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CNBC Transcript: PIMCO Co-Founder Bill Gross Speaks with CNBC's "Street Signs" Today

Tuesday, 25 Feb 2014 | 4:23 PM ET

WHEN: Today, Tuesday, February 25th

WHERE: CNBC's "Street Signs"

Following is the unofficial transcript of a CNBC interview with PIMCO Co-Founder Bill Gross today on CNBC's "Street Signs." Following is a link to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000249047.

All references must be sourced to CNBC.

BRIAN SULLIVAN: WELCOME BACK TO "STREET SIGNS" HERE. LET'S WELCOME IN PIMCO'S BILL GROSS. WE HAD A SEGMENT ON EARLIER REACTING TO THE WALL STREET JOURNAL ARTICLE ABOUT MOHAMMED EL-ERIAN'S DEPARTURE FROM PIMCO. BILL MUST HAVE HEARD IT. JOINING US NOW BY PHONE. BILL, THANK YOU VERY MUCH FOR JOINING US. I'M ASSUMING YOU'RE CALLING IN TO REACT TO WHAT YOU HEARD FROM GREG ZUCKERMAN. OR MAYBE YELL AT US.

BILL GROSS: NO, I AM, BRIAN. I RESPECT GREG. WE'VE BEEN GOOD FRIENDS FOR 10 OR 15 YEARS, BUT LIKE THE OLD RADIO ANNOUNCER PAUL HARVEY SAID, IT'S TIME FOR THE REST OF THE STORY. I THINK HE ONLY HAD HALF OF IT. HE SUGGESTED I THINK ON YOUR PROGRAM THAT BASICALLY, YOU KNOW, WE WERE AN AUTOCRATIC TYPE OF COMPANY AND THAT I NEEDED TO SHARE POWER. YOU KNOW, WHAT HE DIDN'T SAY AND PERHAPS DIDN'T KNOW WAS THAT BEFORE MOHAMMED LEFT AND PROBABLY THREE MONTHS BEFORE HE LEFT, WE PRESENTED A PLAN TO THE EXECUTIVE COMMITTEE THAT WAS AFFIRMED AND ABOUT TO BE CARRIED OUT THAT SHARED RESPONSIBILITY WITH SIX DEPUTY CIOs WHICH WE HAVE ANNOUNCED PUBLICLY AND ADVERTISED IN THE PRESS AND THE WALL STREET JOURNAL, BY THE WAY. AND THOSE DEPUTY CIOs HAVE POWER THAT IS NOT INDEPENDENT BUT CERTAINLY IS SOMETHING DIFFERENT THAN THE AUTOCRATIC STYLE THAT GREG ZUCKERMAN PROPOSED. WHAT WE'VE DONE AND WHAT WE WERE GOING TO DO EVEN WITH MOHAMMED IN PLACE WAS TO PUT SIX DEPUTY CIOs ON THE INVESTMENT COMMITTEE AND THEY HAVE BEEN PUT ON THE INVESTMENT COMMITTEE. MOHAMMED WAS AWARE OF THAT. BASICALLY IT WAS HIS PLAN. A MONTH OR TWO MONTHS BEFORE HE RESIGNED, HE BASICALLY TOLD THE EXECUTIVE COMMITTEE THAT HE THOUGHT IT WAS A GOOD PLAN, AN EXCELLENT PLAN, BUT THAT HE WASN'T THE MAN TO CARRY IT FORWARD. SO ALL OF THIS DISCOURSE ABOUT AN AUTOCRATIC STYLE FROM MY STANDPOINT AND CONFLICT BETWEEN MOHAMMED AND MYSELF IS OVERBLOWN.

SULLIVAN: BILL, DID YOU FEEL THERE WAS ANYTHING THAT WAS FACTUALLY INCORRECT IN THE ARTICLE OR DID YOU THINK THAT THE TONE, PERHAPS THE LINE OF I'M TIRED OF CLEANING UP YOUR YOU-KNOW-WHAT, THAT THAT MISREPRESENTED YOUR RELATIONSHIP, OR WERE THERE ACTUAL FACTUAL ERRORS IN HERE?

GROSS: OH, I DON'T -- LIKE I SAID, I DON'T WANT TO QUARREL WITH GREG ZUCKERMAN AND HIS ARTICLE. HE GAVE US A CHANCE LAST NIGHT TO GO OVER SOME OF THE FACTS AND WE DISPUTED SOME OF THEM, BUT LET'S GO WITH THE BASIC ARTICLE. I THINK THE TONE IN TERMS OF WHAT IT SUGGESTED, IN TERMS OF CONFLICT BETWEEN MOHAMMED AND MYSELF IS JUST FAR OVERBLOWN. IT WOULD BE WONDERFUL TO HAVE MOHAMMED COME ON YOUR PROGRAM OR SOME OTHER PROGRAM AND GET HIS SIDE OF THE STORY, BUT I DON'T THINK THAT'S GOING TO TAKE PLACE. FROM MY STANDPOINT, AND HOW I SAW IT AND HOW OTHERS ON THE EXECUTIVE COMMITTEE AND WITHIN PIMCO SAW IT WAS THAT THIS WAS A COMPANY THAT WAS GROWING, DOING WELL, YOU KNOW, HAD, YES, HAD AN ATMOSPHERE WHICH WAS A COMPETITIVE TYPE OF ATMOSPHERE WHICH IS TYPICAL OF THIS BUSINESS. MOHAMMED LEFT BECAUSE HE TOLD US THAT HE WASN'T THE MAN TO CARRY OUT HIS OWN PLAN. AND SO WHAT I'M REALLY CALLING TO SUGGEST IS THAT WE HAD A PLAN IN PLACE TO SHARE AUTHORITY, NOT JUST BETWEEN MOHAMMED AND MYSELF BUT BETWEEN SIX DEPUTY CIOs. THAT PLAN IS IN PLACE AND HAS BEEN DISSEMINATED TO CLIENTS TWO, THREE, FOUR WEEKS AGO AND WAS GOING TO BE BASICALLY SHARED BY MOHAMMED AND I GOING FORWARD. HE ESSENTIALLY CAME FORWARD TO THE EXECUTIVE COMMITTEE ONCE HE PUT THE PLAN IN PLACE AND SAID I'M NOT THE MAN TO CARRY THIS FORWARD. THOSE ARE HIS EXACT WORDS.

SARA EISEN: BILL, IT'S SARA. ONE THING THAT STRUCK ME IN THIS ARTICLE, AND I THINK THAT A LOT OF READERS WILL AGREE, WAS THAT YOUR PERSONALITY THAT HE DESCRIBED ABOUT YOU, I'M QUOTING FROM THE ARTICLE, "MR. GROSS DOESN'T LIKE EMPLOYEES SPEAKING WITH HIM OR MAKING EYE CONTACT, ESPECIALLY IN THE MORNING. CURRENT AND FORMER EMPLOYEES SAY HE PREFERS SILENCE AND AT TIMES REPRIMANDS THOSE WHO BREAK IT EVEN IF THEY'RE DISCUSSING INVESTMENTS," ACCORDING TO THE PEOPLE THAT MR. ZUCKERMAN SPOKE TO. THAT IS AN ACCURATE ASSESSMENT OF YOUR PERSONALITY? DO YOU WANT TO ADD SOMETHING TO THAT SO PEOPLE PERHAPS GET THE RIGHT IMPRESSION?

GROSS: WELL, SURE I DO. FIRST OF ALL, I'M NOT A MORNING PERSON AND THAT STRIKES PEOPLE AS ODD BECAUSE I HAVE TO GET UP AT 4:30 IN THE MORNING BUT I'M BETTER AT 12:00 THAN I AM AT 7:00. SECOND OF ALL, I INSTITUTED ABOUT THREE YEARS AGO, YOU KNOW, AT 8:00 IN THE MORNING, A TIME WHERE A PROFESSIONAL OR OTHER EMPLOYEE COULD PLAY THEIR OWN ROCK SONG FOR FOUR OR FIVE MINUTES WITHIN THE TRADING ROOM AND ACTUALLY I INSTITUTED A CONGA LINE, THE FIRST TIME IT WAS DONE SEVERAL YEARS AGO, AROUND THE TRADING ROOM TO LET EMPLOYEES KNOW THAT IT WAS OKAY TO SCREAM AND SHOUT AND LET IT ALL HANG OUT. SO I THOUGHT THAT WAS VERY UNFAIR. IT TAKES ME FIVE CUPS OF COFFEE TO WAKE UP AND PERHAPS THAT'S THE IMPRESSION THAT PEOPLE GOT.

SULLIVAN: I HAVE BEEN OUT THERE, BILL, AS YOU KNOW. I HAVE SEEN YOU AND MOHAMMED WORK TOGETHER IN PERSON. YOU DESCRIBE MOHAMMED AS A FRIEND A FEW WEEKS AGO ON THIS PROGRAM. WOULD YOU STILL DESCRIBE MOHAMMED EL-ERIAN AS A FRIEND?

GROSS: HE'S ALWAYS BEEN A GOOD FRIEND. I MEAN, HIS WIFE AND MY WIFE JOINED TOGETHER IN TERMS OF PHILANTHROPIC ACTIVITIES. WE SEE EACH OTHER IN TOWN AND AT THEIR HOME WITH THEIR DAUGHTER. MOHAMMED HAS BEEN VERY PRIVATE SINCE HIS RESIGNATION. I WISH HE HADN'T BEEN PRIVATE. BUT IN TERMS OF OUR FRIENDSHIP, YES. YOU KNOW, LIKE I DESCRIBED ABOUT A MONTH AGO ON ANOTHER STATION, YOU KNOW, MOHAMMED WAS HIRED TWICE BY THE EXECUTIVE COMMITTEE AND BY MYSELF, SO IF WE HADN'T HAVE BEEN FRIENDS THE FIRST TIME, YOU KNOW, CERTAINLY THE SECOND TIME IN TERMS OF HIS COMING BACK, YOU KNOW, WOULDN'T HAVE BEEN MADE POSSIBLE. TO MY WAY OF THINKING, THE COMPETITIVE ATMOSPHERE THAT EXISTS AT PIMCO AND I WOULD ADMIT TO THAT, IS AN ATMOSPHERE THAT ALSO EXISTED BETWEEN MOHAMMED AND MYSELF IN TERMS OF IDEAS. BUT BY NO MEANS WAS ANY ONE OF US DOMINANT. WE SIMPLY WERE EXERCISING OUR INTELLECT NOT JUST BETWEEN OURSELVES BUT BETWEEN OTHER MEMBERS ON THE INVESTMENT COMMITTEE. I WOULD LIKE TO HAVE GREG ZUCKERMAN COME OUT AND SIT ON OUR INVESTMENT COMMITTEE TO SEE EXACTLY THE ATMOSPHERE THAT EXISTS AT PIMCO AND SINCE CERTAINLY NOW IT EXISTS AT PIMCO IN TERMS OF DEPUTY CIOs.

EISEN: IT ALSO SORT OF RAISES THE QUESTION, BILL, AROUND SUCCESSION. I KNOW YOU HAD PREVIOUSLY SAID THAT MR. EL-ERIAN WOULD SUCCEED YOU AND YOU'RE NOT GOING ANYWHERE. BUT WHAT MORE CAN YOU TELL US ABOUT THAT QUESTION ESPECIALLY IN LIGHT OF THIS ARTICLE?

GROSS: WELL, I'M A YOUNG 69. AT LEAST I THINK I AM. I THINK I'VE GOT AT LEAST A GOOD FIVE YEARS LEFT IN ME. THERE ARE BOND PEOPLE AND INVESTORS, AS YOU KNOW, THAT ARE IN THEIR 70s AND 80s. DAN FUSS OF LOOMIS BEING ONE GOOD EXAMPLE ON THE BOND SIDE. SO IT CAN BE DONE. AND, YOU KNOW, I CERTAINLY HAVE THE ENERGY AND THE WILLPOWER TO KEEP GOING FORWARD. YOU KNOW, I RECOGNIZE, AS DID OUR EXECUTIVE COMMITTEE, AS DID MOHAMMED SEVERAL MONTHS AGO BEFORE HE EVEN THOUGHT OF RESIGNING THAT, YOU KNOW, THE SITUATION HAD TO CHANGE. THAT WE NEEDED TO BROADEN OUR AUTHORITY AND TO LET DEPUTY CIOs IN THEIR RESPECTIVE AREAS LIKE CREDIT AND MERGING AND OTHER AREAS HAVE A LITTLE MORE AUTHORITY. AND SO THAT'S FINE, AND A 69-YEAR-OLD SHOULD BE WILLING TO DO THAT, AND PIMCO HAS BEEN WILLING TO DO THAT. I WISH MR. ZUCKERMAN HAD BEEN WILLING TO PURSUE THAT ANGLE A LITTLE BIT MORE THOROUGHLY.

SULLIVAN: I GUESS THE TAKEAWAY TOO, BILL, WAS THAT IF YOU'RE DISAGREEING WITH BILL GROSS AT PIMCO, WATCH OUT. AS A READER, THAT'S WHAT I GOT OUT OF IT. WHAT DOES IT TAKE TO DISAGREE WITH YOU? IF I DISAGREE AND SAY, BILL, I COMPLETELY DISAGREE WITH THAT THESIS, HOW BIG OF A FIGHT ARE WE GOING TO GET IN?

GROSS: WELL, I DON'T THINK AT ALL. I MEAN, MANY OF THESE AREAS, AND AS EVIDENCED BY OUR DEPUTY CIO STRUCTURE, BUT BASICALLY IT WAS IN PLACE BEFORE, WHERE EACH OF THESE UNITS, SO TO SPEAK, CREDIT, HIGH YIELD, DIVERSIFIED INCOME, UNCONSTRAINED, GLOBAL, ET CETERA, YOU KNOW, BASICALLY ARE OPERATING NOT TOTALLY INDEPENDENTLY BUT RELATIVELY INDEPENDENTLY WITH A DIVISION HEAD, AND SO TO DISAGREE WITH ME, YOU KNOW, FOR THE MOST PART, YOU KNOW, ONE PERSON CAN'T HAVE AN OVERALL COMPETENCE REALLY OR AN OVERALL KNOWLEDGE OF A MULTITUDE OF AREAS THAT THE BOND MARKET AND THE ASSET MARKETS NOW CONTAIN. DISAGREEING WITH ME, NO. I'D GIVE MY IMPRESSIONS AND I'D GIVE MY OPINIONS, BUT FOR THE MOST PART THESE ARE RELATIVELY INDEPENDENT UNITS AND DOING VERY WELL ON THEIR OWN, BY THE WAY.

EISEN: BILL, HAVE YOU HEARD FROM ANY OF YOUR INVESTORS AND CLIENTS AFTER THIS ARTICLE HIT?

GROSS: NO, I DON'T THINK THERE'S BEEN MUCH REACTION. BLOG SPACE IS ACTIVE, OF COURSE, AND THE BLOG SPACE GOES ANYWHERE IT WANTS TO GO, BUT CLIENTS UNDERSTAND IT, AND I'M NOT AT PIMCO NOW OR ELSE I'D BE IN FRONT OF THE CAMERA TALKING TO YOU, BUT FROM OUR UNDERSTANDING THE CLIENTS ARE TAKING IT AS A SIGN THAT A COMPETITIVE ATMOSPHERE IS INDICATIVE OF A FIRM THAT'S LOOKING OUT FOR THEIR INTERESTS AS OPPOSED TO INTERNAL INTERESTS. AND THAT'S REALLY THE STORY, YOU KNOW, THAT I WANT TO GET OUT IS THAT COMPETITION AND EXCHANGE OF IDEAS, YOU KNOW, BETWEEN INDIVIDUALS AND BETWEEN DESKS AT ANY INVESTMENT FIRM IS A NECESSITY FOR ALPHA GENERATION AND ALPHA PERFORMANCE. THE MINUTE WE GIVE THAT UP, THE MINUTE THAT WE BASICALLY RESOLVE OURSELVES IN TERMS OF NOT CARING ABOUT, YOU KNOW, A COMPETITIVE INTELLECTUAL DISCUSSION BETWEEN INDIVIDUALS AND GROUPS, THEN CLIENTS, YOU KNOW, DON'T BENEFIT. AND THE CLIENT IS OUR FIRST PRIORITY.

SULLIVAN: YOU KNOW, BILL, THOUGH, A LOT OF PEOPLE MAY NOT REALIZE THAT THOUGH YOU DO HAVE A PARENT COMPANY NOW, YOU BUILT PIMCO, RIGHT? WITH A LOT OF VERY SMART MEN AND WOMEN OVER THE YEARS. SOME WHO HAVE BEEN WITH YOU A LONG TIME. SOME A SHORT TIME. WHEN YOU READ THIS ARTICLE, IS THERE A PART OF YOU THAT JUST WANTS TO SAY, DAMN IT, IT IS MY COMPANY, AND I CAN BE TOUGH AND THAT'S WHAT IT TAKES TO BUILD A GOOD COMPANY. OR DO YOU FEEL LIKE I NEED TO SOFTEN MAYBE MY IMAGE NOW BECAUSE PEOPLE ARE GOING TO VIEW ME AS AN AUTOCRAT THAT COMPARES HIMSELF TO A TRIPLE CROWN WINNING RACEHORSE?

GROSS: WELL, YOU KNOW, I THINK THAT'S THE IMPRESSION THIS ARTICLE GIVES. YOU KNOW, MY IMPRESSION WOULD BE, AND IF MR. ZUCKERMAN WOULD COME TO THE COMPANY AND HAVE A MORE THOROUGH DISCUSSION AND OTHERS TOO, IT WOULD BE THAT FOR 40 YEARS PIMCO HAS BEEN A FAMILY. THAT'S THE WORD I USE MORE THAN ANYTHING. IT'S OUR FAMILY. AND SO TO THINK THAT IT'S MY COMPANY, YOU KNOW, IS TOTALLY AN ANATHEMA TO ME AND AN ANATHEMA TO THE CULTURE OF PIMCO THAT WE HAVE TRIED BUILD. WE SHARE IDEAS, WE SHARE RESPONSIBILITY AND WE FOCUS ON THE CLIENT. I DON'T KNOW WHERE THAT'S COMING FROM. I KNOW THAT, YOU KNOW, I HAVE MY OPINIONS. I KNOW THAT, YOU KNOW, PIMCO HAS EXCELLED OVER THE PAST 30 OR 40 YEARS THAT I HAVE BEEN THERE, BUT BY NO MEANS IS IT MY COMPANY. I HAVE HAD A LOT OF COMPANIES, SO TO SPEAK, TO HELP PIMCO ALONG THE WAY AND WE VIEW IT AS A FAMILY OPERATION AND A FAMILY RESTAURANT SO TO SPEAK AS OPPOSED TO AN EXCLUSIVE CLUB.

EISEN: AND VERY QUICKLY BILL, WHAT WOULD YOU SAY TO THOSE WHO ARE QUESTIONING THE GOVERNANCE, WHETHER THERE'S GOOD GOVERNANCE AT THE TOP OF PIMCO RIGHT NOW?

GROSS: WELL, I'D SAY LOOK AT OUR DEPUTY CIO STRUCTURE ON THE INVESTMENT SIDE, HOW WE'VE PROVIDED A PLAN THREE TO FOUR MONTHS AGO, INSTITUTED THE PLAN, AND SPREAD THE AUTHORITY. YOU KNOW, QUICKLY SARA, THE DEPUTY CIOs EACH WILL LEAD THE INVESTMENT COMMITTEE ON A SEPARATE DAY AND SO THAT CERTAINLY DOESN'T SPEAK TO AUTOCRATIC AUTHORITY. IT SPEAKS TO A SHARING OF RESPONSIBILITY AND SOMETHING THAT THE EXECUTIVE COMMITTEE AND PIMCO AND MOHAMMED AND MYSELF ALL ENDORSED SEVERAL MONTHS AGO BEFORE MOHAMMAD SAID I'M NOT THE MAN TO LEAD IT FORWARD.

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