WEBVTT - Surveillance Exclusive: Bill Gross On His Retirement

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<v Speaker 1>Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene,

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<v Speaker 1>Jay Ley. We bring you insight from the best in economics, finance, investment,

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<v Speaker 1>and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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<v Speaker 1>Bloomberg dot Com and of course on the Bloomberg. And

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<v Speaker 1>now we welcome all of you on Bloomberg Television and

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<v Speaker 1>radio worldwide. Uh. Tom Keene in conversation with a gentleman

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<v Speaker 1>retiring today, but you know he will never slip away

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<v Speaker 1>from the financial analysis of his c f A Institute.

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<v Speaker 1>Bill Gross joins us with Janice Anderson. I guess Bill,

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<v Speaker 1>congratulations on retirement. I want to get to the track

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<v Speaker 1>record the challenges you've had at Janice Henderson. But how

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<v Speaker 1>did you get here? How is this decision made in

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<v Speaker 1>the last number of days? Did you make this unilaterally?

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<v Speaker 1>Did you make this with Janie Henderson management? Well, no,

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<v Speaker 1>I did it unilaterally and in combination with my family

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<v Speaker 1>and my partner, Amy Schwards. So I'm having so much

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<v Speaker 1>fun with um. You know, it's been almost a half

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<v Speaker 1>a century of watching Screenstonge and waking up in the

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<v Speaker 1>middle of the night to check Asia and Europe and

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<v Speaker 1>and Tom Brady equivalent years. That's that's a long time. Um.

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<v Speaker 1>I've got a few Super Bowl rings along the way

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<v Speaker 1>to look at, and it's time to enjoy myself and

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<v Speaker 1>enjoy my family within this is the catalyst of outflows

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<v Speaker 1>of funds. Was it harder to manage the Janison constrained

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<v Speaker 1>fund given the repeated and chronic outflows that you've seen

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<v Speaker 1>over the last number of quarters in even years, Well

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<v Speaker 1>not really. I mean half half of the fund is

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<v Speaker 1>mine and and I haven't taken any money out of

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<v Speaker 1>the fund. Others have as you've mentioned. You know, I

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<v Speaker 1>look back on it um and the performance on the

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<v Speaker 1>unconstrained fund in the past four years with janniss uh

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<v Speaker 1>has been unsatisfactory, no doubt, but still positively um positive

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<v Speaker 1>and normal and nominal terms. UM. What I'd like to

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<v Speaker 1>mention those I've managed some total return accounts what I'm

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<v Speaker 1>famous for for Jannis, and then they've outperformed like the

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<v Speaker 1>old days that Pimco hundred basis points over and actually

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<v Speaker 1>outperformed Pimco. So maybe I should have stuck a total

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<v Speaker 1>return and a little more constrained. This is this is

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<v Speaker 1>a really important point, folks, and that Mr Gross has

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<v Speaker 1>a number of ideas going here, including you know, fighting

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<v Speaker 1>the fixed income battles that fixed them income wars of

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<v Speaker 1>mutual funds. But I was talking with our John Gilson

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<v Speaker 1>and Los Angeles, uh, Bill, and within the unconstrained model,

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<v Speaker 1>the perspective model of this phrase unconstrained, what did you

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<v Speaker 1>learn about the pros and cons the difficult these of

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<v Speaker 1>this phrase unconstrained, Well, unconstrained has come to me and

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<v Speaker 1>basically go anywhere. Um, you know, the total return concept

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<v Speaker 1>that I developed was was really developed on the concept

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<v Speaker 1>of measured risk taking. That's what I learned in the

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<v Speaker 1>days of blackjack. You didn't put a lot on the table.

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<v Speaker 1>And so you know, for the past three or four years,

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<v Speaker 1>the negative trade for unconstrained has always been Germany versus

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<v Speaker 1>the United States in terms of a spread tenure. German

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<v Speaker 1>buns started out in my portfolio at a hundred and

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<v Speaker 1>ninety basis points over and they're now two fifty plus over.

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<v Speaker 1>And so that's been a you know, it's been the

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<v Speaker 1>big decider and probably one in which I shouldn't put

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<v Speaker 1>too many chips on the table. Well, this is critical, Bill,

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<v Speaker 1>and this goes to the hedge funds, and so many

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<v Speaker 1>underperformances of hedge funds, depending on whatever you want to

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<v Speaker 1>look at with the statistics. Was the underperformance that you

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<v Speaker 1>faced in the last year with unconstrained was it because

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<v Speaker 1>you were not diversified? Is it? Is it the phrase

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<v Speaker 1>on constraint gets you into a focus where the bets

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<v Speaker 1>are too big to go back to ed Thorpe, Yeah,

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<v Speaker 1>I think it did for me, and perhaps for other

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<v Speaker 1>unconstrained funds too, if only by the nature of the

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<v Speaker 1>term um. You know, the old ed Thorpe terms. The

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<v Speaker 1>Gambler's ruined concept basically said you could only bet UH

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<v Speaker 1>two of your capital and and and certainly I had

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<v Speaker 1>positions and unconstrained there were significantly more than that, especially

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<v Speaker 1>the German US Treasury trade, and that UH probably was

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<v Speaker 1>too much, but it was an unconstrained portfolio. Investors were

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<v Speaker 1>expecting hedge fund types of returns of five to ten percent,

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<v Speaker 1>you know, for for a while there it was only

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<v Speaker 1>one to two percent, and that was unsatisfactor. It was

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<v Speaker 1>unsatisfactor Reinbill, this goes to your perspective now, and we

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<v Speaker 1>should point out that Mr Gross has written all sorts

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<v Speaker 1>of academic work for the c f A Institute over

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<v Speaker 1>the years on finance, on the integrity of financial theory.

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<v Speaker 1>You've lived it, Bill, Is the hedge fund model broken

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<v Speaker 1>because it's a non diversified model, Well, I I think

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<v Speaker 1>it was broken for a long time, Tom. You know,

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<v Speaker 1>obviously the hedge fund concepts suggested long and short, but

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<v Speaker 1>it was really one in which managers took a lot

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<v Speaker 1>of risks. So when you speak to diversification, you know,

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<v Speaker 1>perhaps most of those hedge funds were non diversified in

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<v Speaker 1>terms of the risk that they were taking. They were

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<v Speaker 1>taking levered risk and still are and so to the

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<v Speaker 1>extent that markets moving and risk off type of mode,

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<v Speaker 1>and they have in December and um other periods of time,

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<v Speaker 1>then the hedge fund concept is really an exposure of

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<v Speaker 1>risk as opposed to anything else, and it and it

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<v Speaker 1>needs to be more diversified for sure. If you're just

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<v Speaker 1>joining us, William Gross with us, of course, with Janice

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<v Speaker 1>Henderson announces his retirement today a very young seventy four

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<v Speaker 1>unto seventy five years old. Of course, this after for

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<v Speaker 1>in five decades of work. We continue now with Bill

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<v Speaker 1>Gross welcoming all of you on Bloomberg Television. And Bloomberg

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<v Speaker 1>Radio worldwide. Bill Gross, if we look at the investment

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<v Speaker 1>in the recent investment return in that you mentioned the

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<v Speaker 1>German trade, the spread trade with Germany? Did the central

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<v Speaker 1>bankers get in your way? Are you willing to blame

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<v Speaker 1>any sense of underperformance on Federal Reserve officials, ECB officials, etcetera, etcetera.

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<v Speaker 1>These people didn't go by the book, and Bill Gross

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<v Speaker 1>got run over because they did something new and original.

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<v Speaker 1>We all not necessarily mean they didn't go by the book,

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<v Speaker 1>and it's up to the portfolio manager to analyze what

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<v Speaker 1>that new book is in terms of reading um. You know,

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<v Speaker 1>for five six of in eight years, the quantitative easiness

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<v Speaker 1>provided an opportunity for bond investors to take advantage of

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<v Speaker 1>capital gains um. The question became in terms of Germany

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<v Speaker 1>versus the United States. You know, what would the effect

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<v Speaker 1>of US tightening by the Federal Reserve and the ultimate uh,

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<v Speaker 1>you know, exclusion of quantitative easing in the beginning of

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<v Speaker 1>quantitative training? What would that do relatives? What was happening

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<v Speaker 1>with the e c B and it uh. The spread

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<v Speaker 1>continued to widen and continues to widen eve until the

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<v Speaker 1>day and that's a that's a very long term situation.

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<v Speaker 1>But Bill, this is critical and critical going forward as

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<v Speaker 1>you invest your own money, and everybody else wants to

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<v Speaker 1>know what you feel about central banks that got away

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<v Speaker 1>from Phillips curve theology over to balance sheet adjustment through

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<v Speaker 1>Q quantitative easy and then onto some set of quantitative

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<v Speaker 1>tightenings to come. Which of those two was the real harm?

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<v Speaker 1>Was that the balance sheet dynamics or was at the

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<v Speaker 1>death of the Philip curve dynamic. Well, I think it's

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<v Speaker 1>basically both. In terms of the balance sheet. I find

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<v Speaker 1>it very interesting, certainly in the US with the Fed.

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<v Speaker 1>Um you know, the FED expanded its balance sheet during

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<v Speaker 1>quantitative easing from proximately one trillion to proximately four trillion

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<v Speaker 1>UM in a world in which credit in the United

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<v Speaker 1>States was around sixty trillion dollars. You know, to my

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<v Speaker 1>way of thinking, back in two thousands seven and two

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<v Speaker 1>thousand and eight, the FED was in a highly levered

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<v Speaker 1>situation relative to total credit. It was one trillion versus

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<v Speaker 1>sixty trillion or sixty to one UM. They expanded that

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<v Speaker 1>and basically equitized their portfolio to four trillion, and that

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<v Speaker 1>was a much leverage situation. Now quantitative tightening, reducing that

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<v Speaker 1>to some extent, although probably going to stop in the

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<v Speaker 1>next few quarters or so. UM. You know it perhaps

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<v Speaker 1>is at a point where the lever inherent in the

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<v Speaker 1>Fed's balance sheet and the leverage inherent in the US

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<v Speaker 1>creditum economy is um It's better probably put it that way,

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<v Speaker 1>although not necessarily satisfactory. So many times I've found Bill

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<v Speaker 1>Gross I don't want to mention names here, but a

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<v Speaker 1>lot of acclaim managers in whatever way are shown the door,

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<v Speaker 1>and then X number of months afterwards, whatever their play was,

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<v Speaker 1>works out like a charm. Do you sense any kind

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<v Speaker 1>of jump condition coming where yields come up or those

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<v Speaker 1>spreads normalized? I mean, is it going to be smooth

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<v Speaker 1>functions over one year, two year, three years, or do

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<v Speaker 1>we get a jump audition and abruptness to some outcome

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<v Speaker 1>this year two thousand nineteen. Well, we need to speak

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<v Speaker 1>to different central banks as supposed in different in the US.

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<v Speaker 1>In the US, the FED is that two and a

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<v Speaker 1>half percent in terms of FED funds. If you assume

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<v Speaker 1>inflations at want to, then you've got a half a percent,

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<v Speaker 1>and to is a real interest rates, which to my

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<v Speaker 1>way of thinking, it's about as high as you can

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<v Speaker 1>go in a levered type of economy, and the rest

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<v Speaker 1>of the world, you know, let's just take the e

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<v Speaker 1>c B and take Japan as well, um, with their

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<v Speaker 1>zero percent interest rates or even negative interest rates in

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<v Speaker 1>Germany all the way out to seven or eight years um.

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<v Speaker 1>You know, there's a very different situation and things haven't

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<v Speaker 1>really changed, and I wonder versus the US, you know

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<v Speaker 1>what that means for their economy. And as I've mentioned

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<v Speaker 1>for many times on your program, Tom, the the disadvantage,

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<v Speaker 1>in addition to potential inflation down the road, the disadvantage

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<v Speaker 1>of negative interest rates and low interest rates in the

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<v Speaker 1>rest of the world is that savers are disadvantaged, and

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<v Speaker 1>insurance companies and banks are disadvantaged, and so the savings

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<v Speaker 1>function is at risk. This is really important for US.

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<v Speaker 1>And doing one more question on this and then switch

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<v Speaker 1>themes in this generous conversation with Bill Gross this morning

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<v Speaker 1>again on Bloomberg Television and Bloomberg Radio. Worldwide, we have

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<v Speaker 1>negative interest rates. This was a huge theme of Davos

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<v Speaker 1>in the in the hallways, Bill grows a chronic nature

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<v Speaker 1>to negative interest rates in Europe. It redounds on the

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<v Speaker 1>US is well, is that something that goes to a

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<v Speaker 1>breaking point or do you have an optimism that e

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<v Speaker 1>c B in Europe as a political entity can extricate

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<v Speaker 1>itself from these negative interest rates that don't help savers. Well,

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<v Speaker 1>I think it will take time to observe, and haven't

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<v Speaker 1>we had that for the last three or four or

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<v Speaker 1>five years. And what we've found, certainly in in the

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<v Speaker 1>easy in Europe with the e c B, is that

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<v Speaker 1>these raids are just enough to keep growth above the

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<v Speaker 1>line and just enough, uh, you know, to keep inflation

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<v Speaker 1>at one to two percent, you know Japean For me,

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<v Speaker 1>Tom is the Petri dish because they've been doing this

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<v Speaker 1>for ten or fifteen years um. And you know, in

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<v Speaker 1>e commerce would have predicted that if the government was

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<v Speaker 1>buying all of the debt issued by its treasury, or

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<v Speaker 1>if the central bank was buying it, that that would

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<v Speaker 1>be quite inflationary, but it hasn't been. So the quandary

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<v Speaker 1>going forward is for other central banks, will this behavior

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<v Speaker 1>create inflation? And in my context, will this disadvantaged savers

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<v Speaker 1>to the point where the savings function and the investment

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<v Speaker 1>function is severely disrupted. We welcome all of you on

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<v Speaker 1>Bloomberg television in Bloomberg Radio worldwide, Bill Gross announcing his

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<v Speaker 1>retirement today from Janice Henderson. We're thrilled to bring him

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<v Speaker 1>to you on Bloomberg Surveillance. Bill Gross, I want you

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<v Speaker 1>to speak to the savers of America. You grew up Middletown, Ohio.

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<v Speaker 1>You went out to San Francisco to get as far

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<v Speaker 1>away from Tom Brady. Is its theoretically possible? And Bill Gross,

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<v Speaker 1>you're out in San Francisco. You did more duty in

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<v Speaker 1>Vietnam assisting the tet offensive, decorated for that, etcetera. And

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<v Speaker 1>there was a time there where savers could actually say,

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<v Speaker 1>if you go back to the seventies, it actually worked.

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<v Speaker 1>You go back to the eighties, it actually worked. I

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<v Speaker 1>want you to speak right now to our savers on

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<v Speaker 1>television and radio who haven't gotten a fair deal in

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<v Speaker 1>the Gilded Age. When did the savers finally get a

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<v Speaker 1>break and actually get a real return. Well, to be fair,

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<v Speaker 1>it's better now than it was a year or two

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<v Speaker 1>years ago. They have a chance to basically stay up

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<v Speaker 1>with inflation with their money market type of account. But um,

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<v Speaker 1>you know, for a long time it hasn't. And I

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<v Speaker 1>suspect going forward, if the FED stops here, you know,

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<v Speaker 1>there won't be the same advantage as you mentioned over

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<v Speaker 1>the past forty years, all the way back to when

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<v Speaker 1>I started in the early nineties seventies, And so what

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<v Speaker 1>does that mean we Ultimately it means to a saver

0:13:56.920 --> 0:14:00.360
<v Speaker 1>that you know, they fall behind. Pension funds fall behind,

0:14:00.480 --> 0:14:03.960
<v Speaker 1>individual savers fall behind in terms of retirement, education for

0:14:04.000 --> 0:14:07.520
<v Speaker 1>the kids, etcetera. And it's only been the stock market,

0:14:07.800 --> 0:14:11.600
<v Speaker 1>um that has been uh, you know, the savior in

0:14:11.880 --> 0:14:14.840
<v Speaker 1>terms of their necessity to build up an st egg

0:14:14.880 --> 0:14:19.040
<v Speaker 1>and many um individuals, as you know, uh, don't invest

0:14:19.080 --> 0:14:22.000
<v Speaker 1>in the stock market, and so um, yeah, you've got

0:14:22.040 --> 0:14:25.360
<v Speaker 1>to get the interest rate above the inflation rate in

0:14:25.440 --> 0:14:29.720
<v Speaker 1>order to give savers, pension funds, insurance companies okay, fighting

0:14:29.800 --> 0:14:32.440
<v Speaker 1>chance to to take care of their liabilities. So that's

0:14:32.440 --> 0:14:35.720
<v Speaker 1>a great summary. But do you anticipate that will occur

0:14:36.080 --> 0:14:38.280
<v Speaker 1>or is there a permanence to our guild Today? The

0:14:38.360 --> 0:14:41.120
<v Speaker 1>President is going to speak tomor nighted a state of

0:14:41.480 --> 0:14:44.440
<v Speaker 1>state of the Union with a wide perception across all

0:14:44.440 --> 0:14:47.800
<v Speaker 1>of politics. Did it's the very narrow haves and a

0:14:47.920 --> 0:14:51.280
<v Speaker 1>huge body of have nots that can't get a fair shake,

0:14:51.360 --> 0:14:55.200
<v Speaker 1>Whether fixed income or equity markets. Are we gonna shift

0:14:55.600 --> 0:14:59.320
<v Speaker 1>to some form of real return in fixed income and

0:14:59.360 --> 0:15:04.600
<v Speaker 1>indeed per cist with equity total returns? Yeah, I don't

0:15:04.600 --> 0:15:06.480
<v Speaker 1>think so, tom or or if it does, it will

0:15:06.520 --> 0:15:08.720
<v Speaker 1>take a long long time. I mean, what the FED

0:15:08.800 --> 0:15:11.280
<v Speaker 1>did in two thousand and five and six to raise

0:15:11.400 --> 0:15:15.040
<v Speaker 1>FED funds to five percent or three percent real or so,

0:15:15.560 --> 0:15:19.200
<v Speaker 1>it was to basically break the levered economy. Now, someone

0:15:19.280 --> 0:15:22.640
<v Speaker 1>suggests that we're less levered now in terms of banks

0:15:22.680 --> 0:15:26.240
<v Speaker 1>and capital, and we are, but the debt to GDP

0:15:26.400 --> 0:15:30.560
<v Speaker 1>is still at two and climbing, and around the world

0:15:30.560 --> 0:15:33.800
<v Speaker 1>it's even higher. And so, um, I think central banks

0:15:33.800 --> 0:15:35.920
<v Speaker 1>have to be cognizant of the fact that a certain

0:15:35.960 --> 0:15:39.520
<v Speaker 1>interest rate, you know, could break the global economy again.

0:15:39.560 --> 0:15:44.240
<v Speaker 1>And as that a realistic observation, yes, but it's also

0:15:44.720 --> 0:15:49.040
<v Speaker 1>a negative, as we've mentioned, for savings institutions to be

0:15:49.080 --> 0:15:52.000
<v Speaker 1>able to pay off their liabilities going forward. One of

0:15:52.040 --> 0:15:55.480
<v Speaker 1>these days, UM, you know, pension funds, large pension funds

0:15:55.480 --> 0:15:59.520
<v Speaker 1>will simply say, you know, three percent is not enough.

0:16:00.080 --> 0:16:03.280
<v Speaker 1>I've I've basically guaranteed five or six percent from my

0:16:03.840 --> 0:16:07.440
<v Speaker 1>uh pension retirees and uh, you know, we're gonna need

0:16:07.440 --> 0:16:09.440
<v Speaker 1>some welp here from the government. Well, we got every

0:16:09.440 --> 0:16:11.880
<v Speaker 1>other city out there, you name, the city's everything, but

0:16:11.960 --> 0:16:17.640
<v Speaker 1>fancy Newport beaches underwater. We've got serious actuarial assumptions in

0:16:17.720 --> 0:16:21.480
<v Speaker 1>America that have gone wrong. How urgent is that? And

0:16:21.640 --> 0:16:25.560
<v Speaker 1>when do the owners of pension, owners of people not

0:16:25.680 --> 0:16:29.840
<v Speaker 1>making the actual assumption, when do they say enough fixus.

0:16:29.880 --> 0:16:33.240
<v Speaker 1>I don't see that pressure out there, Bill, I don't

0:16:33.280 --> 0:16:35.640
<v Speaker 1>see it either, because it's a long term problem. In

0:16:35.760 --> 0:16:38.880
<v Speaker 1>politicians and even the public, you know, are our wont

0:16:38.960 --> 0:16:42.960
<v Speaker 1>to observe a long term problem. They tend to look

0:16:43.000 --> 0:16:45.240
<v Speaker 1>for the day as opposed to tomorrow. But I think

0:16:45.320 --> 0:16:48.400
<v Speaker 1>ultimately it is it is a problem. How might it

0:16:48.480 --> 0:16:52.160
<v Speaker 1>be solved? It might be solved by this melding of

0:16:52.680 --> 0:16:55.880
<v Speaker 1>fiscal and monetary policy that we've seen in Japan and

0:16:56.200 --> 0:16:59.520
<v Speaker 1>actually in the United States and elsewhere. What does that mean?

0:16:59.800 --> 0:17:03.680
<v Speaker 1>It means ultimately that the United States could you know,

0:17:03.840 --> 0:17:07.560
<v Speaker 1>issue dead to solve these problems. But you know, have

0:17:07.640 --> 0:17:10.600
<v Speaker 1>the central bank buy it back itself? And is that

0:17:10.640 --> 0:17:14.840
<v Speaker 1>a negative? Is that a potential harm to the account certainly,

0:17:15.000 --> 0:17:17.600
<v Speaker 1>But what we've seen in Japan is that so far

0:17:17.640 --> 0:17:20.960
<v Speaker 1>it's working so ultimately to me a long term forecast.

0:17:21.000 --> 0:17:23.640
<v Speaker 1>I used to be really negative on this about the

0:17:23.680 --> 0:17:27.480
<v Speaker 1>fifty or sixty trillion dollars of liabilities with social Security

0:17:27.480 --> 0:17:31.359
<v Speaker 1>and healthcare and so on. But the Fed can basically

0:17:31.520 --> 0:17:35.240
<v Speaker 1>buy it back. And if it's non inflationary, which is

0:17:35.280 --> 0:17:38.840
<v Speaker 1>the critical key, If it's non inflationary, then perhaps they

0:17:38.840 --> 0:17:41.560
<v Speaker 1>can pull a rabbit out of the hat. I don't

0:17:41.840 --> 0:17:44.440
<v Speaker 1>think so, but I think they might try. I'm Bloomberg

0:17:44.440 --> 0:17:46.960
<v Speaker 1>Television and Bloomberg Radio. William Gross with us today. He

0:17:47.040 --> 0:17:49.960
<v Speaker 1>retires from Janice Henderson. We're thrilled that he could join

0:17:50.040 --> 0:17:53.320
<v Speaker 1>us for this extensive and special conversation. Bill Gross, I

0:17:53.400 --> 0:17:55.080
<v Speaker 1>want to go back to the theory the moment I

0:17:55.119 --> 0:17:58.080
<v Speaker 1>got Marko. It's his book on My Desk from ninety two,

0:17:58.359 --> 0:18:00.520
<v Speaker 1>which is a bunch of fancy theory that you've written

0:18:00.560 --> 0:18:02.960
<v Speaker 1>about at the cf A Institute. I think of Abby,

0:18:03.080 --> 0:18:06.000
<v Speaker 1>Joseph Cohen and others that have written about the architecture

0:18:06.440 --> 0:18:09.400
<v Speaker 1>that all of our listeners and viewers rely on. Does

0:18:09.440 --> 0:18:13.000
<v Speaker 1>that architecture still work? Is the efficient frontier still there?

0:18:13.200 --> 0:18:15.320
<v Speaker 1>Does the sharp ratio still work? And all the other

0:18:15.400 --> 0:18:20.600
<v Speaker 1>mumbo jumbo the alchemy of the trade. Well, I think

0:18:20.640 --> 0:18:23.199
<v Speaker 1>it does, but it's much less than it used to

0:18:23.240 --> 0:18:28.240
<v Speaker 1>be because the financial markets have become so sophisticated with

0:18:28.520 --> 0:18:32.640
<v Speaker 1>UH you know, and not only advanced theories, but with

0:18:33.080 --> 0:18:36.800
<v Speaker 1>speed trading and UH computer iration and al goes and

0:18:36.880 --> 0:18:39.639
<v Speaker 1>so on. But um, I think it still works. But

0:18:39.760 --> 0:18:44.840
<v Speaker 1>to expect information and sharp ratios to be higher than

0:18:44.920 --> 0:18:48.840
<v Speaker 1>one or one okay for what we have done, I

0:18:48.880 --> 0:18:51.560
<v Speaker 1>think it's a little unrealistic, certainly in an era of

0:18:51.840 --> 0:18:54.400
<v Speaker 1>low interest rate. This is the critical folks. You've got

0:18:54.400 --> 0:18:57.520
<v Speaker 1>to understand this out at Pacific Investment Management Company, and

0:18:57.560 --> 0:19:00.359
<v Speaker 1>I'm sure over at Jane Anderson, Mr grow Hit on

0:19:00.400 --> 0:19:04.680
<v Speaker 1>his desk before the Bloomberg terminal a Monroe trader, which

0:19:04.720 --> 0:19:07.919
<v Speaker 1>is how he got his information advantage. Bill, Are you

0:19:08.040 --> 0:19:12.600
<v Speaker 1>suggesting that the information advantage for all of active management

0:19:12.680 --> 0:19:16.280
<v Speaker 1>equity and indeed fixed income as well, has to give

0:19:16.359 --> 0:19:20.040
<v Speaker 1>way to the wonderful John Bogel's passive investment? Please a

0:19:20.080 --> 0:19:23.879
<v Speaker 1>comment on active versus passive and the legacy you know

0:19:24.080 --> 0:19:29.560
<v Speaker 1>from Mr Bogel. Well, I'm still believing believer in active management,

0:19:29.600 --> 0:19:31.680
<v Speaker 1>and and Jack and I would go back and forth

0:19:31.720 --> 0:19:35.840
<v Speaker 1>on this. I've always been willing to acknowledge that indexation's

0:19:35.960 --> 0:19:39.000
<v Speaker 1>primary benefit and Jack would have said this too, you know,

0:19:39.400 --> 0:19:42.400
<v Speaker 1>is that it's low fees and and investors in some

0:19:42.480 --> 0:19:46.159
<v Speaker 1>cases don't pay any fees now for index funds, whereas

0:19:46.200 --> 0:19:49.680
<v Speaker 1>active management can charge fifty hundred and fifty basis points

0:19:49.760 --> 0:19:53.080
<v Speaker 1>depending on um, you know, the risk asset itself and

0:19:53.160 --> 0:19:56.840
<v Speaker 1>so um. You know, can active managers produce those types

0:19:56.840 --> 0:20:00.960
<v Speaker 1>of retains to compensate for those fees? I think with

0:20:01.200 --> 0:20:04.000
<v Speaker 1>interest rates as low as they are, and remember Tom,

0:20:04.080 --> 0:20:08.600
<v Speaker 1>that low interest rates basically or the foundation for returns

0:20:08.680 --> 0:20:13.360
<v Speaker 1>for all other assets absent you know, euphoria, which we've

0:20:13.440 --> 0:20:16.760
<v Speaker 1>we've seen certainly in the past few years. Um, you know,

0:20:16.880 --> 0:20:22.040
<v Speaker 1>the the alpha the information ratio of the sharks ratios. Um,

0:20:22.320 --> 0:20:24.800
<v Speaker 1>they're going to be much less than they were. And

0:20:24.920 --> 0:20:28.280
<v Speaker 1>if they are, then active managers have got to lower

0:20:28.320 --> 0:20:32.600
<v Speaker 1>their own fees and recognition of their inability to return

0:20:33.240 --> 0:20:36.080
<v Speaker 1>a proper rate of return to their investors. On the

0:20:36.160 --> 0:20:38.360
<v Speaker 1>time that I've got left to you with Bloomberg Television

0:20:38.400 --> 0:20:41.160
<v Speaker 1>and Bloomberg Radio today, I want to touch upon your philanthropy.

0:20:41.440 --> 0:20:43.680
<v Speaker 1>Do you still own any stamps or if you sold

0:20:43.720 --> 0:20:48.000
<v Speaker 1>it off for medical research. I still got. I've got

0:20:48.040 --> 0:20:51.480
<v Speaker 1>six auctions going forward. I've got you know, the bulk

0:20:51.520 --> 0:20:53.800
<v Speaker 1>of my stamp collection is still to go, and it's

0:20:54.119 --> 0:20:57.960
<v Speaker 1>it's a little tier, I guess every auction that I have.

0:20:58.160 --> 0:21:01.000
<v Speaker 1>But you know, in the past ten years since I

0:21:01.080 --> 0:21:04.879
<v Speaker 1>started these functions, you know, probably forty five to fifty

0:21:04.920 --> 0:21:12.880
<v Speaker 1>million dollars to philanthropic institutions, including a a Smithsonian stamp

0:21:13.960 --> 0:21:17.000
<v Speaker 1>exhibit and post office in Washington, d C. Which is

0:21:17.040 --> 0:21:19.960
<v Speaker 1>lovely and so uh. You know, there's a lot more

0:21:20.000 --> 0:21:22.880
<v Speaker 1>to come. I still have a few left. I may

0:21:23.080 --> 0:21:26.359
<v Speaker 1>keep one or two, uh in the next few years.

0:21:26.600 --> 0:21:28.880
<v Speaker 1>One final question, if I can, Bill Gross, I would

0:21:28.920 --> 0:21:32.200
<v Speaker 1>note the uh, the discussion that Gronk may retire from

0:21:32.200 --> 0:21:34.800
<v Speaker 1>the New England Patriots. I guess Edelman will go forever.

0:21:35.240 --> 0:21:38.679
<v Speaker 1>But there's this guy Tom Brady, who you have clearly

0:21:38.720 --> 0:21:42.960
<v Speaker 1>shown a lack of affinity for over the years. You're

0:21:42.960 --> 0:21:45.879
<v Speaker 1>not going out on top after a difficult track record

0:21:45.880 --> 0:21:49.879
<v Speaker 1>at janis uh Anderson, Bill Gross, do you suggest that

0:21:50.000 --> 0:21:52.760
<v Speaker 1>Mr Brady take the high road and retire today and

0:21:52.800 --> 0:21:58.160
<v Speaker 1>go out strong? Now I've based upon last night's performance.

0:21:58.160 --> 0:22:01.840
<v Speaker 1>I mean Tom eats right, he uh, he works out right.

0:22:01.960 --> 0:22:04.040
<v Speaker 1>He has a belief that he can keep on going

0:22:04.080 --> 0:22:06.840
<v Speaker 1>for another few years. And as a quarterback, um, he

0:22:06.920 --> 0:22:08.840
<v Speaker 1>doesn't need to be fast, he needs to have a

0:22:08.880 --> 0:22:11.440
<v Speaker 1>strong arm. So um, you know, let the guy go

0:22:11.600 --> 0:22:17.240
<v Speaker 1>and uh evidently uh and perhaps going forward he'll be

0:22:17.359 --> 0:22:20.480
<v Speaker 1>defeated in a super Bowl and cash and his chips.

0:22:20.520 --> 0:22:22.320
<v Speaker 1>But he's got a lot of rings. And like I said,

0:22:22.680 --> 0:22:24.639
<v Speaker 1>I've got a lot of rings too. I'm very proud

0:22:24.680 --> 0:22:28.960
<v Speaker 1>of total return concept. I'm very proud of the you know,

0:22:29.040 --> 0:22:33.760
<v Speaker 1>the innovative assets that we were able to move into

0:22:33.840 --> 0:22:38.760
<v Speaker 1>like mortgages and financial futures and UH tips and so on,

0:22:39.200 --> 0:22:43.760
<v Speaker 1>which was really the basis for performance in PIMCO. And

0:22:43.800 --> 0:22:46.239
<v Speaker 1>so I've got a great career. I'm proud of it.

0:22:46.440 --> 0:22:50.120
<v Speaker 1>Uh the last few years. UM, you know, we'll we'll

0:22:50.800 --> 0:22:55.320
<v Speaker 1>wipe those off the magic slate and go forward having

0:22:55.359 --> 0:22:58.280
<v Speaker 1>fun and uh enjoy life. Bill gross thank you so

0:22:58.359 --> 0:23:01.399
<v Speaker 1>much for these comments this morning on UH philanthropy and

0:23:01.400 --> 0:23:04.440
<v Speaker 1>there of course on active passive and as well on

0:23:04.840 --> 0:23:08.159
<v Speaker 1>the state of the economics, finance and investment that we

0:23:08.200 --> 0:23:12.119
<v Speaker 1>all live. Mr Grosser's with Janice Henderson we greatly appreciate

0:23:12.160 --> 0:23:20.600
<v Speaker 1>as a tendency. Thanks for listening to the Bloomberg Surveillance podcast.

0:23:20.960 --> 0:23:25.879
<v Speaker 1>Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or

0:23:26.040 --> 0:23:30.359
<v Speaker 1>whichever podcast platform you prefer. I'm on Twitter at Tom

0:23:30.440 --> 0:23:34.280
<v Speaker 1>Keane before the podcast. You can always catch us worldwide.

0:23:34.800 --> 0:23:35.879
<v Speaker 1>I'm Bloomberg Radio