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PIMCO Compares Greece To Titanic, Says Bonds Not Attractive Even Over 7%
ZeroHedge Blog ^ | April 8, 2010 | Tyler Durden

Posted on 04/08/2010 11:15:18 AM PDT by Cheap_Hessian

In an interview with Bloomberg's Tom Keene, Richard Clarida of PIMCO has pretty much sealed the fate of Greece: "I don’t think that [7%] would be an attractive enough yield. Greece is sort of like the Titanic. Eighteen things went wrong, and when they go wrong at once it’s problematic." Of course, with this kind of rhetoric the 10 Year will be trading at 8% tomorrow, followed up by Clarida saying not even 9% would be attractive, and so forth. When you have the world's largest bond fund say it is not touching Greece with a ten foot pole essentially no matter what the yield, you get an idea of why Greek 1 Year CDS is trading 600/700. In the meantime, stocks continue to be blissfully unaware of what the surge in the dollar will mean to Obama's export-led US manufacturing utopia. Oh well, at least we can continue to export "advanced" Wall Street services to Greece (and most other European peripheral countries) post default, courtesy of every domestic restructuring firm which is currently brushing up the "sovereign reorganization" tombstone pages in its pitchbooks.

(Excerpt) Read more at zerohedge.com ...


TOPICS: Business/Economy
KEYWORDS: bonds; greece; pimco; risk

1 posted on 04/08/2010 11:15:18 AM PDT by Cheap_Hessian
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To: Cheap_Hessian

2 posted on 04/08/2010 11:17:21 AM PDT by OB1kNOb (When injustice becomes law, resistance becomes duty. - Thomas Jefferson)
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To: Cheap_Hessian

Hell, US Govt bonds would need to be paying 15% or more for me to consider loaning Uncle Sam money for more than 12 months. Anyone who thinks that 4.75% is a good deal for giving the US Govt your money for such a long period as 30 years is a fool.


3 posted on 04/08/2010 11:21:58 AM PDT by PGR88 (I'm so open-minded, my brains fell out.)
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To: Cheap_Hessian
Of course, with this kind of rhetoric the 10 Year will be trading at 8% tomorrow, followed up by Clarida saying not even 9% would be attractive, and so forth.

I always take with a grain of salt experts who get on TV and tell what they think. It is possible that Clarida is jawboning the yield up, and then he will buy.

4 posted on 04/08/2010 11:23:01 AM PDT by mlocher (USA is a sovereign nation)
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To: PGR88

Exactly, which is why pretty much nobody is loaning money to our government any more other than the Fed. It’s an absolutely absurd situation.


5 posted on 04/08/2010 11:26:09 AM PDT by jpl
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To: Cheap_Hessian

The US isn’t far behind. Our $1.6 trillion budget deficit accounts for 12% of our $14 trillion economy. Our level of debt is therefore at about the same level as Greece’s.

BTW Here is a joke I heard:

If Turkey is attacked in the rear, will Greece help?


6 posted on 04/08/2010 11:35:45 AM PDT by Gen. Burkhalter
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To: Cheap_Hessian

The Titanic is for sure not Greece..but the whole fake one world corporatist secularist order that Greece bought into and is now reaping the fragments of promises that were lies.

Greece can survive by getting out of this ponzi scheme. I hope we have the guts to do so too. I fear it’s too late.


7 posted on 04/08/2010 11:38:34 AM PDT by eleni121 (For Jesus did not give us a timid spirit , but a spirit of power, of love and of self-discipline)
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To: Gen. Burkhalter

The VAT is being touted as the way for us to get out of debt. What rate do the Greeks pay in VAT?


8 posted on 04/08/2010 11:40:13 AM PDT by csmusaret (Sarah Palin thinks everyday in America is the 4th of July. Obama thinks it is April 15th.)
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To: csmusaret

I don’t know precisely. I do know that in Europe, generally speaking, VAT taxes are quite high. I don’t see why Greece would be an exception.

It seems that our policy makers in Washington are adamantly determined to take us down the same path as Greece and most other European nations as well.


9 posted on 04/08/2010 11:59:57 AM PDT by Gen. Burkhalter
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To: Cheap_Hessian

They are just pushing it up and the suckers will buy.


10 posted on 04/08/2010 12:01:47 PM PDT by longtermmemmory (VOTE! http://www.senate.gov and http://www.house.gov)
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To: Gen. Burkhalter

19%


11 posted on 04/08/2010 12:02:54 PM PDT by longtermmemmory (VOTE! http://www.senate.gov and http://www.house.gov)
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To: csmusaret

VAT-generally 19%
— Greeks hate it.

Corporate tax 35% - outrageous

in Germany 15% - smart krauts but they hold lots and lots of debt. I’d love to see them end up getting smoked by the time this is over.

in Russia - 20% - keep it there or lower it Vlad...sooner or later you will win...not a bad idea.


12 posted on 04/08/2010 12:13:04 PM PDT by eleni121 (For Jesus did not give us a timid spirit , but a spirit of power, of love and of self-discipline)
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To: jpl; JasonC

Exactly, which is why pretty much nobody is loaning money to our government any more other than the Fed. It’s an absolutely absurd situation.
***************************************************
Expert analyst JasonC will tell you that you are wrong ,, the bond sales are going swimmingly ,, we aren’t buying bonds from ourselves...


13 posted on 04/08/2010 12:19:56 PM PDT by Neidermeyer
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To: Gen. Burkhalter; eleni121

Thanks for your replies. I have yet to see any honest reporting about this stealth tax. Commentators routinely refer to it as a national sales tax, yet politicians know they could never sell a sales tax high enough to do any good. That is why they prefer a tax that is added in increments along the way from raw materiel to finished product.


14 posted on 04/08/2010 12:29:24 PM PDT by csmusaret (Sarah Palin thinks everyday in America is the 4th of July. Obama thinks it is April 15th.)
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To: longtermmemmory

Pretty damned high if you ask me. And that dumbkopf, Volcker, wants the same insidious tax imposed here in the US. I can only think of a firing squad at times when I think of what
is in store. Obamacare and the Porkulus was just the start. Next is new draconian financial regulations, unilateral disarmament, Crap and Tax, and amnesty.

Contrary to popular opinion, BHO is not stupid and incompetent. I wish he was. He knows exactly what he’s doing and exactly where he wants to take the country. He has already achieved many of his objectives and is focused like a laser beam on implementing the rest of his radical left agenda. I, too, read Rules For Radicals, so I know exactly the game plan and I am well familiar with the battlefield.


15 posted on 04/08/2010 12:34:13 PM PDT by Gen. Burkhalter
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To: csmusaret

danka.


16 posted on 04/08/2010 12:45:15 PM PDT by Gen. Burkhalter
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To: Cheap_Hessian

Q: What’s the difference between California and the Titanic?
A: At least the Titanic had lights on when it sank.


17 posted on 04/08/2010 3:44:54 PM PDT by TexasRepublic (Socialism is the gospel of envy and the religion of thieves)
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To: Gen. Burkhalter

that is PER MONTH.


18 posted on 04/08/2010 4:14:03 PM PDT by longtermmemmory (VOTE! http://www.senate.gov and http://www.house.gov)
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To: Gen. Burkhalter

“It seems that our policy makers in Washington are adamantly determined to take us down the same path as Greece and most other European nations as well.”

Idiot RATS worship Europe, and no moreso than when they lamented for 6 years during the Iraq war about ‘what Europe thinks of us.’ IDIOTS! So you want to be like ‘em?


19 posted on 04/08/2010 4:55:41 PM PDT by SeattleBruce (God, Family, Church, Country - Keep on Tea Partiers - party like it's 1773 & pray 2 Chronicles 7:14!)
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To: Gen. Burkhalter

“He has already achieved many of his objectives and is focused like a laser beam on implementing the rest”

I don’t want to underestimate maobama who passed the health scare fraud, but with 55 to 65% of the country now opposing him, do you really think even laser focus will bring in cramnesty and crap and tax? I believe his power will evaporate on 11/2010 and 11/2012.


20 posted on 04/08/2010 5:08:34 PM PDT by SeattleBruce (God, Family, Church, Country - Keep on Tea Partiers - party like it's 1773 & pray 2 Chronicles 7:14!)
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To: jpl
The Fed hasn't bought any treasuries, net, since the end of 2007. All of the net treasury issuance since then has been successfully placed with end market buyers. More than half of them domestic.

Since the smash itself in the 3rd quarter of 2008, the Fed did add about $400 billion to its treasury holdings, which simply rebought the bonds it had sold into the open market during the course of 2008 as it extending loans to the banking system. And it hasn't added anything to its treasury holdings in the last six months.

Moreover, its entire balance sheet is less than 6% larger than it was on November 20, 2008, about a year and a half ago. It has bought gobs of mortgage securities over that period but those purchases were funded by the repayments flowing back to it of all the emergency credits it extended during the crash itself, in the short span from mid September to mid Novemember of 2008.

The Fed's actions in easing and the massive fiscal swing (taxes $400 billion lower per year, benefit payments that much higher, plus additional deficit spending etc) stopped the drop in personal and corporate incomes in about six months, and both incomes and consumption expenditure in the private economy have recovered to pre crash levels as a direct result. And an entirely predictable, and predicted, one. By me among others, here among other places.

The expansion is now self sustaining and there is no prospect whatever of renewed recession. Deleveraging will however continue for some time, unemployment will remain at elevated levels, dropping gradually, etc. All the perfectly ordinary consequences of the combined business and financial cycles at this stage.

Who is loaning money to the government? Every financial institution on the planet. They are all simultaneously trying to reduce their credit risk and they sure as hell don't want to lend it to homebuyers or to Greece...

21 posted on 04/10/2010 5:28:45 AM PDT by JasonC
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To: mlocher
It is possible people try to, and it is possible they grew up in financial terms in the 1980s and think 8-9% without inflation or risk is their birthright as capitalists, but wishes are not horses. Rates aren't going to 8%. They might go to 4.5%, and in 2-3 years they might even go to 5% - but they are just as likely to stay at 4%. There is a whole passel of people who hate that and have been consistently wrong in their prediction that it must end and go back to their glory days for a decade solid, or even 2. But they are fools.
22 posted on 04/10/2010 5:35:58 AM PDT by JasonC
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To: JasonC

Within the context of US bonds, I tend to agree with you, although I would add .5% to your numbers. I think the comment, however, was made in the context of Greece gov’t bonds, where rates are already over 7.5%. PIMCO’s advisor is saying he won’t buy them until rates go higher.


23 posted on 04/10/2010 6:35:00 AM PDT by mlocher (USA is a sovereign nation)
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To: mlocher
I understand that. And buying Greek bonds is a risk trade on a junk credit in hopes of an international backstop - something PIMCO regularly "plays", but definitely not for the average bond investor.

My comment was instead directed at the endless refrain that US and global rates "must" soar, based on nothing more than investors not liking them, hating the fact that government credit is as sound as it actually is, and wishing rates were higher and governments hated.

Which remains ideological nonsense...

24 posted on 04/10/2010 9:02:12 AM PDT by JasonC
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To: JasonC

The Fed has been monetizing the debt like mad, we’re in danger of heading into a Japanese style liquidity trap, and a “jobless recovery” is a bullshit recovery.


25 posted on 04/10/2010 9:07:06 AM PDT by jpl
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To: JasonC
My comment was instead directed at the endless refrain that US and global rates "must" soar, based on nothing more than investors not liking them, hating the fact that government credit is as sound as it actually is, and wishing rates were higher and governments hated.

I got it. I agree with your assessment. There are other market forces, such as people bailing out of European debt and looking at treasuries. Also, investment cash is a commodity, there is plenty of it right now, so there is no need to pay a large interest rate.

26 posted on 04/10/2010 9:23:03 AM PDT by mlocher (USA is a sovereign nation)
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To: jpl
Fed holdings of treasuries as of April 7, 2010, latest weekly report - $776.7 billion
Fed holding of treasuries as of November 15, 2007 - a year before the crash - $779.6 billion
net change negative $2.9 billion, practically zero

total Fed balance sheet, latest, April 7, 2010 - $2289.8 billion
total Fed balance sheet right after the crash, November 20, 2008 - $2178.9 billion
net change $110.9 billion or about 5%

The Fed has not been monetizing the federal debt. It greatly expanded its total sheet in the period September 2008 to November 2008 by extending over $1.1 trillion in loans to the private banking system, and since April of 2009, a year ago now, it has been repaid practically all of that emergency lending. It has parked all the fund flowing back to it, net, into a new position in agency mortgage backed securities, emphatically not treasuries.

The Fed has not financed the US treasury even on an emergency basis. The US treasury did not need it; it's credit has been outstanding throughout and still is. The Fed did finance the private banking system on an emergency basis, to the tune of $1 trillion, and it has already been repaid that emergency lending.

In the meantime, Fannie Mae and Freddie Mac went into receivorship, and the Fed has effectively taken on much of the new mortgage issuance they have created over the last year (only), in the ordinary course of their business. It has not expanded the money supply in doing so. It has merely prevented the huge repayment of its emergency loans, over the last year, from cutting the money supply in half.

Having a functioning banking system undoubtedly helps the US treasury place its net new debts compared to not having a functioning banking system. It also helps that the US air force has not nuked lower Manhattan. But the private financial system, US households, and international investors have financed all of the US treasury's net debt issuance on their own, and they own it.

The total net worth of the US household sector as of the latest available reports, which runs through year end 2009 and was released March 11, stands at $54.176 trillion. That includes $540 billion more in direct treasury holdings than at the end of 2007. It is also $5.65 trillion higher than the cycle low a year ago, though still $10.3 trillion below the cycle peak around October 2007.

Movements in the total asset value of the US household sector dwarf everything going on on the money side alone, or fiscal operations, or net trade and foreign investment. It's the swing in the financial cycle, in other words, that drives all of it, not the other way around. And right now, the very rich US private sector and the very large world financial sector are extremely risk averse, and are reducing their loans to riskier borrowers, and running up their loans to governments instead.

The reason for this is obvious. It wasn't the US treasury that stiffed bankers for $3 trillion in dud loans over the last 3 years. It was deadbeats on mainstreet, and overleveraged and thereby failing private companies on Wall Street. The treasury paid on the nail and its credit is sky high. You do not have to like government or think it should have a large role in our economy or our markets to notice this.

The plain fact is, it does and markets know it and they prefer not to get taken to the cleaners by private sector deadbeats. And your ideological morality tales about how everyone in the private sector is a virtuous yeoman with a heart of gold or an enterprising clever businessman, while everyone in government is a thief and a rogue, do not cut it, when private deadbeats default of $3 trillion and walk away, while the government not only pays its own debts on the nail but picks up many of theirs as well.

The US treasury's credit is in no danger from your ideological hatreds, or anything else for that matter. But your contact with financial reality is another story...

27 posted on 04/10/2010 10:14:47 AM PDT by JasonC
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To: mlocher

Xactly...


28 posted on 04/10/2010 10:28:28 AM PDT by JasonC
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