PIMCO sold US-Bonds (March 2011)

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isora's picture
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PIMCO sold US-Bonds (March 2011)

A german source reported that PIMCO started to sell off or even almost sold it's entire positions of US-bonds and related holdings (TIPS, derivatives...). Time: 2011-03-09  (9th of March).

PIMCO was described as the worlds largest fund for US-Bonds and that it was formerly known as a part of the FED's system or let's say: always acting as expected by "The System".

The volume we are talking about lies around $245 billion.

The question is:  is this a signal, a trigger point? The Chairman of PIMCO called Bernanke something like a "devil" and so on - sorry, I'm just unable to check the source again this moment. I wil add that soon.

isora from germany

docmims's picture
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Posts: 644
yes and Greenspan is on

yes and Greenspan is on their(PIMCO)  board of directors (no inside info there).  However they sold off before the earthquake in Japan with their reasoning that Quantitative Easing was ending and interest rates were set to rise.  Initially they will look like Geniuses because Japanese selling(to raise currency for rebuilding) will depress bond prices and raise rates.  However I think this will lead to an excuse for Bernanke to anounce QE3 for more fun and games keeping rates artificially low and probably to the fed buying up all the Japanese held bonds.  What the hell it's only digits in a computer.  There aren't enough trees to print that kind of cash.  It will be interesting to see how things play out as the bankrupt Japanese gov't (debt to GDP > Greece) sells everything in sight to raise cash, and how that effects Fed actions.

christophe's picture
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here is more about this and (up in Canada I use Pimco alot, will

Tokyo stocks rebound after two-day plunge
Japanese stocks rally as much as 6 per cent a day after earthquake disaster sparks the third-biggest fall in the history of the Nikkei 225, the benchmark index

Japan central bank’s cash injections hit nearly $700 billion amid disaster aftermath
TOKYO — Japan’s central bank continued to flood money markets with cash on Wednesday, bringing its total emergency funding to nearly $700 billion as it tries to soothe fears about the economic impact of the catastrophic earthquake, tsunami and unfolding nuclear crisis. The Bank of Japan conducted emergency operations for the the third day in a row, bringing its total liquidity injection to 55.6 trillion yen ($688.3 billion) since Monday. By flooding the banking system with money, it hopes banks will continue lending and meet the likely surge in demand for post-disaster funds.



Analysis - Japan nuclear crisis passes Three Mile
NEW YORK (Reuters) - Conditions at a stricken nuclear power plant in Japan have deteriorated so much that there is a growing consensus the crisis is greater than the Three Mile Island accident in 1979, and there are fears that it could get significantly worse. Academics and nuclear experts agree the problems at the Fukushima Daiichi reactors are grave, and the solutions being proposed are last-ditch efforts to stem what could well be remembered as one of the world's worst industrial disasters. All six reactors at the complex have problems -- be it blown-out roofs, potentially cracked containment structures, exposed fuel rods or just the risk of explosion that has been great enough to force emergency measures.


SA's gold output drops to level of a century ago
A's gold output for last year was 6,4% lower than the previous year's production of 204922,8kg. THE last time SA's gold production was at last year's level of 191833,7kg, the country fielded its rugby team under the moniker "de Springbokken" for the first time, San Francisco experienced one of the worst earthquakes in American history, and the Bambaata revolt was brutally put down by British troops. In 1906, SA generated 180187kg of gold and a year later this rose to 200685kg.



Bahrain Suspends Stock Market Trading Due to State of Emergency
Bahrain closed its bourse and the cost of insuring against default was near the highest since July 2009 after the country declared a state of emergency and security forces drove protesters from their rallying points. “From a market fear standpoint the Bahrain situation really boils down to how Iran will react if the military starts coming down very hard on the protesters,” said Akram Annous, Middle East and North Africa strategist at Al Mal Capital PSC in Dubai. “Will it just be saber rattling or does it turn into something more?”



Portugal’s Rating Cut Two Steps by Moody’s on Outlook Portugal’s debt rating was cut by Moody’s Investors Service, which cited a weaker outlook for economic growth, risks to the government’s deficit- reduction plans and a possible need to recapitalize banks. The rating was downgraded to A3, four steps from so-called junk status, according to an e-mailed statement from Moody’s yesterday, with the outlook on the grade “negative.” Higher interest rates set by the European Central Bank may exacerbate the challenge for Portugal, Moody's said, as it tries to rein in the euro region’s fourth-biggest budget gap and avoid the bailout fate of Greece and Ireland needed.



Anatomy of a Bubble - Hussman

On the subject of commodities, it's a natural question whether gold falls into the same category as agricultural commodities. After all, gold and other hard assets have an important role as an alternative to money to store value, and it appears clear that the world is monetizing in a way that is unlikely to be fully reversed even if policy makers wish to do so down the road. In my view, it's not clear that gold is in a bubble here, but it will be important to watch for the earmarks of a classic bubble.


Quake Provides 'Excuse' for More Easing: Economist
The earthquake and situation in the Middle East will provide an excuse for the Federal Reserve to buy more bonds (QE3) and for the European Central Bank and the Bank of England not to raise interest rates, he added.



Total German triumph as EU minnows subjugated
The Iron Chancellor of Germany could not have been clearer. “Whoever wants credit must fulfill our conditions“.These conditions are capitulation by three vulnerable states on core policies, and partial loss of sovereignty for the rest of the eurozone. For Greece, the terms are a fire-sale of €50bn (£43.2bn) of national assets within four years, a tenfold increase from the original €5bn that premier George Papandreou thought he signed up to a year ago. In return, Chancellor Angela Merkel has agreed to cut the penal interest rate on the EU share of Greece’s €110bn loan package by 100 basis points (still penal), and stretch the maturity to 7.5 years. For Portugal, the condition is more hairshirt retrenchment, a fiscal squeeze of 5.3pc in one year. Pensions, welfare, and health will be cut, following wage cuts already under way. "A descent into Hell," said the Bloco de Ezquerda. Almost 300,000 youth took to the streets of Lisbon and Oporto on Saturday in a day of wrath by the "Desperate Generation", openly invoking the events of Egypt’s Tahrir Square. For Ireland, one condition - as yet unmet - is to give up the 12.5pc corporate tax rate described by France’s leader Nicolas Sarkozy as "shameful". Angela Merkel was more clinically imperious: "We weren't satisfied with what Ireland agreed to, so the question of lowering interest rates has only been addressed for Greece."



Welfare State: Handouts Make Up One-Third of U.S. Wages
Government payouts-including Social Security, Medicare and unemployment insurance-make up more than a third of total wages and salaries of the U.S. population, a record figure that will only increase if action isn't taken before the majority of Baby Boomers enter retirement. Even as the economy has recovered, social welfare benefits make up 35 percent of wages and salaries this year, up from 21 percent in 2000 and 10 percent in 1960, according to TrimTabs Investment Research using Bureau of Economic Analysis data. "The U.S. economy has become alarmingly dependent on government stimulus," said Madeline Schnapp, director of Macroeconomic Research at TrimTabs, in a note to clients. "Consumption supported by wages and salaries is a much stronger foundation for economic growth than consumption based on social welfare benefits."



Five Years of Housing Supply and 5 or 6 Trillion Dollars of Additional Pain
Feder, speaking with Matt Miller and Carol Massar on Bloomberg Television's "Street Smart," also discusses the Obama administration's efforts to prevent foreclosures and plans to overhaul Fannie Mae and Freddie Mac. "We are terribly concerned with what is ultimately the pain hast to be taken. The number could approach aggregate mortgages 5 or 6 trillion dollars. The question is how much of that is overhang and how much of it has to be written off." "NAR says based on inventory and absorption rates we have little over 8 months supply. The reality which you add up all the houses for sale, houses vacant not yet on the market, houses underwater, seriously delinquent, in foreclosure, almost in foreclosure, the number is closer to 60 months, 5 years" "Who is going to absorb the foreclosed homes?"



Number Of Underwater Mortgages Rises As More Homeowners Fall Behind

WASHINGTON — The number of Americans who owe more on their mortgages than their homes are worth rose at the end of last year, preventing many people from selling their homes in an already weak housing market.  About 11.1 million households, or 23.1 percent of all mortgaged homes, were underwater in the October-December quarter, according to report released Tuesday by housing data firm CoreLogic. That's up from 22.5 percent, or 10.8 million households, in the July-September quarter.  The number of underwater mortgages had fallen in the previous three quarters. But that was mostly because more homes had fallen into foreclosure.  Underwater mortgages typically rise when home prices fall. Home prices in December hit their lowest point since the housing bust in 11 of 20 major U.S. metro areas. In a healthy housing market, about 5 percent of homeowners are underwater.


Pimco Goes to Cash, Exits Treasurys

Pimco has dumped all of its US Treasury bond exposure in its flagship Total Return Fund. The move makes sense given Pimco chief Bill Gross's public statements that Treasurys are over-valued. "It just gives people that follow him the bias not to bullish on the Treasury market," said Jefferies Treasury Strategist John Spinello. "He thinks rates are going higher." In fact, there was little reaction in the bond market when news of move leaked out Wednesday morning. "The Treasury market typifies perhaps the most overvalued area of the bond market," Gross said on Yahoo's Tech Ticker. The move would underline Gross's expectation is that there will not be a third round of US monetary easing. enormous downward pressure on the price of government bonds. The fund has fled to cash: Its cash position has jumped to a staggering $54.5 billion, up from $11.9 billion—a leap of over 350 percent, according to Durden.


Having worked at PIMCO for 4.5 years, I can tell you that this kind of a major allocation decision was not reached overnight nor was it reached without considerable debate by every senior member of the firm.  In other words, the decision to lower total US Treasuries to 0% was discussed by senior portfolio managers, senior account managers and many prominent outside consultants for days and perhaps even weeks before it was finally implemented.  They never do anything over there without vigorous debate and discussion.  For example, Alan Greenspan is a paid consultant to the firm and often participates in their quarterly Secular Outlook meetings.  I don’t know if Mr. Greenspan participated in the debate about this decision but I wouldn’t be surprised if he or others of his stature did. By this move PIMCO is clearly indicating, almost by putting their reputation on the line because imagine the underperformance they face if they are wrong, that bond yields in the US will be rising soon, US Treasury prices falling and liquidity drying up to some degree.



"No Way Out" of Debt Trap, Gross Says: U.S. Living Standards Doomed to Fall

PIMCO founder Bill Gross -- one of the world's largest mutual funds managers, who focuses mostly on bonds -- has previously said that if the United States were a corporation, no one in their right mind would lend us money. For the last decade, we’ve been “relying on the kindness of strangers” to help cover our debts, he tells Aaron Task in the accompanying clip.  By “strangers” he is referring to our foreign counterparts, like China for example. Basically, for years Americans have spent their hard-earned dollars on less-expensive Chinese made goods. With great gratitude, China turned around and used all those dollars to buy up U.S. Treasuries and other dollar-denominated assets.  But now after years of reckless spending, America’s debt level is nearing a breaking point and can no longer rely on foreign capital as a last resort.  “When a country reaches a certain debt level, confidence in that country’s ability to repay that debt becomes jeopardized,” says Gross, citing the work of Ken Rogoff and Carmen Reinhart in This Time Is Different.



Gross Dumping Treasuries Leads Managers Calling Rally's End

Bill Gross has dumped all Treasuries from the world’s biggest mutual fund, Warren Buffett is shifting to shorter-term debt, and Swiss Reinsurance Co. is boosting equities and corporate bonds.  Some of the biggest private investors in the bond market, from fund managers to insurers and pensions, are preparing for an end to the three-decade Treasury rally, as interest rates near zero and unprecedented spending by the U.S. government and the central bank threaten to fuel inflation. Their strategies range from reducing the longest-dated holdings and shifting to higher-yielding corporate debt, to investing in stocks, commodities, non-U.S. bonds and even holding cash.

Bernanke Tries To Explain Why A Ponzi Scheme Is A Perfectly Acceptable System For Post Civil-War America, Fails

The following exchange between Ben Bernanke and Senator Kirk is a must watch for everyone who wonders how Ben Bernanke justifies the fact that America is now an open Ponzi scheme. Kirk's question "in laymen's terms this is one part of the government lending another part of the government money, which would not let to long term confidence once the American people understood the basics a little bit better" relates to the open monetization that the Fed does each and every day at least until the end of June. What Kirk did not ask is what happens when the American people realize just how truly preposterous the Ponzi is, and that all the interest "paid" by the Treasury to the Fed ends up being remitted as cash right back to the Treasury as revenue in essence incentivizing the Treasury to spend and borrow more in order to earn more! This is the most circular Weimarian nightmare scenario imaginable, and we can only hope that "the American people" understand this as soon as possible. As to Bernanke's surprise that the US had a currency without any Federal debt to back it up (yes, it is possible to live within one's means, even for a central bank) can we remind the Chairman that the gold on the Fed's balance sheet, all eight tungsten thousand tons of it, is actually Marked to Market to almost $300 billion, and can by definition be used as a pledge to any liability, such as a currency or excess reserves. But oh yes, how could we forget, using just gold as an asset would never afford us the kind of adamantium price stability that we have seen in recent times. Plus how on earth could one infinitely dilute the dollar if the Fed's balance sheet was limited by actual "assets" that do not require Hewlett Packard tech support every now and then.
Debt Clock shows National deficit over $500 billion (Canada)
After being retired in 1997 with a balanced Canadian budget, the National Debt Clock is being rolled out again. Canada’s debt is now over $500 billion, so the Canadian Taxpayers Federation is taking the clock across the country to remind citizens how much the country is in the red. According to the clock, our national debt increases by $1,400 every second.


Price of food in Canada could jump between 5 and 7 per cent in 2011: economist
With the United Nations blaming higher crude oil prices for pushing global food prices to an all time high, Canadians have been spared so far because of cutthroat grocery store competition and the high loonie making the cost of imported goods cheaper.  But it's just a matter of time until higher commodity prices trickle down to Canadian grocery shelves and Canadians have to reach further into their wallets, says Douglas Porter, deputy chief economist at BMO Nesbitt Burns.


His Recession, Becoming Hers
Heather Boushey, an economist with the Center for American Progress, points out that since the economic recovery officially began in June 2009, private-sector employers have hired a net total of 503,000 men, while jobs held by women have declined by 141,000.




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