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"Buy what central banks buy before they buy them," says Bill Gross (BOND), explaining why he's...

"Buy what central banks buy before they buy them," says Bill Gross (BOND), explaining why he's been stocking up on Spanish and Italian sovereign debt. It's not complicated - the ECB unveiled a program to buy the same, but hasn't started yet, so Gross is taking advantage by getting in there first.
Comments (6)
  • Intangible Valuation
    , contributor
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    Brilliant.
    5 Oct 2012, 03:20 PM Reply Like
  • Russ Winter
    , contributor
    Comments (648) | Send Message
     
    Bill Gross and every other trained monkey. Moral hazard running amok.
    5 Oct 2012, 03:21 PM Reply Like
  • FocalPoint Analytics
    , contributor
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    I doubt ECB will be buying bonds pari passu with private investors. Draghi lies for a living. My guess is Gross is doing a pump so he can dump.
    5 Oct 2012, 03:48 PM Reply Like
  • Intangible Valuation
    , contributor
    Comments (612) | Send Message
     
    You're right that they won't be buying from private investors. But in theory the ECB buying ought to push down interest rates. If Gross owns bonds with a higher stated interest rate than the future market rate (the one manipulated by the ECB), then he can sell them at a profit.
    5 Oct 2012, 03:55 PM Reply Like
  • FocalPoint Analytics
    , contributor
    Comments (5803) | Send Message
     
    I don't believe the ECB can buy bonds unless they have seniority status irrespective of what Draghi claims. In the past when the ECB bought bonds with their seniority status, private capital sold their bonds and stopped buying new issues. I suggest Gross wants to exit his bond holdings before the ECB enters and the private selling starts.

     

    After all, if people believed what Gross said, they would be buying the paper and driving yields down. If Gross was intending to buy, that would lower his returns.
    5 Oct 2012, 04:24 PM Reply Like
  • Uncle Pie
    , contributor
    Comments (2675) | Send Message
     
    Mr. Gross would be prudent to keep his ideas to himself, and if indeed he does have occasional exemplary investment results, let them speak for themselves.
    5 Oct 2012, 04:20 PM Reply Like
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