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Strategies & Market Trends : The Residential Real Estate Crash Index
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From: ChanceIs11/5/2007 9:22:40 PM
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Pimco's Gross: Subprime market a “$1-trillion problem”

Reuters

November 5, 2007 at 12:19 PM EST

NEW YORK — The Federal Reserve will have to cut its federal funds target rate to prevent a dramatic fall in housing prices in the wake of the subprime mortgage meltdown, the manager of the world's biggest bond fund said Monday.

The turmoil in the risky subprime mortgage-market is a “$1-trillion problem ... There are $1-trillion worth of subprimes and Alt-As and basically garbage loans,” said Bill Gross, chief investment officer of Pacific Investment Management Co. or Pimco, on CNBC Television.

Gross said he expects $250-billion of subprime and Alt-A mortgage loans to default and those defaults will fall to the balance sheets of investment stalwarts such as Merrill Lynch and Citigroup.

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Personal comment: If you are the "Bond King" you might be long just a few bonds. So when rates go down, bond prices rise. So if you want to see your bond portfolio increase by say $100 billion, it might pay to advertise that the economy could suck $1 trillion unless rates get cut - tomorrow.

Of course, I think that the economy will suck $1 trillion even if they do cut. Frankly I think that the best thing is to raise rates.
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