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PIMCO (biggest bond fund) Dumping All Treasuries, Bringing "Government Related" Holdings To Zero
ZeroHedge ^

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.

[...]

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


TOPICS: Breaking News; Business/Economy; Front Page News; News/Current Events
KEYWORDS: bankrupt; broke; china; debt; deficit; economy; obama; palin; pimco; qe3
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To: paulycy

Just reading the graphs it appears that they are still above the level that they had back in 2008. What this graph doesn’t show is what the “normal” holdings of government securities are. I would not panic based on the first chart.


51 posted on 03/09/2011 1:36:16 PM PST by the_Watchman (Healthcare reform was never about health.)
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To: El Cid

It’s not a move to dollars. The bonds were denominated in dollars, and the cash is denominated in dollars. Devaluation has the same effect, regardless of your dollar-denominated investment. With bonds, however, you have the additional loss from higher interest rates driving down the value of the bonds.

Gross is screwed, just like the rest of us. There is no where to hide. Even if a move to hard assets (or some equity substitute) is a solution, I’m sure Gross’s bond funds are contractually bound to avoid such investments. Gross’s big worry may be the need to satisfy the huge redemptions that will occur when his investors decide they must try some alternative to bonds and cash—an alternative that Gross does not have.


52 posted on 03/09/2011 1:37:03 PM PST by olrtex
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To: Dr. Sheldon Cooper
The canary just died.

Yep.

In related news, Carl Icahn is bailing out. Actually, he's not just bailing out, he's shutting his whole operation down. He's returning all of his investors money.

His stated reason is that he doesn't want to be responsible for a big loss of his investor's funds if there is another market meltdown.

See below:

Icahn Returning All Outside Money from Hedge Fund

53 posted on 03/09/2011 1:37:26 PM PST by EternalHope (You can't make a deal with the Devil, or reach across the aisle to Obama.)
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To: gregd0180

probably a good idea.

The government might just mandate we buy these bonds, if they can mandate healthcare insurance...


54 posted on 03/09/2011 1:41:21 PM PST by GeronL (The Right to Life came before the Right to Happiness)
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To: DannyTN

ping


55 posted on 03/09/2011 1:44:32 PM PST by surfer (To err is human, to really foul things up takes a Democrat, don't expect the GOP to have the answer!)
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To: paulycy

I’m wondering if we can have inflation and deflation at the same time. Of course the brain trust up there in Washington would say on the average, we’re perfectly fine.


56 posted on 03/09/2011 1:45:00 PM PST by ichabod1 (Hail Mary Full of Grace, The Lord Is With Thee...)
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To: gregd0180

bookmark


57 posted on 03/09/2011 1:45:36 PM PST by silverleaf (All that is necessary for evil to succeed, is that good men do nothing)
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To: the_Watchman
I would not panic based on the first chart.

Not panicking is a good idea in any case. I forwarded this original article to my mother's financial guy so I'll get his feedback at some point soon. In the meantime, no panic. :0)

58 posted on 03/09/2011 1:46:09 PM PST by paulycy (Islamo-Marxism is Evil.)
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To: ichabod1
Of course the brain trust up there in Washington would say on the average, we’re perfectly fine.

LOL! Of course they would. Nothing wrong here! We should be thanking zer0 for how good he is to us and our soon-to-be commie country...

59 posted on 03/09/2011 1:47:34 PM PST by paulycy (Islamo-Marxism is Evil.)
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To: ichabod1
I’m wondering if we can have inflation and deflation at the same time.

Inflation AND deflation at the same time? Economic straws in the wind

by futurist Richard Worzel, C.F.A.

I’ve noticed a strange development recently: two indicators that I follow for inflation and deflation are both rising, implying that we may be headed for a period of both inflation and deflation at the same time. Since no reputable economist that I’ve ever read would conceive of such an apparent oxymoron, this caught my attention. First let me describe the indicators, discuss how it might happen despite the apparent contradiction, and then talk about some of the potential implications and what you might do about them.

60 posted on 03/09/2011 1:48:55 PM PST by EBH ( Whether you eat your bread or see it vanish into a looter's stomach, is an absolute.)
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To: gregd0180

http://www.businessweek.com/news/2011-03-09/pimco-s-gross-eliminates-government-debt-from-total-return-fund.html


61 posted on 03/09/2011 1:53:14 PM PST by demsux (Obama: THE job destroyer)
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To: olrtex
"...Your kids and grandkids are up the creek."

Sold down the river by a bunch of power hungry money grubbing gangsters. They will be sitting soiling themselves in their adult diapers in a nursing home somewhere someday and our kids will be picking up the ball and chain to pay for the mess these elites made for them. What kind of future is that for the coming American generations?

62 posted on 03/09/2011 1:58:23 PM PST by 444Flyer ("...Rather the scorned- the rejected -the men hemmed in with the spears..." from 'A Consecration')
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To: SE Mom

These guys are playing some sort of 3D Chess game...


63 posted on 03/09/2011 1:58:54 PM PST by Chunga85 ("Foreclosure Fraud", TARP, "Mortgage Crisis", Bailout)
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To: gregd0180

This on the heels of the Carl Icahn announcement.


64 posted on 03/09/2011 1:59:44 PM PST by americanophile ("this absurd theology of an immoral Bedouin, is a rotting corpse which poisons our lives"-Ataturk)
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To: reasonisfaith

ping


65 posted on 03/09/2011 1:59:44 PM PST by surfer (To err is human, to really foul things up takes a Democrat, don't expect the GOP to have the answer!)
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To: gregd0180

This on the heels of the Carl Icahn announcement.


66 posted on 03/09/2011 1:59:49 PM PST by americanophile ("this absurd theology of an immoral Bedouin, is a rotting corpse which poisons our lives"-Ataturk)
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To: gregd0180

any comments re the change in Fed accounting rules relating that prevent it ever becoming insolvent? S Saville sees this as anticipating continued monetisation. I think there the provision makes more sense in the opposite case...ie falling bond prices as a result of cessation of QE


67 posted on 03/09/2011 2:01:39 PM PST by griswold3 (Character determines destiny)
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To: gregd0180

Alrighty then. Just sent it to the Knower of All Things Financial, aka the Father in Law, we shall see what his take is : /

BTTT

May God give us strength.
Tatt


68 posted on 03/09/2011 2:04:28 PM PST by thesearethetimes... ("Courage, is fear that has said its prayers." DorothyBernard)
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To: Dr. Sheldon Cooper

“The canary just died.”

Got that right.


69 posted on 03/09/2011 2:04:28 PM PST by gregd0180
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To: Lazamataz

Could you please repeat that?


70 posted on 03/09/2011 2:10:21 PM PST by JPG (May the WI GOP stay united and strong.)
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To: familyop; SE Mom; FromLori
Pimco has many, many funds. Gross is the big manager of them all?

What is Gross doing with all the other Pimco Funds that hold U.S.A. Treasuries. He mentions only Total Return.

My hunch? He sold Total Return's treasuries to the other Pimco Funds, or traded them for equities so Total Return's treasuries didn't take a hit on the open market.

yitbos

71 posted on 03/09/2011 2:10:39 PM PST by bruinbirdman ("Those who control language control minds." -- Ayn Rand)
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To: Lazamataz

seems to be that tradin bonds for dollars aint real bright unless youre sure that the next wave from helicopter ben has been stifled...
It seems odd to me, too, although I am no trader. But just on the face of it, it seems someone’s not as concerned about dollar devaluation as I am.


It is relative, one is worse than the other but they are both crap.


72 posted on 03/09/2011 2:12:26 PM PST by PeterPrinciple ( getting closer to the truth.................)
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To: Drill Thrawl

It’s an ex-canary, it is definitely deceased. The only reason it hadn’t fallen off it’s perch is because it had been TARP’d there.


73 posted on 03/09/2011 2:23:24 PM PST by Dr. Sheldon Cooper (The truth can indeed be a finger-down-the-throat for those unprepared to hear it.)
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To: gregd0180
No equities, no bonds...nothing but cash.

It's clear the big boys are expecting a major debt deflation when the Fed turns off the spigot...and it's clear they believe that spigot is being shut.

As I've been say for over a year now: Buy and hold cash, in the bank, under your mattress and in your gun safe.

It should be your only investment above the necessities of survival.

74 posted on 03/09/2011 2:24:44 PM PST by Mariner (USS Tarawa, VQ3, USS Benjamin Stoddert, NAVCAMS WestPac, 7th Fleet, Navcommsta Puget Sound)
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To: gregd0180

getting the hell out of dodge Ping


75 posted on 03/09/2011 2:31:39 PM PST by spokeshave (WTF....the only thing 0bambi's investments will get us is a bullet train to bankruptcy.)
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To: Mariner

When Bernake is forced to pull the plug on the funny money, the parasites on Wall St. will abandon ship as fast as possible. Last one holding the bag gets a major whacking. Gross converted to cash most likely for two reasons:

1) He knows interest rates are going to soar in order to pull in outside investors to buy our debt once the FED quits monetizing it and didn’t want his current bonds to get squashed.

2) He knows without the billions/month of FED market buying that he can get in much cheaper once the market has free fallen to its real value representing the real economy not the fake ponzi scheme economy.

Either way, for him to do this means it is about to hit the fan soon.


76 posted on 03/09/2011 2:33:38 PM PST by Gen-X-Dad
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To: gregd0180

The prognosis for the economy is the same as my dad’s before he died: “yes, he’s doing fine for an 85 year old with congestive heart and kidney failure.”

Seeing that both Gross and Icahn are making these moves leads me to believe we are getting close to something morbid.


77 posted on 03/09/2011 2:33:55 PM PST by Paraclete
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To: paulycy

Would someone kindly translate this into english and advise?


I was hoping the same thing. I don’t know what to make of all of this and am hoping some kind FReeper will lay it all out for the rest of us.


78 posted on 03/09/2011 2:34:04 PM PST by VirginiaMom
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To: paulycy
Would someone kindly translate this into english and advise?

The game of musical chairs is about to end. Hyperinflation, the collapse of the dollar, food riots, and other miseries are soon to arrive.

79 posted on 03/09/2011 2:34:44 PM PST by ccmay (Too much Law; not enough Order.)
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To: VirginiaMom

What I’ve gather from the good FReepers is that faith in the economy is rapidly draining and things aren’t looking too good. Prices may start going up drastically and people are going to be upset about it.

We’ll have to wait and see what happens. A lot of FReepers think you should prepare for hard times.


80 posted on 03/09/2011 2:36:44 PM PST by paulycy (Islamo-Marxism is Evil.)
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To: gregd0180

Interesting content. Duration refers to the length of maturity of a security instrument, and with mortgages, that means the length of time the mortgage is EXPECTED to be out there, the outcome is dependent on a large number of factors, but mostly related to interest rates. When bonds or mortgages are initiated when rates are low, they have a longer duration. When they are initiated at higher interest rates, it is typically shorter, because lots of them get refinanced. Interesting the action of the fund, their money can’t stay idle for very long, they need to invest, so I wonder what they are thinking will be the new vehicle. There are loads of trading done the last week or two of any given quarter (coming up 3/31) to put the portfolio in a more favorable position for the quarterly report. They are talking about the Quantitative Easing (essentially the fed pumping $ into the system) that has been going on....and one thing that drives interest rates lower is this artificial support.

Essentially it looks like we will be seeing the rise in interest rates fairly soon, that may explain why the fund went to cash, they can buy back treasuries when the rates are higher, thus increasing the interest return on the portfolio...but I am not as practiced as I once was in this type of analysis, so don’t quote me!! :)


81 posted on 03/09/2011 2:39:59 PM PST by Chattering Class of 58
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To: GeronL
The government might just mandate we buy these bonds

Yeah...perhaps 0bambi will nationalize all the 401k/retirewment providers and so freeze all those 401k's....while convering them into a gobmnt run annity

82 posted on 03/09/2011 2:40:26 PM PST by spokeshave (WTF....the only thing 0bambi's investments will get us is a bullet train to bankruptcy.)
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To: olrtex
"The absence of a QE3 will not reverse the previous debt monetization, which will continue to spur inflation for awhile. All this absurd borowing the federal government is doing will eventually lead to much higher inflation and interest rates; and the longer the fed delays that effect, the greater the effect will be."

While the Fed and the Treasury have done everything in their power to create a real inflation, they have essentially failed.

The velocity of money is about where it was in 1930...if not the slowest ever.

These surges of printed fiat money (QE whatever) are going into what the banks and institutional players see as "safe bets"...which has been gold, oil and agricultural commodities. And the will preserve some value there.

But once the last hurrah of the last QE event has circulated through the system with a sub 1.0 velocity, everyone will turn around and find not buyers at their back, but a cold wind.

That's when the "fun" starts. The previous, natural and healthy deflation that has been put on hold by endlessly low interest rates, exotic instruments, QE and the purchase of financial assets...will be augmented by the NEW deflationary pop.

Combined with the crushing psychological despair that comes with realizing you've been screwed and lied to...and that everything everywhere is now gone...this will be a tough one.

When Bill Gross believes cash is better than treasuries...you can BET the S is about to HTF.

83 posted on 03/09/2011 2:44:25 PM PST by Mariner (USS Tarawa, VQ3, USS Benjamin Stoddert, NAVCAMS WestPac, 7th Fleet, Navcommsta Puget Sound)
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To: FARS

reduction in treasury holdings...HHmmmmm

Can anyone say INFLATION?


84 posted on 03/09/2011 2:44:38 PM PST by RaceBannon (RON PAUL: THE PARTY OF TRUTHERS, TRAITORS AND UFO CHASERS!!!)
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To: SonsOfLibertyII
How do I convince my wife that this is not going to end as a nice cycle up and down and back again?

You could tell her that all civilizations collapse eventually and ours could collapse tomorrow or in another five hundred years. If that doesn't convince her you could always use a hammer.

85 posted on 03/09/2011 2:47:42 PM PST by Sawdring
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To: xjcsa
If there’s no QE3, isn’t that a *good* thing?

The US now has 10,000 Baby Boomers becoming eligible for Soc. Security and Medicare every single day for the next 15 years.

We have unfunded liabilities somewhere between 80 to 100 Trillion dollars.

There's going to be a QE3, a QE4, and a QE5, 6, 7, 8..., until monetary collapse. Just do what you can to get ready for it.

86 posted on 03/09/2011 2:49:24 PM PST by triumphant values (Never criticize that to your right.)
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To: paulycy

“We’ll have to wait and see what happens. A lot of FReepers think you should prepare for hard times.”


Yes, I was pretty sure that’s what it meant. I’ve been preparing for quite awhile now, so I suppose I’ll step it up a notch now.


87 posted on 03/09/2011 2:55:27 PM PST by VirginiaMom
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To: gregd0180

BUMP to read after I eat supper, because I want to enjoy my food.


88 posted on 03/09/2011 3:05:44 PM PST by Always A Marine
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To: Mariner

It’s really hard to believe deflation is, or will be, a threat. The government debt cannot be paid unless there is first a severe devaluation in the dollar, which means lots of inflation.

At least one of us is wrong (I hope it’s both of us, but I’m confident it’s not).


89 posted on 03/09/2011 3:21:15 PM PST by olrtex
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To: EBH; Sleeping Freeper

90 posted on 03/09/2011 3:23:53 PM PST by LucyT
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To: Neoliberalnot

...and savings will be wiped out as well...


91 posted on 03/09/2011 3:26:24 PM PST by Shady (Our quest is to rebuild the United States of America as it was founded by the Founders!)
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To: Lazamataz


92 posted on 03/09/2011 3:30:04 PM PST by musicman (Until I see the REAL Long Form Vault BC, he's just "PRES__ENT" Obama = Without "ID")
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To: Mariner

It’s really hard to believe deflation is, or will be, a threat. The government debt cannot be paid unless there is first a severe devaluation in the dollar, which means lots of inflation.

At least one of us is wrong (I hope it’s both of us, but I’m confident it’s not).


93 posted on 03/09/2011 3:33:57 PM PST by olrtex
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To: triumphant values

“There’s going to be a QE3, a QE4, and a QE5, 6, 7, 8..., until monetary collapse. Just do what you can to get ready for it.”

That’s a sick joke, whether so intended or not. Sorta like “lay back and enjoy it.”


94 posted on 03/09/2011 3:38:24 PM PST by olrtex
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To: Lurker; paulycy

Absolutely.

Conservative investment managers believe in holding for the long term and they love bonds. Trusting them cost us big in 2008.

If interest rates go up, laddered CDs would be an option.


95 posted on 03/09/2011 3:41:34 PM PST by reformedliberal
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To: gregd0180

http://www.businessweek.com/news/2011-03-07/china-adding-to-1-trillion-of-u-s-debt-caps-rise-in-rates.html


96 posted on 03/09/2011 3:51:18 PM PST by headstamp 2
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To: spokeshave

That is a liberal wet dream!


97 posted on 03/09/2011 4:00:36 PM PST by GeronL (The Right to Life came before the Right to Happiness)
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To: olrtex
It looks like I will leave my wife to live out her life in poverty, regardless of how hard I have worked to be sure that did not happen.

If the value of money becomes nearly worthless you can still use it to pay off your house and debts. Maybe you have already done this, but if not, think abaout it. Owning a home outright will be a crucial part of surviving this mess. When the dam breaks be prepared to pay stuff off with cheap dollars, starting with your house.

98 posted on 03/09/2011 4:01:41 PM PST by ExtremeUnction
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To: gregd0180

This could actually be a sign that they believe the economy is about to heat up; that they’ve weathered the storm by being in treasuries and it’s time to enter the market again.


99 posted on 03/09/2011 4:23:19 PM PST by americanophile ("this absurd theology of an immoral Bedouin, is a rotting corpse which poisons our lives"-Ataturk)
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To: gregd0180

If PIMCO’s Gross was expecting deflation/ie lower int. rates...would he not have held onto the bonds?..........Bonds go up in value as interest rates decline in a deflationary environment...


100 posted on 03/09/2011 4:27:56 PM PST by sbark
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