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Housing

Pimco Bets The Farm On Mortgage Debt

Photo of Douglas A. McIntyre
By Douglas A. McIntyre Published

The Pimco Total Return, run by highly-worshiped bond manager Bill Gross, is putting most of its chips into mortgage debt. The fund, which manages $130 billion, is counting on the federal government to make the bet work.

According to the FT "Mr Gross said 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."

Gross is usually right, but, with his exposure to mortgage-related paper tripled over that last few months, he could be facing his Waterloo. The housing crisis in the US could still get much worse. Recent data shows that housing prices are still falling. Consumer ability to pay housing debt is being hurt by rising costs of food and fuel and unemployment, which is edging up. A number of subprime ARMs will reset through the summer.

Pimco has been an unusually good performer over the last decade. Nothing good lasts forever.

Douglas A. McIntyre

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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