Monday, January 17, 2011

Meredith Whitney Speaks Truth To Power a/k/a PIMCO's Bill Gross

For once, someone is speaking honestly regarding PIMCO's bond gorilla Bill Gross. MeredithWhitney accused Gross of having Pollyanna attitudes on US municipal defaults because he holds so many of their bonds.

Yes, at last, some truth about Gross' shameless pumping his own book and positions on CNBC. Whitney was on the network last week as a guest host. I believe that's where she made her comments regarding her differences of opinion with Gross on the default question. It was picked up in a weekend Wall Street Journal piece, as well.

In that latter article, Whitney is quoted as agreeing that we won't see state-level defaults. But she is clear in believing that there will be a fair number of municipal bond defaults.

This isn't the first time Gross has used CNBC to advance his firm's positions. A few years ago, when the Chinese were questioning US backing of Fannie Mae bonds, Gross asserted unequivocally that the bonds were explicitly backed by the US government, despite evidence to the contrary. In the event, the administration buckled and reassured the Chinese, and Gross. But in the interval before that public statement, Gross did his best to talk up the value of the bonds in question.

This time, however, he's up against a well-regarded, objective analyst. Whitney's warnings on credit card policies by banks in light of new regulations was prescient. Her work on municipal bond safety is looking pretty good, as well. And she recently intimated that her firm will initiate muni credit ratings very soon.

It's refreshing to see someone in the financial sector have the courage and ability to challenge Bill Gross' contentions. Especially when he hasn't exactly provided evidence for his views, other than a general knowledge that his firm's book drives his publicly-expressed opinions.

No comments: