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Advice On How To Trade Gross' Treasury Dump From A Former PIMCO Employee

Tyler Durden's picture




 

From Brian Rogers at Fator Securities

The PIMCO call

The commentary today is about the bond fund manager PIMCO and the US Treasury holdings in their flagship $236bn Total Return Fund, the largest bond fund on the planet.  An article today on Zero Hedge discussed how as of 2/28/11, the Total Return Fund had reduced its holdings of US Treasuries down to 0%!  (link here)  This is a very big deal and the only time to my knowledge the fund has ever moved total US Treasury holdings to 0%. 

To give this call some perspective, the PIMCO Total Return Fund is managed vs. the BarCap Aggregrate Total Return Index (this is the former LBAGG or Lehman Brothers Aggregrate).  The BarCap Agg index has a total allocation to US Government securities of around 40% (link here).  This means that PIMCO is underweight its bogey in US Treasuries by about 40 % which in the bond market is a MASSIVE underweight.  PIMCO has also reduced duration in the fund to 3.89 years which is the lowest since December 2008 at the height of the liquidity crisis.

Why is this significant?

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.

Does this move make sense?

While it’s impossible to know the future, in my opinion this is something that should NOT be ignored.  The S&P has rallied about 25% on pure QE2 since late-August 2010 which is not organic or sustainable.  Commodity prices have surged and it is becoming well-documented that many companies are having a hard time passing along price increases without facing demand destruction: this leads to margin compression.  If rates do rise as PIMCO suggests, add into the mix a cost of capital that could go up by at least the move in Treasuries which Gross argues should be at least 150bps to compensate Treasury investors for their risk.  Which means that cost of capital could go up by at least 150bps while input costs are rising, margins are compressing and liquidity drying up.  This is a sure recipe for a sell-off so yes, I think this move by PIMCO makes sense.

Another thing to consider is that because of their sheer size in the fixed income market, PIMCO is a market mover no matter what they do.  So simply not being in the US Treasury market means a huge buyer is missing and rates will rise simply due to this supply/demand imbalance so to some extent, PIMCO can make interest rates go up all by themselves by simply not buying.  Very few organizations on the planet can exert this kind of pressure on rates outside of central banks.

How should equity investors play this?

If this call is correct, and of course there is no way to know if the people at PIMCO will ultimately be right, BUT, if this call is correct, I think the way to play this news is as follows:

1.    Sell positions that have done well since Aug 2010 when Bernanke first announced QE2 at Jacksonhole.
2.    Move into an overweight position in large, liquid names.
3.    Buy defensives like utilities and telecoms as dividend plays should outperform growth plays.
4.    Raise cash with the idea of being a liquidity provider at some point in the future after the market has moved lower.
a.    To this end, create a “wish list” of stocks that you like but think are too expensive.  They are likely to get cheaper soon.
5.    Liquid Brazilian names to consider include Petrobras, Itau, AmBev, Copel, and Vivo.

Cheers,

Brain


* Fator Securities LLC, Member FINRA/SIPC, is a U.S. entity and a member of the Fator group of companies in Brazil. The comments below are from Brian Rogers, who is employed by Fator Securities (Brian’s opinions are his own and do not constitute the opinions of Fator Securities or the Fator group of companies).

Fator Securities LLC is not affiliated with Zero Hedge or any third party mentioned in this communication; nor is Fator Securities LLC responsible for content on third party websites referred to in this communication.

This material was not prepared by Fator Securities LLC. U.S. Persons seeking further information must contact Fator Securities LLC in New York at (646) 205-1160. This material shall not constitute an offer to sell or the solicitation of any offer to buy (may only be made at the time qualified participants are in receipt of the requisite documentation, e.g., confidential private offering memorandum describing the offering, related subscription agreement, etc.). Securities shall not be offered or sold in any jurisdiction in which such offer, solicitation or sale would be unlawful or until all applicable regulatory or legal requirements of such jurisdictions have been satisfied. This material is not intended for general public use or distribution and is intended for distribution only to appropriate investors. The opinions contained herein are based on personal judgments and estimates and are, therefore, subject to revision. Past performances are not indicative of future results.

 

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Wed, 03/09/2011 - 19:43 | 1034558 Nolsgrad
Nolsgrad's picture

whoa nellie! PIMCO had 0% gov't related in Jan '09! kinda puts a dent in this argument.

edit:see graph

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/von%20havenstein/PIMCO%20Jan%201.jpg

Wed, 03/09/2011 - 19:54 | 1034591 morph
morph's picture

Yes and bond yields were rock bottom then too. When they rose to 4% again PIMCO started buying, clearly this time they don't plan to start buying till past 4%

http://www.bloomberg.com/apps/quote?ticker=USGG10YR:IND

 

Wed, 03/09/2011 - 20:37 | 1034706 Pladizow
Pladizow's picture

What about the obvious - Short Long Bonds?

Thu, 03/10/2011 - 01:59 | 1035735 IQ 145
IQ 145's picture

 This is correct. Spoken of frequently as the trade of the decade and then ignored, due to "information overload"; eg. something buzzy came along. The Long Bond, a contract on the CME topped out in Sept. and Oct. of last year. It can be shorted at any time, provided that you understand not to use huge amounts of margin, and that you wait for a reasonable amount of time; ie. a year.The important thing about this trade is that it is guaranteed; the Long Bond took many many years to get to it;s high; and it will trade down for years.

Thu, 03/10/2011 - 05:11 | 1035931 uhb
uhb's picture

Sell the fvcking dip in $bonds, bitchez!

My iq is only 127, but even i figured that one out. But i'm honored we're in the same boat, investment-wise.

Thu, 03/10/2011 - 10:27 | 1036351 Kobe Beef
Kobe Beef's picture

Played with rolling Put option spreads? Sounds like a good game.

I must confess, I'm somewhat alarmed by this. Is PIMCO foretelling a UST sovereign default (in un-hyperinflated dollars) coming soon?

Cheers,

Beef

Wed, 03/09/2011 - 20:12 | 1034636 impending doom
impending doom's picture

Should you trust a person who spells his own name incorrectly? Brain/Brian? For the life of me I can't recall a single time in my life I've ever spelled my own slave name wrong...

Wed, 03/09/2011 - 20:46 | 1034729 Infinite QE
Infinite QE's picture

+1

Wed, 03/09/2011 - 21:53 | 1034891 Bear
Bear's picture

Impending Doom is pretty easy to spell.

Wed, 03/09/2011 - 22:06 | 1034916 Atomizer
Atomizer's picture

Brian is having a brain fart.

Wed, 03/09/2011 - 22:43 | 1035045 vxpatel
vxpatel's picture

Really? you think he used his real name AND the fact he worked at PIMCO?

HELLLOOOO McFLY....

Wed, 03/09/2011 - 21:00 | 1034759 VegasBD
VegasBD's picture

Plus Greenspan has been at PimCo's offices once a week for the past two months. Talk about 'expert networks' !!!

Thu, 03/10/2011 - 05:27 | 1035945 StychoKiller
StychoKiller's picture

I'm thinking someone knows that QE3 is coming down the pipe, like a huge, rotten lump of filth...SPLASH!! :>(

Wed, 03/09/2011 - 22:02 | 1034895 Judge Judy Scheinlok
Judge Judy Scheinlok's picture

Dent in the argument?

Making trades based on advice from a anonymous blog is FOLLY. Did Tyler forget or is this a test? This whole PIMPCO thing stinks like a yeasty vagina.

~Judge Judy, Fagwhor Securities

Wed, 03/09/2011 - 22:16 | 1034950 cbaba
cbaba's picture

+1

Thu, 03/10/2011 - 02:02 | 1035739 IQ 145
IQ 145's picture

 of course, it's the worst example of internet wisdom to be attracted to anything because of "insiders"; but look at the price chart; the long bond topped out in sept. Oct. last year. it will go down for years; completely without the "insider", this is a trade that will give you money for years.

Wed, 03/09/2011 - 19:44 | 1034561 carbonmutant
carbonmutant's picture

Well if there is no QE3 the Dollar should do well...

Wed, 03/09/2011 - 20:18 | 1034659 DosZap
DosZap's picture

Here's a stud that will disagree on the QE.

http://www.kitco.com/ind/willie/mar092011.html

Great Opinion Piece w/data/

Thu, 03/10/2011 - 05:32 | 1035951 Eric Cartman
Eric Cartman's picture

It might not be named QE3, but whatever program they impliment will function the same way. 

Wed, 03/09/2011 - 19:50 | 1034568 Rainman
Rainman's picture

Ahah....the Maestro was the mole all along. h/t Brain

Wed, 03/09/2011 - 19:51 | 1034577 Bastiat
Bastiat's picture

Under that scenario, the toilet will flush on the US economy so hard it will make your ears pop.

Wed, 03/09/2011 - 19:51 | 1034581 bull-market_3.0
bull-market_3.0's picture

Does this suggest PM are going down too? 

Wed, 03/09/2011 - 20:00 | 1034606 Bastiat
Bastiat's picture

Years to go is my opinion and I don't believe they will ever "go down" priced in terms of the doomed USD.  Collapse the economy as interest rates rise and compounding UST debt and interest rates spiral up?  How's that look for tax revenues?  Collapsing pension balances?  r/e prices (bank balance sheets)?  Deflationary death or QE to infinity--either destroys the USD one sooner, one later.

Thu, 03/10/2011 - 01:06 | 1035608 gwar5
gwar5's picture

I'm with you. Interest rate raises will only make us more like Portugal. US deficits worse, debt worse, the USD worser.

And, there's an election coming up and pressure to spend even more.

Thu, 03/10/2011 - 05:30 | 1035948 StychoKiller
StychoKiller's picture

The Bernank:  "D@mn it, I KNOW prosperity is under this mountain of FRNs somewhere..." :>(

Wed, 03/09/2011 - 20:22 | 1034674 huntergvl
huntergvl's picture

I think PMs will retreat by maybe 10% during the s&p reset, and Miners will take a bigger hit, maybe 25%. The broader market will be worse with energy and other commodities doing best along with huge Blue Chips with solid dividend streams.

All others will be annihlated.

My view and plan is that if you are nimble, you can catch a hellacious deal in PM Miners and stick with them at least through the years end, then re-evaluate the trade. Of course you can just stay long term and you will do well, but I prefer the trade.

I have a large cash position right now and I'm waiting patiently. QE3 is by no means assured. The sell off will be intense and oversold and there will be much misery and fear, but savvy investors will know where the deals are.

Thu, 03/10/2011 - 02:03 | 1035741 IQ 145
IQ 145's picture

 No. It does not.

Wed, 03/09/2011 - 19:53 | 1034582 Caviar Emptor
Caviar Emptor's picture

I think they believe that yields will spike without the implied threat of QE3, and now at 3-months out the Fed is being coy. 

But I also think they want to send a clear message to the Fed: without that QE bid being long bonds is like stepping in front of a bus so just call us Charles Bronson (still the ultimate Vigilante)

Wed, 03/09/2011 - 19:54 | 1034587 pauldia
pauldia's picture

Interesting to see if Pimco traded out of their Treasuries took a position into PM's.

Wed, 03/09/2011 - 19:57 | 1034599 Tucson Tom
Tucson Tom's picture

Bingo! The question Tyler raised today.And the answer is-----

Wed, 03/09/2011 - 20:02 | 1034609 Rainman
Rainman's picture

raises hand, all assets classes in a bubble ??

Thu, 03/10/2011 - 05:31 | 1035950 StychoKiller
StychoKiller's picture

Get thee into commodities, especially PMs!

Wed, 03/09/2011 - 20:41 | 1034714 gordengeko
gordengeko's picture

I think TD nailed it when he said everything not nailed down goes bubbye.  This is the most leveraged market in the history of ponzi casino-in-the-sky schemes.  So, it shouldn't surprise to see everything take a hit, once it commences.  My skepticism is with the silver price.  There is too much physical gone and if that price fell back to 31-32 let alone <30, I just don't see how it will be possible for the price to stay down for very long.  It would lead to the end game for real.  Which also means gold should stay close to current levels.  Pimco sitting on all that cash waiting for something???  I'm sure they aren't the only big money in town that's waiting for Ben to use up all the dumbass-charlie sheen-snooki-idol watching US tax payer money!  Then swoop in and buy.

Wed, 03/09/2011 - 23:57 | 1035375 Bear
Bear's picture

If you buy soap, you can be assured of bubbles ... but that's it

Wed, 03/09/2011 - 19:58 | 1034598 CitizenPete
CitizenPete's picture

Wha?  what's with the Brazilian name pump at the end?

Wed, 03/09/2011 - 20:13 | 1034642 william the bastard
william the bastard's picture

Curious yes? Is he too cute by half with that?

However, refernce the obvious as stated by Jeff Gundlach this morning (and I paraphrase): "The best asset in a blown up asset class will still suffer"

Gundlach Sees Munis Dropping Another 15-20%, "By The Time All Muni Shoes Drop It Will Look Like Imelda Marcos' Closet"

http://www.zerohedge.com/article/gundlach-sees-munis-dropping-15-20-time-all-shoes-drop-it-will-look-imelda-marcos-closet

Wed, 03/09/2011 - 20:24 | 1034678 william the bastard
william the bastard's picture

Looks like Factor has a Brazilian parent and as such have concerned Brazilian clients. It is after all Ash Wednesday and they may be waking up soon.

Wed, 03/09/2011 - 20:00 | 1034605 random shots
random shots's picture

Really ZH?...

We are suppose to take advice from a person who has not worked at PIMCO for nearly nine years?

http://www.linkedin.com/in/brianarogers

Sell side whores are cool when they serve the cause?

 

Wed, 03/09/2011 - 20:11 | 1034637 gringo28
gringo28's picture

yea, nice catch. amd he worked at Bulltick which is a latam broker dealer. bottom line, is if there is a sell-off here, Brazil will get whacked hard. i can't believe this guy put his real name on this. unfuckingbelievable.

Wed, 03/09/2011 - 20:18 | 1034655 Tyler Durden
Tyler Durden's picture

What cause would that be?

Wed, 03/09/2011 - 21:12 | 1034749 Spalding_Smailes
Spalding_Smailes's picture

The Chinese Communist Part Promotes Evil

March 7 2011

(Clearwisdom.net) Many Chinese are aware of two significant challenges in seeking medical care in China—the high cost of medication and the abundance of fake medication. Hospital pharmacy managers are in charge of buying medication for hospital patients. Practitioner Mr. Hu Dali is the pharmacy manager at Chinese Medical Hospital in Xiuwen County, Guizhou Province. After he began practicing Falun Dafa in 1996, he strictly followed the principles of Truthfulness-Compassion-Forbearance. As the pharmacy manager, he always put the patients’ health as top priority and was careful in buying only good quality medicine.

Since the Chinese Communist Party (CCP) began its persecution of Falun Gong in 1999, Mr. Hu has been detained and sent to a forced labor camp three times for his belief in Falun Gong. As a result of the tortures he suffered, his legs became disabled in 2003. He was later sentenced to ten years imprisonment at Duyun Prison. There, he was subjected to the most unimaginable torture, the so-called “bacteria treatment”—where prison guards mix tuberculosis patients’ spit into practitioners’ food. Mr. Hu was locked in solitary confinement and his meals were handled by the prison inmates. As a result of eating the contaminated foods, he was infected with tuberculosis. Mr. Hu passed away at age of 39 in January 2011.

http://truthinchina.wordpress.com/2011/03/07/the-chinese-communist-party...

Torture of Falun Gong Practitioners in Hebei Province Women's Prison

(Clearwisdom.net) Hebei Province Women’s Prison is located southwest of Shijiazhuang City, near Luquan City, and at the base of Taihang Mountain. To the north of the prison is the Hebei Province Women’s Detention Center. The prison is divided into 17 sections, including a Juvenile Detention Center. There are a total of 3,000 prisoners, among which are more than 200 Falun Gong practitioners. Forced labor mainly includes clothing production, and much of it is the production of police and army uniforms. The prison claims a “transformation rate” (of Falun Gong practitioners) of more than 95%. I’d like to provide an account of the persecution here.

I. Section 14′s “Newcomers Group,” otherwise known as the “Lock-down Group”

New arrivals are forced to wear a prison uniform and have their hair cut. If the practitioner refuses to wear the uniform, she is assaulted by several team leaders. In the evening, the section instructor comes to talk to the practitioner. He will act very pleasant, asking the practitioner about where she lives, her family situation, etc. Then he will say things like, “If you follow the rules and behave well, then we will shorten the sentence for a Falun Gong practitioner more than the regular prisoners, and so you can get out sooner.” Meanwhile, the guards arrange prisoners to monitor the practitioner 24 hours a day, and these prisoners have to report back on the situation each day. Practitioners are not allowed to go outside or join any group activities.

From 5:00 a.m. to 9:30 p.m., practitioners are often forced to sit on tiny stools and are not allowed to talk to anyone. If the practitioner refuses to give up her faith, the persecution gets escalated. She will be watched by more prisoners and forced to stand still facing a wall. Other than meals and going to the restroom, she will have to stand the entire time and will be beaten and cursed at if she does not follow orders.

In its literature for outside consumption, the prison states that in Section 14, prisoners do not do labor and only “study and attend classes.” However, the prisoners are made to do forced labor, including putting beads on strings, folding shower curtains and shower caps, folding magazines, etc. If more labor is assigned than what they can finish, they are forced to work overtime. If a Falun Gong practitioner refuse to do the labor, she is made to stand still or sit on a tiny stool for long periods of time. After several days of sitting, the hip area swells up, causing severe pain.

I personally saw the torture of a Falun Gong practitioner who looked about 35 years old. She refused to cooperate with the prison authorities, and was punished with being forced to sit on a tiny stool every day. She was not allowed to speak and sometimes was not allowed to go to bed until midnight. She was constantly cursed at and beaten. Frequently she would have nightmares and scream in the middle of the night. As a result, she suffered even more brutal beatings. Many times she was dragged by guards into a restroom and brutally beaten. She was also dragged into a lobby, where she was forced to stand for a long time. On more than one occasion, her mouth was taped shut and she was dragged along the ground while completely naked.

She resisted the persecution with a hunger strike. In response, the authorities took her to the prison hospital to be force-fed. They force-fed an unknown drug to her, causing her mental condition to deteriorate. When she returned, prison guards continued to torture her behind closed doors. She became expressionless, lost much of her memory, and could only talk very slowly in a weak voice. Her face was swollen and she had trouble walking. The torture caused her to look much older than she was. Later she was sent to Section 11, designated for prisoners with mental illnesses, where the torture continued.

While being held in their individual sections, Falun Gong practitioners are not allowed to contact each other. Even when performing forced labor, practitioners have to be separated by regular prisoners. Practitioners are not allowed to study or recite the Falun Gong teachings or do the Falun Gong exercises. Every week the prison cells are searched and practitioners are the main targets. If Falun Gong books or lectures are found, the practitioners are either fined or punished; usually they are made to stand still. Each practitioner has 1-3 monitoring prisoners who closely watch the practitioner and report to team leaders whenever they see anything not in line with prison rules. Because prisoners are awarded points for their cooperation, which may allow them to get out of prison sooner, they often beat and curse Falun Gong practitioners at will.

In Section 4, there is a practitioner who is about 50 years old, an intellectual likely from the Zhangjiakou area. Because he went on a hunger strike to resist the persecution, every day he was dragged by several monitoring prisoners to the prison hospital to be force-fed. There were carts available for transportation, but they chose not use one, so as to inflict more harm on the practitioner. As a result, the practitioner’s pants were torn and ripped, his hip area was bloody, and she was covered in sand and dirt.

Practitioners are also forced to have their meals outside year-round, and those who are on hunger strikes have to watch the others eat on the side while standing.

Work in the various sections starts at 7:00 a.m. and lasts until 9:00 p.m.– around 13 or 14 hours of hard labor. There is no time off on the weekends and rarely time off on holidays. Even with this kind of work schedule, the prisoners often have to work overtime. On one occasion, sections 4 and 5 did not allow the prisoners to go to bed for an entire week. They fell asleep at their work benches and continued to work after waking up.

http://truthinchina.wordpress.com/2010/11/25/torture-of-falun-gong-pract...

Wed, 03/09/2011 - 23:52 | 1035354 Bear
Bear's picture

Sad .. but still junk.

Thu, 03/10/2011 - 02:09 | 1035747 IQ 145
IQ 145's picture

 No, you're not supposed to take advice from him. you're supposed to look at the price charts and think. The news item about Pimcos holdings is very cognent. The long bond has had it; it's a short, for a long time; for a lot of money; study the futures market; forget about stocks. The Long Bond is traded on the CME

Wed, 03/09/2011 - 20:06 | 1034618 Sutton
Sutton's picture

PIMCO rotated all of the money into Coffee futures.

Wed, 03/09/2011 - 20:07 | 1034624 TooBearish
TooBearish's picture

A large west coast account was selling straddles on FI futures today - FWIW

Wed, 03/09/2011 - 20:08 | 1034626 Bastiat
Bastiat's picture

Likely rates will continue to go up and printing press will run faster, not slower.  Commodities won't be stopped by interest rates.  Nor will gold and silver. 

Wed, 03/09/2011 - 20:21 | 1034665 william the bastard
william the bastard's picture

Ah! This time is different?

Wed, 03/09/2011 - 20:26 | 1034683 InconvenientCou...
InconvenientCounterParty's picture

"Commodities won't be stopped by interest rates. Nor will gold and silver."

Not everyone hated the 70's

Wed, 03/09/2011 - 21:14 | 1034799 william the bastard
william the bastard's picture

You assume it isn't 1980?

Wed, 03/09/2011 - 21:50 | 1034885 Bastiat
Bastiat's picture

I know it isn't 1980.  We weren't in monetizatizing in 1980. 

Thu, 03/10/2011 - 08:47 | 1036103 Math Man
Math Man's picture

We doubled interest rates in the early 80s...  just as interest rates are about to double now.

Wed, 03/09/2011 - 20:11 | 1034630 Bastiat
Bastiat's picture

1.    Sell positions that have done well since Aug 2010 when Bernanke first announced QE2 at Jacksonhole.

Especially silver . . . sell all your silver, please, now.

XXXOOO Blythe

 

 

Wed, 03/09/2011 - 20:11 | 1034631 Nine Pies
Nine Pies's picture

He says "The S&P has rallied about 25% on pure QE2 since late-August 2010 which is not organic or sustainable."

Then he advises we take an overweight position in large liquid names?  Coca-Cola and Exxon (and AAPL NFLX AMZN) won't be affected?  And advises raising cash to buy later when everything tanks?

I got question marks here.  Question marks, people!

Wed, 03/09/2011 - 20:33 | 1034699 bob_dabolina
bob_dabolina's picture

I couldn't figure that out either.

Thu, 03/10/2011 - 05:37 | 1035954 Eric Cartman
Eric Cartman's picture

Same here, it goes against everything I've learned.

Wed, 03/09/2011 - 20:12 | 1034632 kengland
kengland's picture

Do you honestly think Bill Gross and PIMCO is bigger than Ben? Do you think Ben will allow Bill to be right? Ben has made road meat out of the most prominent shorts in the world. Bill has just made himself a target. An example will be made of him over the next 9 months.

 

I went long RYGBX when I read this.

Wed, 03/09/2011 - 20:14 | 1034648 gringo28
gringo28's picture

yesh. frak Pimpco. this whole thing is a major head fake to bring commods & PMs down. did anyone catch the $200b low income housing program announced in China today? DC is dying to do Hu a favor by getting copper lower so Hu can push off the death knell turning point when the Yuan floats freely and we take every single fucking dime back from them, plus interest......

Wed, 03/09/2011 - 20:17 | 1034656 william the bastard
william the bastard's picture

People in Washington aren't that smart but if someone is writing that kind of a script for them they'd still find a way to ruck it up.

Thu, 03/10/2011 - 02:13 | 1035756 IQ 145
IQ 145's picture

 Bill Fross sold Bonds, for christsakes. Wake the fuck up. this is not a discussion about stocks; Ben knows he's right; it;s not his problem. If you want to short the long bond, you can get paid; although I seriously doubt whether you have any idea how to do this. Once again; Bonds, Bonds, only Bonds. Did you get it yet? It;s about Bonds. The long Bond is going down, Ben knows this already. Okay?

Wed, 03/09/2011 - 20:20 | 1034663 Johnny Yuma
Johnny Yuma's picture

I've always been amazed by the fact that sell sider's can never recommend the thought of possibly shorting the market outright or through a derivatives strategy. WTF is "raise cash" really? Sounds like CNBS speaking if you ask me. Forget trading on rumors. Trade what you see on the charts. There is no signal to go short (ES) just yet but the next few days could be interesting if the bulls can't push the market back up. The daily range has been coiling up tighter and tighter the last few days potentially building up for a big move.

Wed, 03/09/2011 - 20:25 | 1034679 DosZap
DosZap's picture

Anyone ignorant enough to trust their money to a Gv't pushed mkt, be my guest.

Crooks,the entire lot of them.

Wed, 03/09/2011 - 20:21 | 1034668 buzzsaw99
buzzsaw99's picture

The fed and wall street gangsters will never stop meddling in the capital markets. Gross is a pig. The only reason he can do this is because the fed and fed gub bailed out all the agency mbs and bank bonds. Gross isn't afraid of his other holdings because they all carry the same guarantees. Freaking maggots at pimpco can suck it!

BRING THE FREAKING FEAR BACK TO THE MARKETS!

Wed, 03/09/2011 - 20:26 | 1034687 cosmictrainwreck
cosmictrainwreck's picture

Brain......what a douche. Loser. Nit-wit. His fuckin' "advice" to "investors" is just boilerplate from a stinkin' 3rd grade asset-allocation manual

Wed, 03/09/2011 - 20:47 | 1034731 Sophist Economicus
Sophist Economicus's picture

Yup.    Wonder if our dear friend Bill is doing one of his out in the open "tantrums" - smells like another extortion attempt....The last time he pulled this shit was when there wasn't a backstop for his brilliant investment in motgage backed securities -- which were bought out by the federales at 100% on the dollar. 

Screw you Bill - BTW, great move going into FRNs....

Wed, 03/09/2011 - 21:01 | 1034762 NotApplicable
NotApplicable's picture

Or is Bill doing the famed/fabled Rothschild bond market trick of showng a sell in order to set up a massive buy on the cheap once the Fed 'capitulates' and announces QE3?

Wed, 03/09/2011 - 20:27 | 1034689 Can2001
Can2001's picture

the world largest Bond Fund don't held anymore (lt)Debt of "globals leading Nation"

with world currency status....really sick sick times...isnt a affront against Benozide???

Wed, 03/09/2011 - 20:47 | 1034726 Can2001
Can2001's picture

the only conclusion , when the pimco call is correct must be : not was brian the brain says...it means the holy printing press goes on fire and we will dont see any correction

@ equities. In this szenario the big pigs would pile in Treasuries and lift up the

"save heaven". Pimco would be wrong on all sides( not all, $ cahsvalue would be going strong) . Is this possible " inside the ring" ??

sick sicker sickest

Wed, 03/09/2011 - 20:48 | 1034734 Infinite QE
Infinite QE's picture

You GATA believe that Gross has loaded his own villa with gold purchased from his down-the-road buddy, Tulving.

Wed, 03/09/2011 - 20:54 | 1034732 silvertrain
silvertrain's picture

.

Wed, 03/09/2011 - 20:54 | 1034742 americanspirit
americanspirit's picture

PIMCO is a company that has been making a fortune for years in a market that is now just about to disappear as far as investment-grade opportunities matter. From this point on in, PIMCO is saying, anybody in USTs is PIMPCO.

Wed, 03/09/2011 - 20:54 | 1034743 Docinthedark
Docinthedark's picture

anybody out there able to explain the ES down around 10 from the close?

Wed, 03/09/2011 - 20:59 | 1034758 Can2001
Can2001's picture

es mar 1315,5

es jun 1310,5

maybe you have an endless feed and its rolling over to next fronth month...

Wed, 03/09/2011 - 21:42 | 1034840 Bear
Bear's picture

Fear of collapse ... talk all over about no QE3 (even CNBC) with Pco's announcement. If ES drops to 1308 and hovers there for over an hour; sell on the subsdequent rally to 1311-1312 and watch out below.

Why is copper down so much (China play) or lead indicator of market decline? When the strongest wail, the weakest quail.

Wed, 03/09/2011 - 22:44 | 1035039 Can2001
Can2001's picture

you must look cnbc @ primetime? I'm with you.

Thu, 03/10/2011 - 00:19 | 1035465 Bear
Bear's picture

Comic relief

Wed, 03/09/2011 - 23:43 | 1035305 Bear
Bear's picture

Update ES at 1307.25 ... now watch for rally to 1310.50 ... short big time

Thu, 03/10/2011 - 07:25 | 1036000 bluemaster
bluemaster's picture

ASX 200 dropped like rock today , something is going on

Wed, 03/09/2011 - 20:55 | 1034746 lesterbegood
lesterbegood's picture

"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."

Greenspan and "stature" do not belong in the same sentence. The man is a colossal fraud and should be hanging from a "stature"!

Wed, 03/09/2011 - 20:57 | 1034750 Downtoolong
Downtoolong's picture

How To Trade Gross' Treasury Dump ?

You could just do nothing and wait for Wild Bill to change his mind about bond direction again, which he seems to do about every two months or so. The hardest thing to do in any type of market is nothing, but, often the best investment decision.

 

 

Wed, 03/09/2011 - 21:01 | 1034754 mynhair
mynhair's picture

Were there no other takers of TBT at 38.83 today?

TY, ZH, for that morning story on PimpCo.

(actual was 38.85)

Wed, 03/09/2011 - 21:07 | 1034777 buzzsaw99
buzzsaw99's picture

The price is wrong bitch[ez]. [/slappy gilmore]

Wed, 03/09/2011 - 21:27 | 1034826 Bear
Bear's picture

Bonds rose this am when it dawned on everyone that the weakness over the last few weeks was PCO dumping their holding but now one would have to think: "Which way Charlie?"

Wed, 03/09/2011 - 21:08 | 1034784 zeroman
zeroman's picture

Folks, I think it is pretty simple. In 09, Pimco got out of treasuries all the way to zero as a percentage of their portfolio largely because of the huge unknown around the big financial banks. However, we had mark to market go bye bye allowed the beginning of the new ponszi program.  Today, there is a huge unknown what will happen with QE3. Short term, there is going to be a sellof to serve as a smokescreen and create enough fear that there is the need to have QE3. With out this, there can not be a QE3. FEAR has to be instilled in the sheep and the politicians who fight the Ponzi Master. Short term, PIMCO has maximized its profits and its time to cash in and wait to reload.  Then ride the long bonds to new high interest rates.

Wed, 03/09/2011 - 21:30 | 1034833 rex-lacrymarum
rex-lacrymarum's picture

'So simply not being in the US Treasury market means a huge buyer is missing....'

This is exactly the wrong way around - it means a huge seller is now 'missing' -  presumably the biggest seller there was in recent months. And yes, since this is probably short term bullish for bonds, it means it is a sell signal for 'risk assets' by inference. They asked Greenspan for advice? He's the second-worst forecaster ever, right after Bernanke.

Wed, 03/09/2011 - 22:39 | 1035019 Can2001
Can2001's picture

LOL you are right , when Ben the chairsatan himself is #1 , where you

can pin his hell master "Mr. ( i have made some mistakes) Greenspan.

Wed, 03/09/2011 - 21:38 | 1034855 Atomizer
Atomizer's picture

Today's history lesson:

Looting of Treasuries

Capitoline Hill 753 BC

Online reading: 

The Social and economic history of the Roman empire

The Decline and Fall of the Roman Empire

In the meantime, crank your speakers to drown out future events 

M|A|R|R|S - PumpUpTheVolume

Wed, 03/09/2011 - 21:41 | 1034859 Wrighteous Wrath
Wrighteous Wrath's picture

There are just too many variables in the market now. Gross is as smart and, as far as I am able to determine from his interviews to be, a straight up guy. He answers hard questions with very clear and precise language and facts rather than the typical hemming and hawing you get from liars.

If Pimco has reduced UST holdings to 0%, aren't they now the very paragon of "zero hedge?"

I that this move is a very ominous omen and wrighteous wrath may be visited on the markets very soon.

 

Thu, 03/10/2011 - 00:13 | 1035442 SilverBaron
SilverBaron's picture

Smart?  Not hard to call a rise in rates when Qe 2 already caused a rise.  Rates will rise with or without Qe3.

Thu, 03/10/2011 - 02:18 | 1035763 IQ 145
IQ 145's picture

 Never mind the fucking omens for god's sake; you're not the Delphic Oracle. You can short the long bond contract on the CME and make money, for years. real money. What Gross has just told you is the risk is zero; he's right.

Wed, 03/09/2011 - 21:42 | 1034862 Papasmurf
Papasmurf's picture

Gross is just rebalancing to make room for GM corporates.

Wed, 03/09/2011 - 21:42 | 1034866 Seasmoke
Seasmoke's picture

i will bet on Bill over Ben ......but than again my favorite Thomas and Friends trains are Ben and Bill

Wed, 03/09/2011 - 22:15 | 1034940 oygevalt
oygevalt's picture

+2 mustard-yellow engines

Wed, 03/09/2011 - 21:49 | 1034881 Savonarola
Savonarola's picture

Brian, we want to know who pissed in the sap buckets ?

This is nothing more than good old office politics at work...

Sounds to me like Gross is under attack from the young Turks at PIMCO.  

 

Wed, 03/09/2011 - 22:04 | 1034911 Atomizer
Atomizer's picture

Harvey shadowboxed Tyler today. The shit is getting harder to sweep under the rug.

http://harveyorgan.blogspot.com/

 

 

Thu, 03/10/2011 - 01:00 | 1035602 Irwin Fletcher
Irwin Fletcher's picture

Harvey's been doing it more for the last few weeks, but the general theme - The shit, as you put it -does seem more fashionable in polite conversation these days.

Wed, 03/09/2011 - 22:15 | 1034939 Instant Karma
Instant Karma's picture

Assuming this means no QE3, everything is going to tank--equities, commodities, and bonds. The USD will do ok. At some point, there will be an outcry for more QE, like last summer, and everything will float back up with newly created funny money. I would use the pull back to buy physical metals and the reflation trade, again.

Wed, 03/09/2011 - 22:40 | 1035021 Yits and the Yimrum
Yits and the Yimrum's picture

no QE means there is nothing left to loot;hardly the case

trillions in private pensions, gold hoarding, paid for real estate

the QE goes on till the fat lady sings, anyone who tells you different is a liar!

I can't believe pimpCo doesn't own any Treasuries: Gross must of had a fat lady vision or something of equal, traumatic effect

Thu, 03/10/2011 - 05:42 | 1035958 StychoKiller
StychoKiller's picture

You want the truth?  Can you handle the truth?

http://news.goldseek.com/GoldenJackass/1299704400.php

Wed, 03/09/2011 - 22:43 | 1035038 moneymutt
moneymutt's picture

Is it too much to ask that after our high level govt execs retire, to fat pensions and book deals, they not consult with anyone. Generals are becoming multi-millionaires in retirement, sitting on panels to give govt advice on what weapon system to buy while they are being paid big bucks by defense contractors. 

And here, Greenspan who no doubt still talks to Fed, tells PIMCO to front run Fed...ridiculous, this should be illegal, there is no good reason for it not to be illegal, and yet we let these guys parasite huge chunks of economy...just pass a feaking law and enforce it uniformly. 

Wed, 03/09/2011 - 22:43 | 1035040 moneymutt
moneymutt's picture

Is it too much to ask that after our high level govt execs retire, to fat pensions and book deals, they not consult with anyone. Generals are becoming multi-millionaires in retirement, sitting on panels to give govt advice on what weapon system to buy while they are being paid big bucks by defense contractors. 

And here, Greenspan who no doubt still talks to Fed, tells PIMCO to front run Fed...ridiculous, this should be illegal, there is no good reason for it not to be illegal, and yet we let these guys parasite huge chunks of economy...just pass a feaking law and enforce it uniformly. 

Wed, 03/09/2011 - 23:04 | 1035116 Creed
Creed's picture

Tyler got junked. lol

Wed, 03/09/2011 - 23:13 | 1035181 Fearless Rick
Fearless Rick's picture

Pimco is a party to the put-back suit against Bank of America and there are surely other proposed suits heading for WFC and JPM and C and others.

Gross and his wise guys at PIMCO sense the end game, as the banks will no longer be able to hide the hideous deficiencies on and off their balance sheets.

Gross would not zero out his Treasury account without good reason. Expect a kill shot before June, when QE2 is supposed to end.

The game is getting fierce but the banks eventually will lose, no doubt about it, because the Bernanke's policies are causing even more obscene imbalances.

Notice how nobody has declared themselves a candidate for president? Nobody serious, anyhow. Who would want it, when the country is going to be much worse off in 2012 than it was in 2008. Mayeb the Fed can trot Blythe Masters up to it. HAHAHAHAHAHAHAHAHAHA!

Thu, 03/10/2011 - 05:45 | 1035961 StychoKiller
StychoKiller's picture

If Hillary is smart, she'll bail from Washington DC and run off to the Caymans BEFORE the Decepticrats try and draft her in 2012!

Wed, 03/09/2011 - 23:14 | 1035184 High Plains Drifter
High Plains Drifter's picture

Zawiyah has fallen to government forces.

Wed, 03/09/2011 - 23:50 | 1035337 Bear
Bear's picture

Oil still at 104.60, must be a yawn.

Thu, 03/10/2011 - 00:30 | 1035510 AldoHux_IV
AldoHux_IV's picture

If treasury yields are expected to rise and an insider like PIMCO is already preparing it really only means one thing: the fed realizes it's backed in a corner and it's survivablility on the line.  Thus, it will hold rates hostage as they've become the only buyer of their own worthless debt.  In a last desperate attempt to show we need the fed it will create another problem and come up with another solution that will only add to other problems.  End game: we start ignoring the worthless federal reserve notes and dissolve all association in our economy to those crap yields and start anew.

Thu, 03/10/2011 - 01:06 | 1035615 Irwin Fletcher
Irwin Fletcher's picture

After reading article and scrolling comments, I find the lack of LBAGG jokes curious. Where are all the trolls? </flamebait OFF>

Thu, 03/10/2011 - 01:15 | 1035632 gwar5
gwar5's picture

LBAGG jokes?

Thu, 03/10/2011 - 01:17 | 1035639 Irwin Fletcher
Irwin Fletcher's picture

Lehman Brothers Aggregrate? How about Liquidity Baggers no more? No, that sucks, I can do better. 

Thu, 03/10/2011 - 01:12 | 1035628 gwar5
gwar5's picture

Thanks Brian. More confirmation the game is almost over.

I'm out of the market now, but after the peak in 2007 I did well with ETF shorts on the way down.

Only trouble with the scenario now is that everything is still in USD. I see that as the biggest risk.

We could wake up one morning with USD down 40%.  James Turk: "It will shock the world." 

Thu, 03/10/2011 - 01:25 | 1035653 Irwin Fletcher
Irwin Fletcher's picture

My thoughts on these recommendations:

1.    Sell positions that have done well since Aug 2010 when Bernanke first announced QE2 at Jacksonhole.

* Sell off REM miners. Take profits, remove investment from sector, hope China isn't stockpiling resources and playing Sun Tzu karate tricks on the American economy.  

2.    Move into an overweight position in large, liquid names.

* Four words: Too Big To Fail

3.    Buy defensives like utilities and telecoms as dividend plays should outperform growth plays.

* Still Ponzi, but not as Ponzi as your favorite 3x ETN. Preferably, buy them on a dip.

4.    Raise cash with the idea of being a liquidity provider at some point in the future after the market has moved lower.

* Achieve this by doing more work, or finding the next level of suckers on the Ponzi pyramid. Your choice. 

a.    To this end, create a “wish list” of stocks that you like but think are too expensive.  They are likely to get cheaper soon.

* Chicken stock, beef stock, dashi.

5.    Liquid Brazilian names to consider include Petrobras, Itau, AmBev, Copel, and Vivo.

* And Caipirinhas, bitchez!

 

Thu, 03/10/2011 - 02:26 | 1035772 IQ 145
IQ 145's picture

 of course this is all horsehit; but it is the kind of horsehit you're used to; and that you like. The article was posted because of the recent article about Bill Gross going to zero Treasury Bonds. Research the futures market; find out how to short the Long Bond Contract; (it's easy); don't use large margin; be patient; this is a market that just wants to give you lots and lots of money; for years. That's what Bill is trying to tell you. Okay?

Thu, 03/10/2011 - 03:46 | 1035786 Arthur
Arthur's picture

TBT - ProShares UltraShort 20+ Year Trea (ETF)   Funny, you would think this would have gone up in value.

 

38.86 
-0.75 (-1.89%) After Hours: 38.95 +0.09 (0.23%)
Mar 9, 7:48PM EST  
NYSE real-time data - Disclaimer
Currency in USD
  1. Range 38.63 - 39.49

 

Thu, 03/10/2011 - 05:24 | 1035943 Eric Cartman
Eric Cartman's picture

So remaining long in stocks like Apple and Amazon are smart plays because of the liquidity? 

Thu, 03/10/2011 - 05:50 | 1035963 StychoKiller
StychoKiller's picture

The call is coming from inside the house, get out of there!

Thu, 03/10/2011 - 14:48 | 1037252 Kobe Beef
Kobe Beef's picture

hahaha good one

Thu, 03/10/2011 - 07:55 | 1036031 kwality
kwality's picture

Maybe he means large liquid names like "Water" or "Booze" or "Fuel".

 

Thu, 03/10/2011 - 08:28 | 1036072 tmftdoyle
tmftdoyle's picture

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. 

The word stature, unqualified by an adjective, means simply a level of achievement attained. So in suggesting that, perhaps, others of Greenspan's stature may have been involved in Pimco's decision, what exactly are you inferring?

 That there are others as guilty as Greenspan for the deep-shit we are in as a result of 25 years of asymmetrical policies from the Fed. That there are others that have, as successfully as Greenspan, whored their prior "public service" for immense monetary gain. That there are others as delusional as Greenspan in refusing to accept any responsibility for past mistakes: Only Greenspan could say with a straight face, "I challenge anyone to find proof that Fed policies were ill-conceived", when the proof is right in front of him and any other Fed defender in a fast approaching $3 trillion Fed balance sheet.

Just a wretched human being.

Thu, 03/10/2011 - 08:41 | 1036095 Math Man
Math Man's picture

This PIMCO news is more validation that the recovery is real and we will soon see tightening. 

Thu, 03/10/2011 - 09:06 | 1036134 sharkbait
sharkbait's picture

Isn't the time for a 'how to trade on the PIMCO treasury dump' a little behind us? 

THe fact that they have dumped is info for the decision making process going forward but why trade on the dump when the dump is done?  Seems a bit horse is out of the barn 'ish to me.

Love always,

K

Thu, 03/10/2011 - 09:07 | 1036136 Youri Carma
Youri Carma's picture

Pimco cuts US Treasuries holdings to zero, 9 March 2011, by Dan McCrum and Michael Mackenzie in New York (The Financial Times) http://www.ft.com/cms/s/0/d7b68a9a-4a7f-11e0-82ab-00144feab49a.html

Excerpt:

"The move was first reported by the Zero Hedge website." :-)

Thu, 03/10/2011 - 09:43 | 1036190 tradewithdave
tradewithdave's picture

Can't believe I am thinking this. Will be very short-term. Actual dollars... Greenbacks. Non-counterparty transactional transport and vaulting services. I'm feeling it. Excess velocity impacts stocks over flows. Brake pad owners will be in demand when zero counterparty risk factors are suddenly monetized.

Tradewithdave.com

Tue, 07/12/2011 - 08:06 | 1447188 Dokemion
Dokemion's picture

it's good to see this information in your post, i was looking the same but there was not any proper resource, thanx now i have the link which i was looking for my research.

 

http://www.whoownsphone.net/

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