Bill Gross on stamps, leverage and giving it all away

  • By Noah Schumacher

  • June 28, 2018
  • 1:06 am BST

The eccentric, mischievous personality of bond king Bill Gross is certainly mirrored in his financial moves – and perhaps what he finds to be his best alternative investment and what his financial crystal ball predicts are the most interesting insights yet into this mega-successful, maverick investor.

According to Forbes magazine, the former Pacific Investment Management Company (PIMC) founder has a net worth of a whopping $2.5bn despite a well-publicised and costly divorce that was finalised in late 2017. His net worth is hardly surprising though – PIMC’s Total Return Fund established itself as one of the biggest mutual funds in the world under Gross’ management. These days he manages a lesser fund at the rival Janus Capital Group, now called Janus Henderson following a merger with the Henderson group in 2017. Gross controversially left PIMC for the latter in 2014.

Gross fans and investors alike eagerly devour his monthly newsletters which are full of sage CFD trading advice but indulge Gross in his digressive ramblings, covering everything from his pet hates to his pet loves, including an enduring infatuation with his female cat called Bob.

Gross’ latest thoughts on the market

In March, Gross explained his latest market thoughts and trading tips in his newsletter. Gross wrote that when it came to investing markets, spanning both bonds and stocks, the “beast” was leverage. He went on to concede that while it was hard to say with precision when enough was enough, we should never lose sight of the lesson of the great depression. The lesson he speaks of is that “stability will eventually lead to instability” as higher prices lead to a market buoyancy based on false expectations, which eventually leads to a retreat or burst bubble when market reality sets in.

Gross says that the market must rebalance itself. He has claimed that an eventual normal rebalancing is necessary for financial institutions and smaller savers to continue playing their important parts in capitalist systems. This, he says, can happen through a phased re-entry back toward privately influenced interest rates. He adds that the current limit, he thinks, is 2% funds by the Federal Reserve in a world of 2% inflation.

Gross’ suggestion to investors? Look for approximately 3% on the 10-year for the 2018 balance. He says this will compel UK Gilts and German Bunds to higher yields.

Gross puts his stamp on it

So, what is the bond king’s favourite investment? Gross is an avid rare stamp collector. His is no ordinary collection though – he is estimated to have spent between $50m and $100m on it. And as he has sold portions of it for up to four times as much, this has proven to be no amateur hobby, with Gross labelling his returns as being much more profitable than investing on the stock market.

Stamps are certainly not considered mainstream but are rather alternative in the US. However, in China, almost 65% of millionaires are reported to invest in rare stamps. These offer steady returns, as they have almost no links to traded securities. They are also not affected by the moods of the market.

It all comes down to philanthropy

In the final analysis, though, it all comes down to philanthropy. Gross says that ultimately this is what success has come to mean to him – not hoarding cash, but giving it away to worthy causes that will make a difference and leave a legacy long after he is gone. Among his causes are tertiary education, stem cell research, medical emergency kits, Doctors Without Borders and Alzheimer’s research. Perhaps the adage then that to give for the sake of giving and not expecting reward, is reward itself – both literally and in a manner of speaking.