|Home||About Us||Resources||Archive||Free Reports||Market Window|
Wednesday, June 13, 2007
Billionaire Bill Gross just made four times his money Monday... and I was sitting two feet away from him as it happened... At the end of the day, Gross joked to a Bloomberg reporter, "It's better than the stock market."
Bill Gross is deservedly an investment legend. He's delivered investment nirvana for decades – high returns and low volatility.
His extraordinary performance hasn't gone unnoticed. Bill Gross is now the world's biggest investor, managing some $700 billion, primarily in bonds, from his office on the California coast.
But Monday wasn't about selling bonds... Bill auctioned off his collection of British stamps – at record prices. I was one of about a dozen bidders in the room (more bids came in by phone and the Internet).
Just as the bidding started, Bill Gross walked in. He sat down in the seat directly behind me, just a couple feet away. We chatted a bit during breaks. And we walked to a small invitation-only lunch together, talking newsletters and Icelandic bonds.
This picture of the two of us was taken after the auction ended.
Getting back to the auction, Bill realized a fourfold return on Monday... You see, Bill bought the bulk of his collection of British stamps in 2000 for roughly $2.5 million. At this auction, his stamps sold for more than $10 million, including the buyer's premium. Bill's stamp collection is much larger than this. He told Bloomberg he "was just testing the market." Clearly, the market is much stronger than anyone imagined. This auction raised the bar. I expect those who took me up on my advice to buy stamps will likely be thanking me in a year when the new price guides come out.
I was at the auction on behalf of Stanley Gibbons Limited. As you may know, I've been writing about collectibles (like these) as a cheap asset class for years now. Recently, Stanley Gibbons Limited – a London-based world leader in stamps and collectibles – asked me to join its board of directors. (Stanley Gibbons actually sold some of these items to Mr. Gross years ago. Great stuff is hard to come by, so Stanley Gibbons was here to buy some of it back!)
Shifting gears, it's funny how life goes... I don't think I ever would have had the chance to meet Bill Gross in the investment world... But through stamps, we got the chance to meet in a much more relaxed environment.
Nobody knew if he would show up. I didn't expect him to. But there he was...
I don't say this often, but Bill is an "idol" of mine, for lack of a better word... He is one of the few people in the entire investment world who speaks his mind AND puts his money where his mouth is. I may not agree with him every time. But when I don't, I think hard about why.
Before, I knew "the legend" of Bill Gross... "The Bond King." But I didn't know his personality...
Bill was as kind as any human being could be. For the day, he donated more than $9 million to charity (the auction house pocketed the other $1+ million).
While his "people" were insisting he had to catch a plane, he ever so graciously answered everyone's questions. He was like that the whole day, giving his full attention to whoever was in front of him – even when reporters bombarded him with ridiculous questions.
One final note... I had Bill sign the auction catalog for me. I think his usual signature is "Buy bonds! Bill." But he wrote to me "Steve, Buy stamps! Bill."There's a bit of humor hiding in there... Bill recently became bearish on bonds, and this new outlook is being blamed for the selloff in stocks and bonds in the last week. Maybe he's not signing "Buy bonds" anymore...
I came away from the auction feeling lucky that I got to spend some time with Bill Gross... and I have more respect for him as a person than I ever have.
I also think that the auction results (which were twice what was forecast) vindicate my belief that collectibles are a place where you can make some good money. With a fourfold increase in seven years, who cares what the asset is, right?
Importantly, the average investor won't go near these things... still! In extremely "alternative" assets, like rare coins and stamps, I believe the sky is still the limit...
HOW RICH PEOPLE LOOK AT THE STOCK MARKET
Investors are finally seeing red again.
With interest rates climbing to multiyear highs, the red color of a losing position has accompanied nearly every stock quote we've seen this week. Folks who've enjoyed three months of gains are starting to get worried...
Taking the long view of stocks, though, we see that the benchmark S&P 500 is stretched to the upside. So much so that it could suffer a big fall and still be well within the confines of a bull market.
The action in stocks actually reminds us of last year's action in gold. After rising virtually nonstop from late 2005 to mid-2006, gold became extended from its normal bull-market trendline and still sits below its old high.
Could stocks do the same and play dead for a year? Sure... that's why we recommend holding assets that throw off plenty of income. No matter if stocks do nothing, you'll still enjoy the magical effects of compounding. As the great Richard Russell reminds us, "It's the rich man's way to invest."