Bill Gross: "No QE 3"

Tyler Durden's picture

The latest soundbite from Bill Gross comes from the Morningstar fund conference, where he again repeated his conviction that there will be no QE3. Reuters reports: "Pimco co-chief investment officer Bill Gross said the Federal Reserve would not be able to start a third round of quantitative easing after the second round expires at the end of this month. The members of the central bank's open market committee are "balanced but divided," Gross, manager of the world's largest bond fund, said on Wednesday in a speech at the Morningstar fund conference. "It will be difficult to initiate a QE3." Instead, the Fed will try to keep interest rates low with its official statements, Gross said.  Gross's fund, the $243 billion Pimco Total Return Fund, has gained 3.24 percent so far this year, trailing 58 percent of similar funds, according to Morningstar data."

It is odd that Bill continues to stick to his guns in light of both the economic deterioration and the market realization that there will need to be a major drop in stocks for further easing. Ironically, Gross should realize that absent more easing, there will be continued transfer of capital from equities into bonds for the time being (thereby further impairing his, yes, short position), and with the world slowing down and global central bank tightening, a global re-recession (deep in the depression that started in December 2007) seems inevitable. The paradox is that absent QE3 to force a capital reallocation out of fixed income into stocks but mostly commodities, PIMCO's TRF will continue to be unprofitable (even more if the fund has a steepener position on as many have speculated). The only wildcard is if there is a tax repatriation holiday which we believe has about a 30-40% chance of passing in temporary lieu of QE3.

Nonetheless, if indeed Gross believes there is no QE3, his increasing UST short position may be precariously positioned. We expect to get an update of the TRF positioning over the next 48 hours. It should prove quite informative on what Gross thinks now (and we completely ignore the discussion of "who will buy US debt" in the absence of the Fed, which is an unresolver quandary we share with Gross).

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camaro68ss's picture

No QE3, but...but... i need my fix man. (scraching arms)

DutchZeroPrinter's picture

It won't be bullish for UST, not even in the short term. Dollar and UST are no safe haven anymore. When the economy comes crashing through the floor, creditor nations will get out as fast as possible.

HpDeskjet's picture

To what? There is no market liquid/big enough to absorb that amount of money (yet)... If US continues down the current fiscal path, for sure the $ will be destroyed, but this point won't be reached for longer than most people think 

hack3434's picture

Common misconception...Captical can and will be lost. The real question is who and how fast they can outrun the others. 

GetZeeGold's picture


Is it just me.....or do I not detect a whiff of ozone and a hint of panic?


Michael's picture

Stop it, stop it, stop the speculation right now on whether or not there is going to be QE3. Jut stop it! They made a below 3% yield for a cushion on the 10 year you fucking morons. There absolutely will be QE3 when the 10 year moves back to it's nominal drop dead value of 3.5%, maybe 3.75% and panic sets in at that point.

The world will come to an end if there is no QE3. There will be QE3 come hell or high water. Can I make it any more clearer for you fucking morons?

GetZeeGold's picture


I believe you've made that perfectly ucking clear.


Re-Discovery's picture

Gross believes in Financial Repression theory which is a variant of loose monetary policy not technically QE.  he believes Fed will target inflation at 4-5 % for a long period of time to reduce debt.

He is making "No QE" call to tank bonds when Fed leaves as a buyer (prices tank) and validates his anti-treasury stance.

Under financial repression theory over the longer term, the TBTF step in to buy bonds when Fed exits because the Fed forces them to.

trav7777's picture

Dunno how the USG is going to fund...not with sustained $2T deficits, that is.

The wars can't end because the oil supply is dwindling.

The Fed will print when the government puts a gun to their head

BorisTheBlade's picture

Maybe Gross is right, QE sounds bad already. Time to rebrand it, then run for a couple more iterations.

Boston's picture

No QE3?


.....for Treasuries.


Dr. No's picture

Please explain.  I would expect the removal of $700B in demand to put pressure on prices.

Hugh G Rection's picture

No QE3


Either they're rebranding under a new name, or its straight to QE4

Conrad Murray's picture

Who needs QEanything when you have a Marxist president, a neutered and captured Congress, and a complacent, if not outright treasonous, judiciary. This is end game for America. October 26, 2001 Lady Liberty was gutted like a hog. October 3, 2008 the markets were sacrificed to the demons of central planning.

Either the tree gets watered, or it will surely die.

Hugh G Rection's picture

I agree, but you completely left out the Federal Reserve and its cabal of international banksters.  America started to die after the federal reserve act in 1913, the monetary terrorists have been bleeding us damn near a hundred years.

WonderDawg's picture

 "a neutered and captured Congress"

You're not helping matters by buying into and perpetuating the euphamisms so prevalently used by the MSM. "Captured"? Call it what it is. Corrupt. Bought and paid for. Owned. Congress is corrupt and on the take. Captured sounds like some kind of kids game. Call a spade a spade. The motherfuckers are corrupt.


el Gallinazo's picture

Comrade, maybe it's time for you to learn the difference between Marxist and fascist. I am not a big fan of either one, but it's nice not to flaunt your ignorance. Obama talked like a moderate liberal running for election, but his policies, like Bush's, both foreign and domestic, have been totally fascists. Marxists do not hand the government over to the giant corporations.

Conrad Murray's picture

Fascism/Marxism, merely different sides of the socialist spectrum.

Obama most certainly did not talk like a moderate. He spoke of spreading the wealth around, and having energy rates necessarily skyrocket under his administration(which he most certainly followed up on by bringing Steven Chu aboard as US Energy Secretary, who said, "Somehow we have to figure out how to boost the price of gasoline to the levels in Europe") all while attending a church of pure hate( ).

The only people that thought he was a moderate were those not paying attention. The people who parrot whatever the talking heads tell them to, such as the lie that he is eloquent: He has a teleprompter and nothing more. He doesn't know how many states there are( ), and he doesn't even know what year it is( ). These are the same idiots that voted for him out of spite for Bush or to prove they are "post-racial", whatever the hell that is.

I'll give you Bush, but if Obama were a fascist he would be more homeland(USA, not Kenya) orientated. He wouldn't bow down to leaders all over the world apologizing for the past, he would firm up. Sure, there is plenty of corporatism left over from previous administrations, and Barry Soetoro isn't helping much, but Barack Hussein Obama wants global communism. He is a Marxist through and through.

In any case, if you want to quibble over terms instead of focusing on the issues, how about we agree to refer to all of it as Statism or Authoritarianism? Or maybe delusional mass-murder inducing bullshit...

GoinFawr's picture

Oh, so it`s `quibbling` if you get called on misnoming one political ideology because you erroneously superimposed it onto its polar opposite? That is propagating the sort of misinformation that anyone should take issue with.

I recommend you update your lexicon if you want to be taken seriously.

Fur Trader's picture

That's truth; thanks to ZH, 'QE3' will be called anything but that.    We should start a tracking sub-blog pool here on what it will be known as.

Hugh G Rection's picture

How about Qualitative Fleecing?

Nathan Muir's picture

Certainly more appropriate! Although "money printing" rolls off the tongue nicely and sums it up perfectly.

Rational Psycho's picture

Certainly some acronym that means the opposite of what the program does. How about Highly Effective Liquidity Purchases Under Soveriegn Authority, HELP USA.

Boston's picture

One explanation is based on studying what happened the last time QE ended in the spring of 2010. Counter-intuitively, Treasury prices soared, taking the 10 year down to under 2.4% by early fall 2010.

There is no overwhelming reason why Treasuries would behave differently this time.  In fact, this argument is already supported by the "surprising" (hello Bill Gross!) Treasury rally we've seen over the last six weeks.

(BTW, I don't comment here often, but I've been yapping about the LONG Treasury trade here for over two months)

RobotTrader's picture

The market has spoken.

The PigMen have decided to allow the market to clear on its own accord and find its own level without any assistance from the Fed.

Deep's picture

Flip flop Cramer. STFU

Rynak's picture

Since when is the market the bernanke and goldman? Oh wait.... nevermind..... that actually makes sense. The only problem is that this "The market" seems to contradict its own data all the time.

HamyWanger's picture

Robot, bro', I'm beginning to be worried too about a possible stocks correction. XRT has started to fall like a stone and LNKD has not been supported by the Pigmen like I had anticipated. 

Sancho Ponzi's picture

OT: Cullen Roche takes Jamie Dimon behind the woodshed. Enjoy!

Via PragCap:

cosmictrainwreck's picture

I like the close "thank yer stars & shut up" but sure wish he'd have gone with "just STFD & STFU, ya asshole!"

Fiat2Zero's picture

You and robot are such obvious agents of the ChairSatan that it is disturbing.

dark pools of soros's picture

or they are just E-trade babies

LongBalls's picture

And the buyer of $1+ Trillion dollar treasuries will be? And the Treasury will pay back the pension fund money it has borrowed while awaiting congress to raise the debt ceiling how?

css1971's picture

Someone like me possibly, at 12%


Smokey1's picture

Gross may well be full of shit. If the Dow backs off about a thousand points, the Bernanke  will not hesitate to continue with QE.

Bernanke's probably going to do QE anyway, because his heart is set on it and it is what he does. But he would love the cover provided by a nasty drop in stocks.

rbjmartin's picture

My thoughts exactly, although I don't think it will take another thousand points to spook Fed board members into begging for more QE. Another 400 to 500 points down, more weak GDP numbers, unemployment constant around 9% to 10%, and sinking real estate prices will leave them with no choice.

WonderDawg's picture

In a word: bullshit. The Dow is down about 850 since early May and not a peep about QE3, other than the wishful thinking bulls. Unemployment has been around 9-10% for a couple of years now, and the previous QE's did nothing to improve that. Real estate prices have another 40-50% down before they touch any kind of bottom, and the Fed can do nothing to change that, and everyone knows it. It will take several thousand points more off the Dow before the will to throw more money away will reach the tipping point, and at that point it will be too late to make a difference. IMO. 

dark pools of soros's picture

QE is not about making the country better..  it's about making the country better for the banksters

Strider52's picture

Every time I go to Ireland there is a financial calamity. I arrive in Dublin in 16 days.

 Prepare accordingly.

dark pools of soros's picture

are they asking YOU to bring scotch to them yet?

Rational Psycho's picture

In insolvent Ireland, scotch drink you!

Mae Kadoodie's picture

an enigma trapped inside a riddle.

ursus.peracto's picture

Throttle down on the clichès.

Smokey1's picture

Gross may well be full of shit. If the Dow backs off about a thousand points, the Bernanke  will not hesitate to continue with QE.

Bernanke's probably going to do QE anyway, because his heart is set on it and it is what he does. But he would love the cover provided by a nasty drop in stocks.

tekhneek's picture

There's no reason to debate it. There will be QE3. It really is that simple.

Imagine what they were saying about QE2 near the ending of QE1.

Buy as much AGQ as you can. I give it 2 weeks before they announce more "fiscal stimulus" regardless of the naming.

Conrad Murray's picture

Who will buy debt? Why, your 401k/pension/IRA and whatever the hell else they can find. Bend over and take it debt slave. Come on, squeal like a pig! SUCKERS!!!