Posted on 03/09/2011 12:27:54 PM PST by gregd0180
And many thought Bill Gross was only posturing when he said he is getting the hell out of dodge. Based on still to be publicly reported data by Pimco's flagship Total Return Fund, the world's largest bond fund, in the month of January, has taken its bond holdings to zero (and -14% on a Duration Weighted Exposure basis). The offset, not surprisingly, is cash. After sporting $28.6 billion in "government related" securities, TRF dropped to $0.0, while its cash holdings surged from $11.9 billion to a whopping $54.5 billion (based on total TRF holdings of $236.9 billion as of February 28). This is the most cash the flagship fund has ever held, and the lowest amount in Treasury holdings since January 2009 before it was made clear that the Fed was going to adjust QE1 to include Treasurys in addition to Mortgage Backed Securities. PIMCO's Treasury holdings peaked in June 2010 at $147.4 billion and have declined consistently ever since. And while we expected that the spike in MBS holdings (at times on margin) was indicative of an expectation that QE3 would monetize mortgage backed securities, the ongoing decline in that asset class now leads us to believe that Bill Gross is now convinced there will be no QE3 at all, at least based on his just putting his money where his monthly pen is! And if Bill Gross, the most connected person to the upcoming actions by the Fed, believes there is no more quantitative easing, it is really time to get the hell out of dodge in all security classes - bonds, and most certainly, equities.
Note the plunge in Treasury holdings in the chart below (blue line), offset by the surge in cash (dotted pink line). Time to panic.
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(Excerpt) Read more at zerohedge.com ...
I don't know what else to say. The proposed "radical" cuts by the Republicans are equal to 1/4 of last month's federal deficit.
And they'll probably even cave on that.
Care to share your re-scope?
While I agree that is what the Fed and the Treasury are trying to do, inflate.
However they are moving against very strong fundamental currents. Wealth destruction has been enormous and all this new money isn't going anywhere besides the banks balance sheets to cover their earlier bad investments (now held mostly by the Fed) or into "safe" investments as the banks now see them.
If you believe inflation is going to roar up and bailout the holders of assets, that's a good reason to drop bonds...but even bonds are better than straight cash as a hedge against inflation. Cash pays nothing or very close to it.
However, if you expect massive deflation, cash is the ONLY place to be. It's real value accelerates in direct proportion to the level of deflation.
My deduction is thus: Gross believes cash would be better than US treasuries and he knows as much about the treasury markets that just about anybody. He wants to be liquid. Since all he can hold is bonds and cash...he doesn't have an option for commodities or equities...he hold cash.
Yes, he could be positioning for 8% on the 10yr bond...but I doubt it.
Some very astute people are starting to see massive default everywhere. Hell, the United States Government is going to default and Treasuries are CERTAIN to be worthless then.
Should I sell every US Treasury Bond I have?
Q.E. Money Printing Negative Feed Back Loop to Hyper-Inflation Oblivion
Yes, IMHO.
Whether inflation or generalized sovereign default, you don't want to be holding US Treasuries.
The are also a tough hold during a severe deflation as there will not be sufficient buyers to suck them up even at their original purchase price. The are an illiquid asset in severe deflation...but if you can hold on and the issuing government survives you did OK.
But not nearly as well as those who were holding cash. A 50% monetary deflation will drive some real things to greater than a 50% drop as the poison clears the system. Homes, farmland, businesses, capital assets of every sort will be cheap, cheap cheap.
Think 3-1 purchasing power...or potentially higher.
"We’ll have to wait and see what happens. A lot of FReepers think you should prepare for hard times."
I agree with this view and HAVE prepared for hard times. My fear is that when something does not happen shortly that people will become complacent. It may happen tomorrow or it may take a while but....bad things are going to happen.
So...Prepare now.
Good advice.
Don’t coount on that. Brokers and IA ‘s are for the most part salesmen that were able to pass an examination or two. Look at her holdings. I would have no more than 20% in dollar denominated bonds, 20% in domestic equities and the remaining 60% split up into foreign equities and commodities ETF’s or pools.
The Coming Rout (In Stocks, Bonds, Commodities and Precious Metals)
I agree.
But, I think it's too late...we're past the point of no return.
Deflation? Inflation? Either way will end with Americans rioting in the streets and perhaps a civil war.
Prepare now.
Thank you.
So, you think Gross is preparing for a bout of deflation?
BTW, I like the way you write, it's easy to read and understand.
“U.S. Living Standards Doomed to Fall”
Where’s Captain Obvious? Gross is simply stating what we have been seeing around us for a few years now. We didn’t need higher gas prices to tell us that name-brand foods are a thing of the past; people have been buying budget-brand groceries for years now at Wal-Mart (who have been kind enough to put in a frozen section by me). Wal-Mart will displace grocery stores as Americans flock to the “company store” to spend their inflated dollars on everything from food to cheap Chinese clothing to cheap Chinese tools to cheap Chinese toys. Our standard of living has been falling for over a decade, but it was masked by purchasing necessities with credit cards. The only difference now is the “company store” isn’t giving advances against future earnings that are looking more uncertain by the week...
Sorry to wake you up, Sleeping Freeper, but those shadows you see in the bushes are not bankers -- they are just rabbits.
Now that the "insiders" revealed that QE3 is coming, why don't you too bet on it?
Bet also on the "speculators" that drive up oil prices: you know that because of them the price is going up, so bet on it.
I know, I know, it's hard to think about these matters and even harder to study them. But, fortunately, you don't have to know anything: just throw those accusations around, defame people --- that'll surely make yourself look patriotic...
I hate everything he's saying, but I concur.
Your anti Saudi anti News Corp bigotry is illfounded
-——the value of U.S. government bonds will fall.-—
Does this not mean that there is a belief that interest rates on new bonds will rise
Should I sell every US Treasury Bond I have?
Ummmm...yes. Right now.
In the Carter years, economists said that we couldn’t have rising inflation AND rising unemployment at the same time.
Here’s the brutal truth: Economics is not a science, dismal or otherwise. They’re a bunch of mathematical BS artists who have been hoodwinking people and policy makers for centuries now. Left, right, center - doesn’t matter. They’re infected with a love of their own theories, which are almost invariably nothing more than a collection of loose statistical relationships from cherry-picked data over a narrow set of circumstances and time so as to not provide too many problems for them to resolve in their theories.
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