Bill Gross Couldn’t Profit From His Two Prescient Calls

Bill Gross

Do as I say not as I do is something which Bill Gross seems to take to heart.

Bill Gross, the famed Janus Capital Group money manager, made two prescient calls on the market this year, but he did not make much profit from both either of them.

However, Gross’ Janus Global Unconstrained Bond Fund has returned 0.8% in the past month, beating 98% of comparable funds.

Bill Gross called German Bunds the “short of a lifetime”

As highlighted by ValueWalk, Bill Gross accurately proclaimed to the world the short bund strategy was a tremendous trading opportunity, though his actual trading didn’t reflect this opinion. Instead of outright shorting bunds, which have delivered significant short term success, Gross created a short volatility collar around the market.

In an interview Gross said: “Let’s shift over to the left side of our brains for an analysis of current financial markets. On the bond side, my famous (infamous?) “Short of a lifetime” trade on the German Bund market was well timed but not necessarily well executed. Still, it was a prime example of opportunities hatched by the excess of global monetary policy – zero based policy rates and tag team match quantitative easing programs which continue to encourage malinvestment in financial assets as opposed to the real economy.”

According to Bloomberg, Bill Gross bet that bunds would remain range-bound over the short-term, a move that by the end of March, left him short puts that had risen by as much as 11,000% in the case of one contract, and 6,000% in the case of another.

Bill Gross couldn’t capitalize his China strategy as well

Around six weeks after his bund call, Bill Gross was eying a short in the Chinese market. With algorithmic sell signals starting to flash signs of a top last month, Bill Gross was out with a tweet that predicted the top was coming in the Shenzhen index, though it’s just not happening…yet.

However, with the Shenzhen Composite Index falling 38% since Bill Gross recommended shorting it last month, he chose instead to wager against both the Standard & Poor’s 500 Index and emerging market currencies that would be affected by falling stocks in China. He indicated that those trades have worked.

In his telephone interview Wednesday, Bill Gross said: “I was trying to stick to my knitting, and China wasn’t really my knitting”.  He added: “Having been unrewarded, I guess, on the German bund, I decided to let the public know, but to pursue my standard knitting, which has worked pretty well for the last month-and-a-half. I’m making it back and I’m sort of happy.”

Bill Gross indicated that the best way to best against Chinese stocks would have been the Deutsche X-trackers Harvest CSI 300 China A-Shares exchange-traded fund. He disclosed that he had sold credit-default swaps tied to China about five months ago, which have widened 15 basis points. However, he said he hasn’t traded out of the position because “these days, you’ve got to be careful in terms of liquidity”.

Thus, it appears Gross once again didn’t follow his own advice.

However, as detailed by ValueWalk, Bill Gross’s Janus Global Unconstrained Bond Fund is benefiting from “pretty big positions” in Mexico, including hedged bonds. He also disclosed that he’s also selling short-dated calls and puts on Treasury bonds, betting the 10-year U.S. note will trade within 2.1% and 2.5% over the next few months.

For exclusive info on hedge funds and the latest news from value investing world at only a few dollars a month check out ValueWalk Premium right here.

Multiple people interested? Check out our new corporate plan right here (We are currently offering a major discount)

About the Author

Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports

Be the first to comment on "Bill Gross Couldn’t Profit From His Two Prescient Calls"

Leave a comment

Your email address will not be published.