The irrational mass psychology of financial markets was never on sharper display than Friday, when Treasurys fell because star bond fund manager Bill Gross left Pimco for Janus Capital Group.
The market reaction was silly for several reasons. There is no reason to believe Gross' move will lead to widespread purchases or sales of Treasurys at either Pimco or Janus. And even if it did, the bond trades executed by Pimco and Janus represent a drop in the ocean.
Daily turnover in the Treasury market has averaged $488 billion a day so far this year, according to the Securities Industry and Financial Markets Association.
"We are talking here of the departure of one man from one fund, whose influence had been waning for quite some time while as his asset base was falling," Dennis Gartman, publisher of the Gartman Letter wrote Monday, according to CNBC
"The bond market is collectively wise enough to accept Mr. Gross' departure from Pimco and 'get-on-with-it' without undue problems," he added.
"More simply put, the bond market is bigger by far than the mere machinations of Mr. William Gross, genius though he is, has been and likely shall be in the future."
To be sure, the impact of Gross' departure on Pimco has been real. Investors withdrew approximately $10 billion from the firm after the move was announced, and many analysts expect the total to rise above $100 million, according to The Wall Street Journal
"There is a good chance that Pimco will lose its dominant position as a fixed-income manager," Gary Pollack, head of fixed-income trading at Deutsche Bank's private wealth management unit, told the paper.
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