Thursday, December 10, 2009

PIMCO's 'Bond King' likes utility stocks

From Charts and Coffee:



Unlike the rest of the market, utilities have been moving up nicely over the past month. A little breakout today....MORE

From the Financial Post:
You can’t help but like Bill Gross. He’s a self-made billionaire who scored his first big win playing blackjack in Vegas after he graduated from Duke University. He’s a Vietnam veteran who does yoga and litters his monthly investment notes with references to rock classics. He is also, of course, the head of Pimco Total Return Fund, a bond fund that is on the verge of becoming the biggest mutual fund in history.

So should you follow this brilliant, charismatic investing genius and put your money into bonds? Let me confess that I’m of two minds. I always make a point of reading his monthly commentary, available on the Pimco investing site. But I don’t think that Gross has invented a magical cash machine. In fact, if you take Gross at his word, you have little reason to invest in his core competency right now.

Gross’s biggest virtue over the years has been that he’s a bond guy, not the usual stock market blowhard. During the past decade, while a previous generation of investing superstars impaled themselves on the jagged edges of an overvalued stock market, Gross was in the right asset class at the right time. Anyone who preached the virtues of bonds over the past decade would have appeared equally prescient and many did. The economists Lacey Hunt and Gary Shilling are just two examples of other bond bulls who called things equally right.

Their success does not diminish Gross’s—it merely suggests that the case for bonds was discernible to anyone who was smart enough to free themselves from the stock-loving orthodoxy of the late 1990s. To his considerable credit, Gross was there early and with impeccable logic. Back in 1997, he explained why stocks looked overvalued and put forward both the quantitative and sociological reasons for buying bonds in a little noticed book with the charming title Everything You’ve Heard About Investing is Wrong. While everyone else was treating bonds like radioactive waste, he was buying truckloads of the stuff.

Gross’s problem these days is that everyone agrees with him....MORE
That is until yesterday's 10-year and today's 30-year auctions.