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Bill Gross Calls Fed "Most Brazen" Of All Ponzi Schemes, Says 30 Year Bond Market Is Ending, Compares US Economy To Black Hole
A surprising amount of truth from Bill Gross this morning. Now if only Bill Gross would explain why he has been buying MBS on margin last month (in anticipation of the last move higher in the "Sammy" scheme no doubt) we will call it quits. Oddly enough, Bill Gross, who for the first time confirms everything Zero Hedge has been saying for almost two years now, is not accussed of hyperventilating... yet
Run Turkey, Run from PIMCO
They
say a country gets the politicians it deserves or perhaps it deserves
the politicians it gets. Whatever the order, America is next in line,
and as we go to the polls in a few short days it’s incumbent upon a
sleepy and befuddled electorate to at least ask ourselves, “What’s going
on here?” Democrat or Republican, Elephant or Donkey, nothing much ever
seems to change. Each party has shown it can add hundreds of billions
of dollars to the national debt with little to show for it or move our
military from one country to the next chasing phantoms instead of
focusing on more serious problems back home. This isn’t a choice between
chocolate and vanilla folks, it’s all rocky road: a few marshmallows to
get you excited before the election, but with a lot of nuts to ruin the
aftermath.
Each party’s campaign tactics remind me of airport terminals pre-9/11
when solicitors only yards apart would compete for the attention and
dollars of travelers. “Save the Whales,” one would demand, while the
other would pose as its evil twin – “Eat Whale Blubber,” the makeshift
sign would read. It didn’t matter which slogan grabbed you, the end of the day’s results always produced a pot of money for them
and the whales were neither saved nor eaten. American politics resemble
an airline terminal with a huckster’s bowl waiting to be filled every
two years.
And the paramount problem is not that we contribute so willingly or
even so cluelessly, but that there are only two bowls to choose from.
Thomas Friedman, the respected author of The World Is Flat, and a weekly New York Times
Op-Ed author, recently suggested “ripping open this two-party duopoly
and having it challenged by a serious third party” unencumbered by
special interest megabucks. “We basically have two bankrupt parties,
bankrupting the country,” was the explicit sentiment of his article, and
I couldn’t agree more – whales or no whales. Was it relevant in 2004
that John Kerry was or was not an admirable “swift boat” commander? Will
the absence of a mosque within several hundred yards of Ground Zero
solve our deficit crisis? Is Christine O’Donnell really a witch? Did Meg
Whitman employ an illegal maid? Who cares! We are being conned, folks;
Democrats and Republicans alike. What have you really heard from either
party that addresses America’s future instead of its prurient overnight
fascination with scandal? Shame on them and of course, shame on us.
We’re getting what we deserve. Vote NO in November – no to both parties.
Vote NO to a two-party system that trades promises for dollars and hope
for power, and leaves the American people high and dry.
There’s another important day next week and it rather coincidentally
occurs on Wednesday – the day after Election Day – when either the
Donkeys or the Elephants will be celebrating a return to power and the
continuation of partisan bickering no matter who is in charge. Wednesday
is the day when the Fed will announce a renewed commitment to
Quantitative Easing – a polite form disguise for “writing checks.” The
market will be interested in the amount (perhaps as much as an initial
$500 billion) as well as the targeted objective (perhaps a muddied
version of “2% inflation or bust!”). The announcement, however, has been
well telegraphed and the market’s reaction is likely to be subdued.
More important will be the answer to the long-term question of “will it
work?” and perhaps its associated twin “will it create a bond market
bubble?”
Whatever the conclusion, not only investors, but the American people
should recognize that Wednesday, even more than Tuesday, represents a
critical inflection point in determining our future prosperity. Of
course we’ve tried it before, most recently in the aftermath of the
Lehman crisis, during which the Fed wrote $1.5 trillion or so in
“checks” to purchase Agency mortgages and a smattering of Treasuries. It
might seem a tad dramatic then, to label QEII as “critical,” sort of
like those airport hucksters, I suppose, that sold whale blubber for a
living. But two years ago, there was the implicit assumption that the
U.S. and its associated G-7 economies needed just an espresso or perhaps
an Adderall or two to get back to normal. Normal just hasn’t happened
yet, and economic historians such as Kenneth Rogoff and Carmen Reinhart
have since alerted us that countries in the throes of delevering can
take many, not several, years to return to a steady state.
The Fed’s second round of QE, therefore, more closely resembles an
attempted hypodermic straight to the economy’s heart than its mood
elevator counterpart of 2009. If QEII cannot reflate capital markets, if
it can’t produce 2% inflation and an assumed reduction of unemployment
rates back towards historical levels, then it will be a long, painful
slog back to prosperity. Perhaps, as a vocal contingent suggests, our
paper-based foundation of wealth deserves to be buried, making a fresh
start from admittedly lower levels. The Fed, on Wednesday, however, will
decide that it is better to keep the patient on life support with an
adrenaline injection and a following morphine drip than to risk its
demise and ultimate rebirth in another form.
We at PIMCO join with Ben Bernanke in this diagnosis, but we will
tell you, as perhaps he cannot, that the outcome is by no means certain.
We are, as even some Fed Governors now publically admit, in a
“liquidity trap,” where interest rates or trillions in QEII asset
purchases may not stimulate borrowing or lending because consumer
demand is just not there. Escaping from a liquidity trap may be
impossible, much like light trapped in a black hole. Just ask
Japan. Ben Bernanke, however, will try – it is, to be honest, all he can
do. He can’t raise or lower taxes, he can’t direct a fiscal thrust of
infrastructure spending, he can’t change our educational system, he
can’t force the Chinese to revalue their currency – it is all he can do,
and as he proceeds, the dual questions of “will it work” and “will it
create a bond market bubble” will be answered. We at PIMCO are not sure.
Still, while next Wednesday’s announcement will carry our qualified
endorsement, I must admit it may be similar to a Turkey looking forward
to a Thanksgiving Day celebration. Bondholders, while immediate
beneficiaries, will likely eventually be delivered on a platter to more
fortunate celebrants, be they financial asset classes more adaptable to
inflation such as stocks or commodities, or perhaps the average American
on Main Street who might benefit from a hoped-for rise in job growth or
simply a boost in nominal wages, however deceptive the illusion. Check
writing in the trillions is not a bondholder’s friend; it is in fact
inflationary, and, if truth be told, somewhat of a Ponzi scheme. Public
debt, actually, has always had a Ponzi-like characteristic. Granted,
the U.S. has, at times, paid down its national debt, but there was
always the assumption that as long as creditors could be found to roll
over existing loans – and buy new ones – the game could keep going
forever. Sovereign countries have always implicitly acknowledged that
the existing debt would never be paid off because they would “grow” their way out of the apparent predicament, allowing future’s prosperity to continually pay for today’s finance.
Now, however, with growth in doubt, it seems that the Fed has taken
Charles Ponzi one step further. Instead of simply paying for maturing
debt with receipts from financial sector creditors – banks, insurance
companies, surplus reserve nations and investment managers, to name the
most significant – the Fed has joined the party itself. Rather than
orchestrating the game from on high, it has jumped into the pond with
the other swimmers. One and one-half trillion in checks were written in
2009, and trillions more lie ahead. The Fed, in effect, is telling the
markets not to worry about our fiscal deficits, it will be the buyer of
first and perhaps last resort. There is no need – as with Charles Ponzi –
to find an increasing amount of future gullibles, they will just write
the check themselves. I ask you: Has there ever been a Ponzi scheme so
brazen? There has not. This one is so unique that it requires a new
name. I call it a Sammy scheme, in honor of Uncle Sam and the
politicians (as well as its citizens) who have brought us to this
critical moment in time. It is not a Bernanke scheme, because this is
his only alternative and he shares no responsibility for its origin. It
is a Sammy scheme – you and I, and the politicians that we elect every
two years – deserve all the blame.
Still, as I’ve indicated, a Sammy scheme is temporarily, but not
ultimately, a bondholder’s friend. It raises bond prices to create the
illusion of high annual returns, but ultimately it reaches a dead-end
where those prices can no longer go up. Having arrived at its
destination, the market then offers near 0% returns and a picking of the
creditor’s pocket via inflation and negative real interest rates. A
similar fate, by the way, awaits stockholders, although their ability
to adjust somewhat to rising inflation prevents such a startling
conclusion. Last month I outlined the case for low asset returns in
almost all categories, in part due to the end of the 30-year bull
market in interest rates, a trend accentuated by QEII in which 2- and
3-year Treasury yields approach the 0% bound. Anyone for 1.10% 5-year
Treasuries? Well, the Fed will buy them, but then what, and how
will PIMCO tell the 500 billion investor dollars in the Total Return
strategy and our equally valued 750 billion dollars of other assets that
the Thanksgiving Day axe has finally arrived?
We will tell them this. Certain Turkeys receive a Thanksgiving
pardon or they just run faster than others! We intend PIMCO to be one of
the chosen gobblers. We haven’t been around for 35+ years and not
figured out a way to avoid the November axe. We are a survivor and our
clients are not going to be Turkeys on a platter. You may not be
strutting around the barnyard as briskly as you used to – those near 10%
annualized yields in stocks and bonds are a thing of the past – but
you’re gonna be around next year, and then the next, and the next.
Interest rates may be rock bottom, but there are other ways – what we
call “safe spread” ways –to beat the axe without taking a lot of risk:
developing/emerging market debt with higher yields and non-dollar
denominations is one way; high quality global corporate bonds are
another. Even U.S. Agency mortgages yielding 200 basis points more than
those 1% Treasuries, qualify as “safe spreads.” While our “safe spread”
terminology offers no guarantees, it is designed to let you sleep at
night with less interest rate volatility. The Fed wants to buy, so come
on, Ben Bernanke, show us your best and perhaps last moves on Wednesday
next. You are doing what you have to do, and it may or may not work. But
either way it will likely signify the end of a great 30-year bull
market in bonds and the necessity for bond managers and, yes, equity
managers to adjust to a new environment.
If a country gets the politicians it deserves, then the same can be
said of an investor – you’re gonna get what you deserve. Vote No to
Republican and Democratic turkeys on Tuesday and Yes to PIMCO on
Wednesday. We hope to be your global investment authority for a new era
of “SAFE spread” with lower interest rate duration and price risk, and
still reasonably high potential returns. For us, and hopefully you,
Turkey Day may have to be postponed indefinitely.
William H. Gross
Managing Director
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Fed disappoints, i buy cheaper gold. Fed makes us proud, i buy more expensive gold. We're still all entering a world of pain.
you should be managing CALPERS with this strategy.
Pimco has alreadly cut their exposure. Down to 33%- from63% in bonds.
You can bet that 33% is hedged to kingdom come....
Cold turkey, bitchez!
Bill Gross is the master of Newspeak. The Fed is doubleplusbad today. The Fed is doubleplusgood tomorrow.
What we need is some f'ing Oldspeak. You can only lie for so long. Doublespeak does not overcome math.
...unless that math happens to be of the "fuzzy" variety.
Charlie Bravo
Toss this article down the memory hole.
Bond market zero, Dude.
"Paper money eventually returns to its intrinsic value: zero." -- Voltaire
Exactly.
No one listens to "old liberals" anymore ;-)
Nice language and righteous hand-wringing - but Bill basically goes along with killing the currency with QE2 - after all, it might not work - but its all we got!!
C'mon Bill - how about cold turkey. How about starving our bankrupt banks of money - so they stop paying out bonuses that the rest of the country looks at with incredulity , disbelief and anger. How about shutting down a few of those weak sister TBTFs - nationalize them - anything that at least smells hoinest. Money is nothing - just a figment of our imagination - but the damage the Fed is doing is unravelling social trust, trust in the system etc - lose that and it will take decades if ever to get it back.
"unraveling social trust" ...... THANK YOU FOR SAYING THAT !! This is the worst part of this whole mess ! Those who thought they were living a correct & prudent life are now the losers as they see what they worked for go down the drain ........ paid off homes worthless (in hyperinflation) & a bank filled with dollar bills for their retirement worthless . The worst part of all of this is that many elderly will probably pass away from poverty & starvation (unless they have a caring family). ......... & the government doesn't care, in fact, looks to me like this is the plan all along ~~ GET RID OF THE OLD PEOPLE ~~ because it is the "older people" among us who remember what life was life BEFORE the government became tyranical....... the young people know no better.
I'm past that incredulity and disbelief thing and running full speed to door #3
The majority of the American public has been "voting 'No' to a two party system" for a hundred years . . . by not voting. I'm surprised that so few seem to understand this.
What, vote for alternative parties? Sure, when you have no idea what they represent. Oh, as a dutiful citizen you should do "the homework" yourself? Right, just like the fanatic supporters of the two-party system do, I suppose.
Look, there is astounding market potential for strong "alternative" parties. The problem is that nobody with the money is investing it to support the product rollout required.
Hey, Bill! How about you put a little of that money where your mouth is and get some of your buddies to do the same?
Word. I don't vote, it just encourages the basterds.
Go Bill. Go Bill. Go Bill.
Make them eat their shit.
I think I am starting to hallucinate.
"I ask you: Has there ever been a Ponzi scheme so brazen?"
when does gross take the blame? he promoted this
Sounds like a jilted lover backpedalling from promises s/he made/received. It also sounds like he's conditioning his shareholders/investors for the coming "house of pain".
It's pure diversion, CD. Slight-of-hand, a flourish of the right hand so the left hand can hide the booty. I don't trust Gross for a second. He's running interference for the Fed. (Sorry for the mixed metaphors.) When (not if) some of his investors lose money he'll be able to point at this comment of his as a way out -- blame the Fed. He can't guarantee all his investors that they'll come out smelling like a rose, so he has to write this exculpatory comment. Is there any money manager who can't point back to 2007, 2006, (pick a year) and say, "See?! I predicted this." Bill Gross had to get this comment in under the SHTF wire, but waited as long as possible before cutting the Fed umbilical.
when bonds go up, he's a genius. when bonds go down, its someone else's fault. Bill Gross should run for President.
Why do that when he already has equivalent power without the bashing.
exactly. he is officially the face of 'the oligarchy'.
Billy Bond Boy has spoken the truth.
Therefore will be executed in an "accident". Fishing? Flying? Driving? Who knows? Who cares?!
All kneel before El Erian!
Heart attack while drowning in his Newport Beach hot tub bitchez...
Quite the confession
OMG, is it too late to sell my bond funds and buy gold?? ...sorry, gotta go now, my Depends just had a failure
"I call it a Sammy scheme, in honor of Uncle Sam and the politicians (as well as its citizens) who have brought us to this critical moment in time. It is not a Bernanke scheme, because this is his only alternative and he shares no responsibility for its origin. It is a Sammy scheme – you and I, and the politicians that we elect every two years – deserve all the blame."
Hey, Bill. I'm not to blame. I voted correctly, every time. I've been buying gold since 1985. I've been hoping and preparing for failure in the U.S. financial system for years. I'm against TARP and QE and I hope all of you playing your silly game burn. You can take my share.
Since we seem to be all out of solutions here is a radical idea:
- Govt guarantees all bank deposits and money market funds ... Period.
- Then they systematically force all the bad debts etc out in the open and let the chips fall where they may.
- There may be a necessity to selectively write off/default on our external obligations.
- Capital controls may be necessary for a couple of years to keep the zillionaires from fleeing.
- Income tax holiday. Burn the tax code and rethink the whole thing.
- Then they get rid of the Fed. The Treasury can issue money. No need for an organization with Jamie Dimon on its board setting national fiscal and monetary policy - that is NOT what the founders had in mind for this country.
- then maybe this country can slowly start focusing on the real things - third world infrastructure, third world education, mass poverty etc etc. Printing money and having all of the eletes focused on how much money will be printed next Wednesday is NOT going to solve anything.
And this country is responsible for the third world because?.........
Look, if you want to donate to charity and help the poor, fine. But don't pick my pocket and force me to do the same.
Every sucker for themselves now, this whole BS about working and paying for those less fortunate now applies to the USA itself!
I am pretty sure he/she was referring to the third-world conditions in many backwater areas here in the good old US of A.
maybe more people are waking up to the scam. i dont know why he says ben has to do something. if it is wrong and wont work, dont do it. it is wrong. ben should be removed.
No doubt, Gross is probably buying bonds like mad today.
"But either way it will likely signify the end of a great 30-year bull market in bonds and the necessity for bond managers and, yes, equity managers to adjust to a new environment."
I don't think he's blowing smoke. He's just saying the bull run in bonds is coming to an end. He's basically partying until the janitors show up.
A lot of sobering realizations in that missive. PIMCO and Bill Gross are inextricably linked to the Fed's actions but that doesn't make him incapable of seeing the truth. The November 3 event horizon is approaching and no one knows what is on the other side or if there is another side.
That's my take as well. Some "social/political hedging", if you will. The uncertainty facing everyone, even the "Seers" reminds me of the movie Dune.
We'll see if the spice continues to flow.
while the rest of us struggle for water
u.s. steel,cat,vale,amzn,wmt,mt, .... look out below ...
well.. this explains the recent selling in the long end... even in front of a QE annoucement in which Ben is targeting the long end...
if a trillion was going to get 50 bps...
looks like more than that will come off in front of the annoucement.. lol
Should I be selling my PTTRX ? ;)
fed does not equal dollar, america does.
When Bill Gross calls you out in BROAD DAYLIGHT (regardless of his motive)... Hm, das bad!
Interesting to say the least...!
Bill Gross doesn't see a way out of this that doesn't lose him power. Now he wants to be a truth teller.
exactly, "man of the people" now because insiders are on the eve of being lynched. more (attempted) front-running from the master.
ummm, Bill, you owe us some tax dollars for all those years of frontrunning The Fed. any last words?
I concur, but we do not know his real intentions- he might have jumped ship because he sees the pending doom and wants to save his own ass -or- perhaps he is just a kind Samaritan looking out for the "small people..." [smirk]
Whatever his reasons are, I do not fault him for letting the cat out of the bag albeit too little too late.
Do you hear the violins playing in the background, as the engineroom blows the seals?
"Truth Teller" is too kind a word to describe Bill Gross.
"Opportunist" is probably the more apt term.
Does the Fed REALLY have no other choice but to write bad checks into infinity?
Nope. They could do nothing, and force a corrupted Congress and Executive Branch to start making tough decisions. Sure, doing nothing would make Treasury auctions really tough-- and cause interest rates to spike, let alone spark another global recession. But it would put the onus on the U.S. government to more properly allocate capital with finite resources.
Mr. Gross is a Fed sympathizer because front running Fed moves is his best opportunity to make any semblance of a return in a collapsing universe. With the Fed buying up debt, they are explcitly endorsing governement debt issuing policy.
In the end, buying up debt for the sake of issuing even more debt is Ponzi policy. Calling it a "Sammy scheme" is a clever misdirection on Gross' part-- primarily because the Federal Reserve is the enabler of the scheme. If there is no incremental borrowing from the Fed, the Ponzi falls flat on its face.
While it's nice to hear the identificiation of the Ponzi for what it is (2 years late), it still doesn't make Mr. Gross any less a snake.
perfectly put.
"Perhaps, as a vocal contingent suggests, our paper-based foundation of wealth deserves to be buried, making a fresh start from admittedly lower levels."
Am I reading too much into this or is he subtly calling out fiat?
Dune indeed: "He who controls a thing, can destroy a thing!"
I think the new environment is going to be one where investors are decreasingly interested in anything originating from financial markets - bonds, stocks, commodity futures, carbon credits, you name it. The few investors who have any money left to be concerned about will have had it up to their eyeballs with the likes of the Fed, traders, economists, money managers, advisors, and market leaders like Bill Gross who seem to have done nothing but steer them down a course to ultimate disaster.
The big question of course becomes, “What’s the alternative approach?” That’s what I spend most of my time thinking about and working on now. I realize that Wall Street is so arrogant they doubt I can come up with something on my own. They are also so arrogant as to believe that if I do, I will tell them what it is.
Stocks are NOT a creation of wall street. They represent a fractional interest in a business that makes diapers or whatever. They are a piece of American business. We just need to get wall street and the Fed out of the business of constantly manipulating stock prices to set national economic policy.
invest privately when the dust settles. until then, buy gold.
Risk f*cking OFF, bitchez.
Excellent read. But leaves me with more questions than answers. These are all sharks... circling, planning, posturing, manipulating, etc.
Gross is sounding like Greenspan. Both of them know it's torch and pitchfork time. It's gonna be a bad time for celebrities
Gross is scheduled to be on CNBC with Erin Burnett later today... wonder if she'll kick him off for being rude.
CFR Burnett will welcome CFR Gross with open lips.
Mannish-Boy Burnett will gush wildly in her chair...
What else is a B-cup amongst Stacked CNBC Anchorettes to do?
spread her legs, oh i mean the spread between the bond spreads. oh you know what kind of spread im talking about Problem is..............
in other news:
Runs at 420 kilometers per hour, a world record, astounding.
http://abcnews.go.com/Business/wirestory?id=11969069&page=2
Looks like someone is re-industralizing and re-modernizing the world from the ground up...
we're just talking the talk while they're walking the walk. Pathetic
http://www.amtrak.com/servlet/ContentServer/Page/1248542787937/1237405732517
Great find! Wow, that's quite a contrast indeed darling.
I'm unable to understand the material advantage of ground shipping bodies at 250 mph when the billions could be used to upgrade the web to universal 1GB service that would allow lifelike video conferencing plus all the other advantages.
This is just feel-good bs investment, imo.
A la Bruce Willis in "Surrogates", which would require lot's of bandwidth. Or maybe the porn industry which (it has been reported) uses over half the current bandwidth.
Who knows what would come if the infrastructure were laid down? It ain't just a wild "build it and he will come" leap of faith to expect innovation. HD porn would be the least of it.
wouldn't have it any other way
Good comment. 1GB is somewhat high for the average human consumption. Aggregation is another story.
In your example, the average home DSL is capable of streaming HD down (not up unless sDSL). 720p only uses 768kbps connection (with AAC audio). 1080 is just over 1MBit (1000x less than GB). That's interactive (conferencing) per call. The majority of people don't care about true HD, which opens the sweet spot at 488p which is 512kbps. All these metrics are H.323/SIP.
The largest problem you speak is the CELLULAR CARRIERS repressing their own networks. You may recognize the monopoly by eliminating unlimited use plans, and service based on usage models - bending you over. They will lose long term as wireless becomes ever more distributed.
Any thoughts on Chatanooga's recent rollout of 1GB service city-wide at $300 per month? What would you do to profit on that? I'm offering to relocate to make it work!
Καλ? σχ?λιο. 1GB ε?ναι κ?πως υψηλ? για το μ?σο ?ρο καταν?λωση απ? τον ?νθρωπο. Συνυπολογισμ?ς ε?ναι μια ?λλη ιστορ?α.
Στο παρ?δειγμ? σας, ο μ?σος ?ρος DSL σπ?τι ε?ναι σε θ?ση να streaming HD κ?τω (?χι επ?νω εκτ?ς SDSL). 720p χρησιμοποιε? μ?νο 768kbps σ?νδεση (με ?χο AAC). 1080 ε?ναι μ?λις π?νω απ? 1Mbit (1000x λιγ?τερο απ? GB). Αυτ? ε?ναι διαδραστικ? (conferencing) αν? κλ?ση. Η πλειοψηφ?α των ανθρ?πων που δεν νοι?ζονται για True HD, το οπο?ο ανο?γει το γλυκ? σημε?ο σε 488p το οπο?ο ε?ναι 512kbps. ?λες αυτ?ς οι μετρ?σεις ε?ναι H.323/SIP.
Το μεγαλ?τερο πρ?βλημα που μιλο?ν ε?ναι οι μεταφορε?ς CELLULAR καταστολ? δικ? τους δ?κτυα. Μπορε?τε να αναγνωρ?σει το μονοπ?λιο, καταργ?ντας απερι?ριστη σχ?δια χρ?σης, καθ?ς και των υπηρεσι?ν που βασ?ζονται σε μοντ?λα χρ?σης - κ?μψη σας π?νω. Θα χ?σουν μακροπρ?θεσμα και ασ?ρματη γ?νεται ?λο και πιο διανεμηθε?.
I'm with CogDis on this. Someone SO on 'the inside' as Bill Gross doesn't 'go off the reservation' all haphazard like. Cover perhaps? I see plans within plans...
(and more from Dune: The Spacing Guild to the Emperor: "You must go to Arakas and FIX this or you will live out your life in a PAIN Amplifier!" And later a distraught Emperor: "Bring me that FLOATING FAT MAN!")
How about this one from "The Hunt for Red October"?
Konovalov Crewman: Torpedo, Dead Ahead!
Andrei Bonovia: [to Captain Tupolev] You arrogant ass! You've killed us!
[just moments later, the Konovalov explodes.]
Actually most of it would implode. But at that point what does it matter? :>)
Either way it's a cellular problem at depth. Dead is dead, eh?
Bill Gross must have found God.
On a second thought, he is probably shorting the treasuries now.
Otherwise why would he be so nasty to Ben and Timmy?
Interesting mixture of CYA and
"Trust us, we will make it (survive), put your money on us!"
I would have to say that the 5 year TIPS auction, is what pushed BG to put this down for all to see. I am sure he sees what is going on when TIPS come in with negative interest rates. Basically expect 08 to happen all over again, except this time there will be no safe haven in US Bonds/Treasuries.
@first division
Yeah, the negative numbers are a like noticing the curtains on fire in a crowded theater. In the immediate panic, Treasuries will be _the_ safe haven. Where else can the money go? PMs are too limited and illiquid, and no other currency could handle the trade volumes. One last blast for the bond bulls, and then interest rates will have to go up. PMs and commodities get hammered (again), and AAPL will only fetch $150.
But can you imagine it? We might again see savings accounts that actually pay enough interest to entice savers. A balanced economy may emerge from the ashes, what a concept!
How exactly does US govt fund natnl debt with higher interest rates? Austerity? France tried that.
My guess is:
1) Higher taxes - "new, fairer!" taxes disguised in the form of a national sales tax
2) Some austerity (P.J. O'Rourke's Bar Mitzvah Principle)
3) Creative defaults, confiscation of assets like PMs and retirement accounts, replaced with annuities
this will lead to blood in the streets. eveyone knows what happened last time PMs were taken at gunpoint. never again.
i've mentioned 'retirement account confiscation' to the most passive people, and the first response is: "revolt".
@chopper
Confiscation doesn't mean going door to door in body armor and ransacking houses. They aren't that stupid. They will simply tax the hell out of PM transactions and force them into a black market. Sure people can deal in the black market, but it has its own costs and penalties. How many people are that dedicated to their PM stash? My guess is very few, and in a few years it will all be "confiscated".
Another ploy is to offer to exchange PMs for a "good as gold", guaranteed by Uncle Sam, annuity. The same for money holed away in IRAs. Hell, throw in a "act now!" 20% bonus and half the population would jump at that.
hence, the 1099 for $600 gold transactions.
sadly, i believe you are onto something with this forecast of events to come. ...argh!!!
It's the TAX STRUCTURE ....STUPID !!!!!!
The BIGS have lost.....they have lost more....than what the savers have....once marked to market....
Any person who supports govt. policy to date...
Supports money counterfeiting and accounting fraud....
....................................................
Govt. has to be dramatically reduced....whereas entrepreneurship and the equities market has to be dramatically increased....
There is nothing on the govt. table that addresses this....
Here it is....
The current govt. take is 30/100 ....and growing....all policies recently done and pending will bring the number to 50/100 or more....
Recent and pending numbers....
2006/7 = 100 ....Credit and Assets
2010 = 60.....
2012 = 40.....to be made even lower by money counterfeiting and accounting fraud....
...........................................
Equities
The banks have had a suspect uncanny day to day record of making profits in equities by basically illegal algos that are co-condoned by the SEC....
The equities markets....one of the few best levers of money....has to be reconstructed for RETAIL.....The banks should be allowed to service ....not game retail....
And just as there are a few too big to fail banks....this is also true in equities....
In today's internet age....it is far better to have 2 billion RETAIL clients pressing their own computer buttons at home....versus just a handful of large accounts....
................................................
The US will never compete successfully with the govt. as a major partner....ie demanding 50% or more of the prices of all goods and services.....
This should be no more than 10%.....
How ?
A very broad based tax on all cash balances.....a small monthly basis point charge....
..............................................
ANYONE who ignores the above....desires ECONOMIC FAILURE....thus the allowance of the current FASCIST regime to continue.....
Now that the banks/govts. are stealing the interest income of retirees....maybe when a few good ole boys see grandma shoot a banker with her twelve gauge....just maybe America will start its much needed revolution....
And put a lot of heads on poles in public display...spat on by its children....
When the dust clears ....and the US Entreprenuers have a sustainable TAX STRUCTURE model in place....The USA rides again....
And by the way....how much $ has Gross made on privileged FED tips ? Why is he walking around as a free man ?
"The BIGS have lost.....they have lost more....than what the savers have....once marked to market..."
"Why is he walking around as a free man ?"
Because the "BIGS" Have Won
They always win. They can buy more justice, more politics, and more law than you or I. That is the privilege of "BIGS."
The "BIGS" buy all the government laws and corporate welfare in their favor and buy the regulations. They decide the tax laws... Hence, we pay taxes the "BIGS" don't...
No "BIGS" have gone to jail and none will. "BIGS" will simply order Congress to make it "not" a crime...
Like the "Notarization = Anything on This Note Act"... It will be passed in the lame duck session... Voila! Mortgage frauds over!
"BIGS" Get Printed... Rabble Blow Hot Air
They can talk pocket lining, self serving shit and get it printed. We can just talk shit...
exactly. don't get all "man of the people" on us, Bill. you're fucked.
BB has no choice but to kill the greatest inflation the world has ever seen - he must buy Gold and not Debt.
This will implode the mercantile states and recapitalise the US / Western Europe and stop the bleeding of capital.
Double post
Question the motive, question the spin, question the timing.
Question, question, question.
Why?
We are zero-hedged.
Too big to fail.
Says Goldenballs to "Mosquito Balls" Gross...
We hope to be your global investment authority for a new era of “SAFE spread” with lower interest rate duration and price risk, and still reasonably high potential returns.
So there it is. Bill is incensed at the Feds push to the long end, the 50year bond. He's not going there, dammit!! Come on Bill, pretty soon you're be singing their song, front running them, buy the 50 and the 60, sell the 100. Dollar in negative territory, who'd of thunk it. Because you just have to do what you have to do. So Bill is angry, come on over boys, we'll storm the Bastille, they've got some good grub in there, three squares and a place to sleep, cable TV, healthcare (no worse than what we're at it)
Bill if you want to bust monoparty rule, you need to destroy the Feds' balance sheet, no third party can do that, it will take a Soros, or a Blankenfein, or a Paulson. But some mutinous, traitorous bastard. It obviously isn't Mr. Gross, but that's okay, heros always come from unexpected places.
Bill Gross is alluding to something I've been saying here: QE has introduced a potentially fatal economic distortion.
That's because bond yields are no longer responsive to actual inflationary expectations as they are supposed to. They therefore are useless as an economic tool to all but the Fed itself in its quest to roll its own massive debt at artificially low yields (and perhaps as a brief quick money tool to POMO frontrunners). Bond price discovery has been permanently completely short circuited.
So investors can no longer reliably use Treasuries and Agencies as reliable tools to seek meaningful yield. That's a problem. It signals that GOld is still the King of all inflation hedges.
But this is also a PIMCO killer since bond investing as a broad class going forward will be viewed as a losing proposition with yields not reflecting inflation risks.
This is yet another aspect of what I've been discussing: the risk of Biflation. If bond yield can't hedge out or keep up with inflation, then you get simultaneous inflation and deflation since capital is going to get eroded at a quicker pace without proper interest rates. It's already happening on so many levels in the economy and in so many countries that were deep into the debt/mortgage/US Treasury Ponzi. And the Fed has no tools to deal with it.
You are making a lot of sense. Please keep elaborating in future posts.
trying to keep everything under control is the best way to lose it
+1
“Ben Bernanke, however, will try – it is, to be honest, all he can do.”---
All he can do??? Ha! As regulator over the financial institutions, he could crack down on the rampant fraud in the financial industry. Then honest banks will actually have a shot at engaging in productive lending activities without being elbowed out of the way by those who know they can lie, cheat and steal while the Fed turns a blind eye and ramps up the printing press to cover their multitude of sins.
How about we try getting rid of fraud as our economic stimulus plan instead of the current “bail-out-the-fraudsters and hope everything gets better” strategy?
...but what if the bad guys promise to change their wicked ways? then would you take them back? please, they need you.
Blah blah blah. When an insider like Gross talks like this, he has been old to talk like this (rather someone penned the piece for him).
What does this mean though..
"and Yes to PIMCO on Wednesday"
Huh?
ORI
http://aadivaahan.wordpress.com
Yeah, WTF was that "Yes to PIMCO on Wednesday". I plan to say fuck you all and head for the hills.
they know everyone is divided and conqured.. so this is just a way to go after the ZH segment.. they'll say something totally different another day to grab another group think segment
they can just pay google to string together the most searched items and automatically write articles like these now.. Bill Gross doesn't even exist
they=the ones that do not show themselves
If Gross believes more QE is coming and that it will be used to buy Treasuries how can he then argue that the end of bull market in these is nigh ?
Get the politicians the people deserve? As in the ones we vote for?
In the UK the politicians have rigged the system to that for one party they don't have to get a majority to be the majority party, yet another party has to win a massive majority of the votes just to get a coalition!
Those in power made and continue a system where the people don't get what they voted for at all
QE2 is so fricking stupid. How is lowering long-term interest rates or raising asset values going to increase employment or re-levitate housing prices? Has anyone at the Fed or in the administration asked and answered this simple question? Because I haven't heard a single reason how those two things will occur as a result of QE2.
Its Imagination Land now, the key is 'BELIEVING'! Like the FED today saying its all good, they can sell their trillions in stocks and MBS's and all that garbage they own at face value! No one could be stupid enough to believe whats being spewed from the FED today, they have no more bullets all they hold is a broken slingshot.
you know, i actually think they believed this, as though we haven't been living off and spending as a result of declining interest rates for 30 years. what were they thinking with any 'stimulus' or 'QE'? who did not know this would fail and leave us worse off?
then again, a delay to a total reset does buy a few more days for a personal exit strategy. I think Greenspan should fake his own death and move to the Cook Islands if he expects to escape the gallows.
ben must be calling to make up. POMO-mania will be a daily event, now it is every other day.
Nov 10 is when the next POMO QE++ is announced. Of course Bill will get the news today.
http://www.newyorkfed.org/markets/tot_operation_schedule.html
Good.
F##k 'em.
agreed. Federal governments should not be borrowing money, and squids should not be living off of the backs of taxpayers.
that said, bondholders are better than commercial banks engaged in fractional reserve lending. At least with bondholders it is 1 unit in, 1 unit out. If there is a default, the money is gone.
with banks it is 1 unit in, 10 units out. If there is a default, they make up for it with returns from the other 9 loans, or wait for an economic recovery to bail out their loan portfolio, or package the loan into 'collateralized debt obligations', or (worst case) get bailed out by taxpayers (FDIC insurance).
in a perfect world, there are no central money planners or commercial banks engaged in fractional reserve counterfeiting. In a perfect world, all loans are private between lenders and borrowers with no major social consequences outside the interested parties.
"in a perfect world", ha, ha. get it?
Isn't gross the mf'er frontrunning the FED and buying bonds on margin?
He musta took his tinfoil hat off...
This suicide note means we won't have to have any costly investigations. Stuff happens.
ok, so it was ok to suck on reb Shalom Bernookystein's circumcised dick to get a list of cuspids to frontrun; but, now when Shalom wants him to swallow, Gross pimpco Billy turns on Shalom. Sweet. Isnt that pimpco Billy such an ungrateful whore? That's what I want to know.
Pretty unbelievable Gross would say all that. Just shows how imaginary it has all gotten.
PIMCO Gold Fund, bitches.
Yet the bastard plays along front running Fed at every turn. He is a moraless turd.
First Chilton, now Gross gets religion! Don't you see? They're severing ties with the lumpen - identifying with the commoners - saving their skins.
Agreed MasterB, now theyre all trying to be 'whistelblowers' and trying to act like they werent at the center of it all...theyre probably sleepless now, kept up at nite by images of pitch forks and nooses.
great point, Main Street could really care what Wall Street is doing, except they both use the same banks. and the same dollar. the point i continue to make is this, the dollars the Fed is playing with are continually impaired, toxic MBS, buying their own treasuries, while the real money, which is pension fund and investment money, collateral, is being held by other than Fed entities. these entities have the power to call the Feds bluff.
everyone is wondering will the Tea Party upset the two party system, NO. The stock market will upset the two party system, by destroying the Feds balance sheet, shorting the market down to zero, and hedging their position, they win, and the Fed loses. and the political class has to get out of Washington.
Man, I see it all the same way, now all the bigwigs are playing cover their ass, they know its all about to come unhinged. The last trick they had was promising this huge Q/E2 for 3 months to keep the wheels on a bit longer, thats all.
Hitler gets sodomy, whiners, jump you fuckers, and tinfoil hats. My mother is so proud! Bring Kleenex.
http://thecivillibertarian.blogspot.com/
http://www.treas.gov/offices/domestic-finance/debt-management/adv-com/members/
Enough said
Hah ! That's funny. "Office of debt management" are banksters from Bank of America, Goldman Sachs, Sorors hedge fund........
I take no responsibility for Bernanke's insane QE2 plan. When this crazy plan fails miserably, Bernanke and the financial elite are the reason why. The Fed is responsible for the coming Great Depression-II, and should be put out of existence, period.
Been saying that for ages & glad to see more people joining the bandwagon. It is all about competition and well established duopoly lacks it. Humans especially those with power are all about incentives, when it come to their actions. And yes, ZH was one of the first publications that promoted the similar idea.
This November, unless there is a reasonable choice - just say NO.
We deserve better than two fairly bad options, much better. YOU deserve better!
Sounds like a TBTF thought.
Certain Turkeys receive a Thanksgiving pardon..snip..We intend PIMCO to be one of the chosen gobblers.
El Erian said an interesting comment yesterday about interest rates. He opined that the Fed were making all safe investments "not worth it" and trying to force everyone into riskier bets.
Nice to be able to force retirees and others to eat up and loosen their principal $ onto the markets.
My friend once told me, and this can be applied to gov't and corporations alike. "You have assests and THEY want them."
It's high comedy that these types of individuals are considered experts. I cannot know for sure but my guess is most of their prognostications are derived from cocktail party chatter.
If one were to, uh I don't know, actually read the game plan as was laid out by Maestro 2.0 one might have known all along that communication policy to shape public expectations was the first bullet in the chamber. To wit, "spend it or invest it or I debase it". And, for now at least, it worked - as evidenced by the rise in asset prices and, albeit fragile, increase in economic activity.
When the positive feedback loop as anticipated by the first shot does not manifest, then the second bullet will be fired.
And by the time bb's master work is completely discredited some other economic charlatan will already be force-feeding the economy his personalized dish of theory. Ultimately and inevitability, shaping the environment for the creation of asset bubbles, denying their existence, and mopping up after they pop is all these people know how to do. Everything else - unfamiliar language, arcane mathematics - is there to conceal this simple fact.
William H. Gross from PIMCO
Even U.S. Agency mortgages yielding 200 basis points more than those 1% Treasuries, qualify as “safe spreads.” While our “safe spread” terminology offers no guarantees, it is designed to let you sleep at night with less interest rate volatility.
Normal just hasn’t happened yet, and economic historians such as Kenneth Rogoff and Carmen Reinhart have since alerted us that countries in the throes of delevering can take many, not several, years to return to a steady state.
... necessity for bond managers and, yes, equity managers to adjust to a new environment.
---
Bill, you left out the most important part in your speech.
You got to survive in an environment that is CONTRACTING. You don’t know how to do that.
You got to survive in an environment that has NO GROWTH. You don’t know how to do that.
You got to survive in a STEADY STATE environment. You don’t know how to do that.
You got to survive in a STEADY STATE environment that has RESET at a lower equilibrium. You don’t know how to do that.
YOUR INVESTORS ARE F#*KED! If they are smart they would leave you. You cannot survive on a 2% spread. You never did survive on that low spread. You are only doing a GREEK BUDGET.
CNBC is talking about this now. "It's a good read."
Nice pitch. Was he standing on a soapbox?
Gee, do you think PIMCO is looking for fresh new capital inflows? Wonder why? Has PIMCO become just another Ponzi?
So Tyler, you are calling for a forced 4 + trillions intervention by the Fed and a 0% 30 year bond. Bill Gross is calling the bond market now DEAD. We are entering a long bear market, and possible collapse, of the bond market. I will be listeing to Bill Gross far in advance of your mathematical nonsense Tyler. The short trade is on NOW.
Given how uncomfortably close Bill seemed to the administration, it sounds like someone either missed a payment, or took his "crystal ball" away.
So is everybody out yet or what? Let's get this show on the road.
Bill's clarity was sufficient for professionals and the financially intelligent, however for the masses... he came up short on providing the clarity they need.... so I'll help him out.
It's the CONSUMER DEBT idiots! You kept electing officials that put you in the deep end of the pool with a deflating life ring and bucket being filled with sand from a huge hour-glass.
Ive said it before and I'll say it again. The proof of the politicians being EVIL and the masses being selfish and ignorant is the complete absence of a requirement for basic finance being taught in all four years of high-school and a nation wide exam that covers finance and mathematics that MUST be passed before one can receive a high-school diploma.
And the politicians are EVIL..... evil is when you know something is wrong and you encourage and enable people to do that which is wrong. Believe it or not, only an idiot believes in Keynesian idolatry of a fiat currency system. And the difference between a fiat currency system and a non-fiat system should be the first class in finance during the senior year.
I for one can not cheer for Bill's honesty moment; if he were to include a request for forgiveness for all his years of supporting this Ponzi Scheme he knew was going on, then things would be different.
But the fact is Bill G and Warren B are the two most dishonest men in the history of markets and investing. They make Bernie M look like a street hustler.
AMDG
HCSKnight
Second !
<<<<<<We hope to be your global investment authority for a new era of “SAFE spread” with lower interest rate duration and price risk, and still reasonably high potential returns. For us, and hopefully you, Turkey Day may have to be postponed indefinitely.>>>>
Mr Gross is a good example of what went wrong in America. He thinks he'll find justice from the rest of the world instead of fixing America..... Wrong!!
Well well well - it looks like Bill has started reading Zerohedge to me.
I think he's had an epiphany.
I think he's having a hissy fit over one of his more recent fed front runs.
I think he's about ready to plead for the blue pill.
I wonder which Zerohedge signup is Bill?
Dear Bill Gross,
How stupid of you to say "...It is a Sammy scheme – you and I, and the politicians that we elect every two years..."
Not all citizens fall for the "Uncle Sam" propaganda, nor contribute to election of pre-selected candidates and their covert agendas.
All citizens have the right to observe their own stupidities...and often.
Use your rights, Bill. You will discover wisdom has no upper limit, and is not a tell for class.
It's never going to change until there's a revolt. All these high and mighty banksters pen their retorts and opinions about what's wrong - but they still collect the 1% day after day. Until the middle class loses almost everything, there will be no changes to this ridiculous system. Unemployment is still too low to create a revolution. The FED - (government/corporations) lever to prevent the revolution is slowly running out of bullets. It's taking time, but their primary goal is to maintain the status quo for another day. Every day they can prop up the market and collect another paycheck is another win. That's all that matters.
At some point these UST auctions start to fail when there's no other bidders. Maybe this negative talk by the Banksters is a targeted attempt to get bond prices lower in the short term to perpetuate the ponzi....? If they can drive prices lower in the short term, scaring everyone out - Maybe they can get some other suckers...errr buyers to come in and take over the buying for awhile.
THE FED HAS SUCKED IN ENOUGH WORLDWIDE INVESTORS INTO THE "BELIEF" TO GO ALL IN. NOW, IT SEEMS NO SHOCK AND AWE. PERFECT INITIATED GREEK DRAMA WITH SOME HIGH QUALITY THEATRICAL APPEARANCES BY SOME FED GOVERNORS. THE PRICE WILL BE PAID BY ALL DUMB A$$ INTERNATIONAL INVESTORS WHO WERE TRAPPED BY THIS PROFESSIONAL FRAUDSTERS IN THE FIRST PLACE. THE SAME BULLSH1T AS WITH SELLING CDO´s TO THE WORLDWIDE FRANCHISE. THERE IS ONLY ONE ANSWER TO THIS FARCE : NEVER DO BUSINESS WITH WALL STREET GANGSTERS AGAIN. LET THEM BLEED. NO BROKERAGE COMMISSIONS, NO HEDGING, NO BOND UNDERWRITING, NO EQUITY UNDERWRITING ! VOLCKER RULE IS THE BEST THING HAPPENNING TO THIS BUNCH OF THIEVES IN THE LAST 30 YEARS.
http://www.youtube.com/watch?v=QfXNVhU2EfM
Your vote is pointless. But you're doomed if you don't vote. Both parties are corrupt to the core. But Republicans are corrupt-er. Turn out the vote. Get free food and Starbucks gift card to vote for Harry Reid. Voting machines are rigged to disenfranchise voters anyway.
Wow. This is quite the 3-ring circus on an acid trip while being sliced ever so gently with razorblades, and being basted in lemon juice at the same time.
The CNNBC logo is pretty funny though. We don't have to wait for the 26th century or even 2057 for idiocracy --we are there already.
The average guy is a sitting duck in "risky" investments - which is where the Fed wants him. Why? Because in this current environment of rampant speculation, 11 second average holding periods, HFTs etc - the Big guys with the deep pockets can always shake you out. All it takes is a 20% "crash" and you will sell your nice, well researched, under-valued stocks - to Them.
If you cannot take a 20-30% hit and hold on - requires a lot of research , conviction, proper sizing of the bet ( cant play with the rent money hoping to make it into 2 months rent!) - Then Dont Play in "Risk Assets".
Social Security dwarfs the Fed's Ponzi scheme in time duration and total dollar amount. Ultimately the source of both problems is government.
The Fed is truly being deceitful and unfair to the average worker who is trying to save a little. By creating a negative real interest rate environment - the cash savings are guaranteed to lose in real terms. However, the average guy is not able to stomach the volatility to protect himself in things like hard asset stocks, commodities etc - those markets are designed to separate the little guys from their money. Particularly since the great protector of the average guy - the SEC - is sound asleep. So - nowhere to go, nowhere to hide, your savings are destined to decay - Thats what Bernanke is doing.
All I see when I read this is "I just did major bong hits and now I am hungry".
So, the Wizard of Oz pulls back the curtain on himself this time. Perhaps by preempting Toto, he hopes that Dorothy won’t kick him in the balls with her ruby slipper when she learns the sorry truth about who and what he really is.
Silver slipper!
the nut is on now
this guy promotes and vote for every lib dem that comes along and then says on tv in public - I'm not a member of either party.
how about the liar party