Bill Gross, Pimco managing director and co-CIO, is calling for a third round of quantitative easing from the Fed.
Exclusive: York Capital to wind down European funds, spin out Asian funds
York Capital Management has decided to focus on longer-duration assets like private equity, private debt and collateralized loan obligations. The firm also plans to wind down its European hedge funds and spin out its Asian fund. Q3 2020 hedge fund letters, conferences and more York announces structural and operational changes York Chairman and CEO Jamie Read More
from hyundai. a third robbed of qe there fer the fed started up again. ever since that may jobs report was weaker than expected. now the bond king chiming in. he says should prepare for the fed to combat a slowing economy. bill gross joins us this morning. a lot of talk about so many things. it’s the total return funds birthday today. i am curious how the jpm news is playing out west. well, probably the same way it’s playing out around the world. jp morgan is one of the best-run banks in the world. it’s got 120 billion of tier 1 capital, that’s 10.5% which ishigher than the 9% u.s. average. it’s a well-run bank anddecently capitalized bank. i think we should ask the question and we have or should banks in general be doing these types of trades? i’m with paul volcker here. but if it can’t separate trading from the traditional banking activities, which is really what it wants it to do to release bank equity and bank capital.you asked, you know, coyou trust jp morgan, do you trust theregulators what pimco trusts is capital. so you think it’s not so much a volcker rule issue as a buffer requirement issue? i think it’s both. but let’s be honest. volcker has for several yearsnow tried to make end roads in terms of reversing the glassstiegel egg aggregation in the 1990s. so let’s at least go in thedirection of the higher capital. so if banks are forced to increase capital from 10, 11, 12, 13%, than these trades which are probably going to be a part of banking going forward becausetheir margins are so narrow, we’ll at least be protected by more equity. just as an aside, where are you on money markets and the on going discussion about those funds and the buffers theyshould have in order to protect their clients and, indeed, thetaxpayer further down the line. i think they should, too. the buffers have been in terms of quality lines. but we’ve seen and we cernly saw in 2008, that those quality guidelines can go by the board and that credit can move quickly from triple a to double and lower. stow i think that’s an attractive idea, whether or not that’s possible within the context of their profits, whichare nonexist tent. the money market funds are shrinking because the ability to earn money relative to their expenses has disappeared. one of these days, we’re going to see a very much smaller money market base. hey, bill, what’s your time frame in terms of qe 3. we’ve investing mortgages because they’re safe.if the fed comes in and buys them, which they have been doingby the way, over the past 12, months, mortgages basically are,you know, a one percent, 1.5% higher yielding alternative thantreasuries. that’s been the benefit to us. what is the possibility of qe 3? i think it’s increasing. you know, as the economy doesn’tdo well, that is move above 2% then the fed has to be concerned not only in terms of economic growth. one little bump in the road was announced several days ago in the u.k.they eave been doing qe as well. and they have halted their qeprocess at least for the moment. and so if the u.s. follows theleader in terms of the uk, than perhaps the wait at the end ofjune. i don’t know. a lot of people use that bank of england example bill as a reason why the fed would not embark. if u.k. and all of their troubles, why wouldn’t we be. and then there’s the whole politically sensible argument. you don’t seem moved by that. well, i think that’s true. ewe know, that would be fourmonths or five months away from the election and probably about as close as you want to get to the fire. but ultimately, it becomes a question as to — you know, qe is basically check writing. they write checks, they buy treasury bonds. the recipients of those checks are theoretically supposed to take those funds and employ them in the broader co conmy. we’re beginning to see an exhaustion of the benefits and the qe. from this point forward, qes can twist the treasury by 30, 40, 50 basis points. probably not. i think monetary agents, central banks are increasingly frustrated going forward. that they’re not being assisted in terms of fiscal policies. isn’t the danger that you’reon the wrong side of this trade? increasingly, that’s what people are talking about. as carl says, they’re moving away from qe.well, i think they are. there’s a divided fed. and a divided fed is obviously having some impact. so to the extent that you haveincreasing the sense it’s now at $3 trillion. they’re twisting.they’re basically trying to add duration without adding assets.but other fed governors and fed officials are increasingly vocal. i think the benefits have been limited. and so the possibility of qe, i think the chairman believes in it. he’s a person that has expounded on and advanced the theory of helicopter money and so we may continue to see it. but there will be increasingconflict. happy birthday to pttrx. i’m sure you remember what youwere doing 25 years ago. i do. and i remember real well. he said with a smile. congratulations, we’ll see you next time.thanks for coming on. news and video reporting first quarter results that beat