This page has been archived and commenting is disabled.
Bill Gross: "No QE 3"
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).
»
- 14052 reads
- Printer-friendly version
- Send to friend
- advertisements -
so much dry powder, so patient, just waiting for the right moment
Me too. Been in cash for over a month.
I usually don't market time with macro calls. But fading inflation hysteria, and then fading the deflation hysteria seems my only hope to make a decent return over the next few years.
Seems obvious. The answer will be cash, it is the only thing that can't be devalued (when the printing stops).
If Gross is short treasuries, isn't that leveraged long cash really?
The Bill Gross chant:
No QE3
No QE3
No QE3
No QE3
No QE3
ooooohhhhhmmmmm...
I have been on record as saying no qe3 unless we have congress and everyone begging for it. As slow as congress is then the S and P will be 700 before it starts.
I would love to see the stock and bond markets melt down in unison I just don't believe "they" will allow it.
kissy?
let's have a look under that bag first.
In order for QE3 to work, it has to be a surprise.
How in the hell do you keep something that big, and that obvious a surprise?
You need to tell "the big lie."
Gross does not think that there won't be QE3.
The sheeple need to believe there won't be QE3, or it can't happen.
Please, someone tell me who is going to buy our bonds with negative real interest rates?
If they're so great, why do they get flipped back to the Treasury's asset sheet like they are flaming hot turds?
uh.....let me give that a shot.... because they are flaming hot turds?
mercantilists and central bankers do not buy our bonds for the return.
"Please, someone tell me who is going to buy our bonds with negative real interest rates?"
Yeah, forget about Chinese, FED is the biggest buyer right now.
It's like: I'm buying my own grown tomatoes from myself.
And then eat the tomatoes and then buying booze for the
profit I "made".. *LOL*
....sometime around the July 4th wk/end
" EXTRA EXTRA ...READ ALL ABOUT IT"
"EXTRA EXTRA ...READ ALL ABOUT IT"
President Obama announces today an historical 3-way deal reached last night in which the Democrats get to make only token budget cuts, the Republicans get their no-tax hike wish and the kicker is that the bernanke will shoot up the markets with a massive 2 trillion dose of QE in order to prop-up the sinking economy.
More news to come after banker celebrations....
No QE3? Short treasuries? Seems like Gross is putting a lot of faith in the ability of equities to stand on their own this summer.
If there is no QE3 who is going to buy UST's? Not a snarky question, I really want to know.
The only answer I come up with is the Fed will look to sell its mortgage holding to buy Treasuries, which seems possible as of now, I guess.
The fed doesn't need to raise cash to buy Ts.
Cuba is an island, but that doesn't address my question either.
Your question is broad enough to drive a battleship through it sideways. In theory the market works on supply and demand. As the price drops demand increases. Econ 101
In theory the market works on supply and demand. As the price drops demand increases.
Only while confidence in the government exists. That won't last too much longer as they begin to steal pensions. Are IRA's and 401Ks' next? There is a proposal out there somewhere by our trusty politicians where they are proposing switching IRA and 401K investments into Treasuries. This justifies a market crash by TPTB which shows us that stock returns are too risky.
"Please save my retirement account with a guaranteed 4% return per year Mr. Congressman!"
You know, this is one of those ideas thrown around here all the time, but I'd really like to try to understand the logic (if any) behind it.
401Ks and IRAs are held by private financial companies. The government would need to pass laws seizing/confiscating private assets in order to "require" any specific investment path. What's significant about that idea is NOT that such laws would be a significant change of direction of policy, but that they would have to be enacted in the most destructive manner possible--not only would the government be confiscating individual citizens' assets (probably not a big deal from the perspective of our politicians), but it would be doing so in such a way as to cause incredible pain to our big financial/investment institutions, who currently exist solely by siphoning off the (generally meager) assets held by the "affluent" 40% or so of the US population.
Now I realize I'm a bit cynical here--but it really seems to me that if the government is going to overtly seize our money to save our large corporate interests, it CERTAINLY isn't going to do so in a way that destroys a significant sub-set of our large corporate interests.
What would make a lot more sense would be to seize all the "already" government-held assets directly, such as all the Fannie/Freddie mortgages and (eventually) real-estate and auction it back to the banks/investment houses at pennies on the dollar to generate enough income to make another year's worth of interest payments. Just for example, off the top of my head.
Does anyone with half a clue really have a clear notion of how the Feds might even TRY to seize 401Ks/IRAs? Anyone besides a Pauliac/Larouchian Constitutionalist gun-nut?
Seriously...I'm more than willing to agree, as I see nothing but bad-crazy from our boys in DC, but the idea makes Alex Jones sound like a classical music station DJ.
By gun nut do you mean a person who belives in the second amendment, without which you would be inside a cell right now? What other parts of the constitution do you disagree with? Please don't look for a "gun nut" when the SHTF. Go run to the nearest TSA agent and lick his boots!
Tuco Benedicto Pacifico Juan Maria Ramirez
I'm a gun-nut, moron, but thanks for demonstrating you have no answers and a knee-jerk mentality.
I do not believe you as I have never met a gun owner who characterizes himself or herself as a gun nut. How about the U. S. Government selling some of the citizens assets in terms of national parks, buidling etc. to finance the next round of QE3 as an idea? I think it far more likely that the feds will come after private assets.
Also, I am a fan of Alex Jones, oh yeah of little faith. Read the Bill of Rights. There may be some aspects of it you actually agree with?
Tuco Benedicto Pacifico Juan Maria Ramirez
Well, Mr. Ramirez, golly by gum I'm not going to worry what some slimy greaser thinks.
(Ha ha.)
"Dear Secretaries Solis and Geithner:
As members of the Republican Savings Solutions Group, we write today to express our strong opposition to any proposal to eliminate or federalize private-sector defined contribution pension plans, such as 401(k)s, or impose burdensome new requirements upon the businesses, large and small, who choose to offer these plans to their employees.
In the Annual Report of the White House Task Force on the Middle Class, Vice President Biden discussed at length the creation of so-called “Guaranteed Retirement Accounts, (GRAs)” which would provide for protection from “inflation and market risk” and potentially “guarantee a specified real return above the rate of inflation” -- presumably at taxpayer expense. In the Report, the Vice President recommended “further study of these issues.”
The Vice President’s comments are troubling, insofar as they come on the heels of testimony before Congress from supporters of GRAs proposing to eliminate the favorable tax treatment currently afforded to 401(k) plans, and instead use those dollars to fund government-invested GRAs into which all employees would be required to contribute a portion of their salary -- again, with a government subsidy. These advocates would, essentially, dismantle the present private-sector 401(k) system, replacing it instead with a government-run investment plan, the size and scope of which remain to be seen. This despite data showing that 90 percent of households have a favorable opinion of the existing 401(k)/IRA system.
In light of these facts, we write today to express our opposition in the strongest terms to any effort to “nationalize” the private 401(k) system, or any proposal that would dismantle or disfavor the private 401(k) system in favor of a government-run retirement security regime.
Similarly, and more recently, the Departments of Labor and Treasury have jointly issued a “Request for Information” regarding the “annuitization” of 401(k) plans through “Lifetime Income Options.” While we appreciate the Departments’ seeking guidance and information from all parties and stakeholders in advance of regulatory activity, we strongly urge that the Departments not proceed with any regulation in this area before they have carefully and thoroughly considered all of the information received..."
http://mayrantandrave.com/2010/05/11/gop-letter-to-hilda-solis-and-tim-geitner-guaranteed-retirement-accounts-gras/
Well there you go, then. Threat averted. Some dude sent a letter.
some dude? no actually it was...
House Republican Leader John Boehner (R-OH), Rep. John Kline (R-MN), Rep. Dave Camp (R-MI), Rep. Sam Johnson (R-TX), Rep. Dean Heller (R-NV), Rep. Brett Guthrie (R-KY), Rep. Michele Bachmann (R-MN), Rep. Pat Tiberi (R-OH), Rep. Bob Latta (R-OH), Rep. Erik Paulsen (R-MN), Rep. Lynn Jenkins (R-KS), Rep. Ed Royce (R-CA), Rep. Buck McKeon (R-CA).
"One aspect of a new and improved federal regulatory scheme is the seizure of 401(k) retirement plans and the subsequent government-administered disbursement of the funds.In Chapter 3 of the Annual Report on the Middle Class released in February by Vice President Biden and the White House Task Force on the Middle Class, the Obama administration calls for enhancing the “retirement options” for the middle class by imposing “new regulations to improve the transparency and adequacy of 401(k) retirement savings.”
The plan, as sketched in the 43-page document, calls for the creation of something called “Guaranteed Retirement Accounts” (GRAs). Biden slyly shifts the onus for the idea through weasel words typical of the federal government: “Some have suggested the creation of Guaranteed Retirement Accounts (GRAs), which would give workers a simple way to invest a portion of their retirement savings in an account that was free of inflation and market risk, and in some versions under discussion, would guarantee a specified real return above the rate of inflation.”
free of market risk
They will crash the market as ammo to pass this and confiscate the 401K's.
"Please Mr. Congressman, give me the guaranteed 4% per year instead of these risky stocks which have erased 20% of my 401K!"
OK, I'll spell it out:
This is political posturing ONLY. There was no bill on the floor, there was no concrete plan being formulated, there was nothing but bullshit mentioned by a politician followed by a lot more bullshit written by a politician.
If you take everything a politician says seriously, you'll go nuts. Most of what they say is finger-in-the-wind. THEY don't even believe their bullshit. When they write letters, such as the one you seem so impressed by, it's MORE finger-in-the-wind bullshit.
None of it means anything. It's as irrelevant as campaign speeches.
Would you say it's sillier to be exuberant about Obama's "yes we can" or to be terrified by Biden's "some have suggested"?
What about Boehner's "smaller, less costly, and more accountable government"?
Is that where you'll put your trust?
Yeah so who's gonna finance the debt with "no QEIII"?
The citizens, that's who.
They'd sell their mother. They'll steal the 401K's and IRA's to keep their ponzi going.
Actually, I think it's going to continue to be banks and foreign investors.
There are already so many dollars in circulation that the biggest holders *literally* have nothing to do with them. The majority of the US citizenry doesn't have enough wealth in investments to have to worry about losing all their savings--they can actually convert their savings into real assets and wait for things to go to hell. A house, some land, some precious metals and a reliable car--this is the level of "wealth" the average American ASPIRES to.
But if you have half a billion, you have a real problem. There's no place to put that money that's "safe." So given that you can't come up with any better ideas, yeah, you'll keep buying government debt until the bitter end. And the banks will keep screwing around at the periphery of the auctions to prevent the interest rates from climbing enough to really threaten the system. What choice do they have? They don't exist when the music stops.
The vast majority of us don't stand to lose much in case of a real economic collapse, because we don't HAVE anything. This is the downside to the current level of inequality, and this is part of why it doesn't matter how much anyone threatens the poor. Folks who live in Hooverville are well-prepared to deal with an end to their foodstamps, because they already expect it. Folks who live in the Hamptons are not well-prepared to deal with an end to million-dollar bonuses, because they really think it'll go on forever.
June is going to be a lot of fun. Stock up on the popcorn.
No more crack and ganja dude?!!! ... well, not until the ekonome wakes up tomorrow spewing green fluids all over 'investment banksters' ... then will use their MSM to rationalise a need for more ... just one last time ... this time is different ...
I guess this is where we discover the Fed doesn't actually have 'a full range of tools available' ... </shocked, I say!>
But Dear-Leader Obahhhma can still have a $1.6 trill deficit every year .... right? ... ... RIGHT???!!! ... Ben???!! ...
Yes there will be, almost a certainly. But traders rule of thumb stock correction of more than 20%, say touching 40% going into a complete bear markets and QE3 will Be activated.
The question is though will QE3 do anything if it isn't at least trillion 500+
TD to what extent will the Treasury demand from the PD's soak up issuance when this Dodo-Frank OTC migration begins? What is the estimated time frame here?
The sole reason for shorting Treasuries right now is because the Fed fools have been buying 70% of all Treasury auctions and no one can truly know what interest rates should be for these bonds. Until this is known you would have to agree with Pimco's stance or at least stay neutral. On the other side of this is the potential melt down of the markets. In the end which takes on more importance is the real question for market participants.
Another mouthpiece of controlled media helps push commodities lower, so the rats can print and sell more judefteztenh while "goyim" believe it's worth more than zero.
Do any of you believe Gross doesn't have some of his own money in metals for the same reason that you do?
Big as he is, Bill Gross is somewhat of an outsider among the politburo of financial power. His voice doesn’t carry the weight of a Goldman or JPM with the Fed, so, he must play the agitator a bit more to get some attention (I want to know what alias he’s using to post on ZH). If he’s wrong on his no QE3 call, his investment position wins. If he’s right, he at least gets the satisfaction of saying I told you so. It’s the perfect management hedge; a sort or psychological double back flip with a twist that you often see coming from the top tier of society these days. I think he’s probably just trying to pressure the Fed to say something about QE3 sooner than later. Nonetheless, with convoluted examples like this to guide us lesser human beings, it’s no wonder nobody can figure out how to get anything done anymore.
I think that he is trying to make himself a victim when the QE3 happens and then when this whole game comes down, he can say look I wasn't part of that mess. The rats are leaving the ship.
Bill Gross:
Step 1) try to call the top.
Step 2) try to cause the tank
Step 3) squawk like a seagull
Bill Gross has a record that speaks for itself. Now people who hates money mangers aren't going to like him by definition. But if you hate people who slap a fee on assets on which they generate extraordinary performance that is your problem. Envy is a bitch.
You seem unusually stupid and uneducated in finance. I won't be acknowledging your presence again. But please do yourself and others who have to scan your nonsense and try to learn something here. It is embarrassing you have been posting here so long while digesting so little.
sounds like you had another date with the bishop tonight!
Not...the Bishop?!
It makes sense thatBill Gross predicts that there won't be a QE3. His funds have 66% short term money markets and short term bonds. He sold all his long term and intermediate term bonds. This is a bet that interest rates will go up. This seems like an easy bet since interest rates can't go any lower. But he has been positioned like this for 6 months, so his funds have suffered compared to the ones that have long term bonds. But he's better positioned for the future.
His funds have derivatives which bet against treasury bonds. That is a bet that interest rates will go up and treasury bond values will go down. This also seems like an easy bet, but the problem is that derivatives usually have a time limit. If the derivative contract expires in July and interest rates go up in August, you lose the bet. The longer it takes for interest rates to go up, the more bets you have to make and the funds costs go up. This is why he wants no QE3. If there is no QE3. interest rates will immediately go up. If there is a QE3, interest rates will stay low in the short term, but QE3 itself will make inflation worse and interest rates will eventually go up, but who knows when.
Here's what I think will happen: The FED is in cahoots with Obama, even though by law they shouldn't be. They are just trying to make the economy look good until the next election, even if they are making it worse in the long run. So they will continue buying treasury bonds with printed money. Interest rates will stay low in the short term, but inflation will go up and interest rates will be even higher in the long term. But they are hoping long term is AFTER the election. But if the FED announces that there will be a QE3, the dollar will get bitch slapped and all the owners of treasury bonds will complain. So the FED will announce that there will be no QE3. When they do that, the stock market will take a dive. Things that people buy to hedge inflation will go down (oil, gold, silver). So the FED will continue printing money and buying treasury bonds "on a month to month basis". Maybe they will do it in secret. They don't have to tell us what they are doing. In the past, we always were trying to figure out what they did in the previous year. Eventually, people will catch on and stocks, oil, gold, and silver will go back up. So when everything goes down, it's time to buy more.
If the FED tightens now, the economy will be bad for the election. They are killing the dollar on purpose. A cheaper dollar is good for debtors (the federal government) and worse for savers (me). But they don't care about me. Since our salaries won't keep up with inflation, we will all essentially be making less money, but they don't care about that. If this was a strategy for making the economy better, Argentina would be the world's strongest economy, because this is what they always did.
Why do you think the Fed is in cahoots with Obama? How do Fed interests align with his?
(Just curious. I like your piece although I don't agree. That bit kinda jumped out.)
If McCain had been elected in '08, there wouldn't be a dimesworth of difference between him and Obama in how much money the Fed credited the accounts of the banks, that sold bonds to them. And Bernanke would still have called the scheme Quantative Easing.
As a matter of fact, if President McCain had asked for a larger surplus, more concerned Republicans in the Senate may have given him a lot more that 787 bil, the most Senator Snowe could consider voting for. If McCain had been elected, there would have been a bipartisan effort to get the economy back on the tracks.
After the Obama victory, the most important items on the Republican's to do list wasn't fixing the economy. It was starting the campaign for the presidency in 2012 for whomever the GOP candidate might be.
They let the economy founder to get back into the Oval Office.
How great is that?
What if Bernanke decides not to call it QE3 but doesn't tell anybody, and then presses 'enter'?
If a quadrillion transistors fall from 1`s to 0`s in the forest of Bernanke`s beard and nobody sees it, does he have to make a sound?
.
What if a quintillion pixels the size of bottom quarks suddenly lighted up the flat screen, bald pate of Bernanke's cranium, and a QE debt clock ticker crept around his skull from ear to ear alternately flashing the National Debt, in16 digits including the penny, with a running tally of the the current year's Chinese exports to Walmart?
k, you win that round... did that piece of paper you ate have a mikkey mawse or a microdot on it?
How about this: The Fed is fed up being beaten up by Ron Paul
and the tea party people. So they let things go way down until
the people beg uncle Ben to save them. The Fed is concerned about
their bank and share holders so throwing Obumer under the
buss may not bother them in the least.
Wow... Not one of you smart chaps have even mentioned the 'reform' of the GIC's. With the new Xmas rules of unlimited backstop there is no reason that these entities cannot just buy US paper all on their own. No?
This is the same Bill Gross who bought a property (two years ago) for $23 million with a house on it and tore it down and now wants to sell it for $26.5 million without a house. Talk about improvements.
http://www.cnbc.com/id/43354714