Bill Gross Irresponsibly Calls for More Stimulus

PIMCO's Bill Gross, who has been dubbed the "Bond King," isn't convinced Federal Reserve Chairman Ben Bernanke has it right when he said last week when testifying before Capitol Hill that ther is "increasing evidence that a self sustaining recovery in consumer and business spending may be taking hold."
Rather he sees the American economy as being unsustainable, and incredibly, rather than calling for the government to get its financial house in order by starting to shrink itself, he's calling for even more stimulus going forward.

Gross says in an interview, "I suspect that it's not as self-sustaining as they think. I suspect at we're not standing firmly on our own two legs and that ultimately we're going to continue to need some stimulation from the government."

"Basically the U.S. is not saving enough money to replace its own capital from the standpoint of depreciation and potential investment," added Gross, who said the greatest long-term threat to the American economy is the negative net savings rate of 1-2 percent.




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Bank of America (BAC), Pimco May Have Investor Battle on Their Hands

It appears investors are ready to do battle against Bank of America Corp. (NYSE:BAC) and Pimco, which are in negotiations which could weaken the leverage opponents would have in payback demands over failed mortgage loans.

Included in the fight would be the Federal Reserve Bank of New York, Freddie Mac and Blackrock Inc.

This all stems from an announcement in December by the Pimco group that they had started communicating with Bank of America (BAC) over the quality of loans as they were packaged into bonds for sale to investors.

The dialogue appears to have weakened the former litigious atmosphere, which could lead to the problem being worked out.

Others affected by the mortgage loans are concerned if the two settle it could set a precedent which would undermine their ability to extract more from Bank of America.

Lawyers stand to lose a lot as well, and obviously aren't going to let this rest without a fight.

Bank of America (NYSE:BAC) Attracting Buyers to Toxic Bonds

Approximately $1 billion in toxic bonds are being offered for sale by Bank of America (NYSE:BAC), which has already written them off, said a report in the New York Post.

In anticipation of this, bond buyers like Pimco's Total Return Fund (PTTRX), managed by the legendary Bill Gross, and the DoubleLine Total Return Bond Fund (DBLTX), managed by Jeffrey Gundlach have been raising capital in order to take advantage of Bank of America and others ready to offload the mortgage bonds.

"The sale is very small relative to the overall size - but it is probably the troubled stuff that is the most expensive to service and this is what the hedge fund guys would want to buy," said Paul Miller, bank analyst at FBR Capital Markets, cited by the Post.

They added, “Buyers for the loans, which BofA has already written off, are circling. Bids are due by the end of December."

It should be a win/win, as the more risky bonds are more expensive to service, but also more desirable to investors.

Having already been written off, it shouldn't drive the share price of Bank of America down.

BofA was trading at $12.75, down $0.05, or 0.39 percent, as of 12:29 PM EST.

PIMCO's Total Return Fund Getting Crushed on Bond Selloff

Bill Gross' PIMCO Total Return Fund is getting hammered in the midst of investors fleeing Treasury bonds.

For the 30-day period ending December 8 the $250 billion fund lost 3 percent.

Starting on December 1 through the 8th, the fund has plummeted 1.2 percent.

For the month of November, the fund lost $5.75 billion, a drop of 1.4 percent.

The fund had bee providing a return of just over 8 percent annually over the last five years through December 8, besting the fast majority of its competitors.

Pimco: Britain Losing AAA Credit Rating?

British AAA Credit Rating at Risk

According to bond investor Pacific Investment Management Co (Pimco), Britain is in danger of losing its AAA credit rating within the next 12 months.

This is why the idea the recession is over and everything is on solid footing is a ridiculous assertion from those making it and shouldn't be believed be gold investors.

As a matter of fact, Pimco added the stability of the British financial system is at risk and the public finances of the company could end up in a disaster.

Scott Mather, the head of global portfolio management at Pimco gave a devastating critique of the condition of not only Britain, but the U.S. and European sovereign debt situation as well, saying, "Miracles are needed in the next six months in order to keep economic growth in the developed world."

Moody's (NYSE:MCO) has also stated Britain is considerably closer to losing its AAA rating too.

Oh, I must have forgotten though, we're in a sustainable economic recovery now, so we don't have to be concerned with little things like sovereign debt ratings and threats.