Pimco's Bill Gross Gets Praised, Rebuffed for His Views on War By GREGORY ZUCKERMAN Staff Reporter of THE WALL STREET JOURNAL As the world's largest mutual-fund manager, Bill Gross carries a lot of weight in his musings on the economy and the markets. But what about his views on war with Iraq? In a letter to investors last week, Mr. Gross, overseer of the nearly $70 billion-in-assets Pimco Total Return Fund, veers far afield of his usual expertise, the bond market, to an extent that has some investors and Wall Street traders agape. In particular, he goes further than any other Wall Street heavyweight in arguing against a U.S. war, saying that by invading Iraq "we may lessen our vulnerability, but lose a piece of our soul in the process." While Mr. Gross has long been famously outspoken -- often writing investor letters that stray from the market mainstream -- his latest piece takes it to another level, full of eclectic references to Virginia Woolf, Alfred Lord Tennyson and character Father Guido Sarducci. The war discussion, in particular, has traders talking -- particularly those who support a move against Iraq. "He has a right to speak out, even though he's wrong," says Stan Jonas, managing director at Fimat USA, the derivative-trading division of French bank Societe Generale. "It's a feel-good piece from someone who lives in California, which isn't a particularly risky place." But Mr. Gross, 58 years old, also has won some praise for his views, in part because they buck the industry's conventional wisdom. And as the man atop the biggest fund of them all, he is widely seen to have a longer leash to air his views. "He's always a bit out of step and unconventional," says Tim Medley, a Jackson, Miss., money manager who has directed client money to funds managed by Mr. Gross for 12 years and supports military action against Iraq. "This just makes him more human." Mr. Gross, chief investment officer of Pacific Investment Management, or Pimco, in Newport Beach, Calif., saw combat in Vietnam and says the experience profoundly colored his views. He says he regrets not having the "courage" to speak out against that war and decided to do something publicly this time. "No more Peter Lynch of bonds, I wanted to be the Sean Penn of bonds," he said in an interview, referring to the actor who last year controversially visited Baghdad as part of a fact-finding mission. In his March 2003 market commentary, Mr. Gross acknowledges that the U.S. has a right to defend itself, and that Iraq has failed to comply with United Nations' resolutions demanding it dismantle its weapons program. And he calls Iraqi leader Saddam Hussein a "near madman." But he says that doesn't justify waging war. "I know the arguments -- I'm even temporarily persuaded by them during emotional speeches such as Bush's State of the Union," he wrote. "The question is how far we can go in that defense and in the process what cost to the American spirit and the American soul." Mr. Gross says a war against Iraq is unwise because it would be a sign that the U.S. is abusing its position as the strongest world power and could lead to more action. "Absolute power corrupts," he says, and with a war against Iraq, "we may be crossing a thin line." Mr. Gross says he spent days writing up his views, unsure whether he should send them out. Before airing his thoughts, he circulated them to senior executives at Pimco, including the firm's chief executive officer, Bill Thompson. When he got the thumbs up, Mr. Gross posted the piece on the firm's Web site. An indication of the heated reaction he has already stirred up was -- as of Monday morning -- the more than 100 e-mails he received -- mostly in favor of his piece and his right to speak out. Others, though, have told him to stick to investing, or even worse. "Some people are ticked off, some are telling me to mind my own business," he says. Wall Street's more cynical traders sneered that Mr. Gross was "talking his book," or taking a public position that could help his portfolio. In fact, he has been shifting Pimco away from U.S. Treasurys, which usually do best in a war, and into more corporate bonds, which could suffer in any attack. Mr. Gross blanched at the criticism, saying his portfolio isn't positioned against a war. "That's beyond the pale," he says about those suggestions that he's motivated by his returns. "Hopefully over the years I've proved to most people that while I talk my book, I am open and honest about where markets are headed. There's no deception involved." Though Mr. Gross spends the second half of his letter talking about why bonds could stay strong, despite the war, that's not the part of the letter that people are talking about. "I can't remember reading anything that far afield from him for some time," says Eric Jacobson, senior analyst at Morningstar Inc., the Chicago-based fund tracker. "For anyone else it would be a very risky thing. He's a money manager speaking to a pretty conservative audience." As the bear market for stocks enters its fourth year, and bonds continue to rack up gains, Mr. Gross's stature has soared on Wall Street. The Pimco Total Return Fund is up almost 2% so far this year, and the fund has averaged gains of more than 8% in the past five years, besting most of the competition in the stock and bond markets. The returns, and surge of money into his fund, in turn seem to have emboldened him. In the past year, Mr. Gross has lashed into the management practices of General Electric Co., predicted the Dow Jones Industrial Average would drop to 5000 (it closed at 7837.86 on Monday) and said investors should prepare for the "hegemonic decline" of the U.S. "He's got the soapbox now," says Paul Goldstein, who runs Goldstein Capital in New York. "The world wants to hear what he has to say."
----- Original Message ----- From: "Carl Remick" <carlremick at hotmail.com> To: <lbo-talk at lists.panix.com> Sent: Wednesday, March 05, 2003 9:04 AM Subject: PIMCO's Gross speaks out against Iraq attack
> [The Wall Street Journal had better coverage of this story yesterday than
> the NewsMax article below, but I don't have online access to the WSJ.
Among
> other added details, the WSJ article noted that Bill Gross "saw combat in
> Vietnam and says the experience profoundly colored his views. He says he
> regrets not having the 'courage' to speak out against that war and decided
> to do something publicly this time."]
>