Bill Gross’s PIMCO eyes UK banks even in a “chaotic” Brexit.
The world’s largest fixed income fund manager, Pimco recently said that UK banks are being “unduly punished” by investors even if the worst-case scenario played out with the UK exiting the EU with no deal.
The UK is scheduled to leave the EU, next month on March 29, 2019. Capital has been hemorrhaging from the UK, particularly during the last eight weeks amid a Brexit deadlock.
Property prices in some parts of central London have crashed by as much as 30 percent and UK funds have shed $2bn in the last eight weeks alone amid a Brexit deadlock.
“The world’s largest fixed income fund manager, Pimco recently said that UK banks are being “unduly punished” by investors even if the worst-case scenario played out with the UK exiting the EU with no deal”
Could Bill Gross’s PIMCO eyes UK banks investments be a classic contrarian play?
Bread and butter investing styles keep investors/traders ticking over and provide investors with average, mediocre performance but it is the winning contrarian plays that rake in the bumper profits and pull in the alpha.
As Warren Buffet says “Be fearful when others are greedy and greedy when others are fearful” and time and time again this philosophy has worked for the value investor.
Perhaps as Bill Gross’s PIMCO eyes UK banks could be interpreted by investors that it is time to get greedy on battered down UK assets.
“Be fearful when others are greedy and greedy when others are fearful”
Warren Buffett
Pimco, the world’s largest fixed-income investor has volume and makes waves when it moves capital. Is it now time for retailers to position themselves for the ride in Uk assets? At some point, the wave of capital is going to flood back into UK assets.
Indeed, it’s fear of missing out versus the fear of losing your money that gives Bill Gross’s PIMCO eyes UK banks play worth considering. At the moment, more investors fall into the latter camp. They’re turning to cash and super-defensive such as utilities and healthcare, although European healthcare stocks are now beginning to turn.
Bill Gross’s PIMCO eyes UK banks play is about the first to jump on the green bandwagon
Pimco says UK banks are one of the investment picks of 2019 despite the potential risks posed to the sector by Brexit.
Bill Gross’s PIMCO eyes UK banks at a time when most investors are sitting on the sidelines.
Many investors started the year with the highest cash weighted position they ever had for the past 12 months. One investment manager of a large fund said that he had a “25 percent cash weighting,” cash position. So a year ago, everything was too expensive; now everything is too scary. Indeed, the psychology of herd investing is odd. Rising prices trigger creed and when assets price are low, represent value and a bargain nobody wants to buy.
“Not everyone is convinced that Bill Gross’s PIMCO eyes UK banks play is a good one”
Bill Gross’s PIMCO eyes UK bank while UK retail investors are steering a wide berth
The retail investor across all age groups hold 18 percent of their portfolio in cash. For the under 35s age group that figure rises to 24 percent and if they hold funds where the manager has a high cash position, the percentage could be even higher than they realize.
But perhaps UK investors are hesitating because of Brexit? A number of investors don’t think that investors are hesitating because of Brexit. One theory could be that investors are holding large cash positions in anticipation of further falls, at which point they will pile back in. Another view could be that investors just don’t know what assets to buy in these politically uncertain times.
Not everyone is convinced that Bill Gross’s PIMCO eyes UK banks play is a good one
The pessimistic view is that pent-up demand might not be realized in UK investments. Regardless of Brexit, the UK still has a productivity problem, the economy is at full employment and pretty low business investment rates has not yet trickled into the economy. “I don’t buy the theory of a post-Brexit boost from massive, pent-up investment demand,” said Chris Giles. Global business sentiment has slumped this year “More people fear that 2019 could be the year the world slides into recession . . . there’s negativity that wasn’t here last year,” added Chris Giles.
“We now need some time to complete that process” – Theresa May (on Brexit)
Perhaps the main reason why Bill Gross’s PIMCO eyes UK banks is because he believes that a hard Brexit will also be avoided
Indeed, British PM Theresa May continues to play for more time.”We now need some time to complete that process”, she added. If no agreement is reached by 26 February, then MPs will get more non-binding votes on Brexit options the following day.
Mrs. May updated her cabinet on Tuesday morning about the talks with the EU and said it was “clear that these discussions with the EU will need a little more time to conclude”.
Speaking after dinner with Brexit Secretary Steve Barclay on Monday night, EU negotiator Michel Barnier said the talks had been “constructive”.
Moreover, a statement from the Department for Exiting the European Union said that the Brexit secretary and the EU negotiator had agreed to further talks and their teams would continue to work in the meantime “on finding a way forward”.
So it appears that both parties are eager to “finding a way forward” and avoid a hard Brexit.
That is the diplomatic public face view whether it is the same behind closed doors remains to be seen. Bill Gross’s PIMCO eyes UK banks and time will tell whether it remains the best contrarian play of the year or a big loss-making position.
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