WSJ: Pimco Takes Bath on Lehman

Investor

http://www.google.com/search?q=Pimco+Takes+Bath+on+Lehman

I hope you can access one of the links for the article. If not here is a short synopsis.

Losses on certain Lehman bonds traded by Mr. Gross's firm, Pacific Investment Management Co., exceed $3.4 billion, according to a Wall Street Journal analysis of liquidation plans and investment disclosures filed in a federal bankruptcy court in New York.
...
Underlying the wrong-way Lehman bet was Mr. Gross's belief—articulated in a July 2008 appearance on CNBC-TV and shared by many others—that there was "close to 100% probability" that Lehman would avoid failure.

Be careful with what Mr. Gross says.


Edit: Alternate link: http://online.wsj.com/article/SB10001424052702304563104576361742449372266.html?mod=mktw

AndyJ

I wonder how the $3.4 billion was spread across the funds (and separate accounts?). It wouldn't represent a very big part of the Pimco portfolio overall. I'd have to bet all the big funds and firms have stories like this.

Whatever the case, your last thought doesn't really need much additional backup from the Lehman bet, IMO.

GregFromBoston

For example: the holdings listed for Harbor Bond at http://www.harborfunds.com/holdings-2014.htm#block8834 show that Lehman doesn't currently contribute very much to current NAV, so the losses have mostly been absorbed. I realize the interest comes from the partial window on the decision-making; I'd like to see a deeper analysis of what factors enabled the Gross-managed funds to outperform in spite of the bad bet on Lehman. Was it all just from sniffing out and avoiding the most toxic asset-backed securities, or were there lots of good individual calls to overcome this bad one?

Sven

I lean toward the notion that Gross made more "good" calls to overcome some "bad" calls.