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 ...
Been preparing since November 2008....have felt stupid at times....like a hoarder....but....I’m hoping we are prepared. Nor will I stop preparing either.
CNBC will be interesting tomorrow morning....
FWIW, we have.
Whoa there, slick.
When did you buy these Treasuries?
NB that Gross and PIMCO are constantly moving in and out of bonds, maturity of bonds, classes of bonds, etc. They have 10’s of billions of dollars that they have to move around every year based on bond portfolios rolling, etc.
If you set up a bond ladder of varying maturities and it is kicking off a good income stream, the only reasons to sell are because a) you were planning on selling the bonds at some future date and NOT holding them to maturity, or b) because you think the US government will default on those bonds the way GM did on their bondholders.
B4L8r
No it won’t. They’ll tell the girls to put on lower necklines and really frilly undergarments, tease their hair and act extra-perky.
CNBC cannot stand the idea of cold, hard reality.
Tomorrow’s Thursday. Santelli should be on to do the unemployment numbers. This just might come up as well :)
Yea, it might.
Then again, Steve Leisman will likely pooh-pooh PIMCO’s actions.
The only person who will shut down the programmed robot-like perkiness of the anchorettes would be Bill Gross himself.
Or Warren Buffett.
Yes, and one so serious that he doesn't think he can sell bonds at any price...because there won't be any "money" left to buy them when things pop.
Under inflation, the currency eventually becomes worthless.
In a severe deflation...even of the hosting government defaults...the currency can survive and become the new king.
If somebody had $1mil in 1930, they had $1bil in 1945.
Or Nouriel Roubini?
I *like* your idea immensely.
Cheers!
Let's argue!
Yes, and one so serious that he doesn't think he can sell bonds at any price...because there won't be any "money" left to buy them when things pop.
So...you don't think there will be a QE-3 or believe the talk about coming high inflation or hyperinflation?
Excellent use the cycle thing against her argument, brilliant. All previous governments have a cycle of rising and falling. May G_d have mercy on us.
Yes, I think there'll be a QEIII...or an attempt. But there are counter pressures to that as well.
Is the Fed will to buy the entire issue instead of just 1/2? I don't think they are. I think they know that would be criminal malfeasance even on their jaded terms.
The other potential, maybe more likely, is that the US Congress will soon prevent the ISSUANCE of that much debt...cut 'em down several 10% notches every time they talk.
The Fed has been buying everything in sight, by the ton. Those days are coming to an end.
Then, POP! Debt Deflation.
>>>>OK. This is a really, really, really big deal.<<<<
Correction. According to Vice Prez Bite Me, its a big F’N deal! ;)
What about savings bonds like I-bonds? Are they soon-to-be TP? Or would they come in handy during inflation since they are inflation-protected? Inquiring minds...Thanks!
“Would someone kindly translate this into english and advise?”
One of the smartest bond guys in the world has sold all US treasury bonds in the mutual funds he manages. His funds are, I think, the largest fixed income (bond) funds in the world. I believe his bond funds have held more in US Treasuries than any other bond fund in the world. US Treasury Bonds are how Zero finances the federal deficit.
If I interpret that move correctly, he thinks that the price of US Treasuries is going to fall. That means he thinks interest rates in the US are going up a lot. He has reached this conclusion for one of two reasons: (1) He thinks the Fed will not do a quantative easing 3 QE3; or (2) He thinks the fed will soon lose control of US interest rates no matter how much quantative easing it does.
Probable consequences if he is correct: An enormously increased federal deficit as interest carrying cost goes up. Dollar increases in value. Stock market falls a lot. Economy, already weak, slows down a lot. China is really pissed off because, other than the Federal Reserve Board, they are the largest holder of US Treasuries. Possible deflationary spiral as debts that are collateralized by US Treasuries and other fixed income default. Probable sovereign default by other countries as world interest rates increase in response to higher US rates and marginal countries cannot refinance the monies they already owe.
Personally, I believe the US Taxpayer will repudiate the US Debt. Still, it's better than holding stocks...same as treasuries.
Bill Gross Thinks This Recovery Is Not Self-Sustaining And That Our Low Savings Rate Is A Threat
"However, Gross says the biggest long-term threat to the economy is not one often mentioned: it's America's negative net savings rate of 1-2%. "Basically the U.S. is not saving enough money to replace its own capital from the standpoint of depreciation and potential investment," he says."
If it continues, this is a recipe for disaster, he concludes: "Ultimately a country can't grow that way going forward."
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