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Bill Gross interview: From clipping coupons to golf with realtors





Bill Gross interview-Key insights from the pod:
What it was like trading bonds in the 70s — 1:41
Surviving a bear market — 2:48
The origins of active bond trading — 3:49
How much of Bill’s success was luck? — 5:28
Trading in size at Pimco — 7:42
Interest rates and the economy — 10:48
Will interest rates go down again? — 12:51
The inverted yield curve — 15:10
Missing buyers for bonds — 17:08
The return of financial repression — 18:58
How to hedge duration risk now — 21:09
Why own a bond at all? — 23:19
40% of Bill’s portfolio is MLPs — 25:59
Bill’s daily schedule and trading — 28:32
Arbitrage opportunities — 31:29
On private credit — 32:50
China’s economic slowdown — 24:11
Fitch’s downgrade of the US credit rating — 37:44
Can there be another bond king? — 38:52
His legacy — 42:55



 On the old days: "There were no real computers no clearing house overnight types of trades. You, as a matter of fact, at Pimco, which was owned by Pacific Mutual, Downtown LA, we had a billion dollars in a vault. And I would, 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 of 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, 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 illiquid markets."
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On emotion: "It seemed to me that the bane of investor is emotion. And I'm the same way. I never thought of myself as a good trader. I mean, if Nvidia, you know, hits $500 I'm just as likely to buy it as to sell it and then regret it the next day."
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On the long view: "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."
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If you remember anything: "If you remember anything I've 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. I'm not saying get out, I'm just saying that assets have to go up or else the economy will not do well."

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On volatility, momentum, and what he would do now: "Pimco was always a great believer in selling volatility. Selling volatility has an alpha, pretty consistent alpha over time.

Momentum doesn't always work, obviously when black swans appear, but momentum is like an insurance company. And so that's the way Buffet works. Buffet 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, etc., etc.

I would, and what have I done? I would sell a put and a call on, say a 10-year Treasury, the TY contract, TYZ3 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."


Gross owned a 4-block of this famous stamp. Which we saw at US Post Museum in Wash D.C. He later traded for a Ben Franklin. He dispersed much of collection for charity. Said: "I'm 74 and all I need is pizza and the Lakers on TV." 

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