2010

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Bill Gross

If you ask a question of who is today one of the best traders in the world market, fixed income, the majority of responses, most likely, will sound the same: Bill Gross (Bill Gross). Bill Gross is often called «the Warren Buffett of bonds of peace» ( «the Warren Buffett of the bond world»). As the founder and managing director of one of the world’s largest asset management companies — Pacific Investment Management Company, or PIMCO, — Bill Gross manages the $ 96-billion fund PIMCO Total Return Fund (PTTAX), as well as several smaller-sized funds. Total Return is the largest of the world bond funds, and the fifth-largest mutual funds. But not so much the size of Total Return, as excellent results, almost always demonstrated by Bill Gross, since its inception in 1987, making it operates one of the most visible stars on the financial «sky» of America and the world. Over the past ten years the average yield of the Fund amounted to approximately 8,3%. Not surprisingly, the New York Times called the Gross «the most prominent of American investors in bonds.» In December 1996 he was the first among portfolio managers has been introduced in the Hall of Fame Society for analysts on fixed income instruments (Fixed-Income Analyst Society, FIASI) — for the great achievements in the field of financial analysis and portfolio management. Agency Morningstar, tracking mutual funds, twice — in 1998 and 2000. — Bill Gross prize awarded Manager of the Year in the field of fixed income «(» Fixed-Income Manager of the Year «), where he became the first to receive this award more than once. Morningstar noted that Gross has earned this distinction, demonstrating excellent investment skill, the courage to go against general opinion and commitment to the interests of shareholders needed to achieve outstanding results in the long term. » In December 2001, SmartMoney magazine included Bill Gross among the 30 most influential representatives of the investment community. Bill Gross has written two books on investment. In 1997 came the work of «Everything you’ve heard about investing — not true!» ( «Everything You’ve Heard About Investing Is Wrong!»), And a year later — Bill Gross on investing «(» Bill Gross on Investing » ). He is also the author of numerous articles on the bond market, a frequent speaker at various media and publishes a monthly investment forecast, which can be found at PIMCO (www.pimco.com). In addition, Bill Gross is a member of the Los Angeles Society of Financial Analysts (Los Angeles Society of Financial Analysts). Bill from those who like to fight and win, displaying a rare faith and perseverance. One day he ran six marathons in six days, and in 2003 reached the final round of a golf tournament AT & T Pebble Beach National Pro-Am. Still, the born winner said that he is still surprised at the way, having also reached the position of the largest bond manager in the world. William Hunt Gross (William Hunt Gross) was born April 13, 1944 in the small town of Middletown, Ohio, the main role in life is to play steel company American Rolling Mill Co., Armco. Father, Bill Gross, Sewell (Sewell «Dutch» Gross) worked in this company as a sales manager, his mother Shirley was a homemaker. The family had two children: son, Craig a year older than Bill (now the owner of the company’s distribution of food in California) and daughter Lin eight years younger. In 1954, Gross Sr. Armco was transferred to San Francisco to promote the company’s fast-growing markets of California and Japan. Bill was amazed the size of this city, which seemed to him «another universe. In 1962, Bill Gross received a scholarship from the University of Duke University in Durham, North Carolina. According to Gross, he went to Durham, with no idea what to study, and chose psychology because he was always interested in how the human mind. With the growth of six feet, he hoped to become a player in the basketball team Duke Blue Devils, but here it is expected soon disappointed, and he had to be content with playing a college team. But Bill Gross has taken an active part in the fraternity Phi Kappa Psi, where he earned the nickname «Hatty» ( «cap») for the cap blond hair shoulder-length. Andrew Ashe (Andrew Ash), also a former member of the Phi Kappa Psi, recalls that in those days, Bill Gross is constantly inventing various schemes for earning money. He once organized a tote, and acted as a bookmaker, earning about $ 100, the second time formed a team of three people to play poker, they called the «Syndicate», hoping that by playing together and distributing risk, players can increase their income. Sam Bill Gross believes that his financial career began in Las Vegas at the bar for a game of blackjack. For the first time he faced the casino in the summer of 1965, laboring operator of gaming machine in one of the towns of Nevada for $ 5 per hour. Passion came very quickly, but that summer, Bill Gross, he did not play. To save money, he slept in a car wash in the lake and shaved at the petrol station. Only in the spring of next year, he first tried to play, with $ 50, and lost them all, making a bet, because he did not know the rules. » Returning to college, Gross bought a book called «Victory dealer» ( «Beat the Dealer») — Bestseller Edward Thorpe (Edward Thorp). This professor of mathematics at the University of California perfectly mastered the techniques of blackjack, using a computer calculated the best card strategies, and then began to apply these strategies to invest in shares, creating a hedge fund. Bill Gross has been fascinated by the ideas of Thorpe and as a training played thousands of parties against himself. After graduating college in May 1966 and received a bachelor’s degree, he went to Las Vegas with a pocket $ 200, settled in the Indian Hotel, where the room cost $ 6 per night and was playing 16 hours a day. Four months later, $ 200 turned into $ 10000. It was his first real money. Now, becoming one of the best traders in the world, Bill Gross argues that the brief period of professional blackjack was crucial to his career as gambling are very much in common with the management of cash. And there, and here the goal is to properly allocate risk, to calculate the next moves and avoid acrimony, focusing on rates. All this is only a game, «says Gross, and to survive in this business can not afford to lose courage in front of a considerable sum: the fear — and awed — the dollar clouds the ability to judgment. As the financier in an interview, Las Vegas has taught him that he «can defeat the system using a combination of hard work, ideas that still no one came to mind and the ability to make their daily routine, which others will undoubtedly find tedious. Soon after Las Vegas, in October 1966, Bill Gross for a period of military service, which lasted three years. He wanted to become a fighter pilot, but has not shown the necessary qualities, and was sent an assistant chief engineer on a destroyer stationed off the coast of Vietnam. According to Bill Gross himself, either before or after he had occasion to deal with the case, to which he would be less capable. Discharged at the end of 1969, Gross used his card to gain training in business school for university graduates (Graduate School of Business Administration) University of California at Los Angeles. By the time he read the second book, Thorpe called «Winning the market» ( «Beat the Market»), published in 1967, and dreamed of a career, developing a strategy of investing in the stock market. Received in 1971 a Master’s degree Business Administration, Bill Gross has sent more than 100 resumes in firms engaged in investment, but at first it was all to no avail. The stock market then experienced hard times. In the end, the mother of the Gross noticed in the newspaper Sunday Los Angeles Times ad that an insurance company Pacific Mutual Life Insurance Co. seeking securities analyst with an annual salary of $ 11000. Bill Gross got the job, but it did not meet his expectations. Rather than analyze the action, he «clipped coupons, ie involved in repayment of the interest payments on Treasury certificates, in the department of bonds. But here he met James Muzzy (James Muzzy) and William Podlichem (William Podlich), and three of them persuaded the Pacific Mutual trust them to manage the bond assets of $ 5 million, Bill Gross, manager of the new fund has, while Muzzy held positions in marketing and Podlich — administration. According to Muzzy, the success of their trio was due, primarily, the fact that everyone was in the right place and brought to a common cause something of their own, different from the contribution of others. Colleagues Gross at the beginning of joint work, it was clear that he most has the qualities necessary for managing the portfolio, as can quickly and without hesitation to make decisions. Cooperation was strong: currently Muzzy is one of the leaders of PIMCO Global Advisors, a Podlich performs advisory duties in PIMCO Managing Director. Begin to manage fund, Bill Gross quickly realized that he would never make more money on the bonds, if it is just «clip coupons. Need of capital gains earned in addition to interest: total revenue. He was supposed to be a trader, not an investor in the style of «buy and hold». Soon after Bill Gross’s methods attracted the attention of Walter Jerky (Walter Gerken), head of investment division of Pacific Mutual Life Insurance. In 1973 he persuaded Jerky Southern California Edison Co., Now the second largest utility company in California, trust Grosso bond assets of $ 10 million fund So Bill Gross was the first client paid him. In 1975 and 1976. annual profit of almost 18%, and this success has brought a second client — a telecommunications company AT & T Corp. By 1977 PIMCO assets under management reached $ 400 million In the years 1980-81. When the bond market was in decline, Bill Gross, despite the outrage of clients, began to conduct trades in higher-yielding securities such as certificates of federal agency Ginnie Mae (Government National Mortgage Association). Most money managers then thought such investments too risky, but Gross believed that Ginnie Mae securities will go up as soon cut interest rates — and he was right. In 1987, when PIMCO assets increased to $ 20 billion, Bill Gross has opened its main funds — Total Return Fund. Gross Fund’s success, their high profitability and continuous growth in assets significantly increased the attractiveness of fixed income securities to investors of mutual funds. As noted by Mike Green (Micah Green), President of the Bond Market Association (the Association of the bond market), the name of Bill Gross, perhaps, might be considered symbolic in terms of awakening interest in the bond market. » On the other hand, Gross is able to impose that market their own «rules of the game, because his actions could undermine the position of the largest U.S. companies. For example, in March 2002, he sold all the assets of the PIMCO in commercial paper (promissory notes) GE Capital, the finance unit General Electric (GE), the amount of $ 1 billion, claiming that the company is exposing itself to unnecessary risk because of too much short-term debt. Received «severe reprimand» by Bill Gross, GE «capitulated», by replacing a large part of bills over the long-term commitments, after which the PIMCO again started to buy its securities. Its the best investment decision Bill Gross took in 2000: to buy treasury bonds before the government, have additional funds through a budget surplus will begin to repay them. For several weeks, traders Gross bought on his behalf treasury bonds worth $ 5 billion by year-end bond fund PIMCO earned on rising prices of securities purchased about $ 200 million As for the worst solution, it was the purchase of the 2001 bond energy company Enron, around which soon there was a scandal in connection with financial fraud, it is depreciating her paper. However, such «punctures» in practice, Bill Gross met very rarely. There are many companies that have positive averages in the long run sometimes mask the sharp fluctuations in yield, but PIMCO is not included in their number. Bill Gross manages the largest in the U.S. bond funds from the office in Newport Beach, California, located thousands of miles from Wall Street. His working day begins long before the arrival in office. The first thing he does, standing about half-past four in the morning — is monitoring the current situation in the markets, including Europe and Japan, and the view of economic reports that allow you to judge the economic situation that affects, in turn, the prices of bonds. Bill Gross believes that the portfolio manager for the critical factor is the lack of noise and the reduction of information flow to a minimum. He does not read e-mails, but really necessary, takes the phone, only three or four times a day (not counting his wife’s calls). His motto is: I do not want to be connected, I want to be disconnected: «My motto is, I don’t want to be connected — I want to be disconnected.» Interestingly, the most important and valuable part of the working day is Bill Gross, in his words, not on the trading floor. Every day, between half of the ninth and ten in the morning, he visited a health club near the office, where yoga. Gross argues that many great ideas, including his best decision of 2000, referred to above, came to him when he literally stood on his head — an office away from the hustle and POS terminals. PIMCO Managing Director is a permanent supporter of the so-called top-down approach «(top-down investing), at which the investor is concerned primarily with macroeconomic trends, then proceeds to branch analysis and then makes a choice of specific sites for investment. In an article published in 2005 in the Financial Analysts Journal, Bill Gross points out that the success of investments in the long term, whether it is stocks or bonds, depends on two main factors: the ability to formulate a «secular» (secular, ie, secular, Long-term) forecast and ensure the «correct structural composition» of the portfolio. «Secular» outlook, according to Gross, should cover demographic and political trends, structural changes in the U.S. and world economy for the period of three to five years. This avoids the destructive «emotional shock caused by fear or greed.» It is these emotions cause investors to commit serious errors when the market is experiencing «irrational» periods. Relying on long-term prognosis, Bill Gross defines duration of the portfolio, and then makes changes in its structure depending on short-term trends. Regarding the structure of the portfolio, then, according to Gross, it includes the formation of principles designed to obtain higher yields than can be expected at a given level of risk. As examples of institutions, investment structure which is effective over time, Bill Gross leads banks and insurance companies. First take short-term loans and issuing long-term loans, creating interest spread, almost guaranteeing them profits in the long term. The latter attracted a steady flow of funds, being able to roughly calculate their future liabilities. This approach also allows us to generate reliable income. An example of such a financial structure is Berkshire Hathaway, controlled by Warren Buffett (Warren Buffett). Experts say that over time, Bill Gross in the management of the assets transferred to the use of increasingly sophisticated instruments, demonstrating the freedom of thinking and a willingness to take risks associated with interest rates, currencies, highly profitable securities and emerging markets. All this sharply distinguishes it from most other fund managers. According to Eric Jacobson (Eric Jacobson), an analyst from the agency Morningstar, Bill Gross does everything complicated way «and» more aggressive than most portfolio managers.

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