PIMCO Takes Don Draper’s Advice

Don Draper, the trenchant, dark presence of television’s Mad Men, counseled: “If you don’t like what’s being said, change the conversation.” That seems to be PIMCO’s communications strategy as the bond mega-manager grapples with faltering performance, sizable outflows and a failure to launch in the equities business. By benching Mohamed El-Erian, PIMCO gets its chance to change the conversation.

The problem was never that El-Erian failed to hold up his end of the conversation. To the contrary, he dominated the conversation, sometimes booked as the celebrity brainiac multiple times a week on cable TV’s business talkathons. Rarely required to field questions about PIMCO’s investment performance, he dazzled interviewers with pithy, big picture commentary and headline-worthy catch phrases.

Like “the new normal,” which summed up — with viral effect — his view that the world had entered an age of persistently anemic growth and low investment returns, punctuated by the occasional crisis. Some cynics saw a rationale for poor performance. But, more to the point, market performance belied the “new normal.” Equity markets bounced back in brisk fashion, as they had in previous cycles. Economies recovered, and corporate profits surged.

Scrambling to adjust, El-Erian said in August that the “the new normal has morphed into something that is less stable.” He called this something the “forced normal” – which some might say sounded, well, forced. Then last week, El-Erian informed CNBC the “new normal” might soon end altogether, though he couldn’t say when.

The Financial Times’ Dan McCrum, in the Alphaville blog, neatly sums up PIMCO’s communication challenge going forward: “The existing mountain of money will of course remain, without Mohamed at the top of it. But the challenge now for PIMCO may be that if it is going to say less, it actually becomes more important that what it says is right.”

Bill McBride
January 23, 2014

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