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Strategies & Market Trends : Take the Money and Run -- Ignore unavailable to you. Want to Upgrade?

To: Original Mad Dog who wrote (11979)	7/31/2002 10:01:09 PM
From: Jorj X Mckie	Respond to of 17639

clearly biased propaganda.

To: Original Mad Dog who wrote (11979)	7/31/2002 10:25:27 PM
From: Jorj X Mckie	Respond to of 17639

Pimco giant Bill Gross sours on corporate bonds By Jonathan Stempel (Adds details) NEW YORK, July 31 (Reuters) - The world's most powerful bond mutual fund manager has soured on corporate bonds, and worries that companies' inability to affordably raise cash threatens the health of the U.S. economy. ADVERTISEMENT Bill Gross, manager of the $58.6 billion Pimco Total Return fund, had since late last year bulked up on corporate bonds issued by AT&T Corp. (NYSE:T - News) and Sprint Corp. (NYSE:FON - News), among others, on signs the U.S. economy might emerge from recession. Corporate bonds have, however, suffered this year, and turned in an abysmal July following WorldCom Inc.'s (Other OTC:WCOEQ.PK - News) $3.85 billion accounting bombshell and bankruptcy. Bond sales have slowed, big rating downgrades of telecommunications and energy companies are rife, trading activity is thin, and hedge funds are selling bonds aggressively, portfolio managers say. Prices have sunk and yields, which move in the opposite direction, have risen. Gross, a managing director at Pacific Investment Management Co. in Newport Beach, California, says he bought corporate bonds too soon, and got singed. "We ... make mistakes -- witness our premature entry into energy and telecom bonds in order to cyclically increase our corporate debt exposure," he said in his monthly investment outlook, completed before Tuesday and posted on Pimco's Web site. "We at least have the common sense to recognize a long-term sucker's bet when we see one. The $3.9 trillion corporate bond market, he said, "is close to full tilt, half frozen.... It's just fair warning that with a tilting corporate bond market, the economy itself may not be far behind." Investors who poured $7.8 billion of cash into Total Return between January and June, making it the top selling U.S. mutual fund this year according to Financial Research Corp. of Boston, may be feeling a little pinched. The fund is up 4.09 percent this year, according to fund information service Morningstar Inc. While that outperforms 77 percent of its peers, the fund's investors are used to outperforming 97 percent and more. And over the last three months, the fund has lagged 56 percent of its rivals. TOO EARLY Gross worried that corporate bond yields may need to rise because lending banks have changed from being risk takers to risk avoiders. "The banks' retreat from the corporate lending arena has left a void that will take time and higher yields to fill," he said. He said he still likes the investment-grade bonds of Sprint, the No. 3 U.S. long-distance phone company, though their price had fallen to 60 cents on the dollar from 95 cents. Sprint's 10-year notes rose to about 76 cents on Tuesday after the company said it obtained a $1.5 billion bank credit line. Though "double-A" consumer products giants Gillette Co. (NYSE:G - News) and Procter & Gamble Co. (NYSE:PG - News) this week sold bonds yielding less than 4.4 percent, Gross said many lower investment-grade companies would have to shell out double-digit yields to sell bonds, while even some high-rated companies may have trouble selling. This, he said, might sour financial markets and hurt the U.S. economy, making it harder for Federal Reserve Chairman Alan Greenspan to maneuver, with short-term interest rates already at a 40-year low. "One day, corporates will become a decent long-term bet despite their structural negatives but we'll need higher yields before that day arrives," said Gross. "When it does, Pimco will be back in the water." Message 17821262