Pimco Dumps US Debt.

[LorenS]

http://preview.tinyurl.com/6hco6ya

It seems this is actually a small change, but it's the end of along term move, apparently. I wonder if he's early.

Is this significant? It seems Gross was playing along with QE the first time. Maybe the FED was his biggest buyer.

[c1ue]

Re: Pimco Dumps US Debt.

Gross is a smart guy - while I don't applaud his actions, they are completely understandable from the standpoint of making money.

He clearly understands quite well what is happening but doesn't let that interfere with his ability to profit.

What I read into this action is that he doesn't see any possibility of positive QE3 results: either because politically it won't fly or because QE3 will be the straw that broke the dollar reserve's back.

[jk]

Re: Pimco Dumps US Debt.

Gross is a smart guy - while I don't applaud his actions, they are completely understandable from the standpoint of making money.

He clearly understands quite well what is happening but doesn't let that interfere with his ability to profit.

What I read into this action is that he doesn't see any possibility of positive QE3 results: either because politically it won't fly or because QE3 will be the straw that broke the dollar reserve's back.

i agree. i think qe3, for political reasons, can't happen until AFTER another downswing in the financial markets and the economy. so sometime BEFORE qe2 actually ends we should see a sell off in commodities, equities and bonds. of possible interest: this also happens to be consistent with finster's model's forecasts.

[coolhand]

Re: Pimco Dumps US Debt.

yup...remember yields rose after QE 2, didn't fall...meanwhile, commodity inflation has begun to exert greater pressure on profitability in the real economy, & other countries have gone around & started setting up direct trade relationships not settling in the dollar (Canada/China, Russia/China, India/China)...

But as David Stockman pointed out along w/Gross: At 3% growth, GDP grows $40B/mth in the US; the Treasury is issuing ~$125B/mth in debt & the Fed is buying ~$100B/mth of that from Nov-June. They can't stop.

Esp when you consider that ZeroHedge has been doing a terrific job pointing out that 3 different Treasury auctions in the belly of the curve (3, 5 & 7 yrs) would have failed in the past 30 days had the Fed not turned around & monetized substantial portions of those auctions by buying them back from Primary Dealers less than 30 days after they were issued by the Treasury.

[WildspitzE]

Re: Pimco Dumps US Debt.

When I first read about this yesterday, I thought - does he expect rates to rise? But I wasn't convinced that he was anticipating inflation to that degree, he is a Keynesian AFAIK. Then I remembered that QE2 lead to increasing rates, so maybe he is expecting QE3 to have the same effect and that he believes/knows that QE3 is a fait accompli. However, I also thought that politically QE3 is a tough sell at this point. At least not without an "excuse." However, under such scenario - where we would see a sell off in everything - wouldn't his treasuries appreciate due to safe haven buying? Why not hold those? Then I remembered during the Egyptian mess that El-Erian was talking about how the USD and treasuries were no longer a safe haven (although AFAIK USD fared better than USTs) up to a certain point, but that depending on the magnitude of the crises he still thinks USD and UST would act as a safe haven.

So the conclusion I reached yesterday based on the stream of conciousness described above is what you all say:

They expect QE3, but that it won't happen till we see some pain.

I think they plan to keep that defensive position in cash, unless the pain becomes to deep where they think USTs make more sense than USD cash due to safe haven demand increases or they may progressively buy into USTs as the sell off happens.

Before QE3 is announced, based on the anticipated announcement (speculated or because they are in the know, much like the effects of QE2 took hold before it was officially announced), they will redeploy much of this capital in stocks (as they are looking to start investing in them within their big fund).

Thoughts? ideas? trying to figure this out to reposition in time if necessary. That said, yesterday afternoon, based on these thoughts I took off the table a bunch of money that I had in juniors, as well as commos where I had decent gains but at high entry points. That part, at least, worked out.

[jk]

Re: Pimco Dumps US Debt.

as i write, the usd is up 0.7%, the tbond only 12 beeps [correction- ticks, not bps]. gold down 16.5, silver down 1.022 [=3%], oil down 2.42, s&p down about 1.5%.

i sent this email to some friends a bit earlier this morning:


fwiw, it looks to me like the markets are starting to anticipate the end of qe2 and the absence of a qe3. iirc, the fed has been buying something like 70% of the treasury's new issues. when the fed stops buying, long rates will rise: thus the unsurprising announcement that bill gross ["the bond king" who runs the world's largest bond fund] has dumped all his u.s. treasuries and u.k. gilts.

turning off the qe liquidity spigot will also drop commodities and equities.

over the course of the past 4 days i've lightened my precious metals and energy positions. because of their recent run up in prices, pm's HAD grown to 46% of my portfolio= 31% gold, 15% silver. i've now cut back to roughly 28.5% gold, 11.5% silver.

energy had risen to 20%. i've pared it back to 15%.

heaven knows i may well be wrong. but if so, it just means i'll make somewhat less on a further run up in commodities. otoh, if i'm right, i'll still lose money on the sell-off, but not as much.

i've only detailed the trades to show i've put my money where my mouth is.

[WildspitzE]

Re: Pimco Dumps US Debt.

Thanks for sharing jk. I failed to mention that if the FED stops buying UST, the rates will go up as you eliminate the current biggest buyer of USTs (in addition to the QE3 expectations).

[c1ue]

Re: Pimco Dumps US Debt.

Thanks for sharing jk. I failed to mention that if the FED stops buying UST, the rates will go up as you eliminate the current biggest buyer of USTs (in addition to the QE3 expectations).

And if mortgages rates follow, we'll see a housing spike that makes the present downturn look positively Trump-ian.

Which in turn will impact the banks - more bank failures.

Couple this with the 'bad bank' movement at BofA (and presumably other TBTF banks), you have a pointillist picture of...nothing good.

[WildspitzE]

Re: Pimco Dumps US Debt.

maybe i missed it, but im surprised nobody talked about this -- pimco goes beyond dumping longs, and shorts us government debt.

http://www.reuters.com/article/2011/...7FB10S20110411

[touchring]

Re: Pimco Dumps US Debt.

maybe i missed it, but im surprised nobody talked about this -- pimco goes beyond dumping longs, and shorts us government debt.

http://www.reuters.com/article/2011/...7FB10S20110411

This is already old news. Rates has been rising since late last year.

[WildspitzE]

Re: Pimco Dumps US Debt.

This is already old news. Rates has been rising since late last year.

lol. ahh, i don't think that there is anybody on itulip that doesn't know that.

[Master Shake]

Re: Pimco Dumps US Debt.

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