Bill Gross Telling Bloomberg To "Avoid Dollar Denominated Government Debt" Probably Means Bond Rout Is Over

Tyler Durden's picture

When Nassim Taleb and Marc Faber say that US government debt is a suicide investment, one can be allowed some skepticism. After all, they are likely just talking their book. On the other hand, when the manager of the world's biggest bond fund, whose flagship fund Treasury holdings amount to almost $80 billion goes on Bloomberg and says to "avoid dollar-denominated government debt" better known as US Treasuries, and instead recommends viewers invest in "stable" currencies like the Peso, the BRL or the CAD, then you know the bottom in bonds is in. So in addition to dumping fixed rate bonds (which means Pimco will again be able to buy on the cheap ahead of QE3, which as Larry Meyer has by now likely advised Pimco is a sure thing), Gross also told Bloomberg that his other two strategies are to buy floating rate debt (over fixed), and lastly recommend credit spreads over interest rate duration risk. For those who find something troubling with a $1 trillion fixed income manager talking down his investments, and are still wondering whether or not QE3 is coming, we suggest putting one and one together. And while at it, they should also consider that Pimco now holds over $100 billion in MBS: a notional amount last held just as QE1 was announced.

full clip after the jump.

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boeing747's picture

Not there yet, Spain and US stockMarket gona have big problems, bonds will rally at least 1st half of 2011. Happy New Year.

Sophist Economicus's picture

Is it too late in the holiday season to ship this manipulating idiot and Buffet to the Land of Mis-fit Toys?

Raymond K Hassel's picture

+1, at this point the only way to give the appearance of improvement is to make it go down quickly first.

buzzsaw99's picture

His gratitude for the agency bailouts is underwhelming.

TruthInSunshine's picture

Scratch what I said before.

Does this mean the PIMP-CO is bearish on equities?



gwar5's picture

Bill Spooked?

penisouraus erecti's picture

Curious why he keeps shifting his eyes to his right and blinking like crazy.......

Guy Fawkes Mulder's picture

Is that a new species of David Icke Reptilian that I haven't heard of yet? Tell me more...


Catullus's picture

I'm slow. I really don't understand why he would say this. Is he sending a message to someone? "yeah, this fuckton of bonds we're sitting on is not a good investment." Tin foil hat or not, this is just bizarre.

midtowng's picture

It's not bizarre at all.

I remember a few years ago he told everyone that Treasuries were a terrible investment. About four months later we learn that Pimco is buying Treasuries by the truckload.

gkm's picture

I remember the exact same thing.  It was back in 2007.  The quote was something like "I don't know why anyone would want to own treasuries."

Who knows what his game is this time but you can bet it's just that - a game.

deagle44's picture

He seems full of shit to me.  Wouldn't listen to him.

CrashisOptimistic's picture

The problem with all this?

It requires signing onto the concept of mutually exclusive scenarios:

1) QE2 will be successful and generate economic growth via lower interest rates, held down via bond purchases, thereby improving unemployment.

2) QE2 will be unsuccessful in holding down interest rates via the bond purchases, and with higher interest rates economic growth slows and worsens unemployment.

The chicken and the egg question arrives.  Gross is opting to believe in economic growth derived from monetary stimulus, which growth increases interest rates, contrary to the stated purposes of Bernanke.  El Erian will speak up soon, and probably contradict both Gross and  Bernanke.

Overall, they are not on the same page, while pretending that they are and while ignoring oil, largely because there is nothing they can do about it.  They have reached a level of self delusion where they persuade themselves that because there is nothing they can do about it, it can't affect them.

midtowng's picture

Gross has been talking his book for years. He's the perfect contrary indicator - assuming he's wrong.

ATG's picture

USB still targeting 178

no matter what CNBC, Gross, MHFT et al say


Edna R. Rider's picture

I disagree with the thesis of the article.  I think Bill Gross talks his book.  He's saying he doesn't think US Treasuries are a good bet going forward.  He's probably right.  I'm not talking my book because I just bought TLT recently for a couple of dollar gain.  But I might dump it if it shows any real weakness.

Captain Kink's picture

Me too! 

and I bot H 125 calls on the TBond futures.  This morning.

velobabe's picture

gross is just G R O S S , he probably has a last name complex in addition to his small penis complex. Those people suffering from an e-penis complex display symptoms such as obsession over trivial technological matters.

gross |gr?s|
1 unattractively large or bloated : I feel fat, gross—even my legs feel flabby.
• large-scale; not fine or detailed : at the gross anatomical level.
• complete; blatant : a gross exaggeration.
• vulgar; unrefined : the duties we felt called upon to perform toward our inferiors were only gross, material ones.
• informal very unpleasant; repulsive : it's disgusting and gross, but it's a

virgilcaine's picture

Bonds are a BUY then.

Virgil's reasonong.. Debt is being destroyed faster than the Fed can Print.. and It's not getting into the Economy anyway. The Real Economy not the Spec mkts.

57 Trillion in Outstanding total debt..Feds bal Sheet. 2 -3 Tril. (ben's reason to quiver)

BDI and Interest Rates declining..Housing also.

akak's picture


Another deflationary flat-earther.

OK, for the 1001st time, just because our "money" (really, currency) is issued as debt, this does NOT mean that all debt is money!  If that were actually true, then the world would have seen multiple historical examples of hyperdeflationary collapses, when in fact not ONE such event has ever occured!

You fail.  Back to (Austrian) Econ 101.

Guy Fawkes Mulder's picture


"What you've just said... is one of the most insanely idiotic things I have ever heard. At no point in your rambling, incoherent response were you even close to anything that could be considered a rational thought.

"Everyone in this room is now dumber for having listened to it.

"I award you no points, and may God have mercy on your soul."

akak's picture

Your contentless reposte (such as it was) is one of the most insanely idiotic things I have every heard.

Junked in turn (for whatever that is worth).

Guy Fawkes Mulder's picture

Glad I got your attention, for what that's worth.


  • You say "our currency is issued as debt". What the hell, mate? Currency is what people circulate as money. If someone says that the FX markets are currency markets, then they are being imprecise or just plain liberal with the word currency, quite as if one were referring to the tip of the iceberg as being the entire iceberg. Liquid capital reserves are mostly on the ledgers and they are not currency.
  • You make a big deal about people thinking that "all debt is money". That's an outlandish concept, and pure folly. No reasonable person would ever think that all debt is money. I giggle when typing the words "all debt is money". I've never seen anyone confuse debt for money. Debt is the fucking infinite money vacuum that sucks money towards it, and it is always greater in magnitude than money. No one on this whole fucking site could possibly think that all debt is money. So why do you make a big point that "not all debt is money"? All money comes from debt, this is true. But no one thinks that all debt is money.
  • "Hyper-deflationary collapse, not seen once in history". You idiot. What do you think a bank run is? Bank runs always happen after they lend out more than they have. All the "panics" and "bank runs" that they gloss over in your history books are in fact little hyper-deflationary collapses that are a natural occurence in the banking of booms and busts. Just because you and your parents are from a generation that has experienced the beneficence of the Fed's "stability" does not mean that we are living under a banking system that is immune to hyper-deflationary collapse. Do you think the Fed is more afraid of deflationary collapse or inflationary collapse? They are afraid of deflationary collapse, and that is why they are playing chicken with inflationary collapse.
  • Then you are like "Austrian School 101 FOR THE WIN" and I just facepalm myself.

So, yeah.

You earn my Billy Madison Award for that post.

akak's picture

Shit, I had a long and detailed response to your horribly muddle-headed post all typed out, and then lost it at the very end!

Suffice it to say that I am astonished to see you mock me for mocking all those who equate all debt within an economy with money ---- only to then go on to make the exact same argument yourself!  In case you missed where you did so, here it is:

You make a big deal about people thinking that "all debt is money". That's an outlandish concept, and pure folly. No reasonable person would ever think that all debt is money. I giggle when typing the words "all debt is money". I've never seen anyone confuse debt for money.


"Hyper-deflationary collapse, not seen once in history". You idiot. What do you think a bank run is? Bank runs always happen after they lend out more than they have. All the "panics" and "bank runs" that they gloss over in your history books are in fact little hyper-deflationary collapses that are a natural occurence in the banking of booms and busts.

So here you are, calling the destruction of debt in a bank failure a "hyperdeflationary event".  But what was destroyed?  Not money --- and the real, and ONLY, proper definition of deflation is a decrease in the supply of money!  So you are implicitly equating debt with money by calling its destruction "deflation", when by all classical definitions it is NOT.  But that is what 80+ years of academic economic snake oil does to the field: corrupt and taint the very definitions upon which sound thinking depends.

It is still an indisputable fact that there is not one example of deflation, much less your chimera of "hyperdeflation", that has occurred under a fiat currency regime.  But keep looking for those unicorns --- maybe one day you'll be lucky.

Guy Fawkes Mulder's picture

If your deposits were lost in a bank failure you would not say it was debt that was lost so much as you would say it was the supply of your money was lost. And in fact, M2 would have decreased. Just because the bank's debt to you was lost does not mean that money wasn't lost. 

Let me say this again and please do repeat it out loud three times, so that you won't forget what I'm saying: All (paper) money comes from debt, but not all debt is money, and no one here thinks that the debt level is the money supply.

You come off as a rabid intellectual who tries to put everyone else's words into a box that he can explain to himself and then shelve neatly in the library of his own mind.

By the way, I don't think that the real, only, or proper definition of deflation is a "decrease in the supply of money" (I'd call that contraction of the money supply, or monetary contraction). Deflation is a decrease in the general price level. It's a stat that isn't precisely and unambiguously definable (because definition of "general price level" is open to debate), but it is still a useful concept and people tend to know inflation or deflation when they see it.

Finally, what is really at stake is a collapse of the biggest Ponzi of all time. Pensions, 401(k)s, all this imaginary paper wealth that could evaporate when the music stops and the biggest bank run in history starts. I only used the term "hyperdeflationary" because you used it first, and it seemed appropriate. Sure it's something of a chimera or even a strawman but I was playing along with the term you used in the first place. All in all, I like the term, and I'd never heard anyone use it before you did. It's funny and even apt, even if it is a little imprecise.

But call it the collapse of a Ponzi or call it hyperdeflation, what it is will be cascading collapses of financial institutions and governments who all have more debt than money and poor prospects of ever getting the money to pay down the debts. Bank panics are replete through history. The Panic of 1907 is one the biggest examples of this, and only the "stability" of the Federal Reserve System and Act of 1913 has stopped similar panics from evaporating paper wealth during busts. The only unicorn around here is the Federal Reserve's infinite power to stop a dollar panic. And that's a unicorn that not you, not I, nor anyone here actually believes in.

Bennie and his 'Jets are walking the line between hyperinflation and cascading bankruptcies. The economy is that broken. I'm getting on too far here. I'll let you have the last word, in which you can blather on and babble about how you are right and I am wrong. After that, we may meet again on another day on another post.


Caviar Emptor's picture

The Morning Line odds on QE are 2:3.

In a replay, the market will move up on every piece of bad economic news and sell off on newws perceived as 'too good'. 

And gold will be off to the races. 

However the cumulative risk of inflation (amidst domestic economic deflation) can reach critical mass and go nuclear: grocery bills nearing 3 digits on an ordinary day

gmrpeabody's picture

"grocery bills nearing 3 digits on an ordinary day"

So freaking true!

pitz's picture

Maybe the cocksucker will be sent to the gallows next year? 

bob_dabolina's picture

He looks like Skeletor and sounds like my Aunt Agatha that smoked for 40 years.

His wife must have one helluva imagination.

jomama's picture

i'm sure all that money takes the edge off

Thorny Xi's picture

The BRL, Peso and CAD are all oil exporting countries.  If there's anything between the lines in Gross's call, that's it. 

CrashisOptimistic's picture

Yeah, good call.

It is the nature of mankind to want to believe that good results happen from our ideas and philosophies.  Good economies for Reagan and Thatcher just coincidentally, we feel, arrived with Alaskan and North Sea oil revenues. 

And now bad things are going to happen as far as the eye can see, for both Bush and Obama, as oil production falters.  Just a coincidence, you see.

Hitmannie's picture

You Americans Are To Busy With Him, Just Keep Some Money On The Bank And Wait For Everything To Collapse.

Hannibal's picture

Like the rest of Wall Street scum, Gross is not to be trusted!

poydras's picture

The Faber and Gross comments are curious.  The probable reality is that funny money (QE and zero reserver reqs) is the source for sovereign debt purchases.  One year Gilts are selling for less than -200 bps.  The lunacy has to end sometime.

Glasgow Gary's picture

Gross wants bonds to sell off, so that he can accumulate them all over again before the typical Spring/Summer smackdown in risk. He is talking his book. He's either light on USD denominated bonds or wants to get short. He wants to cover and go long starting in June. Until then, he will probably ride the commodity trend.


Hitmannie's picture

I Think The Bankster Only Look At The Average Weight Of A Population Just To Know How Much More There Can Be Squeesed Into!! The Americans Are Too Fat and Nothing Is Left. So Asia and India Are The Countries To Go For!!

XPolemic's picture

Translation: I was making out like a bandit front trading the Bernanke but got my ass handed to me by the market, so now I'm going to go on TeeVee and whine like a girl about fiscal policy.


GetReal's picture

On the precious metals front, it's useful to recognize how important falling Treasury bond yields and negative short-term interest rates have been in the recent commodities run. Historically, the Philadelphia gold stock index (XAU) has advanced at a 23.0% annual rate when the 10-year Treasury bond yield has been below its level of 6 months earlier, but has declined at a -5.9% annual rate when Treasury yields have been rising. With respect to short-term real interest rates, the XAU has advanced at a 16.1% annual rate when 3-month Treasury bill yields have been below the year-over-year CPI inflation rate, and just 4.1% otherwise. Put falling Treasury yields together with negative short-term real rates, as we've seen during much of the recent commodity price run, and you'll find that the XAU has historically advanced at a 33.9% annual rate. Notably, Treasury yields have recently reversed course, and are now above their levels of 6 months ago. While real short rates are still negative, this has historically not been enough to overcome rising bond yields and produce positive returns in the XAU, on average, except when the Gold/XAU ratio has been well above 7.

In short, my impression is that investors chasing commodities have not paused to recognize that one of the major supports for this run - falling Treasury bond yields - has been knocked away from them. There may be some pure momentum remaining for commodities, but this is now purely speculative. A much better environment for gold stock holdings would include falling Treasury yields, negative real rates at the short-end of the maturity curve, reasonable valuations of gold stocks to the bullion (which is presently still the case), and some amount of downward economic pressure, such as a Purchasing Managers Index below 50. The present Market Climate for precious metals shares isn't terrible by any means - it's just not positive anymore.

akak's picture

So what happened during 2004 to 2006, when the Fed funds rate rose from 1% to 5.25%, and gold continued to rise during the whole interval?  Just to take one example that negates the simplistic "interest rates up, gold down" thesis.

Additionally, you are only focusing on nominal interest rates, while REAL interest rates remain negative, and are likely to do so for the foreseeable future.  Any rise in REAL interest rates will rapidly drive the US federal government into undeniable bankruptcy, and would finally crash (yey!) the fiat pseudo-dollar once and for all.

Really, that is just CNBC-level "analysis".

GetReal's picture

No single explanation is perfect; but exceptions often prove the rule.

Regarding "any rise in REAL interest rates will rapidly drive the US federal government into undeniable bankruptcy...", please elaborate.

Regarding gold, do you think it likely that it could test its 100 or 200-DMA support within the next six months?

akak's picture

Regarding "any rise in REAL interest rates will rapidly drive the US federal government into undeniable bankruptcy...", please elaborate.

Given the enormous (and ever increasing) federal debt, would not interest payments on that debt rapidly eat up most of the US federal government's budget, forcing it into ever more extreme and more obvious monetization of that debt?  Of course, this could happen even with real interest rates being negative, but if they turned positive it would only clinch the deal.


Regarding gold, do you think it likely that it could test its 100 or 200-DMA support within the next six months?

Given the ability of our corrupt and kleptocratic elite to routinely test and break the 200 DMA on the chart of their insanity and sociopathy, yes, I think almost anything is possible regarding the price of gold.


GetReal's picture

When will the economy turn around? In my view, Congress needs to address REAL entitlement reform -- starting with standing up to public unions like the teachers' union in NJ. Check out this exchange between Gov. Christie and a disgruntled teacher.

When the banks stop the looting and the Goverment starts prosecuting, then, and only then, will I believe the much-needed challenge of restructuring the debt of the too-big-to-fail zombie banks has begun.

akak's picture

I agree, and yet I can't help but wonder just when --- or whether --- the megabanks will ever stop looting us as a society and finally have their parasitical grip around our collective necks at least loosened.

It is hard for me, though, to even single out the megabanks as the real villains here; it is an entrenched and intermingled confluence of government, finance, "business" and military forces that seem determined to strangle our prosperity, our privacy and our freedoms, all of which are being lost (no, allowed to be taken) at a rate unprecedented in my 40+ year lifetime.

GetReal's picture

Check out this brief video clip (despite its military overtones). Start watching around 2:35...

GetReal's picture

Happy New Year friend! For what it may be worth, I'm looking forward to reading this book when it becomes available in a few more days:

Kayman's picture

Bernanke is on the horns of a dilemna of his own making. He is pumping up asset values and not the economy.

Gold will only go down with a revival of the economy and rising interest rates. Do the math; 2 trillion of deficits and money printing annually for a net gain of $350 billion in GDP growth. This pump don't prime.

Even the recent bump up in rates must have the Bernank crapping his pants (naturally with upper lip quivering). And I am 100% certain of that.