You Talking To Me?

Bill Gross has decided to extort the U.S. treasury buy threatening not to invest in any more bank offerings unless Paulson acts. I can only assume that he wants the Treasury to nationalize the GSEs and wipe out equity and preferred invest. Mr. Gross has two facts working against him. 1) Mr. Paulson cannot act unilaterally. He needs the permission of the GSEs, which themselves need approval of their regulators, which in turn need Congressional approval. 2) The damage done to banks from wiping out GSE preferred holders could do more damage to banks than anything Mr. Gross could do.

Mr. Gross wants Mr. Paulson to blow up one set of investors to help another class, one to which Mr. Paulson belongs, mortgage backed securities. He is more than a little disingenuous.

Also Mr. Gross is a liar. He states that the recent Wells Fargo hybrid deal was a retail deal because institutions would not buy it. Hello Pinocchio, your nose is growing. The WFC 9.75% fixed-to-floater was an institutional-only deal. It was not offered to retail clients anywhere, period. Don't believe me? Here is what Wells Fargo CFO Howard Atkins had to say to CNBC's Jim Cramer:

It was very much an institutional transaction," he said. "I’m not quite sure it’s being characterized as being something different.”

Atkins said that over 100 institutions took part in the offering, adding that it was "successful" and "well oversubscribed."

How he gets away with this is beyond me. I guess it is because that many investors are rats and he is a pied piper. Investors who admire Mr. Gross may be better off investing in his funds rather than listening to him and acting on their own. By the time Mr. Gross makes public statements he has already made his bets. The pied piper then leads the rats to their demise.