Mar 16, 2021
Bill Gross says he made US$10M betting against GameStop
Shan Obata discusses GameStop
It wasn’t just retail traders who cashed in big during the GameStop Corp. stock mania. A legendary billionaire investor made a minor killing shorting the shares.
Bill Gross, the erstwhile bond king and co-founder of Pacific Investment Management Co., said in an interview Tuesday on Bloomberg Television that he made about US$10 million betting against the video game retailer’s shares.
But the trade didn’t go off without a hitch.
“I got in too early,” said Gross. “I was in the hole by about US$10 million.” But he stuck with it to sell at a profit.
GameStop stock, for months among the most heavily shorted on the New York Stock Exchange, surged more than 1,700 per cent from Jan. 1 through Jan. 27 as a legion of Reddit users piled on, forcing bearish traders to scramble for shares and brokers to take the highly unusual step of curbing trading.
Amid that mania, Gross took a shot to bet against the shares: “I got in with options like a good Robinhood trader, I guess.”
He’s not done yet.
“I’m still selling call options at US$250 and US$300,” said Gross. “I think this is the perfect opportunity for options sellers, not buyers, to take advantage.”
Gross was largely known for his bond bets after four decades at Pimco, which he built into one of the world’s largest asset managers. For years he generated industry-leading returns as manager of the Pimco Total Return Fund and in 2013 the firm’s assets approached US$2 trillion. He was ousted though a year later after feuding with his Pimco partners over strategy, succession and managerial control.
Gross then joined Janus Henderson Group Plc as a money manager, switching his focus from pursuing relative return against a benchmark to an unconstrained strategy. The aim was to achieve positive results no matter the market conditions, but it didn’t work out. Returns were disappointing and Gross retired in March 2019.
Gross continues to comment on central bank policy and deficits and speculate in the bond markets with his personal fortune.
He said he was short coming into the Treasuries selloff of recent weeks that took the 10-year yield to a one-year high above 1.6 per cent. He also continues to bet against 10-year futures and the long bond. The investor predicts a jump in inflation ahead that will give Federal Reserve Chair Jerome Powell “pause” about the central bank’s current lower-for-longer policy.
“Inflation, you know, currently below 2 per cent now is not going be below 2 per cent in the next few months,” Gross said. “I see a 3 per cent to 4 per cent number ahead of us.”
--With assistance from Erik Schatzker and Daniela Sirtori-Cortina.