also with us as our guest host, neel kashkari of pimco.it until the last minute to do things. this is really well-known and prominently on everyone's mind. don't you think as lame as these guys are, that it doesn't really happen when push comes to shove? >> you know, i wish i had some confidence in their ability to act. we're facing two problems. we're facing this short term fiscal cliff at the end the year. we're facing a longer term budgetary trend that's unsustainable. would be nice if politicians could address both of those together. it seems, though, they are traffic trouble addressing either of them. >> it's because of the the election. correct me if i'm wrong but the the elections in november, still got a month and a half then before ten, right? we'll have a resolution on that then the same clowns in congress but we'll at least -- actually the same president, but at least know what's going to happen on inauguration day in 2013. >> let's just say the expectations are very high for that lame duck session coming after the the election.

richard, as a man of the woshlgsd not only with pimco but your former treasury responsibilities, do youee any clear steps by the authorities in europe to patch up a shaky financial system? not just spain. not just greek. but the whole potential for contagion, for deposit runs, and you name it. is there a plan? >> well, larry, we need those steps, but we don't see them. there may be a plan, but it's a well-kept secret. it really looks like they're taking this one day at a time. greece is a risk. spanish banks are in crisis. and what you have is really a game of chicken between the ecb and the european authorities. and no one wants to blink. and as a result it's quite chaotic. >> an important "wall street journal" news story came out late last evening. the treasury is sending the undersecretary of the treasury to meet with these leaders. is she and the rest of them going to try to concoct some deposit-taking guarantees the way we did back in 2008? guarantee the deposits, the credits, the liabilities, to give confidence to this whole story. is something like that being cooked up? >> well,

one of which is the us dollar what you could call the cleanest dirty shirt to quote our friends at pimco now as far as fights are concerned officials including european commission's top economic official only red is reportedly warning that the eurozone could crumble without one and she gets stronger crisis fighting measures and tough fiscal discipline now the head of the e.c.b. mario draghi is out saying the central bank we can't fill this policy vacuum now that sounds a little like ben bernanke he talking to congress that we're looking at trends but also he's pushing for some countries to forego national sovereignty pushing for centralized bank supervision and regulation he says that's the big takeaway from banking disasters like bank yeah now let's bring mike shylock in to talk about this though because he's going to bring us a dose of reality amidst these calls from euro kratz technocrats whatever you want to call them now mike said look better known as misha's investment advisor for sick of pacific capital also writes the very popular blog is global economic analysis so mission thank

the bond report is sponsorsed by pimco. >>> welcome back to the program. we're live at morgan stanley's trading floor. a quick check of the dow. the dow industrial is on pace for the biggest monthly decline in two years. it's been a tough month in may. the international monetary fund is putting together a contingency plan for spain. the imf says it's a normal part of the business. right now, as you can see, hitting a four-year high and moving into telecoms on the last day of the month, you heard earlier the rebalancing going on we've had a tough month in terms of most major sectors. over to you. >> not many were positive. the dow is down 6%. look at some of the other indicators that we follow for the month. the yield on that ten-year note, down 18% for the month to 1.56%. a new low for the ten-year yield and then the price of oil in new york down 6%. it's down at $86.66. we started the month around $100, as a matter of fact. joining me right now is michael shay from direct access partners. can we have another month like this in june? >> i think there's a g

you were just telling me during the commercial that it was six years ago that pimco told you in an interview- right, didn't he tell you this, that he sold his house. that was good timing in 2006 before all of this was going on. today mark is back here today and he closes on his new home on the 10th. >> exactly. we wanted to see if this was an indicator. it's significantly outperforming the market year to date. >> with us right now to talk more about it, let's talk about your store. anyone who saw what you did back in 2006 thought you were a genius and you are closing on a new home. why and tell us what you're feeling about this market right here. >> i don't know if it was a genius. it was more luck. i did feel back then that inventories were going up. the big thing is that and on the demand side you have prices down 34%. you've got basically mortgage rates below 1% and you have the fed reflating and that's going to support hard assets. if you look at price to income, price to rents, housing looks real afrac tif. >> and warren agrees with you. watch hopefully as it goes up. why don't you like

earlier bill pimco talked about this. take a listen. >> the bond market only yields 2%. let's start from that point going forward. see if an investor wants more than 2%, requires 3, 4, 5% for that 401(k) or for college education or for retirement, then they have to stretch it a little bit. we're suggesting that they buy, yes. agency mortgages that yield 3, 3.5% and look for agency protection. >> he's reaching for yield. he agrees with you in some ways because he doesn't like the low yield you're getting in the treasury markets. so he's going to go to the agency, the mortgage agencies and and what do you think of that strategy, sharon? >> i tend to agree with bill gross in that the agency mortgage securities make a lot of sense in this environment because i'm not saying that we're out of the woods yet and totally get out of bonds. i'm saying treasuries aren't the safe haven and they are not giving you the kind of returns that i think you deserve for the risks that you're taking. you're at the long end of the curve. so agency mortgage securities give you that higher coupon

he's one of greece's leading investors and also joined by pimco's bill gross, who needs no other introduction and also our very own michelle caruso-cabrera who apparently has her own apartment in athens. thanks very much. i know it's chaotic and busy there. what's going to happen june 17th? will the greek people vote to essentially stay in the eurozone? >> i think that we saw that in the last elections the greeks are definitely going to vote to stay in the euro. the problem is that the -- it's a binary election. one way we stay in the euro, one is we can sustain without following measures. it's a bit chaotic as we speak. >> i think what's interesting overnight is that the bund es bank say it may be better if greece leaves the eurozone. do you think there's any argument to that? >> well, i think we see an argument to that effect, mandy. and i'm not sure that greece has the luxury of time to wait, you know, for another election next month. perhaps they do. but exit plans are in the making. and the bundes bank, speaking to an exit plan is just one of those policymakers have that done so, the spi

of course, we have pimco's bill gross joining us with his latest investment outlook. great to have you on once again. >> thank you, mandy. >> before we get to some of those very meaty questions, i want to get your reaction to what atlanta fed president dennis lockhart said earlier today about the prospects for more qe. >> i think there's only so much we can do to stimulate loan demand and to -- to change the risk appetite of the financial system or banks. so i'm not sure at this moment that more stimulus would -- at least more really active stimulus in the form of quantitative easing, for example, would have that big an effect. >> so, bill, to brian's point, has the fed basically hit the limit in terms of what it can achieve now? >> well, they're beginning to hit the limit, certainly. i mean, mr. lockhart has a point. in terms of the effectiveness of qe, i would simply point out that when qe-1 and qe-2 ended, over the past year and a half to two years, that the stock market went down by 10% to 15%. so it seems that credit markets for one reason or another, you know, s

pimco is backing some of its big cap bets with bonds and derivatives.xplain is steven rinalski. all right, steve. your fund's up 33% over three years. five-star rated. in plain english, please, explain to us your investing strategy. >> this strategy is an enhanced index strategy. the target audience is corporate pension plan managers. they're concerned with two things primarily. managing risk of their liabilities and generating some high returns in order to service those liabilities. so what this strategy does is combine equity index exposure. and with the collateral that you save from investing in futures rather than the physical stocks, we invest in long-term investment grade corporate bonds and government bonds, which are really how those liabilities are measured. so it does a better job of mitigating the risks of the corporate plan. >> indeed, i see in terms of domestic investment -- the sectors you like are pipelines, energy, i get. but banks. considering all the overhead in terms of regulatory unpredictability and various things like we were talki

eastern time, pimco's bill gross on drachma-geden. will greece leave the euro."street signs." ♪ there'll be the usual presentations on research. and development. some new members of the team will be introduced. the chairman emeritus will distribute his usual wisdom. and you? well, you're the chief life officer. you just need the right professional to help you take charge. ♪ an airline has planes... and people. and the planes can seem the same so, it comes down to the people. because, bad weather the price of oil those are every airlines reality. and solutions won't come from 500 tons of metal and a paint job. they'll come from people. delta people. who made us one of the biggest airlines in the world. and then decided that wasn't enough. sadly, no. oh. but i did pick up your dry cleaning and had your shoes shined. well, i made you a reservation at the sushi place around the corner. well, in that case, i better get back to these invoices... which i'll do right after making your favorite pancakes. you know what? i'm going to tidy up your side of the office. i can'

the head of pimco said the narcotics are behaving in a mature fashion, which i think is an interestingare reacting to a news in the sense that they kind of now know what the outcome is for the french elections. >> the french election is an ocean away. what is the big concern for investors here in the united states? >> well, it brings that word uncertainty back in the market. a change in government during a debt crisis makes for a lot of uncertainty. we have a new leader in france who wants to change policy. hollande isn't a fan of os terty measures or spending cuts which we've been talking about for months in the european sooen. -- zone. it futs the franco-german relationship into jeopardy. hollande favors spend iing to create jobs. and that's going to increase their debt. >> thank you so much. appreciate it. don't forget, you can watch cnn live on your computer. cnn news room is continuing right now with banfield. >> let's start with rapid fire. let's go. here's how it starts. security officials saying militants attacked when 26 soldiers were killed and another 16 hostage. militants a

bankruptcy or a receivership, then you could have managed those contracts, renegotiated those contracts, pimcoaid you could have protected 70% of the value of the bondholders' equity in the companies and still done the same thing we did with the government buying 61%. so i just disagreed with the approach totally. as far as freddie and fannie are concerned, the mortgage finance agency is not a bailout of freddie and fan yifment it places them in a structured bankruptcy, replaces them with a new entity whose revenue goes back to pay back the taxpayer. if anybody that's getting bailed out it's the taxpayer who paid $71 billion in funding those losses. host: silver springs, maryland, steven, democrats line. good morning. caller: good morning. i want to make a comment on the housing market thing. to me it seems that it was like a ponzi scheme with the banks creating credit swaup default and -- swap default and giving people loans they couldn't afford and instead of going into bank, you take out a loan depending how much money you make, they know if you work, where you work, if you don't work. if y

in that case, i think the president -- i'd like him to pick bill gross of pimco. >> steve: explain thatof wall street banking. he is very knowledgeable about the economy, about the bond market, and would signal to banks there is a new sheriff in town that's gog ask -- going to ask them to write down loans on people. i mean, different attitude and treasury. >> steve: speaking of new sheriff in town, here is our chief lawman and rook as well, you've got eric holder. >> i don't think he'll change eric holder, but if he did, i think it will be bahara, u.s. attorney -- oh, my gosh -- >> steve: it worked better on the beach when we got it. >> he's u.s. attorney who prosecuted a loft -- lot of the big insider trading cases and times square bomber. he would be i think a great pick for attorney general if there was a switch. i don't believe eric holder will be moved. >> steve: down here as a pawn, steven chiou, energy secretary, the guy who said gas should be ten bucks a gallon. >> that's another one i don't expect to change, but if it did, it would be ray mavis, current secretary of the navy, f

you asked, you know, coyou trust jp morgan, do you trust the regulators what pimco trusts is capital.it's not so much a volcker rule issue as a buffer requirement issue? >> i think it's both. but let's be honest. volcker has for several years now tried to make end roads in terms of reversing the glass stiegel egg aggregation in the 1990s. so let's at least go in the direction of the higher capital. so if banks are forced to increase capital from 10, 11, 12, 13%, than these trades which are probably going to be a part of banking going forward because their margins are so narrow, we'll at least be protected by more equity. >> just as an aside, where are you on money markets and the on going discussion about those funds and the buffers they should have in order to protect their clients and, indeed, the taxpayer further down the line. >> i think they should, too. the buffers have been in terms of quality lines. but we've seen and we cernly saw in 2008, that those quality guidelines can go by the board and that credit can move quickly from triple a to double and lower. stow i think that's

lowell harris, professor of economics at columbia university, adviser at pimco, former assistant treasury secretary. rich, i will let you take it away. the summit, the dollar. >> thank you, peter. it seems like every time we get up here for a new topic, the topics are just as dire as the previous one or, if not, more so. [laughter] so we're going to tackle the dollar here, and there's plenty to be said about the u.s. dollar. certainly, a major issue in the election year. a lot going on there. and we have two brilliant seekers here today to help us. so thanks. i guess you can't talk about the u.s. economy -- i'm sorry, i guess you can't talk about the dollar unless you talk about the fundamentals, the u.s. economy. so i'm going to, again, a 30,000-foot perspective. my question is for each of you, wtf. what's the forecast? [laughter] tim, do you want to tell me -- economically speaking, that is. >> from i have lots of forecasts. but you're right to think about the economy because in some ways the currency of the dollar is a reflection of the u.s. economy. if people believe in the u.s. econo

no person better to ask than bill gross, pimco co-founder. he's here now first on cnbc with his outlook. before we get to your outlook, which was excellent as always, bill, i want to ask you, if i'm young and i want to buy a house, low rates probably good for me. buy a car, probably good for me. if i'm older and a saver, they're bad for me. net-net are low rates good or bad for the united states? >> well, you posed the problem correctly, brian. it's good for certain segments and bad for others. demographically the young benefit from lower rates. demographically the older generation that depends upon bank deposits and low cd rates, are basically disadvantaged. and the economy as a whole ultimately what the fed is trying to do is to promote low interest rates and to elevate asset prices and to have the capitalistic fuel so to speak that has been so evidenced over the past 30 or 40 years in terms of credit extension to see that continue. that's not exactly happening the way they had planned. we have very slow economic growth, better than in euro