Ever heard of Bill Gross?
I'm not going to lie, I have heard of him. He's a genius that happens to be the manager of one of, if not the, largest mutual funds in the world:
Mr. Gross is a founder of PIMCO, managing director and co-CIO in the Newport Beach office. He has been associated with PIMCO for more than 38 years and oversees the management of more than $800 billion of fixed-income securities. He is the author of numerous articles on the bond market, as well as the book "Everything You’ve Heard About Investing is Wrong," published in 1997. He appears frequently in national publications and media. Among the awards he has received, Morningstar named Mr. Gross and his investment team Fixed Income Manager of the Year for 1998, 2000, and 2007, making him the first person to receive this award more than once. Morningstar stated that he demonstrated "excellent investment skill, the courage to differ from consensus, and the commitment to shareholders necessary to deliver outstanding long-term performance.” In 2000, Mr. Gross received the Bond Market Association’s Distinguished Service Award. In 1996, he became the first portfolio manager inducted into the Fixed Income Analysts Society's hall of fame for his major contributions to the advancement of fixed-income analysis and portfolio management. In a survey conducted by Pensions and Investments magazine in 1993, Mr. Gross was recognized by his peers as the most influential authority on the bond market in the U.S. He has 40 years of investment experience and holds an MBA from the Anderson School of Management at the University of California, Los Angeles. He received his undergraduate degree from Duke University.
I read just about everything he publishes publicly, because it's valuable to be able to pick the brain of someone who has his finger on the pulse of government securities. So when I read his January Investment Outlook, I was at the same time shocked, worried, and hopeful.
Gross writes (emphasis mine):
Question: What has become of the American nation? Conceived with the vision of liberty and justice for all, we have descended in the clutches of corporate and other special interests to a second world state defined by K Street instead of Independence Square. Our government doesn’t work anymore, or perhaps more accurately, when it does, it works for special interests and not the American people. Washington consistently stoops to legislate 10,000-page perversions of healthcare, regulatory reform, defense, and budgetary mandates overflowing with earmarks that serve a monied minority as opposed to an all-too-silent majority. You don’t have to be Don Quixote to believe that legislators – and Presidents – often do not work for the benefit of their constituents: A recent NBC News/Wall Street Journal poll reported that over 65% of Americans trust their government to do the right thing “only some of the time” and a stunning 19% said “never.” What most politicians apparently are working for is to perpetuate their power – first via district gerrymandering, and then second by around-the-clock campaigning financed by special interest groups. If, by chance, they’re ever voted out of office, they have a home just down the street – at K Street – with six-figure incomes as a starting wage.
What amazes me most of all is that politicians can be bought so cheaply. Public records show that combined labor, insurance, big pharma and related corporate interests spent just under $500 million last year on healthcare lobbying (not much of which went to politicians) for what is likely to be a $50-100 billion annual return. The fact is that American citizens have never been as divorced from their representatives – and if that description fits the Democratic Congress now in control – then it applies to Republicans as well – past and present. So you watch Fox, or is it MSNBC? O’Reilly or Olbermann? It doesn’t matter. You’re just being conned into rooting for a team that basically runs the same plays called by lookalike coaches on different sidelines. A “ballot box” pox on all their houses – Senators, Representatives and Presidents alike. There has been no change, there will be no change, until we the American people decide to publicly finance all national and local elections and ban the writing of even a $1 check for our favorite candidates. Undemocratic? Hardly. Get on the internet, use Facebook, YouTube, or Twitter to campaign for your choice. That’s the new democracy. When special interests, even singular citizens write a check, it represents a perversion of democracy not the exercise of the First Amendment. Any chance that any of this will happen? Not one ghost of a chance. Forward Don Quixote, the windmills are in sight.
Distressed as I am about the state of American democracy, a rational money manager cannot afford to get mad or “just get even” when it comes to investing clients’ money. Still, like pilots politely advertise at the end of most flights, “We know you have a choice of airlines and we thank you for flying ‘United’.” Global investment managers likewise have a choice of sovereign credits and risk assets where stable inflation and fiscal conservatism are available. If 2008 was the year of financial crisis and 2009 the year of healing via monetary and fiscal stimulus packages, then 2010 appears likely to be the year of “exit strategies,” during which investors should consider economic fundamentals and asset markets that will soon be priced in a world less dominated by the government sector. If, in 2009, PIMCO recommended shaking hands with the government, we now ponder “which” government, and caution that the days of carefree check writing leading to debt issuance without limit or interest rate consequences may be numbered for all countries.
Gross has a unique ability to write the way he feels about our governmental and financial system in a way that few of his fellow "big wigs." I mean, could you ever imagine the CEO of Goldman Sachs, US Steel or Exxon-Mobil writing about how easy it is to buy off an elected official, about how the status quo is unsustainable. Hell, this piece brings up a lot of the "Democrats=Republicans" rhetoric that we see in diaries here from time to time.
Gross can write this because his industry doesn't deal with lobbying government. He doesn't really care, from a business perspective, about the fate of the dollar or American democracy. His job is to search the globe for the best sovereign securities he can, be they German, French, Japanese, etc. His concerns are legitimate because they are a personal cry to the American people to stand up and demand widespread change, rather than the incremental "change" we've been fed over the years, as politicians have become more and more enslaved by "the system."
So why am I hopeful? Because Gross presents the solution we need: publicly financed elections. That needs to be a rallying cry. The Democrats are much better than the Republican alternative, but I'm tantalized by the potential of a Democratic party beholden to no one other than the voters who put them in office.