PIMCO’s Bill Gross appeared on CNBC yesterday and talked about the U.S. housing crisis. According to Gross, home prices will go down another 10 to 15 percent. He also discussed troubled American mortgage giants Fannie Mae and Freddie Mac:

CNBC: Bill, is your assumption that Fannie and Freddie will both have stocks priced at $0, and they will get some sort of a federal bailout?
GROSS: Well, I think so. At three and four dollars per share, respectively, at the moment, in effect, the market is valuing both of these companies at zero. I mean, these are perpetual options at these prices, you know, with three to four dollar prices that effectively use a strike price of zero for the common stock. So at the moment, that’s what the market is saying.

CNBC’s Erin Burnett asked the founder and chief investment officer at PIMCO what an investor needs to hear from the U.S. government to restore confidence in Fannie and Freddie. Gross replied:

They need to hear not only that they’re willing to stand behind Fannie and Freddie but that their money is going to do that. And, in terms of the amount, 15 to 20 billion per institution in the form of preference or preferred stock that hopefully will be at the same level of the existing preferred stock… Yes, we need 15 to 20 billion per institution coming in at the preferred level.

You can view the 7 minute 2 second CNBC segment here.

Source:

Bill Gross Interview
CNBC, August 20, 2008

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