Jeffrey McClure

January 13, 2015 — 8:38 PM

Good letter Brooke!

Please don’t tune him down too much. He has made such a great contrarian indicator over the years that I would miss doing the opposite of whatever he says. He was shouting that the fall had far, far to go down before there was any hope of a bottom in the summer of 2002, right at the bottom. He did it again in spring 2009. It is when Bill Gross gets optimistic about the equities markets that we are in for a fall, no matter how good things look. His current spate of gloom and doom is actually very encouraging.

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