An interesting aside at the end of the NYT’s piece on PIMCO’s Bill Gross this afternoon:
“We were offered this morning a six-month sizable piece of Morgan Stanley,” he said Tuesday. “Here’s the surviving investment bank that just last night got equitized or bailed out by a Japanese bank. We were offered a sizeable piece of a six month Morgan Stanley obligation at a yield of 25 per cent, O.K.?”
Pimco didn’t buy the bonds, however, “because we thought we could get it even cheaper,” Mr. Gross explained. “That’s where the fear builds in and makes for totally illiquid markets. Where no one trusts anybody; no one trusts any price. There’s a total lack of trust and confidence in the markets. And that’s what a market depends on.”
Got that? This is a guy who, like Warren Buffett, feasts on opportunity. Morgan Stanley comes along and says “Hey, we’ve survived, we just raised a ton of new capital from Mitsubishi, and we got the US government to make us a bank–so can we sell you a bond?” And even at an almost incomprehensible yield of 25 per cent, Gross said, “No way.”
No wonder Morgan Stanley’s stock cratered at the end of the day.
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