William Gross - I’m Still Standing: Bond King Bill Gross and the PIMCO Express

William Hunt Gross

Im Still Standing

Bond King Bill Gross and the PIMCO Express

First published by William Hunt Gross 2022

Copyright 2022 by William Hunt Gross

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T his is my story. This is PIMCOs story. The story of the worlds first and likely last Bond King, at one time the worlds greatest philatelist, and the luckiest pro-am golfer ever. But I go too far too soon its mainly about my 43 years at and the building of PIMCO. I want to tell you how PIMCO became the largest bond manager in the world and describe our secret sauce that led to its incredible success. I want to describe leaving PIMCO reluctantly in September of 2014 and whats happened since. But why now you might ask? Like they say on TV these days, Thats a good question. It may seem like a story told by a 19th century railroad man in the age of SpaceX and it likely is. The bond and financial markets have changed so much since my retirement in 2019 that readers may probably think my time has come and gone. And of course it has. But then its still a good story.

A friend of mine, when missing a putt on the golf course sometimes says, a billion and a half Chinese dont care. Same case here, but for those Chinese that might be persuaded to think of me and wonder, Whatever happened to Bill Gross and how did PIMCO become so successful?, its for them that Im writing this story. If not them, at least my kids might (might!) care.

But I also write to set the record straight. There never was a Bond King but there was a passionate leader of a bond management firm called PIMCO which dominated market performance for nearly four decades and made more money for more people as one investment consultant wrote than any firm on Earth. I stood tall then and come to think of it, while my posture is now a little stooped Im still standing!

Let me start with a few brief pages about my personal history before we get into the juicer PIMCO stuff, and then some things about whats been happening with me and the markets since 2014. Maybe a little bit about what might happen in 2022 and beyond as well!

Lets get started. I was born in 1944, a child of Dr. Spock, a child of the Cold War. My parents were cold too, and non-huggy, but devoted to their kids and their education. In the first grade, my mom wanted to skip me from 1st to 3rd grade at our two-story, four-classroom brick schoolhouse in West Middletown, Ohio, because I had tested as having the highest IQ for a six year old in the state of Ohio. Must have been a mistake, because while I was smart, I was only close to Mensa caliber and my Duke undergraduate grades finally proved it in the early 60s. If I had a high Q it was a CQ, a Mensa equivalent common sense quotient enhanced by a for-years undiagnosed mild autism commonly called Aspergers syndrome.

I did not skip 1st grade, but instead the family skipped a town that was later labeled Middletucky in the famous book and movie Hillbilly Elegy. My father, Sewell Gross, must have sensed the necessity for a better education because he sacrificed a blossoming career at Armco Steel to move us all to San Francisco on the California Zephyr a bubble-glass passenger train departing Chicago and arriving in San Francisco in the summer of 1954. In the Zephyrs tiny passenger compartment we put down newspapers for our German shepherd Budgie, along with Mom, Dad, brother Chip, and 2-year-old sister Lynn. Luxury in transportation was to come 40 years later with a private plane!

California was much different than Middletucky. New schools, gyms, swimming pools, even, and the teachers were good, as was the class competition in the early days of Silicon valley. I did great, got an academic scholarship to Duke, tried out for the basketball team in the summer of 1962 and was cut in the first 15 minutes. I was six feet tall and endowed with speed, but only average coordination. After a great pass in high school, my high school basketball coach told me in the ensuing huddle, Gross, if you could only shoot. So true, I couldnt shoot, but my ferocious ambition was allowed to move in a more productive directive because of it. My Duke tryout, though, was to lead to long-term friendships.

Thirty years later, Bucky Waters, the freshman coach who wisely cut me, had become a host for philanthropic guests at Duke. Reaching his hand out as he got out of his rickety Ford station wagon, he said, Nice to meet you Bill. I said, Nice to meet you as well Bucky but weve met before. You cut me in freshman tryouts in 1962. Whoops it was awkward for just a few minutes. He was a wonderful man, as was his wife Dottie, and weve corresponded with portfolio ideas ever since.

I graduated without honors from Duke (2.8 GPA) and was about to be drafted and sent to Vietnam. My draft deferment excuse of flat feet was immediately rejected so I enlisted as an officer in the Navy flight program at Pensacola, Florida. After basically spending five frustrating white-knuckle months training on propeller driven T-28s, the Admiral cut me from his team too, and sent me to Vietnam as captain of a small PT boat transporting Navy SEALs upriver in the Mekong Delta. Mr. Gross, he said, if you think youre going to be transferred to a cushy desk job, youve got another think coming. And so in a few short months I was shipped across the Pacific to an assignment more dangerous than that of a jet jockey spewing Agent Orange over the treetops. My experience there is detailed in a lengthy Stars and Stripes article published in July 2015.

My two years nearly matched that of Martin Sheen in Apocalypse Now, including the surfing and gunboat episodes, but I escaped Nam safely in 1969 and went on to the UCLA Anderson graduate school in finance, where I rediscovered Ed Thorp, and his second book, Beat the Market. I had first learned about him from a blackjack book called Beat the Dealer in 1966 and had played professional blackjack before reporting to flight school. That experience was to be the formative experience of my life because it taught me how to measure risk in the financial markets. But first a little story about how I got there and spent an incredible three months in Las Vegas at the ripe old age of 22.

Fate would have it that I ended up in a head-on collision in college while driving to pick up donuts for a fraternity rush. Instead of donuts I received a long stay in the hospital and multiple surgeries to reattach my scalp, among other extremities. To pass the time, I studied Ed Thorps Beat the Dealer, then headed to Vegas after graduating from Duke in June 1966.

My journey from Durham, North Carolina, to Las Vegas was not exactly in the luxury to which Ive now become accustomed. I hopped a freight train, then traveled to Vegas by way of Atlanta with $200 sewed to the inside of my pants to prevent robbery. When I got to Vegas I stayed in a motel that cost $6 a night, and played the tables 16 hours a day.

As recounted in my prior book Bill Gross on Investing, my goal was to win some money playing blackjack without any clue that my four months at the tables in Vegas were to lay the foundation for a successful career on Wall Street, or the West Coast version of it. What happened in Vegas didnt stay in Vegas, I learned several important principles of investing that I employed throughout my career. And I parlayed that modest bankroll of $200 into $10, 000 to pay my way through graduate school.