Pimco votes ‘yes’ on mortgage debt
Filed under: Forecasts, Economic data, Housing
Perhaps the most well regarded bond manager in the country, Bill Gross of Pimco, is making a huge gamble on mortgage debt. The Pimco Total Return Fund, which invests $130 billion, has tripled its exposure to mortgage debt instruments.
According to the FT, Gross is counting on the US government to partially bail out the housing industry. He told the paper that “his decision to raise exposure to mortgage debt in recent months was based on the US government’s implicit guarantee of Freddie Mac and Fannie Mae, the government-sponsored mortgage agencies.”
Of course, counting on the government to do anything is a bit risky, but Gross is probably making a good bet that the US won’t let the housing situation slide much more than it has already. The danger to the entire economy is too great.
Gross could be right, and, if he’s, Pimco investors stand to make massive returns on the fund.
Douglas A. McIntyre is an editor at 247wallst.com.
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