Chapter 695 The first hedge fund (1)

  Bill Gross, founder and chief investment officer of Pacific Investment Management Corporation. The 64-year-old bond fund manager has a resounding title around the world, "The King of Bonds".

  PIMCO was originally the investment department of Pacific Insurance, and later established itself as an independent fund company. Five years later, Gross took over the company and began his legendary bond investment career.

  Starting from 1987, Gross' return on investment has been close to 10% for the entire 20 years, reaching an astonishing 9.5%. In the volatile bond market, this yield is simply unbelievable. Attracted by this rate of return, the scale of PIMCO's funds has grown day by day, reaching an astonishing US$2 trillion in 2008, while the global bond market is only US$15 trillion.

  He is not tall and looks very ordinary. The only bright spot is probably the two unusually thick eyebrows, which are so thick that they seem to be painted on. Coupled with the same thick beard on the corner of his mouth, it always gives people a solemn and honest feeling.

   But this feeling is downright delusional, as the "Bond King" Gross has a temperamental temper. Inside Pimco, he's the ultimate tyrant, sweeping out anything that doesn't go his way, including talking loudly in the trading room.

   "It shouldn't be, it shouldn't be!"

  At this time, Gross was sitting in his office, looking at the Bloomberg terminal on the desktop. On the screen was the change in the yield of the ten-year U.S. Treasury bond. The sudden drop from a 4% yield to a 3.5% yield not only baffled the entire market, but baffled Gross.

  The lower the yield, the higher the price of the bond itself. For Gross, who is shorting long-term treasury bonds, this is not a small blow. According to his character, he must get to the bottom of it and ask what happened.

"Will it be at the next FOMC meeting that the market expects that interest rates will be lowered. Now that the economic situation is not good, emerging countries have generally implemented huge investment plans to stimulate economic growth. With global interest rates generally low, they want to start as soon as possible. In order to recover the economy, the government has plans to further cut interest rates."

  In order to find out the specific reason, Gross had to make an exception and find several senior traders during the trading hours to discuss the fluctuations on the market together. The above words were analyzed by a senior trader.

"The change of 50 basis points seems very large, but it is still nothing to the size of national debt. I personally prefer the capital preservation of some emerging countries. It is said that the big buyers of national debt in the market now, except Outside of Japan, China, Brazil, and India are all emerging countries with huge foreign exchange reserves in their hands. Maybe these countries have shot up the price of this type of government bond.”

  Another trader spoke eloquently. Because U.S. treasury bonds are guaranteed by national credit and taxation, as long as the United States exists, there is no risk in redemption, so it is one of the favorites for risk-averse large-scale investment. And those emerging countries have accumulated a large amount of foreign exchange through low exchange rate policies. If these funds want to preserve their value, investing in US treasury bonds is an excellent choice.

   "But if the interest rate is lowered again, it may enter a liquidity trap!"

Another trader immediately retorted, "Although the nominal interest rate is 1.5%, there is still some distance from the actual negative interest rate, but it is infinitely close to zero interest rate. If the interest rate is lowered under such circumstances, the market may enter liquidity. In the trap."

The so-called "liquidity trap" means that the interest rate level falls to a very low level for a period of time, and the sensitivity of the market to interest rate changes also decreases. Even if the interest rate is lowered again, investors will not increase investment and consumption. A state in which monetary policy fails completely.

  In the case of a liquidity trap, monetary policy, that is, relying on adjusting interest rates, can no longer stimulate the economy, and can only rely on fiscal policy.

   "Will it be a new round of QE?" A trader asked weakly.

"This is impossible!"

   Just as he finished speaking, several voices retorted in unison. Seeing this posture, the man shrank his neck, not daring to say anything more.

   Gross looked at the person who was asking the question, and frowned unconsciously, feeling a little dissatisfied in his heart.

"According to the usual response of the Federal Reserve, they will first announce the target of QE and the scale of funds to be used, and then slowly absorb bonds in the market over a year or even several years, raising the target interest rate to expectations. The reason for this is that To eliminate the uncertainty caused by expectations, on the other hand, it is to avoid unnecessary cost increases due to excessive price fluctuations.”

   Looking at the trader again, Gross said lightly.

   "So among the remaining possibilities, which one is the most likely?"

   The traders discussed for a long time, but they still couldn't find a reason that could convince everyone. Among them, emerging countries are most likely to buy US bonds on a large scale. But for Pacific Investment Management Corporation, they don't pay much attention to the so-called emerging countries.

   "I still think of a possibility!"

Gross pondered for a moment, then suddenly said, "Is it possible that the hedge fund industry is entering the bond market? You must know that their entire industry has suffered a major blow recently. Under such circumstances, they urgently need new investment points. For them, the risk is much lower than those of their derivatives. Even if the return is only 1%, it is much higher than the return of their entire industry.”

"Even a short-term safe-haven investment is far better than having investors withdraw their capital. There must be people who ask, why can't it be those Eurodollars or other industrial funds? I think that in this case, those European dollars The U.S. dollar is more inclined to arbitrage in the exchange rate market, and for industrial funds, now is the time for aggressive acquisitions and expansion, and they should not easily give up such a good opportunity.”

   I have to say that Gross's analysis is very reasonable, but there are still many illogical places.

"First of all, do hedge funds have so much money? I have a lot of doubts about this. In addition, I don't think you understand that if those guys in hedge funds really want to choose bonds, why do they choose bonds? One-year treasury bonds, rather than one-year or three-year or even five-year treasury bonds, you must know that compared with ten-year treasury bonds, these bonds have better liquidity and are more suitable for cash.”

  A trader bluntly pointed out what was unclear in Gross' analysis.

  Pacific Investment Management Corporation is a giant in the market, and the opponents they face are either opponents of the same magnitude, or giants like the country, so before formulating a strategy, they must first find out the opponent's situation. Traders were not satisfied with Gross' explanation.

  Gross took a glance and clearly caught the doubts in the eyes of other traders. Obviously, although they didn't say it, they must have similar thoughts in their hearts.

   "Your idea is not wrong, but there is another explanation!"

Gross, who was already well-informed, was not overwhelmed by the question. Instead, he explained lightly, "Before this, the ten-year national debt, that is, the forward interest rate, has far deviated from the fundamentals. I believe everyone has such a consensus. In this Under such circumstances, shorting is a good choice. Even if it returns to the normal price range, the profit on the price difference is quite considerable. It is precisely because of this situation that hedge funds are rushing into the ten-year Treasury bond market. Because they need outstanding performance in performance more than ever. However, the yield that should have risen has fallen at this time. It should be that relevant opponents are taking over their sell-offs, and this fund is most likely many hedge funds The goal."

"According to the betting nature of hedge funds, they will not give up in this situation. I predict that before 3%, the momentum of hedge funds pouring into the U.S. Treasury bond market will not stop. But after breaking through 3%, both sides are extremely There may be a winner. Before that, I have communicated with other large bonds, and they all said that they did not take over the ten-year bond positions on a large scale. I believe that with my friendship, the authenticity of this news should be That's right. If I hadn't guessed, this should be a siege operation."

   Gross said this, with an inscrutable smile on his face. When the traders saw it, they all understood.

   "Bill, did you hear something?"

  A trader asked tentatively, feeling even more uneasy. According to Gross' self-willed personality, if he really heard something, he would not go to the trader to discuss it again. But now that he is doing this, the traders can't figure out whether this is an investigation or something else. If it's the former, traders who get it wrong are in trouble.

   "No, I've only heard part of it, but I'm not sure yet."

Shaking his head, Gross did not admit it, "You also know that Soros and I are good friends. Before that, he was designed once in the Porsche acquisition case in Germany. According to him this time, it was his It's a trap for others, but I don't know whether the other party has taken the bait or not."

"what?"

   Hearing this, traders still don't understand. If, according to Gross, the unusual price fluctuations in the 10-year U.S. Treasury market are not due to other reasons, but Soros set up a trap for an opponent, then it can explain why it is so abnormal.

  Although there are still many mysteries that have not been solved, the traders of Pacific Investment Management Company began to come alive, "Bill, what should we do?"

   "We are on the side of the victor if we count with our minds but not with our hearts!"

   Gross replied with a grin.

   Thanks to book friends Xiao Qi for the miracle of civilization, poisoning you thousands of times, book friends 121229134210304, Shihuangtian, and Jiangnan Liu Feiyan for voting monthly tickets! Thank you for your support. Although this time is very rushed, the author will still try his best to write a book and try not to let everyone down~

  

  

  (end of this chapter)