The big banks have all reported fourth-quarter earnings and a jury of their market peers have deliberated in the case of Too Big to Fail vs. Market Expectations. Looks like negative market expectations are winning out against the big U.S. banks–with the exception of PIMCO's Bill Gross, who continues to be a believer in big bank bonds.
To many market participants, though, Gross stands alone in betting on bank bonds. Indeed, players including Los Angeles-based DoubleLine Capital LP's Jeffrey Gundlach, research firm Keefe, Bryuette and Woods and at least one top-ranked boutique fund manager have all come out against the big U.S. banks.
Gross bet on debt of the big banks last year–his worst against peers, noted Charles Stein in a Jan. 25 Bloomberg story. Gundlach, on the other hand, cut bank bonds in May, dodging their second-half slide and beating 99% of his rivals, according to Stein.
"The competing bond managers haven't changed their minds," he wrote. "Gross, whose $244 billion PIMCO Total Return is the world's largest mutual fund, recommended financial debt in this month's investment outlook for Newport Beach, Calif.-based Pacific Investment Management Co., saying senior, higher-rated securities 'should be considered' as clients await the result of central-bank efforts to reinvigorate the global economy."
But Stein went on to say that Gundlach told clients in a Jan. 5 conference call that he isn't putting his money on the big banks. "You want to be underweight banks," Gundlach said. "Certainly, we are."
Keefe, Bryuette and Woods also views big banks unfavorably.
