Bond King Bill Gross Reveals His Biggest Career Mistake and Best Trade
Billionaire investor Bill Gross reflects on his career extremes, from a devastating 1969 leverage mistake to lucrative investments in high-yield energy MLPs and food stocks.
Bill Gross, the American billionaire known as the "Bond King," has seen it all in the capital markets. As one of the co-founders of PIMCO, the giant mutual fund, Gross built the company's flagship fund from scratch until it managed a peak of $270 billion in assets. Now, in correspondence with Business Insider, he offers a glimpse into the two extremes of his career: the most successful trade he ever made, and his worst mistake.
The Costly Lesson: Keeping Bets in the Casino
Surprisingly, Gross's biggest mistake occurred right at the beginning of his career in 1969, just months before he started working at PIMCO. According to Gross, he opened a private trading account at the time and deposited $10,000—money he had earned playing blackjack.
Instead of investing cautiously, Gross chose to make a huge bet, purchasing 30-year U.S. government bonds using an aggressive 10x leverage. The result was painful and immediate. The bonds plummeted, and Gross stated that the move "wiped out half of my savings." He wrote to Business Insider: "I lost 50% in one month." Gross noted that this was the biggest mistake of his career in percentage terms, describing it as "an expensive lesson on the dangers of leverage," and adding his core takeaway from the event: "The place for a bet is in the casino."
The Tax Bonanza of Energy Infrastructure
On the other hand, when asked about the best investment he ever made, Gross did not look back decades. He pointed to a relatively recent move made about three years ago—purchasing shares of energy pipeline companies, massive infrastructure networks (such as transportation pipelines, terminals, and oil and gas storage tanks) operating under the unique financial structure of master limited partnerships (MLPs).
According to Gross, the great advantage of these companies lies in massive tax benefits, as their profit distributions are mostly considered a return of capital rather than a dividend, thus deferring taxes. "Yields are twice as high as those of similar corporate pipeline companies," Gross said. For example, Western Midstream Partners distributes a dividend yield of over 8%, while traditional competing companies settle for around 4%. Additionally, Gross addressed the recent surge in oil due to geopolitical tensions with Iran, noting that "high oil prices provided an additional boost" to the revenues of those companies.
The Artificial Intelligence Revolution Angle
Although these are "old economy" companies, Gross believes they have a bright future precisely thanks to cutting-edge technology. In a post published about a year ago on the social network X, Gross detailed the rationale: "For readers looking for specific recommendations, I continue to like MLP stocks, with their high tax-deferred dividends (7%-9%)," he wrote, adding that he believes in them due to "their future infrastructure forecasts thanks to AI, AI data centers, electricity demand, and the natural gas required to generate it." He concluded the recommendation with the sentence: "My favorite stocks are Plains All American Pipeline LP and Western Midstream Partners."
Finally, Gross also provided an interesting recommendation outside the energy sector: food stocks. "I'm starting to get intrigued by food stocks," he shared with his followers. "They're going nowhere in terms of price, but a 6.2% yield in Kraft Heinz is attractive for income. Plus, the company is splitting into two parts—which could push the price slightly higher."
