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 ...
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!! :)
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
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.
reduction in treasury holdings...HHmmmmm
Can anyone say INFLATION?
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.
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.
“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.
BUMP to read after I eat supper, because I want to enjoy my food.
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).
...and savings will be wiped out as well...
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).
“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.”
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.
That is a liberal wet dream!
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.
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.
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...
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