Pimco's Bill Gross: queen of corporate welfare

I must admit that prior to the widespread recognition of the massive pyramid scheme masquerading as Wall Street (“financial crisis”), I never got Bill Gross.

He was either incredibly smart and lucky or else incredibly stupid and lucky – I couldn’t discern which. His infamous, trade-execution method – the “Pimco drive-by” – is moronic on its face. Surely Gross couldn’t be such a rank amateur as to pull that stunt more than once, could he? Surely his counterparts couldn’t be forgetful enough to fall for the cheap trick more than once, could they? Well, I guess many of us are guilty of overestimating the intelligence of bulge-bracket traders…

The man was clearly adept at talking his position. Evil short sellers are punks in the market-manipulation game, compared to this guy. But surely loose lips were not enough to account for his reputation as the master of the bond universe…or were they?

His monthly missives were all over the map, philosophically. Was he a capitalist? A socialist? A fascist? A communist? Couldn’t really tell…

Then came the financial crisis, and the twin realizations that (i) Bill Gross was scoring more tube time than Obama and McCain combined, begging at every turn for the mother of all taxpayer bailouts and (ii) the man was performing not a public service, but a very private one, namely, whimpering behind a snarl for rescue of his reputation as bond genius. Somehow, this guy had managed to stuff a $100 billion bond portfolio with the biggest losers in the universe.

Bill Gross needed corporate welfare on a previously-unimagined scale. Without it, his reputation would be shattered and his investors a lot poorer for his reckless and imprudent concentration of risk in Fannie, Freddie, and Wall Street.

Years of practice at talking his book for smaller scores worked like a charm, though, and in the end – or at least for now – he was saved from himself.

The scam worked so well, in fact, that Gross has now publicly embraced corporate welfare as an investment theme:

“We like the ones that are submitting applications: Key Bank and Regions and a host of others that are large enough and well capitalized enough to be admitted to the club,” Gross said in a Bloomberg Television interview from Newport Beach, California. “The government is investing 10 to 15 percent of the banks’ total capital themselves into the company and so why not be a partner with the government at a higher yield than the government is giving? It’s a slam dunk in my opinion.”

You have to love his nonchalant patter about clubs, partnering with the government, and slam dunks – a perfectly-reasonable-sounding synthesis of Edmund G. Robinson, Michael Irvin, and Benito Mussolini – hiding the monstrous reality of the corporate-welfare monarchy: behind the queen are a bunch of guns, and anyone who refuses to go along with the confiscation of his hard-earned wealth – anyone who rejects the “we’re all in this lifeboat together” malarkey – will be imprisoned, if necessary, in order to secure compliance with the queen’s wishes.

But why dwell on such unpleasant thoughts? Reality is so…distasteful. For now, at least, the Pimco Total Return Bond Fund has been saved, the reputation of its master is saved, and the day of reckoning is postponed, for the good of all. Long live the queen.

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