Almost a bear market overall for biotech.
I have write a, shares -- r ite-aid, shares popped today.
They came out with earnings that the analysts' estimates.
They said their sales forecast would come in ahead of expectations.
Rite-aid shares bucking the overall trend of the market and seeing a bit of a pop.
The two-day rally has run its course.
The tech selloff picks up,. investors are moving away from highflying momentum names in turn for value.
Joining me right now with more on the selloff, bill gross, pimco's founder and chief investment officer.
It's a good day to have you here.
We are watching this major selloff on the nasdaq and big losses there on the dow and s&p, this flight to quality as we see people move into the bond market.
Is this something that you think could last?
It is probably not a one-day thing.
I don't think you can blame it on the u.s. economy.
We had jobless claims this morning close to cyclical lows.
We are forecasting two percent to three percent economy.
It is not earnings related.
It's probably more related to outside the u.s., to the potential for china to slow down in terms of their growth.
And for the potential of japan to perhaps move back into a recession, based upon their increase in taxes over the past few weeks.
It is a global influence, but certainly not centered within the u.s. at the moment.
How is what the fed is doing or not doing affecting all of this?
The expectation is that janet yellen and company will leave a rates low for the foreseeable future, but they're continuing on with the paper program.
Should that give equity investors reason for pause?
The fed has influenced markets for the past five years, for a long time.
Now that qe is being phased down and markets expect the fed to be done and over with it i the end of november, that is something in terms of potential tightening . the fed dismisses the fact that the taper is a tightening.
It probably is equivalent to something like 100 basis points of hikes in terms of the fed funds.
Policy rates remain at 25 basis points.
We are at the beginning of a tightening cycle.
It's important to analyze exactly where they fed well be in terms of its neutral policy rating.
By that i mean, where will they be over a longer term basis?
Where will fed funds stop if they begin to rise as the market is forecasting in june of 2015? pimco views it differently than the market.
The market and other fed participants view a nominal poli cy rate of 4% at some point out there in the distant future as something that the economy could accept.
We think it is much lower, and that places the emphasis on bonds and on risk assets such as stocks that can benefit -- low interest-rate environment can continue on?
For how long?
The fed funds raised have to increase at some point.
My guess is as good as any at mid-2015. if the scope of that increase, will that increase behave like it has in the past, by 25 basis points, by 150 basis points per year.
We do not think that is the pace that the fed will all finally decide on because that is the pace that is too much for the u.s. economy.
It is dependent upon cheap leverage and we think the fed basically stops at two percent as opposed to four percent, which fed participants indicated with their famous blue dots in the last month.
What is the ata on that two percent?
-- eta on that two percent?
If we begin in mid-2015, there are perhaps 100 basis points a year.
Mid-2017. at that point, we will know more.
We will know whether or not inflation is at two percent, plus or minus, whether growth is at two percent plus or minus, and whether that is the normalized policy rate.
We think the participants in terms of the famous lou dots -- blue dots are looking to the past.
The past was indicative of a, -- economy that was less levered.
The future is indicative of a deal every type of economy that cannot really stand high real interest rates or high nominal rates.
We think stocks are attractive at these levels.
Two percent by mid-2017. there's a cover article coming out on you tomorrow in "business week" magazine.
It looks at the behind-the-scenes drama of what was going on with you and mohamed ali.
-- mohamed al-erien.
There was talk of all kinds of drama.
Do you think the media that that right?
How would you characterize how you were treated by the media at that time?
I think this whole past two months has been silly.
Breaking news, gross gets mad once in a while.
Not quite lindsay lohan or chris christie types of headlines.
The critical link in terms of what you talk about and what the article talks about was, mohamed leaves because gross gets mad sometimes?
The answer is no.
Mohamed has not spoken up, and that's a mystery to us, and an extreme disappointment.
We move on.
We have a new structure and new deputy cio structure that we think is even better than what we had in the past.
Any sense of why he did not speak up?
Does this get at some of the issues that you guys were dealing with internally?
No, i don't think so.
It's a mystery to us.
He simply said he was not the man to take the company forward.
He constantly repeated that without explaining it.
He did not say that he did not have the qualifications.
He did not say he had lost interest.
He simply said he was not the person.
That's a mystery.
The additional mystery is the fact that he has not spoken up.
I would say, come on, mohamed.
Tell us why.
The furor over the past few months really are quite exaggerated.
It's not indicative of what this company is, what this company was, and what this company will be in terms of our future structure.
But how does that make you feel, knowing this is a guy you work alongside and was a trusted partner, your co-cio, the idea that he leaves and doesn't say anything?
Quite an extremely disappointed.
I thought i knew him better.
Pimco and the executive committee hired him twice.
We hired him in the late 1990's. he was working with various markets.
We hired him again to do the co-cio and ceo about six or seven years ago.
We hired him to be my successor.
Does that make me mad?
Yes, that makes me mad.
Does that make me disillusioned?
We have a future that is probably now better than what we had in the past.
We have an investment committee that is stocked with market experts, whether it is equity, corporate bonds, diversified income.
These are people with morningstar manager of the year awards.
This is a different type of company that is inclusive, that hopefully gross response to in terms of allowing discussion and allowing potential this agreement going forward so that when you come up with our famous alpha generation for portfolios going forward.
Give me one chance here to mention something.
We have an ad coming up.
It basically talks about the total return plan and says, 25 years, $31 billion.
Over the last 25 years, the total returns in addition to market rewards has rewarded investors by $31 billion, over $1 billion a year in terms of extra returns.
That's the foundation of this company, and that's the foundation of where were going forward.
I will be here for a long time.
We have a new structure in terms of the investment committee and our deputy cios.
We have a new ceo.
The company is going forward.
You want to move forward.
At some point, we all retire.
You will retire someday.
What happens to pimco, the firm that you started in 1971, the firm that you have built -- what happens when you do retire?
At that point, i hope it is some point in the distant future.
He's 80 years old and still plugging away.
If dan foss can do it, i can do it.
In the meantime, we're developing talent.
We have deputy cio's. there are six of them, and additional people that can fill the slots going forward.
It's not quite a combination of jamie dimon, but it's something where we are developing talent for the future.
It is gross and deputy cio's and the whole staff of pimco that basically works from the tops down and works from the bottoms up and produces alpha in terms of the total return fund it, comes in at $1 billion per year in terms of extra rewards.
They say you are tough to work for, tough to work with.
You mentioned in this article that some people have referred to you as a dictator.
Why is there that perception of you?
I was going to give you an honest answer.
I think that came from disillusioned ex pimco people, pimco people that have been either retired or laid off, and that's their personal impression.
What's my impression, what is the author plus impression of this article in terms of the bloomberg story coming out --i think a leader has to be forceful at times, has to be dynamic at times.
A leader has to allow for inclusiveness, allow for discussion to promote and elevate the best ideas.
Have i done that in the past?
Perhaps not perfectly.
I would point to the pimco record.
If i had not done it in the past, if we had not done it right in the past for the past 35 years, where would chew trillion dollars -- $2 trillion have come from?
Ex-employees with an axe can be critical of may, but we're going to do better going forward.
Tell me about the relationship you had with mohamed.
Do you think it was a mistake to put so much emphasis on one other person?
You now have six different deputies.
Does it help to diversify the management structure?
I think it does going forward.
There was a point when i was 63 or 64. my ex ceo bill thompson was 63 or 64. we thought it was our duty to write a will, find our successors going forward.
That's the obligation of all leaders, cio's and ceo's. in this business, i'm still around for six years, i'm still talking too fast -- i have some life left in may.
Was it too early to bring in one person?
It probably was.
Is it better to have a platform
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