Oct 04

“Central bankers have fostered a casino like atmosphere where savers/investors are presented with a Hobson’s Choice, or perhaps a more damaging Sophie’s Choice of participating (or not) in markets previously beyond prior imagination. Investors/savers are now scrappin’ like mongrel dogs for tidbits of return at the zero bound. This cannot end well.”


“This Cannot End Well” Bill Gross Warns:

In one of his starkest warnings about the endgame of existing unorthodox, monetary policy, in his latest letter titled “Doubling Down”, Bill Gross repeats a familiar tune, warning that “our financial markets have become a Vegas/Macau/Monte Carlo casino, wagering that an unlimited supply of credit generated by central banks can successfully reflate global economies and reinvigorate nominal GDP growth to lower but acceptable norms in today’s highly levered world.” Continue reading »

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May 26

… soon. And the entire financial system will collapse.


“The System Itself Is At Risk” Bill Gross Warns, Shorts Credit As “Day Of Reckoning Is Coming”:

We were surprised to hear none other than legendary bond investor Bill Gross, who made billions going long bonds, admit to Bloomberg’s Erik Schatzker last night that he is starting to short credit, “a position that he said runs contrary to his instincts and training as an investor.

The reason why Gross, who called the Bund blow up last year with uncanny precision, is turning bearish on an asset classes that Mario Draghi is directly supporting – and as such Gross is fighting at least on Central Bank – is peculiar: he thinks the time of central bank dominance is almost over. Gross, who manages the $1.3 billion Janus Global Unconstrained Bond Fund, said he is moving to sell credit risk and insurance on market volatility rather than buying long-term debt, because he believes a day of reckoning will come when central banks will no longer be able to prop up asset prices and investors will withdraw from markets. Continue reading »

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Apr 29

Video of the Day – Bill Gross Warns: “The System Could Suffer an Implosion”:

What’s so remarkable about the following clip from a Bloomberg interview with iconic bond fund manager Bill Gross isn’t so much that he warned about a looming systemic implosion, but how much he struggled to actually say it out loud despite clearly wanting to.

Pretty telling.

* * *

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Dec 04

Related info:

PIMCO Paid Bill Gross & Mohamed El-Erian Over $500 MILLION Dollars In 2013 Bonuses


–  It’s All Coming To An End, Bill Gross Warns (ZeroHedge, Dec 4, 2014):

Say what you want about Bill Gross, but the legendary bond investor is absolutely spot on in the following paragraph from his latest, December, investment outlook:

How could they? How could policymakers have allowed so much debt to be created in the first place, and then failed to regulate their own system accordingly? How could they have thought that money printing and debt creation could create wealth instead of just more and more debt? How could fiscal authorities have stood by and attempted to balance budgets as opposed to borrowing cheaply and investing the proceeds in infrastructure and innovation? It has been a nursery rhyme experience for sure, but more than likely without a fairytale ending.

Here is the full letter (link): Continue reading »

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Nov 15

Bill Gross and Mohamed El-Erian

– Pimco Paid Gross, El-Erian Over Half A Billion Dollars In 2013 Bonuses (ZeroHedge, Nov 14,  2014):

And a stunner just out of of Bloomberg:

PIMCO PAID GROSS $290 MILLION BONUS FOR 2013, DOCUMENT SHOWS
PIMCO PAID FORMER CEO EL-ERIAN ABOUT $230 MLN BONUS IN 2013

More from the source:

Pacific Investment Management Co. paid its former Chief Investment Officer Bill Gross a bonus of about $290 million in 2013, a year in which his Total Return Fund trailed a majority of peers, according to documents provided to Bloomberg View by someone with knowledge of Pimco’s bonus policies. Continue reading »

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Sep 30

Liquidation

PIMCO Liquidations Begin; And So Does The Retaliation: All Bill Gross Tweets Deleted (ZeroHedge, Sep 29, 2014):

The last few days have been hectic for PIMCO executives. As we already noted, expectations of outflows persist and today’s open in CDS markets suggested major concerns among market participants that PIMCO redemptions would force selling through an illiquid market. Sure enough, Bloomberg reports that PIMCO’s Total Return Fund ETF was behind the auction of more than $170m of Fannie Mae CMBS on Friday (and more BWICs were seen today). As one trader noted, “you’re going to sell your most liquid stuff first.” Additionally, PIMCO has seen fit to delete all Bill Gross’ tweets… so here are the last six months for the record.

As Bloomberg reports, the PIMCO liquidations have begun… Continue reading »

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Sep 30

Gross To Have Final Laugh? Whopping Two-Thirds Of PIMCO’s Flagship Fund May Be Withdrawn (ZeroHedge, Sep 29, 2014):

The reason why the first article we wrote on Friday after news hit that PIMCO co-founder was shockingly leaving the firm on Friday, was listing the massive bond fund’s biggest holdings, was because it was only a matter of time: it, being of course, the massive redemptions that would follow Gross’ departure by people that his 30+ tenure at the bond fund made very rich, and who couldn’t care less about a brief central planning-inspired flame out. After all Gross isn’t the first person who has lost the plotline due to the Fed’s manipulation of every market. Continue reading »

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Sep 26

Bill Gross Quits PIMCO, Which He Co-Founded, Joining Janus (ZeroHedge, Sep 26, 2014):

After co-founding PIMCO in 1971, Bill Gross has called it quits…

  • *WILLIAM H. GROSS JOINS JANUS CAPITAL
  • *JANUS:GROSS TO START MANAGING FUND,RELATED STRATEGIES OCT.6,’14

“I look forward to returning my full focus to the fixed income markets and investing, giving up many of the complexities that go with managing a large, complicated organization,” said Mr. Gross.

Janus stock is +20% on the news. 40% now!) Continue reading »

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Sep 26

“You Can’t Fire Me, I Quit” – PIMCO Was Preparing To Fire Gross (ZeroHedge, Sep 26, 2014):

With more than $65 billion pulled from PIMCO’s funds since May 2013, Bill Gross’ firm had been struggling amid spotty performance and it seems, according to The Wall Street Journal, PIMCO (not Allianz) was set to fire the 70-year old bond king this weekend. It seems clear that Mr. Gross move was pre-emptive as sources cite his “increasingly erratic behavior” and ultimatums as factors in the move. Assumptions about Mohamed El-Erian returning to run the company have been denied. Some have estimated PIMCO could see a further 10-30% in fund outflows on the back of Mr. Gross’ departure.

As The Wall Street Journal reports, Continue reading »

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Apr 14

… a well-paid blogger.


Mohamed El-Erian

Mohamed El-Erian Quits Pimco, Becomes A Blogger (ZeroHedge, April 14, 2014):

We realize the future for blogging was bright, but this bright? Moments ago, Bloomberg View, Bloomberg’s in house blogging operation, announced that El-Erian had joined it as a columnist. And just like that Mohamed has his own unedited venue in which to spill all the dirt on his former employer.

From BusinessWeek:

Bloomberg View today announced that Mohamed A. El-Erian is joining the opinion and analysis site as a daily columnist covering economic developments, policy and financial markets.

“Mohamed is one of the world’s most highly-regarded financial and economic observers – and he’s also a wonderful writer” said David Shipley, the senior executive editor of Bloomberg View. “We’re thrilled that he’s going to be sharing his insights with our readers on a daily basis.”

Continue reading »

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May 22

America’s Bubble Economy Is Going To Become An Economic Black Hole (Economic Collapse, May 22, 2013):

What is going to happen when the greatest economic bubble in the history of the world pops?  The mainstream media never talks about that.  They are much too busy covering the latest dogfights in Washington and what Justin Bieber has been up to.  And most Americans seem to think that if the Dow keeps setting new all-time highs that everything must be okay.  Sadly, that is not the case at all.  Right now, the U.S. economy is exhibiting all of the classic symptoms of a bubble economy.  You can see this when you step back and take a longer-term view of things.  Over the past decade, we have added more than 10 trillion dollars to the national debt.  But most Americans have shown very little concern as the balance on our national credit card has soared from 6 trillion dollars to nearly 17 trillion dollars.  Meanwhile, Wall Street has been transformed into the biggest casino on the planet, and much of the new money that the Federal Reserve has been recklessly printing up has gone into stocks.  But the Dow does not keep setting new records because the underlying economic fundamentals are good.  Rather, the reckless euphoria that we are seeing in the financial markets right now reminds me very much of 1929.  Margin debt is absolutely soaring, and every time that happens a crash rapidly follows.  But this time when a crash happens it could very well be unlike anything that we have ever seen before.  The top 25 U.S. banks have more than 212 trillion dollars of exposure to derivatives combined, and when that house of cards comes crashing down there is no way that anyone will be able to prop it back up.  After all, U.S. GDP for an entire year is only a bit more than 15 trillion dollars.

But most Americans are only focused on the short-term because the mainstream media is only focused on the short-term.  Things are good this week and things were good last week, so there is nothing to worry about, right?

Continue reading »

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Apr 13

The Entire Economy Is a Ponzi Scheme (ZeroHedge, April 13, 2013):

Bill Gross, Nouriel Roubini, Laurence Kotlikoff, Steve Keen, Michel Chossudovsky, the Wall Street Journal and many others say that our entire economy is a Ponzi scheme.

Former Reagan budget director David Stockman just agreed:


YouTube Added: 10.04.2013

So did a top Russian con artist and mathematician.

Even the New York Times’ business page asked, “Was [the] whole economy a Ponzi scheme?

In fact – as we’ve noted for 4 years (and here and here) – the banking system is entirely insolvent. And so are most countries. The whole notion of one country bailing out another country is a farce at this point. The whole system is insolvent.

As we noted last year: Continue reading »

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Jan 03

Bill Gross On Bernanke’s Latest Helicopter Flyover, “Money For Nothing, Debt For Free” And The End Of Ponzi Schemes (ZeroHedge, Jan 3, 2013):

Back in April 2012, in “How The Fed’s Visible Hand Is Forcing Corporate Cash Mismanagement” we first explained how despite its best intentions (to boost the Russell 2000 to new all time highs, a goal it achieved), the Fed’s now constant intervention in capital markets has achieved one thing when it comes to the real economy: an unprecedented capital mismanagemenet, where as a result of ZIRP, corporate executives will always opt for short-term, low IRR, myopic cash allocation decisions such as dividend, buyback and, sometimes, M&A, seeking to satisfy shareholders and ignoring real long-term growth opportunities such as R&D spending, efficiency improvements, capital reinvestment, retention and hiring of employees, and generally all those things that determine success for anyone whose investment horizon is longer than the nearest lockup gate. Today, one calendar year later, none other than Bill Gross, in his first investment letter of 2013, admits we were correct: “Zero-bound interest rates, QE maneuvering, and “essentially costless” check writing destroy financial business models and stunt investment decisions which offer increasingly lower ROIs and ROEs. Purchases of “paper” shares as opposed to investments in tangible productive investment assets become the likely preferred corporate choice.

It is this that should be the focus of economists, and not what the level of the S&P is, as it is no longer indicative of any underlying market fundamentals, but merely how large, in nominal terms, the global balance sheet is. And as long as the impact of peak central-planning on “business models” is ignored, there can be no hope of economic stabilization, let alone improvement. All this and much more, especially his admissions that yes, it is flow, and not stock, that dominates the Fed market impact (think great white shark – must always be moving), if not calculus, in Bill Gross’ latest letter.

From PIMCO: Continue reading »

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Dec 13

In the last few years gold and silver bottomed out around Christmas.


Gold – It’s Time (ZeroHedge, Dec 12, 2012):

Authored by Lee Quaintance and Paul Brodsky of QBAMCO,

Gold bugs can’t understand how the public can be so unaware, how highly intelligent policy makers can be so immoral, and how the mainstream media can be so incurious. We can’t understand why more men and women in the investment business haven’t joined some of the more successful ones that have come around to precious metals and have taken substantial positions in them for their funds and personal accounts. The list of high profile independent-minded investors that have come out of the proverbial closet is impressive and growing: Kyle Bass, John Paulson, David Einhorn, George Soros, Bill Gross and Paul Singer, to name only a few.
Continue reading »

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Dec 04

FT: ‘Wages Have To Be Slashed By 30-40% In the UK’


YouTube Added: 04.12.2012

Description:

In this episode, Max Keiser and Stacy Herbert investigate the black hole of debt sucking in our economies, jobs and wealth like strings of spaghetti past the economic event horizon. In the second half, Max Keiser talks to Ned Naylor-Leyland of Cheviot Asset Management about the fishy smoke signals blowing at the LBMA regarding silver contracts and about the debate between inflation, deflation, hyperinflation actually being a debate about the final denouement of paper currencies. Ned also reveals that BBC’s flagship programme, Panorama, had interviewed him and Andrew Maguire about silver manipulation and yet have never aired the episode.

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Nov 11

Deep Sunday Morning Thoughts From Bill Gross (ZeroHedge, Nov 11, 2012):

Just because Jack Handey never got to manage $1+ trillion in debt…

Continue reading »

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Nov 06

Bill Gross Preemptively Summarizes Today’s Election Result In 22 Words (ZeroHedge, Nov 6, 2012):

Presented without comment – adding anything to this concise summation of the state of the union is superfluous…

Continue reading »

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Nov 01


Elite puppets Obama & Romney 2012!


Bill Gross: “Ours Is A Country Of The SuperPAC, By The SuperPAC, And For The SuperPAC” (ZeroHedge, Nov 1, 2012):

Curious why we dedicate precious virtual real estate to periodically bring to you the “billionaires behind the best presidents money can buy“? Bill Gross explains why?

Time To Vote, from PIMCO’s Bill Gross

So I pulled out my magic lamp that for some reason works only every October 22nd, and rubbed until the Genie appeared in his red and white checkered cloak with a 10-inch diameter Flavor Flav clock hanging ceremoniously around his neck. Being a rather forward, although not disrespectful Genie, he immediately said, “Mr. G, instead of the yield on the 10-year Treasury, perhaps this year you should wish to know who is going to win the Presidential election?” After some thought I replied, “Nah, I need some breaking news, Mr. Genie, something that will make a difference, something that will shock the world, like when does the iPhone 6 come out?” Obama/Romney, Romney/Obama – the most important election of our lifetime? Fact is they’re all the same – bought and paid for with the same money. Ours is a country of the SuperPAC, by the SuperPAC, and for the SuperPAC. The “people” are merely election-day pawns, pulling a Democratic or Republican lever that will deliver the same results every four years. “Change you can believe in?” I bought that one hook, line and sinker in 2008 during the last vestige of my disappearing middle age optimism. We got a more intelligent President, but we hardly got change. Healthcare dominated by corporate interests – what’s new? Financial regulation dominated by Wall Street – what’s new? Continuing pointless foreign wars – what’s new?I’ll tell you what isn’t new. Our two-party system continues to play ping pong with the American people, and the electorate is that white little ball going back and forth over the net. This side’s better – no, that one looks best. Elephants/Donkeys, Donkeys/Elephants. Perhaps the most farcical aspect of it all is that the choice between the two seems to occupy most of our time. Instead of digging in and digging out of this mess on a community level, we sit in front of our flat screens and watch endless debates about red and blue state theologies or listen to demagogues like Rush Limbaugh or his ex-cable counterpart Keith Olbermann. To express my discontent, Genie, along with my continuing patriotism, I’ve created a modern-day version of our Pledge of Allegiance. Place your hand over your clock and recite after me: Continue reading »

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Oct 19

Bill Gross Warns “Very Likely’ Central Banks Will Cause 1987-Like Crash (ZeroHedge, Oct 19, 2012):

What takes other Political Journalism majors (and CTRL-C/V minors) pages and pages of verbose essays full of acronyms and meaningless gibberish to refute, Bill Gross asserts in less than 140 characters.

Continue reading »

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Sep 12

Bill Gross Sells $30 Billion In Treasurys In August As Total Return Fund Cuts Government Exposure By Over A Third (ZeroHedge, Sep 12, 2012)

See also:

PIMCO’s Bill Gross (‘The King Of Bonds’): Buy Gold, Not Bonds (Video)

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Sep 08

The Scary Math Behind The Mechanics Of QE3, And Why Bernanke’s Hands May Be Tied (ZeroHedge, Sep 7, 2012):

When it comes to the NEW QE, everyone has an opinion, and most seem to believe that the NEW QE will come next week, now that the US economy added “just” 96,000 people (but, but, the unemployment rate ‘fell’). Certainly, and far more importantly, if the most recent FOMC minutes are any guide, the Fed shares this view. Sadly, as so often happens, most, and this includes the FOMC’s various voting members, have once again made up their minds without actually evaluating the limitations posed by simple math. After all it is far easier to form an opinion, and actually think about the underlying facts later. The math, for those who actually have looked at the numbers behind the scenes, is scary (in UBS’ words, not ours).Here is the math.

As part of its Operation Twist, the Fed is buying long-term bonds, and selling short-term (0-3 years) bonds. As we reported in April, the biggest limitation for the Fed is that it is rapidly running out of short-term bonds to sell. There is a fix to this: the Fed will simply have to sell longer dated bonds from its SOMA portfolio, first up to 5 years, then 7, and so on. Of course, this will also force the Fed to extend its ZIRP language by an appropriate amount of time, through 2017, then 2019, and so on (which also means all bets that the Fed will hike any time in the next 5 years will be immediately null and void, and one can position accordingly in the Eurodollar space).

This move, however, will simply permit the Fed to extend Twist 2 beyond its year-end maturity. As a reminder, the primary role of Twist, aside from that stated one which is to keep the curve as flat as possible (i.e., boost housing which as we showed yesterday is not working, as refis have plunged recently despite record low mortgage rates), is to absorb virtually all the long-end supply: after all, it is all about the funding of the US $1 trillion+ annual budget deficit.

Said otherwise, when it comes to the 10-30 year sector the Fed is already monetizing all new issuance. This is part of the entire flow argument which we have been discussing for the past 6 months, and why we, correctly, say that Operation Twist is really QE 3 and QE 3.5 (for the recent extension of Twist). So far so good.

Here comes the important part.

Three weeks ago we presented a video courtesy of Stone McCarthy which showed a timelapse of the “takeover” of the Fed as the primary holder of public debt. For those short on time, here is how the Fed’s holdings portfolio looked like then…

and now:

The shaded region is important for two reasons: this is where the Fed will be buying new bonds as part of any new QE Large Scale Asset Purchase program, and it tells us all there is to know about how big and how effective QE3 (really 4) will be. The bottom line, as calculated by UBS’ Michael Schumacher and confirmed by anyone with access to the detail behind the Fed’s SOMA holdings, which incidentally just hit a record 116 months two months ahead of Twist 2 schedule, is that “the Fed owns all but $650 billion of 10-30 year nominal Treasuries.” Also as pointed out above, Twist 2, aka QE 3.5 is already absorbing all of the long end supply. And herein lies the rub. To quote UBS: “Taking out, say, $300 billion in long-end Treasuries almost certainly would put tremendous pressure on liquidity in that market….Ploughing ahead with a large, fixed size QE program could cause liquidity to tank.

In other words, anyone expecting a full blown LSAP focusing only on US Treasurys will very likely be disappointed as the Fed will certainly realize, quite soon we hope, that it has only $650 billion in total 10 year + bonds available in the entire private market!

Well, perhaps the Fed will just monetize MBS, as Bill Gross has been betting on for nearly a year now. It could do that… but when once factors in “math“, the results are once again quite startling. Quote UBS again: Continue reading »

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May 21

By The Time Operation Twist 1 Is Over, The Fed Will Have Quietly Completed 40% Of Operation Twist 2 As Well (ZeroHedge, May 20, 2012):

By the time Operation Twist (1) ends in just over 40 days time, on June 30, Fed Chairman Ben Bernanke, according to his previously announced “loose” target, will hope to have extended the average maturity of all bonds in the System Open Market Account (SOMA) to a record of roughly 100 months from 75 month at the onset of the program in October 2011. After all the sole purpose of Twist was to load up the Fed’s portfolio with duration, forcing the rest of the market to shift its investing curve even further into risky assets, as the Fed will have effectively onboarded the bulk of securities in the 3-4% return interval. Now as we showed back in early April, hopes that the Fed will simply continue with Operation Twist 2 after the end of “season” 1, as suggested by some clueless “access journalists” who merely relay what they are told by higher powers, are completely misguided as the Fed simply does not have enough short-term securities (1-3 years) to sell, and would have at most 2 months of inventory for a continued sterilized operation. Which however, does not mean that the Fed can not be quietly ramping up its operations in the ongoing Twisting episode. Because as Stone McCarthy demonstrates, as of the past week, the Fed has already surpassed its 100 month maturity target of 100 months, and is at 102.82 months as of May 16. And this is with 6 more weeks of Twist to go: at the current rate of SOMA purchases, the Fed will have a total portfolio average maturity of just shy of 110 months by June 30! Which means that contrary to market expectations of what the Fed’s own stated goal may have been, Bernanke will have gobbled up nearly 40% more long-dated Flow relative to estimates! In other words, Ben does not need to do a full blown Operation Twist 2 episode: by the time Twist 1 is over, he will have attained nearly 40% of the goals of the next potential sterilized operation.

Why is this important? Well, recall that over a month ago Goldman Sachs itself admitted what we have been saying for over 3 years: it is not stock that matters… it is flow. Recall the Goldman punchline:

we have found some evidence that at the very long end of the yield curve, where Operation Twist is concentrated, it may be not just the stock of securities held by the Fed but also the ongoing flow of purchases that matters for yields…

And there you have it. Continue reading »

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May 01

Gold Bug Bill Gross Will Gladly Pay You Tuesday For A Hamburger Today, Hoping “Tuesday Never Comes” (ZeroHedge, May 1, 2012):

We will forgive Bill Gross for taking the chart that Zero Hedge first presented (oddly enough correctly attributed by his arch rival Jeff Gundlach) as the centerpiece of his just released monthly musings, and wrongfully misattributing it, for the simple reason that everything else in his latest monthly letter “Tuesday Never Comes” is a carbon copy of the topics covered and discussed extensively on these pages both recently and over the past 3 years. However something tells us that the man who manages over $1 trillion in bonds in the form of the world’s largest bond portfolio will be slowly in getting branded a gold bug by the idiot media even with such warnings as “real assets/commodities should occupy an increasing percentage of portfolios.” Neither will his warnings that an inflationary spike courtesy of the tens of trillions in loose money added to the system will be inflationary: “inflation should creep higher. Do not be mellowed by the affirmation of a 2% target rate of inflation here in the U.S. or as targeted in six of the G-7 nations. Not suddenly, but over time, gradually higher rates of inflation should be the result of QE policies and zero bound yields that were initiated in late 2008 and which will likely continue for years to come.” Finally, since Zero Hedge is the only venue that has been pounding the table on the whole “flow” vs “stock” debate which is at the heart of it all (see here), we were delighted to see this topic get a much needed mention by the world’s now most influential gold bug: “The Fed appears to have a theory that is somewhat incomprehensible to me, stressing the “stock” of Treasuries as opposed to the “flow.” And there you have it. In summary: to anyone who has read Zero Hedge recently, don’t expect much new ground covered. To anyone else, this is a must read.

From Bill Gross

Tuesday Never Comes
  • The current acceleration of credit via central bank policies will likely produce a positive rate of real economic growth this year for most developed countries, but the structural distortions brought about by zero bound interest rates will limit that growth and induce serious risks in future years.
  • Not suddenly, but over time, gradually higher rates of inflation should be the result of QE policies and zero bound yields that will likely continue for years to come.
  • Focus on securities with shorter durations – bonds with maturities in the five-year range and stocks paying dividends that offer 3%–4% yields.  In addition, real assets/commodities should occupy an increasing percentage of portfolios.

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Feb 24

‘Gold Bullion or Cash’ Shows Buffett, Roubini, Krugman Mistaken; Faber, Rogers, Bass, Einhorn, Gross Correct (ZeroHedge, Feb. 25, 2012)

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Feb 09

Bill Gross Explains The European Ponzi (ZeroHedge, Feb. 8, 2012):

Not like it is news, but… Out of one pocket, into another, and in the mean time “things get better” as Gross explains below. That said, we hope Bill knows where Allianz of A&G fame (which just happens to be the closest comp to our own AIG) falls in the pecking order of the European house of cards.

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Feb 02

– ‘King Of BondsBill Gross Explains Why “We Are Witnessing The Death Of Abundance” And Why Gold Is Becoming The Default “Store Of Value” (ZeroHedge, Feb. 1, 2012):

While sounding just a tad preachy in his February newsletter, Bill Gross’ latest summary piece on the economy, on the Fed’s forray into infinite ZIRP, into maturity transformation, and the lack thereof, on the Fed’s massive blunder in treating the liquidity trap, but most importantly on what the transition from a levering to delevering global economy means, is a must read. First: on the fatal flaw in the Fed’s plan: “when rational or irrational fear persuades an investor to be more concerned about the return of her money than on her money then liquidity can be trapped in a mattress, a bank account or a five basis point Treasury bill. But that commonsensical observation is well known to Fed policymakers, economic historians and certainly citizens on Main Street.” And secondly, here is why the party is over: “Where does credit go when it dies? It goes back to where it came from. It delevers, it slows and inhibits economic growth, and it turns economic theory upside down, ultimately challenging the wisdom of policymakers. We’ll all be making this up as we go along for what may seem like an eternity. A 30-50 year virtuous cycle of credit expansion which has produced outsize paranormal returns for financial assets – bonds, stocks, real estate and commodities alike – is now delevering because of excessive “risk” and the “price” of money at the zero-bound. We are witnessing the death of abundance and the borning of austerity, for what may be a long, long time.” Yet most troubling is that even Gross, a long-time member of the status quo, now sees what has been obvious only to fringe blogs for years: Recent central bank behavior, including that of the U.S. Fed, provides assurances that short and intermediate yields will not change, and therefore bond prices are not likely threatened on the downside. Still, zero-bound money may kill as opposed to create credit. Developed economies where these low yields reside may suffer accordingly. It may as well, induce inflationary distortions that give a rise to commodities and gold as store of value alternatives when there is little value left in paper.” Let that sink in for a second, and let it further sink in what happens when $1.3 trillion Pimco decides to open a gold fund. Physical preferably…

From PIMCO’s Bill Gross:

Life – and Death Proposition

  • Recent central bank behavior, including that of the U.S. Fed, provides assurances that short and intermediate yields will not change, and therefore bond prices are not likely threatened on the downside.
  • Most short to intermediate Treasury yields are dangerously close to the zero-bound which imply limited potential room, if any, for price appreciation.
  • We can’t put $100 trillion of credit in a system-wide mattress, but we can move in that direction by delevering and refusing to extend maturities and duration. Continue reading »

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Jan 25

Bill Gross’ Explains The FOMC Decision: “QE 2.5 Today, QE 3, 4, 5 … Lie Ahead” (ZeroHedge, Jan. 25, 2012):

Pimco just saved you lots of garbage sellside “research” “analysis” on the topic.

 

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Dec 20

Bill Gross: Enjoy The Santa Rally – The Hangover Is Coming As “US Is Not An Island” (ZeroHedge, Dec. 20, 2011):

Just tweeted from the bond titan who is getting more and more concerned about those asset management fees in a world in which fixed income is increasingly becoming risk free, courtesy of central planning, until Gresham’s law unwind destroys everyone.

Source: Twitter

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Dec 12

Bill Gross Has Record $60 Billion Short Cash Bet Fed To Proceed With MBS Monetization (ZeroHedge, Dec. 12, 2011):

Following the release of its November fund statistics, Pimco’s Total Return Fund has once again reaffirmed it is betting on imminent QE by the Fed in the form of MBS monetization, a trend it started two months ago as we pointed out. And with a record $60 billion short cash position, or 25% of the entire fund $242 billion AUM, they better be right this time (he did the same thing in Jan-Feb… that did not work out too well). It is amazing to consider that back in April, Gross was long $90 billion in cash: a $150 billion swing! The TRF’s 43% holdings of MBS is an increase of 5% compared to October, the most since December 2010, but still just half of the 86% held in February 2009 in expectation sof MBS monetizations by the Fed as part of QE 1. Just as notable is the near record effective fund duration, which at 7.46 was the second highest ever, just a modest drop from the 7.58 in October. What is most curious is that Gross, for the first time as far as our records go, is completely out of the 0-3 year maturity range. Which makes sense: after all the Fed has telegraphed there will be no money made in that band of rates until mid-2013, a deadline which will likely soon be extended.

Continue reading »

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Oct 16

- Bill Gross Sends Out Big Apology To Investors, And Then Declares That The Economy Is Doomed (Business Insider, Oct. 15, 2011):

Funny, just yesterday afternoon we pointed out the irony of nobody caring about the fact that Bill Gross had loaded up the boat on the long end of the yield curve, a gamble that obviously meant one thing: He sees no growth or inflation ahead — essentially an economy that’s doomed.

Well….

Now he might get more attention, because he just put that in writing.

Dealbreaker (via ZeroHedge) put up a special letter from Gross to his investors titled, simply Mea Culpa.

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