This page has been archived and commenting is disabled.

Exclusive: Bill Gross Dumps All Treasuries, Brings Total "Government Related" Holdings To Zero, Flees To Cash - No QE3?

Tyler Durden's picture


And many thought Bill Gross was only posturing when he said he is getting the hell out of dodge. Based on still to be publicly reported data by Pimco's flagship Total Return Fund, the world's largest bond fund, in the month of January, has taken its bond holdings to zero (and -14% on a Duration Weighted Exposure basis). The offset, not surprisingly, is cash. After sporting $28.6 billion in "government related" securities, TRF dropped to $0.0, while its cash holdings surged from $11.9 billion to a whopping $54.5 billion (based on total TRF holdings of $236.9 billion as of February 28). This is the most cash the flagship fund has ever held, and the lowest amount in Treasury holdings since January 2009 before it was made clear that the Fed was going to adjust QE1 to include Treasurys in addition to Mortgage Backed Securities. PIMCO's Treasury holdings peaked in June 2010 at $147.4 billion and have declined consistently ever since. And while we expected that the spike in MBS holdings (at times on margin) was indicative of an expectation that QE3 would monetize mortgage backed securities, the ongoing decline in that asset class now leads us to believe that Bill Gross is now convinced there will be no QE3 at all, at least based on his just putting his money where his monthly pen is! And if Bill Gross, the most connected person to the upcoming actions by the Fed, believes there is no more quantitative easing, it is really time to get the hell out of dodge in all security classes - bonds, and most certainly, equities.

Note the plunge in Treasury holdings in the chart below (blue line), offset by the surge in cash (dotted pink line). Time to panic.

And when it comes to duration adjusted holdings, something wierd is going on: PIMCO has increased its holdings of securities with a 0-1 duration to 14%, quite possibly the highest ever, and certainly the most to where our records go back. The effective duration on the entire portfolio dropped to 3.89, the lowest since December 2008.




- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 03/09/2011 - 10:05 | 1032643 gordengeko
gordengeko's picture

This is going to end well.

Wed, 03/09/2011 - 10:07 | 1032652 NoBull1994
NoBull1994's picture

Well, PIMCO is raising an equity fund, so the capital is going somewhere....

Wed, 03/09/2011 - 10:30 | 1032755 SheepDog-One
SheepDog-One's picture

Pimco going all in on the top of the equity bubble? Good luck to em!

Wed, 03/09/2011 - 10:52 | 1032793 66Sexy
66Sexy's picture

QE 3 is now in question. i give it 50/50 chance now.. and any selloff will happen without any annoucement, because the crooks at the top know before we do.

But.. what if there is QE3? then the little guy gets screwed again, missing out on all the stacked up buying before the announcement; before we even get wind the DOW will be at 14,000.

Hand of blackjack bitchez...

fuck it: just go to vegas and get free drinks.

At this point, I am quite bullish on cocain, hookers, and the entire self inebriation sector.

Wed, 03/09/2011 - 10:58 | 1032878 Al89
Al89's picture

The market surged on the Jackson's hole speech. It did not surge prior to the speech, although insiders may have been buying before Bernanke signalled QE2. Any little guy could have gotten involved in the surge. 

Wed, 03/09/2011 - 11:05 | 1032895 66Sexy
66Sexy's picture

you really think that ben wont get together with Goldie Sachs and JP Morgue brass over Opus X's and 20 year and mention, "oh, by the way...the chair is against the wall"

Trust me, the announcement (if any) will be made when the little sheeple can't trade. And the DOW will open up (or down) so far that it will be unattractive to buy or our portfolio's will be collapsed.

Wed, 03/09/2011 - 11:08 | 1032920 Temporalist
Temporalist's picture

The Bernank doesn't smoke cigars and drink scotch it snorts shredded FRNs and drinks the blood of unborn children.

Wed, 03/09/2011 - 14:10 | 1033522 nyse
nyse's picture


Wed, 03/09/2011 - 14:26 | 1033581 Problem Is
Problem Is's picture

The Bernank is simply a puppet, a useful idiot, a stooge, who is the front man for those who snort shredded FRNs and drink the blood of unborn children... e.g. the Wall Street TBTF bankster class...

That is why he mutters, stutters and his lip quivers...

Batting Order on Bastille Day
I suggest Jamie, Lloyd, Rubinite, and Uncle Warren lead off ...

Jeethner, Obummer and the Bernank are just the Bat Boys...

Wed, 03/09/2011 - 15:16 | 1033746 JW n FL
JW n FL's picture

Highly compensated bat boys... but bat boys none the less.

Wed, 03/09/2011 - 17:03 | 1034059 dogbreath
dogbreath's picture

there's an image for our william to work with. 

Wed, 03/09/2011 - 15:57 | 1033860 D.M.
D.M.'s picture


Wed, 03/09/2011 - 11:44 | 1033053 gabeh73
gabeh73's picture

I agree 100%. "just trust us to manipulate the markets in a way that is good for you because we love you" is the monetary policy in this country(and all the central bank controlled countries). If you think that changes should be made to fix this then you are officially "an insane uneducated wingnut".

Wed, 03/09/2011 - 14:56 | 1033691 Head for the Hills
Head for the Hills's picture

But are they not our benevolent shepherds. 

Always watching over the flock.   Surely they

fleece us from time to time, but how could anyone

think they could slaughter us, their fluffy white

faithful pets.

Wed, 03/09/2011 - 14:46 | 1033655 6 String
6 String's picture

I give it 90-10 odds there will be no QE3, initially. It will be a repeat of 2010 where QE ended, for awhile, then all started to unravel....then, QE II.

It will be the same, worse this time...because the end game gets closer, and ramped up prices will have even further to, T-bonds go bidless, so QE3 will be imminement. Cash will be fine during this transition....which is where Bill Gross is going. Right when you get then next jackson hole moment, go very long PM's, Oil, etc.

Bernak is trying to save face with "self-sustaining" bull-shit statements about the economy. It will fall apart but he'll be able to blame congress and the deficts and bidless bonds and try to save some dignitiy in the History books for the Fed.

But anyone following knows the Fed will ultimately get what they deserve.

Wed, 03/09/2011 - 15:50 | 1033843 asdasmos
asdasmos's picture

I thought the same, they will not do it initially, letting things drop and then when they do announce it, there will not be as much backlash.

Wed, 03/09/2011 - 10:54 | 1032859 ms1408
ms1408's picture

He could be selling bonds because he expects inflation to accelerate and that without China's backing the QE3 bond-buying play is unfounded. Of course you have to sell bonds for cash - who says he isn't going to use that cash to buy other assets?

Without QE3, the Fed's interests would have to end their military expeditions immediately, and banks with leverage ratios of as high as 20:1 (some of whom are direct shareholders in the Fed) will collapse.

Wed, 03/09/2011 - 12:30 | 1033208 Agent P
Agent P's picture

QE3 won't happen, and military expeditions will keep on a rollin'.  Why, because higher oil prices will require it.

Think about it.  I'm not a conspiracy guy, but am I the only one who sees the NA/ME situation as the perfect out if the Fed/WS/Gov think a second collapse is inevitable?  Oil will be the fall guy.

/tin foil

Wed, 03/09/2011 - 12:44 | 1033253 Ironmaan
Ironmaan's picture

QE3 will happen. There will be a delay just after 2 ends, but when the bottom begins to fall out, they will come rushing back in with 3.

Wed, 03/09/2011 - 14:08 | 1033519 NotApplicable
NotApplicable's picture

They've got to let a bunch of stuff break first in order to create the media pundit led mandate for QEIII.

Like say, a few blown-up munis, for instance.

Wed, 03/09/2011 - 14:33 | 1033597 Problem Is
Problem Is's picture

ZHers Vote:

  • [ X ] Ironmaan: QE3 will happen.
  • [    ]  AgentP: QE3 won't happen.

I'm with Ironmaan... QE3 is coming right up, announced or unannounced by the back door if there is too much political resistance for more Bankster TBTF welfare...

Wed, 03/09/2011 - 12:45 | 1033259 trav7777
trav7777's picture

where's the bid for USTs gonna come from w/o QE?

Wed, 03/09/2011 - 13:05 | 1033323 Agent P
Agent P's picture

If the Fed stops printing and there is serious geopolitical turmoil, I think there will plenty of bidders.

Wed, 03/09/2011 - 14:29 | 1033588 trav7777
trav7777's picture

bidding up the bonds of an insolvent state...not a great plan

Wed, 03/09/2011 - 14:35 | 1033606 equity_momo
equity_momo's picture

Since when in the last 15 years has the critical mass of money managers had a great plan? Mutual funds are run by bandits to fleece idiots. They make a fee and justify their career by chasing benchmarks.

Wed, 03/09/2011 - 15:45 | 1033668 Agent P
Agent P's picture

Trust me, I think our shit stinks plenty...just not as bad as everyone else's.  In previous flight to quality moves, the market has agreed with me.  Maybe it will be different in the future...maybe not.

Tue, 04/12/2011 - 16:17 | 1162869 Geoff-UK
Geoff-UK's picture

Not enough physical gold to handle the demand once the proles figure out what's what.


PLENTY of idiots will buy Treasuries to get out of everything else.  Until some magical moment when nobody wants anything but items of intrinsic value.  Food, silver, ammo, gold, the Vanessa Williams issue of Penthouse kept in a pristine plastic envelope...

Wed, 03/09/2011 - 13:05 | 1033327 MrSteve
MrSteve's picture

In this game of Global Jeopardy, I'll take the Bank of England with a Bermuda twist for $50 billion. We got presses, they got presses, just to keep the ponzi even-steven.

Wed, 03/09/2011 - 18:18 | 1034301 mkkby
mkkby's picture

Why Trav?  Think outside the box.  Pimco wrongly assumed QE2 would be bond bullish.  They were wrong and they lost money on the bet.

So now he's sold out at a loss.  It could mean he thinks QE3 WILL START ON SCHEDULE... which will continue to ramp up inflation expectations, and continue the bond selloff.

The crowd thinks no more QE means a bond selloff, i.e no bids until much lower prices.  Maybe.  Maybe it takes the pressure off inflation and restores confidence, which makes it safe to come back to bonds... which certainly jives with the last 6 months trade.  That would be bond bullish and commodity/PM bearish.  (Of course the math of compount interest still goes on so it would be wise to BTFD on commodities/PM's)

Wed, 03/09/2011 - 23:56 | 1035363 forexskin
forexskin's picture

started a rush out, maybe a stampede - where did that happen before... ? oh yea, a redshield dropping british bonds like waterloo was lost. remember the outcome of that? QE3 and a bond reversal is where gross picks up the debt for pennies on the pound, with the expectation that nobody will see the coming ramp after this bloodbath he's precipitating.


or not...

Tue, 04/12/2011 - 16:21 | 1162887 Geoff-UK
Geoff-UK's picture

Well-hedged, Mister Skin.

Wed, 03/09/2011 - 13:16 | 1033356 ms1408
ms1408's picture

Well we all know who the interests of the Fed are - its shareholders and their arm of power, the government. Here some examples of the leverage ratios among the Fed's shareholders:

JP Morgan : 12.6

Goldman : 12.9

Citi : 11.7

That means these banks will be wiped out if their investments depreciate by values less than 10% - you really think they're going to willingly stop QE?

Plus I fail to see how the US government can continue to finance military operations all over the world without debt monetization. Plus the absence of the wealth effect will could easily cause sudden revolt.

Wed, 03/09/2011 - 13:49 | 1033456 Agent P
Agent P's picture

Two points:

1) I think the banks you mention are able to position their books to profit from any scenario if they are either smart enough or informed in advance (take your pick)

2) From what portion of society do you think the revolt will come?  Does this portion of society benefit more from the wealth effect, or suffer more from the inflationary aspects of QE?

I've long been in the camp that believes the Government's game plan for getting out of the debt pickle is inflation.  What I'm saying above is that IF (big if) the Fed/Gov/WS believe there is a coming collapse regardless of QE efforts, they now have a fall guy in NA/ME turmoil and higher oil prices.  Conveniently, this also justifies additional military operations in the region. 

Wed, 03/09/2011 - 16:31 | 1033957 ms1408
ms1408's picture

You could be right but I think they would find it very difficult to avoid counter-party risk in that environmnet - I don't believe the system is capable of absorbing a deflationary collapse. The absence of debt monetization could cause the control-grid to completely disintegrate within a very short period of time. I agree that revolt will arise in either case but my point is that the wealth effect helps to keep people docile as the media can points to rising stock prices and propells the myth of recovery. However I would argue that in either case precious metals are the safe haven since they're a hedge against counter-party risk as well as inflation. Your bank is probably going to default in the case of deflation so unless you fill wheel-barrows with dollars, only hard assets are a safe-haven.

Wed, 03/09/2011 - 13:59 | 1033493 equity_momo
equity_momo's picture

Those leverage ratios are grossly understated. 

Wed, 03/09/2011 - 13:41 | 1033436 Raincheck
Raincheck's picture


Wed, 03/09/2011 - 13:51 | 1033474 Saxxon
Saxxon's picture

1408, d'accord.

Wed, 03/09/2011 - 11:04 | 1032905 snowball777
snowball777's picture

Could be "going in" massively short.

Wed, 03/09/2011 - 14:59 | 1033695 halcyon
halcyon's picture

Big PIMCO funds cannot afford to go "massively short".

They can hedge, but going massively short is a gamble that may run out of liquidity before things unfold and you should know it.



Wed, 03/09/2011 - 11:28 | 1032985 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Gross could hand out dollars like Robin Hood did gold.  Helicopter drops over Times Square?  Shit, he could fly to Tahrir square and do some real good.  In the US the 20% unemployed might get a kick out of that, and it would steal any thunder Bernanke was considering.  Get to the choppa?

Wed, 03/09/2011 - 15:23 | 1033769 uhb
uhb's picture

not if its a long-short equity hedge fund.

Sat, 07/16/2011 - 10:07 | 1461954 Hremas
Hremas's picture

Good luck guys!

forex robot online trading

Wed, 03/09/2011 - 13:20 | 1033361 Ropingdown
Ropingdown's picture

The cash has to go somewhere, and that somewhere almost has to be fully-hedged equity and futures positions.  Certainly Gross can't risk parking it in banks.  He'll be selling off the losing side of those hedges long before I first hear the incoming shells screaming down on my position.  It seems natural to retreat to the equities markets from bonds now, given flexible hedging in the equities world, and sovereign bond risk in every bond market that counts.  Can't trust CDS counter-parties with that kind of money and coming volatility, can you?  Criticism welcomed.

Wed, 03/09/2011 - 14:59 | 1033698 Onlygold1
Onlygold1's picture

Ah, the gross 1, i'd guess he's had a heart to heart talk with blythe and is buying Silver! we'll be the last one's to know what he's doing with all that cashola-

Wed, 03/09/2011 - 10:12 | 1032667 GetZeeGold
GetZeeGold's picture


Remain calm.....all is well.

Wed, 03/09/2011 - 10:15 | 1032679 Divided States ...
Divided States of America's picture

If he sold all of it, then whose the dumbass on the other side of that trade??

I think I know who.

Wed, 03/09/2011 - 10:18 | 1032693 MarketTruth
MarketTruth's picture

Eaxactly, it is where everyone shoots out their (US Debt) load...

Ben Shalom Bukkake

Wed, 03/09/2011 - 10:23 | 1032718 mrgneiss
mrgneiss's picture

Maybe they decided not to bring Bill into the loop this time, hadn't he leaked certain info early over the past year that he seemed to have insider knowledge of, as mentioned before by TD?

Wed, 03/09/2011 - 10:48 | 1032827 Zero Govt
Zero Govt's picture

Oh cum, cum ...surely Ben doesn't swallow it all ?!!!

Wed, 03/09/2011 - 12:47 | 1033272 Best Satan in Town
Best Satan in Town's picture

Well said.

Wed, 03/09/2011 - 10:30 | 1032753 gordengeko
gordengeko's picture

There are about 340ish million dumbasses on the other side of that trade.  I'm one of them.  Thanks Ben

Wed, 03/09/2011 - 15:49 | 1033841 JW n FL
JW n FL's picture

do you have ammo?

do you have silver?

do you have water? control over your very own water source?

do you have medicine? 180 days worth?

do you hae food?

rinse and repeat until you have to, too much in your opinion..

2500 calorie a day diet? ever done the math on what you need to have around the house to maintain that?

do you know how far 1,000 rounds of ammo goes? most guns can shot twice that a minute..

silver? how do you want to live? either way?

You buy TIPS.. or other.. thats great... depending on what you are caring for, you may want to consider offshore storage for PM's.

Wed, 03/09/2011 - 16:11 | 1033907 ColonelCooper
ColonelCooper's picture

"2500 calorie a day diet? ever done the math on what you need to have around the house to maintain that?"


And would add: Do you have any idea how much space that takes to store for a family of four for a year?

Wed, 03/09/2011 - 10:59 | 1032881 66Sexy
66Sexy's picture

**singing** un-cle bens, converted rice, tastes sep-rate from the rest

Wed, 03/09/2011 - 10:31 | 1032747 Spalding_Smailes
Spalding_Smailes's picture

$28.6 billion a drop of water in the sea of Treasuries. Is his cash holdings in Dollars or Yuan ?

Wed, 03/09/2011 - 10:37 | 1032774 Cleanclog
Cleanclog's picture

Just a couple POMOs

Wed, 03/09/2011 - 10:45 | 1032815 Spalding_Smailes
Spalding_Smailes's picture

And say China wants to move out of treasuries what market is liquid enough for said move and how will that move affect that market ? 

Wed, 03/09/2011 - 13:11 | 1033347 KickIce
KickIce's picture

Game over, Japan jumps ship as well.

Wed, 03/09/2011 - 15:26 | 1033782 DosZap
DosZap's picture

I think the Chinee already dumping T's.

We are just not hearing about it to any degree.

Wed, 03/09/2011 - 10:45 | 1032814 tmosley
tmosley's picture

And once again, he misses the point.

Bill Gross had and likely still has insider information from the Fed.  The positions he adopts frontrun Fed activities.

Wed, 03/09/2011 - 10:56 | 1032851 Spalding_Smailes
Spalding_Smailes's picture

Or he's seeking a better return on investment dollars, today , he's a trader of a fund. So if your right, this collapse should happen soon. So when everything is the same in another year, this will be proved as hyperbole, just like Williams hyperinflation post from 2 years ago. So what is it , inflation or deflation ? Everyone jumping from one side to the other ....


See we can talk now without tossing out insults  ... I like it better this way. Always two viewpoints on everything.

Wed, 03/09/2011 - 11:52 | 1033086 Millivanilli
Millivanilli's picture


Wed, 03/09/2011 - 12:12 | 1033160 Spalding_Smailes
Spalding_Smailes's picture


So what's your thesis ? Or you just trolling .... A mindless gimp, drinking whatever fits your outlook, go back to Sinclair's site 
Wed, 03/09/2011 - 13:25 | 1033383 Robot Traders Mom
Robot Traders Mom's picture

I understand and completely agree about people moving back and forth. I don't think anyone on here is worried about deflation, it is more a question of hyperinflation or an all-out market crash with the end of QE2.

Like I've said before, John Williams was not wrong, maybe a little early. Get on Bberg right now and CRR <go> and customize it for 1 year. Every commodity EXCEPT two (zinc, lean hogs) are up, half over +40%. This will hit the economy and the consumer hard very, very soon. It is amazing companies have been able to be squeezed as long as they have (thanks to QE). This is now ending.

Wed, 03/09/2011 - 15:16 | 1033690 EscapeKey
EscapeKey's picture

Hey, Spalding, carrying on from the other thread.

Domestic bond market:

The US was the largest market with 39%

As for the international bond market:

The euro has displaced the US dollar as the world's pre-eminent currency in international bond markets, having outstripped the dollar-denominated market for the second year in a row.

Outstanding euro-denominated debt accounts for 45 percent of the global market, compared with 37 percent for the dollar. New issuance last year accounted for 49 percent of the global total.


So, this means in total 0.39*0.70 + 0.37*0.30 = 38.4%. Seems in line with the following paper.


measured in “global”  terms (that is, including domestic issuance) the percentages are 27.8% in euros and 42.2% in dollars  out of a total of $68 trillion

These are 2006 figures, however. Since then, substantial amounts of debt has been rolled, and the percentages are definitely moving against the favour of the Dollar.

Wed, 03/09/2011 - 13:09 | 1033341 Don Birnam
Don Birnam's picture

It was Gross, was it not, who coined the term "Chairsatan ?"

No Treasury holdings whatsoever. Completely cleansed of unclean debt spirits. Bill has now become "The Exorcist."

Wed, 03/09/2011 - 17:49 | 1034206 Guy Fawkes Mulder
Guy Fawkes Mulder's picture

I guess...

anyone got any better links to the source of the term? Video of Bill Gross saying it would be perfect. As of now the trail seems to go cold at ZH (i.e. ZH may be the ones who coined the term)

edit: fwiw: "Chairsatan Bernanke" is a very apt name if if fact the policies of Treasury and Fed (and more!) have been hijacked by a satanic cabal.

Wed, 03/09/2011 - 14:21 | 1033564 covert
covert's picture

looks like just normal market fluctuations.


Wed, 03/09/2011 - 16:04 | 1033883 10kby2k
10kby2k's picture

There is nowhere on the curve that isnt all downside.  Flight to safety=5 year TIPS    (-0.55%).  LOL

Wed, 03/09/2011 - 18:03 | 1034245 mkkby
mkkby's picture

C'mon guys.  Think outside the box.  Pimco wrongly assumed QE2 would be bond bullish.  They were wrong and they lost money on the bet.

So now he's sold out at a loss.  It could mean he thinks QE3 WILL START ON SCHEDULE... which will continue to ramp up inflation expectations, and continue the bond selloff.

The crowd thinks no more QE means a bond selloff, i.e no bids until much lower prices.  Maybe.  Maybe it takes the pressure off inflation and restores confidence, which makes it safe to come back to bonds... which certainly jives with the last 6 months trade.  That would be bond bullish and commodity/PM bearish.  (Of course the math of compount interest still goes on so it would be wise to BTFD on commodities/PM's)


Wed, 04/13/2011 - 12:05 | 1165407 Geoff-UK
Geoff-UK's picture


Wed, 03/09/2011 - 19:16 | 1034487 mberry8870
mberry8870's picture

Just as long as it ends.

Fri, 08/05/2011 - 05:57 | 1526025 cindycheng
cindycheng's picture

 I want to express my admiration of your writing skill and ability to make readers read from the beginning to the end. I would like to read newer posts and to share my thoughts with you. oilseed expeller

Wed, 03/09/2011 - 10:07 | 1032648 victor82
victor82's picture

Someone mentioned something about frogs raining down in an earlier thread several days back.

Long on umbrellas.



Wed, 03/09/2011 - 12:53 | 1033261 slewie the pi-rat
slewie the pi-rat's picture

my local crane, heron, and ibis friends are drooling!  i recall the frogs thingy from a great "let's get biblical" line going on abt egypt, either w/ the bread-head milestone, or just prior.

so, has bill gross been reading slewie?  hahaha!

prob. more likely that he and el erian have purchased the national banks of egypt and are making so much money doing the vatican's laundry that the retired cops, teachers, and parks employees, most of whom have moved to washington/idaho are converting to both Catholicism and Islam at the same time!

oh---b/c now they know what to believe, of course!

zereHedge covered this el erian piece and i just missed it, right?: / Comment / Opinion - Prepare for a shock from the Middle East  

yes, this is pimco's other talking head, abt. 3 weeks ago.  and (w/out FT's permission) here is the el, finishing strong:  "In the long term, after all, democracy and individual freedoms are the best drivers of prosperity."  so, he has great faith in the interlocking, bankster-controlled, intel/military/propaganda machine of the GB/USA/Israel "alliance"  with it's rothschild (City)/mossad/FED & DOJ-CIA brains, brawn, and legal/media-interpretive sevices.

even as blythe loads up her "bad bank" with the silver shorts and iyam getting so fevered as to palpitate, i say again to the banksters and pols or the good old US of A:  the Militia Of The People Of the USA is well-ordered, standing at defense, stack arms, according to law.  everybody in goobermint works for US.  no exceptions.  start acting like it.  NOW! 

the banksters work for themselves, in a system designed to benefit, or at least not to harm, certainly, US! 

ergo, please do not, at this juncture, fail to take OUR best interests to heart here, rather than your own personal, political, or bankster interests, 'k?

just assume we know what we want, other than peace and non-violence, since you are probably unable to perceive our reality unless you are already in it, somewhat.  don't make that mistake at this point.  seriously. 

we were born to walk with Liberty this day.  we rejoice that She has chosen us.


Wed, 03/09/2011 - 10:07 | 1032649 monopoly
monopoly's picture

Own no securities and will not own them, except for miners who have real earnings. Anyone buying the dip on FNSR. lol

Wed, 03/09/2011 - 10:07 | 1032650 flacon
flacon's picture


Wed, 03/09/2011 - 10:09 | 1032656 Misean
Misean's picture

Without QE3 auctions will fail, no? This is somewhat disconcerting.

Wed, 03/09/2011 - 10:12 | 1032671 Max Hunter
Max Hunter's picture

Not going to happen.  I'm quite certain the FED and US Gov would gladly choose inflation over default.

Wed, 03/09/2011 - 10:19 | 1032695 andy55
andy55's picture

Quite certain, eh? You may be certain but apparently PIMCO isn't, which carries a little more weight than what you or I may believe unfortunately. As an owner of a very serious amount of silver for over two years now (having the very thesis you ascribe to), this new evidence gives me pause and should cause all of us to reevaluate, despite however unlikely it feels that the Fed wil pull the plug and spark a massive selloff in all asset classes. 

Wed, 03/09/2011 - 10:23 | 1032723 Yikes
Yikes's picture

Help me out.  What are you trying to say? I've read it three times and am not sure if your calling BS on the story or something else. 

Wed, 03/09/2011 - 10:31 | 1032757 zaknick
zaknick's picture

He's saying they might have something up their sleeve (read: nukular false flag instant NWO and complete repression of all dissidents like us -excluding trolls). Gold and Silver confiscation, of course.

Wed, 03/09/2011 - 12:04 | 1033122 Goldust
Goldust's picture

PIMCO either ready to BT big FD themselves OR possibly freeing up cash so they can help fill the gap for the Fed between QE2 and 3.  If there is to be a gap between QEs, the USGov still has a deficit to fund & debt to roll.  PIMCO could be preparing to play their part in filling the gap... 

Wed, 03/09/2011 - 13:01 | 1033313 MrSteve
MrSteve's picture

I don't think the trolls will get a pass from the rest of us. Garden nomes maybe , but not the trolls. Dawn take them all!

Wed, 03/09/2011 - 11:05 | 1032768 andy55
andy55's picture

If Bernanke succumbs (either privately or publicly) to the peril of rapidly rising global commodity prices by announcing the prompt end of QE2, it would mean and end to the mountain of speculative ZIR liquidity currently bidding up most asset classes (e.g. commodities, stocks). Anticipating a repeat of 2008 times ten, speculators would also pile on with shorts, causing an even sharper reversal in price levels. Combine that with the UST could easily enter a *serious* funding crisis as her $1.5tn could no longer be raised with the Fed no longer supporting UST paper price levels.  

One could make the argument that UST paper will appreciate as panic returns to US and global markets, but if that's the case then PIMCO wouldn't have offloaded all of its UST paper. This actually is very significant imho; you have to be prette bearish on the appetite for UST paper to think that the market won't flee to safety in UST paper when fear returns.  Well, I know I won't anyway, so maybe it's not so outlandish after all. 

Personally, with this new evidence, I'm shifting my working thesis:

40% - Out of internal/private panic, the Fed ceases QE2 in June, fear returns, equities and commodities dive, Fed restarts QE in 2-8 weeks once things get scary (with the side perk that strength returns to the USD in that time and lower commodity prices help relieve pressures on low income earners). 

30% - Fed continues QE and eventually ignites a hyperinflationary panic. By the time it takes measures to stop it, UST rates have forced the UST into a funding crisis, sparking the entire system to catch on fire and burn.  This is the scariest one as things could burn FAST.

5% - Same as first case except Fed doesn't restart QE meaningfully.  Reapeat of GD times ten.  The fact that all banks lose on this is why I assign a low probability to this (since the bankers gave such a tight grip inside the beltway).

5% - US recovery continues enough to that that the "hand-off" to the private sector in June proceeds without crisis.

20% - Unforseeable (black swan)


Note 1:  This new PIMCO info is most consistent with the first two cases.

Note 2: Although precious metals both win in the long run of the first two cases, the first case suggests one more major and final trip down in precious metal prices before they go up never to return.  The size of that tip, however, is totally unclear since the fear trade will be on big time.

Wed, 03/09/2011 - 11:11 | 1032916 MachoMan
MachoMan's picture

QE will continue in perpetuity, the only question is at what level.  The primary goal, at the present time, is to kick the can down the road as long as possible.  In the present environment, coming off QE 2 and with a large expection of QE 3 priced in, the most longevity will come from a very visible attempt at austerity.  You can already see the wheels spinning...  talk about an organic jobs recovery...  talking about raising retirement age on CNBC, etc.  The debt ceiling will be raised, but the concession to do so will come with a material dose of austerity.  At some point in the future, it will benefit longevity to implement another round of QE.

That said, I believe we will see diminishing returns from the neotraditional flight to quality.  This is what Gross sees...  when the panic hits and treasuries are not bought en masse, it's time to start tossing them over the side.  Each round of austerity->stimulus will result in less and less panic into the dollar.  Eventually, faith will be lost in the currency...  this can happen by outright default or through slow default with rising costs of living and stagnant wages...  either way, the currency is over.  This is what Gross sees.  I suspect when he starts backing the truck up to the front runners of the next QE, we need to do the same too...  I just figure he sees treasuries as having a very limited upside given their manipulated price and having a huge downside...  Will be curious as to what they pile the cash into...  I've been curious for a couple years...  not much worth buying.

of course, all of this comes with the caveat of all things equal.  The loss of faith in the currency can happen at any time...  the "unforseeable" portion of your weighted guestimate.

Wed, 03/09/2011 - 11:22 | 1032957 andy55
andy55's picture

Well, let's be honest and say if/when the USD enters freefall, the Fed won't be foolish enough to do abolutely nothing.  I'm not saying it won't be full of trickery and back-door channels that transfer even more wealth to the elite, but it will enter system preservation mode.  

So I don't think the Fed can do QE the way it's doing now once it enters system (and self) preservation mode.  

Let's be honest and acknowledge that the one thing we can count on these fucking bankers to do is save themselves. They're going to use all means necessary to preserve their corrupt system. And that you can take to the bank.  

Wed, 03/09/2011 - 11:37 | 1033015 MachoMan
MachoMan's picture

If it is universally acknowledged that more printing will only hasten our demise, then I fail to see how self preservation is benefitted from additional printing.  Conceptually, the dollar should not enter freefall while we're trying to repay our creditors with real dollars instead of monopoly money (past devaluation aside).  The problem, of course, is that the dollar may also suffer freefall if/when it becomes clear we cannot repay our debts.  In other words, without the fed there to buy all the treasuries, who picks up the slack?  Who picks up the rollover presuming a balanced budget?  Who picks up the rollover at present prices?

I think a lot of people are missing the fact that ambiguity is what keeps the charade moving...  we MUST have waves to keep the market guessing.  Once we know whether the dollar's death comes from inflation or deflation, it will die pretty quickly thereafter when the herds trample it.

Wed, 03/09/2011 - 11:53 | 1033066 andy55
andy55's picture

Wait, I'm saying that system preservation mode means stopping QE (for at least a time) for all the reasons you list.  The fact that the UST could enter a funding crisis as the world wakes up to the insolvency of the US is another discussion, however.

I think a lot of people are missing the fact that ambiguity is what keeps the charade moving...  we MUST have waves to keep the market guessing.  Once we know whether the dollar's death comes from inflation or deflation, it will die pretty quickly thereafter when the herds trample it.

I think you've said this really well.  So the question becomes, how many waves remain?  It's so hard to say of course since the uncertainty becomes so large after even half a wave (e.g. what we've been discussing in our little side thread here). So in examining this problem, we can only return to the cornerstones that (a) the elite will use all means necessary to grow/preserve their wealth and (b) it won't be a straight line to the bottom for the reason you point out above.  

Wed, 03/09/2011 - 12:10 | 1033146 6_7_42
6_7_42's picture

Election cycle::2012 presidential === ~QE -> 3++  probability >= .95 confidence interval +/- .01


Wed, 03/09/2011 - 13:08 | 1033330 MachoMan
MachoMan's picture

Yes, I was agreeing with you...  I guess I should have prefaced the post with "agreed".

Wed, 03/09/2011 - 12:09 | 1033144 centerline
centerline's picture

Bingo.  Got to keep the herd confused.  Keep them guessing.

Wed, 03/09/2011 - 13:11 | 1033336 B9K9
B9K9's picture

Which is why these kinds of analyses are very interesting from an entertainment perspective, but suicidal from a self-preservation stand-point.

The operative mode should be to assume that this is not going to end well. In support of this position, we merely need to look back @ historical accounts. In fact, we can comfortably refer to events that occurred 3-4,000 years as described in the Bible.

As Denninger constantly points out, you cannot beat the math of compounding principal+interest. Like the movie Terminator, exponents don't care whether we live or die; they just keep on truckin'. So, since the math was true 3-4 millennia ago, so to is it true today.

The traditional end point to all credit ponzi schemes, of course, is jubilee. This is when all the asset holders of paper (um, that would be pensions, savers, etc) find out that their actual net worth is a big fat -0-.

Debt slaves are freed, the King or Strong Man is hailed as a savior for issuing the fateful decree, and the process begins anew. So it shall be written, so it shall be done. Just focus on the period afterward - that's where the game is heading.

Wed, 03/09/2011 - 13:41 | 1033434 spinone
spinone's picture

Agreed, but the TBTF banks and asset holders don't want their assets (debts) marked to 0.  They will fight tooth and nail to prevent it.  I think the subprime market in CDO's was a microcosm in 2007 of what is going on now (reading the big short right now)  there was a time when the mortgages were failing, but the banks who made the rules were not changing the value of the CDO's.  Suddenly, everyone realized what was going on, and it turned.  The banks should have all failed at that point, but were bailed out.  Now the banks make the rules on all their assets and solvency through regulatory largesse and ZIRP.  Nothing has changed, and the same people are still in charge.  There is no reason to believe the same thing isn't still going on, but at a larger scale.

Wed, 03/09/2011 - 14:09 | 1033523 centerline
centerline's picture

That is surely what is going on.  The ponzi is being propped up.  The lucky ones played thier role years and decades ago.  This group of criminals has the dubious distinction of being the group that actually gets to the experience the finale.  At some point it will be sharks eating sharks out in the open - and they know it.

But, the math is going to win in the end no matter what.  We are simply in the last lag of the parabolic curve before the whole thing collapses back onto itself, taking our current financial system with it.

The tough part is that when people realize thier pensions, entitlements, savings, etc. is worth nada, zip, zero, nothing... there will be civil unrest, panic, etc.  Lots of folks are going to go cold (or hot), hungry, sick - and quite frankly, not be around much longer I think.  And that is just based on the math being unsustainable.

Wed, 03/09/2011 - 13:48 | 1033457 scaleindependent
scaleindependent's picture




Who do  you think will end up being being the strong man? Will it be regional strong men? or just ONE, in the shadows,  to rule them all?

IMO: the last strong man standing will be the USA with a sinister force behind it, influencing it.


Wed, 03/09/2011 - 21:47 | 1034879 JethroBodien
JethroBodien's picture

Thy name is lucifer.


Wed, 03/09/2011 - 14:36 | 1033612 MachoMan
MachoMan's picture

How is this type of analysis suicidal from a self-preservation standpoint?  Discussion of day to day events is not mutually exclusive with preparing for the end game.  Ultimately, we're all faced with purchasing and preparation decisions...  while we need to be mindful that these need to be done before the SHTF, it also helps those with limited budget to time their decisions correctly...  And by these decisions I mean not only PM, food, ammo, et al hedges, but also social networks, developing personal knowledge of various trades, etc. 

For those of us with limited budgets, we have to doubly rely upon our ingenuity and ability to brainstorm.  Unfortunately, we have to attempt to time the market in certain regards...  It's not suicide, it's the fact of the situation we're in...  I truly wish it were different...

I think we're in agreement as to compounding interest...  and need to plan for the end game, whatever it may be, although I think we're probably in significant agreement on this as well...  but, some of us have to keep our ears to the ground and navigate minefields in the meantime...  just to have the possibility of implementing our plans for the end game.

Wed, 03/09/2011 - 15:36 | 1033809 destraht
destraht's picture

I have been diversifying lately. I am now working one or two days at my friends high end wine and spirits store. Its a little crazy because I have a computer science degree. I figure that it doesn't hurt my work though because it gets me on my feet and my energy level higher and it also lets me polish my social skills with the quick banter. I know that I won't be out of bread and butter with this job so that is nice. Also I have been learning how to bang out stupid blog websites because I can get paid doing it. Its not exactly engineering but it works.

Wed, 03/09/2011 - 13:39 | 1033425 perelmanfan
perelmanfan's picture

Machoman, you are a smart dude. I would only add that the best evidence QE will continue in perpetuity is that it has been going on since 1913. The Fed always swells the money supply, but backs off the accelerator now and then to keep its license from getting revoked.

Wed, 03/09/2011 - 14:34 | 1033598 Saxxon
Saxxon's picture

"The primary goal, at the present time, is to kick the can down the road as long as possible."

Isn't that the truth.  This has been the fallback game plan of the Western mandarins all along.

Our Magisters are crawling, hand-licking lapdogs and they deserve to be consigned to the dustbin of history.

Wed, 03/09/2011 - 11:28 | 1032993 Reptil
Reptil's picture


made sort of the same calculated guess. (FWTHIW)

Wed, 03/09/2011 - 11:58 | 1033098 Boston
Boston's picture

The most recent data suggest that on risk-off days, UST's still catch a bid. 

There's very little doubt, in my mind, that as the end of QE2 approaches, and risk-off starts, that UST's will also get bid up.

It happened in '08.  It happened in '10.  It will happen in '11.

Bill Gross can go $20 billion - $50 billion of Treasuries very quickly, and fairly easily, to take advantage of this move.


Wed, 03/09/2011 - 12:27 | 1033169 andy55
andy55's picture


The most recent data suggest that on risk-off days, UST's still catch a bid. 

They catch a bid...but in a backdrop that QE still has months+ ahead.  What about when that's no longer a given and UST coupons have to be paid with real (rather than Fed-generated) revenues?  There'll only be a bid for as long as the trend is still in tact, but as the reality sets in that the UST can't possibly move all the paper it needs to at these yields, yields will have to rise.   If the federal gov't made cuts to balance the budget ($1.5tn), the cyclic downdraft from that alone would bludgeon US GDP and cause incomes to plunge, causing tax revenues to crater, further dashing hopes that the US can possibly meet its unfunded future liabilities. Let's not forget that like 22-25% of all income earned comes from the government!


Wed, 03/09/2011 - 12:36 | 1033228 Boston
Boston's picture

When QE1 ended on 3/31/10, and yields began their multi-month down til the fall, there was no QE2 on the table.  In fact, there was a lot of talk of reducing the Fed's balance sheet faster than it otherwise would drop thru roll-offs.

Only after hints of QE2 were dropped in Jackson Hole in late August, and risk-off ebb with equities soaring, did yields begin to rise again (late October).

But longer term, everything you've laid out is no doubt true.  My bullish UST outlook is only a short term "safe harbor" reaction to the risk off phase we may enter as QE2 ebbs.


Wed, 03/09/2011 - 13:14 | 1033293 andy55
andy55's picture

Very solid point about the period starting after QE1 and your short term safe harbor thesis is very hard to oppose that's for sure. It's also easy to see commodities and equities selling off while this occurs (as we also saw during this period up to Jackson Hole).

So I wonder how long a repeat of that period could last. We should note that before Jackson Hole, China held around $1tn and by the end of June the Fed of course have bought (generated) a ghastly 800+ billion more dollars--I feel like that HAS to matter to UST demand. To that point, I keep wondering how much and how long it will take for prospective UST buyers just say "no".  Personally, I think the largest factor that keeps large funds buying UST paper is the simple fact that no large fund manager ever got fired for buying UST paper (which of course will all blow up in 6-24 months in my view).

Wed, 03/09/2011 - 10:32 | 1032759 Robot Traders Mom
Robot Traders Mom's picture

Max is actually right. A reserve currency (in fiat) cannot, theoretically default. They can devalue the currency, but as the reserve, they can print until they become worthless but not default. I mean this in relation to the treasury debt.

Wed, 03/09/2011 - 11:20 | 1032964 A_MacLaren
A_MacLaren's picture

How long would the so called reserve currency maintain that illusory reserve status if the digital printing presses were kicked up to warp 10?

Debt based Fiat cannot hold the reserve status over an infinite time period because of the interest payments and the requirement for continuous growth to meet interest plus principal, even on a rolling, non-repayment basis.

Relative to other Debt based Fiat, it may hold relative preference, but eventually all the debt based ponzimonium on the planet cannot refund and roll the ever increasing debt service and burden.

You can fool all of the people some of the time, but you cannot fool all of the people all of the time.

Wed, 03/09/2011 - 15:52 | 1033847 SME MOFO
SME MOFO's picture

"digital printing presses were kicked up to warp 10?"

This one goes to eleven...


Wed, 03/09/2011 - 11:39 | 1033038 OldTrooper
OldTrooper's picture

You want to quibble about whether debasing the currency is technically a default?

Here's a suggestion:  But everything you have into US Gubermint paper and, when they pay you back with a semi-load of trash (formerly known as FRNs), let me know if you don't feel violated.

Some things, no matter how you re-define them are what they are.  Having a "unilateral-involuntary-boyfriend" is still going to feel like rape.

Wed, 03/09/2011 - 14:21 | 1033562 Robot Traders Mom
Robot Traders Mom's picture

I agree with you completely. Max had said something about being certain that there will be a lot of inflation but no US Tsy default and someone responded by saying he can't be certain and US may default. Max was right, it will be a default via a currency devaluation, but not an outright refusal to pay.

Wed, 03/09/2011 - 13:43 | 1033444 spinone
spinone's picture

The mechanics of the currency are broken now.  If a debt based currency is debt-saturated, its broken.  The engine is running and revving, but the transmission is stuck in neutral. The government can only create new debt for so long in a contracting economy. 

Wed, 03/09/2011 - 10:22 | 1032719 centerline
centerline's picture

In order for the Fed to pass the blame for what happens soon enough down the road (currency crisis) or provide the impetus for a move towards a NWO, it might be reasonable to assume that a taste of real deflation will motivate the politicians to scream out loud for more monetization.  Of course, they can blame it on oil now - so the timing is perfect.  Then the Fed can crank up the printing presses once again and claim that they are being told by our leaders to do so.

Bill Gross in my opinion is painting a picture of short-term deflation.  Then of course, when the herd panics, he will snatch everything back up on the cheap right into QE3.0.

QE3.0, 4.0, 5.0, ... whatever anyone wants to call it is inevitable.  If they stop printing, the game is over.  The rest of this is just posturing, misdirection, etc.

Wed, 03/09/2011 - 10:27 | 1032735 Misean
Misean's picture

I really don't think these guys are all NWO super-genius masters of the friggin universe. You'd need something to show Gross's selling in JANUARY and previous.

Wed, 03/09/2011 - 10:53 | 1032861 centerline
centerline's picture

Agreed.  NWO versus currency crisis...  I'm going with currency crisis myself.  Seems to me there too many peckerheads jockying for control of resources for a NWO on any significant scale.  Maybe regional NWO's at some point.  But, a quantuum leap from where we are now... nto giving it a higher probablility than a currency crisis borne of all the same vile human characteristics that have driven us for millenia.

Wed, 03/09/2011 - 11:16 | 1032943 MachoMan
MachoMan's picture

There will be no torch passing event.  The NWO died when china flipped the bird at copenhagen.  The world is all in on the dollar.  [if you want to look at it a different way, we already have a world currency and police force/dictator].

Wed, 03/09/2011 - 14:14 | 1033537 centerline
centerline's picture

Funny.  And scary.  This is the stuff that makes me want to sit in the corner and rock back and forth for a few hours each day.  When the SHTF here, it is going to be fugly (yup, got to use the f+ugly on that one).

Wed, 03/09/2011 - 10:36 | 1032767 r101958
r101958's picture

you mean 'continue' all out printing?

Wed, 03/09/2011 - 10:48 | 1032822 centerline
centerline's picture

LOL.  Actually, it is game over either way.  But to stop printing would violate the psychology of what we are up against and kill the banking system in short order.

I am not a big NWO believer versus the currency crisis when talking about some sort binary set of possible results.  I dont give these guys that much credit considering the complexity of the global systems.  I think rather a form(s) of NWO would possible arise from the ashes of a currency crisis though.

Wed, 03/09/2011 - 10:23 | 1032726 zaknick
zaknick's picture

There is a faction that is concerned with the risk of losing WRC status if QEIII (and rightly so). There is a desperate gambit coming up in order to place economic fraud issues in the background and to replace them with the NWO.


Wed, 03/09/2011 - 10:13 | 1032677 Chris Jusset
Chris Jusset's picture

Misean wrote:

Without QE3 auctions will fail, no? This is somewhat disconcerting.

QE2 is turning out to be a total disaster (esp. rampant commodities inflation).  Even though Banana Ben really, really, really, really wants QE3 ... it might prove to be too costly, and even Helicopter Ben's tiny pea brain will realize that QE3 would make things worse.

Wed, 03/09/2011 - 10:25 | 1032733 tmosley
tmosley's picture

If that is really true, prepare for crushing deflation, and a possible halt of commerce in the US.

This is disconcerting, and contrary to my plans.  If I can get some confirmation that this is real, I am going to shift some of my assets (say 10%) from silver to gold, and move to 5% the USD (for the firesales that are sure to follow).

I'm not sure that I am convinced about the end of QE3.  I'm thinking more along the lines of "China is about to dump treasuries for reals", which would be too much for the Fed to absorb quickly, even with QE3 going.

Wed, 03/09/2011 - 10:40 | 1032785 Glass Steagall
Glass Steagall's picture

I’m leaning towards your school of thought on this one, tmos. If it’s true, it smells like a deflationary ‘tell’. TPTB may be antsy about commod prices going runaway, ME turmoil, etc. Maybe this is their version of a pressure relief valve..

Wed, 03/09/2011 - 10:48 | 1032829 tmosley
tmosley's picture

I don't know.  The more I think about it, the more I think he has information that China is preparing to dump treasuries onto the market.

Owing this possibility, I would hold no more than 5% USD in my portfolio.

If the Fed did refrain from QE3, that will be less like a pressure relief valve than fixing a leaking pipe by submerging the house in deep enough water that the pressure is equalized.  We might stop the leaking inflation, but we'd drown in our debt.

Wed, 03/09/2011 - 11:00 | 1032884 Glass Steagall
Glass Steagall's picture

So Pimco/Fed signals the end of QE <wink>, commods retreat, Pimco/Fed buy the dip and blowout the ‘crash JPM’ crowd, then blam-o, intro QE3 and ride the rocket to infinity on commods???

It’s nuts and why I’ve bowed outta here for a while. I just can’t keep up.

Wed, 03/09/2011 - 11:04 | 1032902 Tortfeasor
Tortfeasor's picture

Couldn't this be going the other way?  Yesterday, I postulated that one of the reasons Treasury has been (rumored to be) selling more debt than strictly needed to finance was that QE2 would end, but Treasury would at that point have built up a smallish cushion of cash to avoid having to immediately start QE3.  

With this news, don't we have a ready and waiting Buyer of Size(tm-Turd) to help absorb the post QE2 bonds?  PIMCO could just be keeping powder dry under orders from above, so that an insta-collapse post QE2 doesn't happen.

Fits the theory.

Wed, 03/09/2011 - 11:21 | 1032963 MachoMan
MachoMan's picture

They get to keep the whole thing going by ambiguity.  They NEED ambiguity to continue the charade because once the trade becomes obvious, it's long since over.  We will have successive rounds of QE and austerity...  but, I believe we've hit a peak of outright, disclosed, in your face stimulus.  Any additional QEs will be subtle and outside MSM speak and/or progressively smaller.  Who knows how much withdrawal we can stand...  regardless, to continue printing at this juncture is maniacal...  and will act to prohibit them from kicking the can down the road further.

Wed, 03/09/2011 - 13:00 | 1033311 JR
JR's picture

IOW, they want a buyer of those bonds, after QE2 ends... making it look like the economy is stable and giving cover to the Fed.  Gross is too big not to be part of Fed plans.  He’s an instrument; i.e., he’s a bond man, now and forever.

Wed, 03/09/2011 - 11:30 | 1032919 Spalding_Smailes
Spalding_Smailes's picture

Do they dump treasuries into a dumpster or do they need to sell them ? They need return or they go bankrupt, no ... They funded those purchases with trillions in yuan debt.


What happens to the yuan if they dump ? Does this affect production cost for the manufacturing complex the country is built upon ? And when the manufacturers get hit, will they not fire workers at that point because the products they produce are getting priced out of the world marketplace .... This is the reason for the peg in the first place, giving the manufactures a competitive advantage, not sure this can change over a short period of time without causing massive unemployment in China, revolts and riots. 


Yuan exchange rate with the US Dollar • Chinese Yuans to 1 USD •    March 9, 2011 •   ( 6.568 )


Through most of its history, the value of the renminbi was pegged to the U.S. dollar. Initially, the exchange rate was unrealistically high. As China pursued its gradual transition from central planningto a free market economy, and increased its participation in foreign trade, the renminbi was devalued to increase the competitiveness of Chinese industry. The current official exchange rate is far lower than the real value of the renminbi (see below).

Since 2005, the renminbi exchange rate has been allowed to float in a narrow margin around a fixed base rate determined with reference to a basket of world currencies. The Chinese government has announced that it will gradually increase the flexibility of the exchange rate. China has initiated various pilot projects to "internationalize" the RMB in the hope of it becoming areserve currency over the long-term.[5]

Wed, 03/09/2011 - 11:30 | 1033001 Reptil
Reptil's picture

I don't think they're ready yet (that's a guess). They need more gold and silver.

Wed, 03/09/2011 - 13:46 | 1033454 tmosley
tmosley's picture

I've never seen a fund liquidate an entire particular sector of their investments to lock in return.  They liquidate a small portion to cover redemptions.  They don't move wholesale out of a sector unless they see a change coming down the pike, like commodity inflation forcing an end to QE, or China planning to dump bonds.

What happens to the Yuan if they dump?  Nothing.  They have just traded treasuries for dollars, which they can trade for anything else they like.  More than likely, the Fed would be the only buyer, and they would buy them with freshly printed dollars off the books.  It is not until they spend the dollars on real things that they weaken the dollar.  Of course, China holding a trillion dollars in cash is the financial equivalent of DEFCON 1.  

Wed, 03/09/2011 - 15:58 | 1033864 EscapeKey
EscapeKey's picture

They could be using it as a stick during negotiations with the US. Or they could be threatening to dump their lot, if the US invades Iran (where China have substantial investments in the oil sector).

Wed, 03/09/2011 - 11:03 | 1032901 zaknick
zaknick's picture

Yup, no likey the printing presses.

Prepare to meet your fate, slaves!

Wed, 03/09/2011 - 11:59 | 1033107 gabeh73
gabeh73's picture

My calculations show the lag time for this expansionary policy is normally 15-30 months...lets say things are much different this time and the lag time is only 5 months...that means worste case is that the big run in commodities ends in the summer...I don't see any dramatic Volcker or even housing bust 2006-8 level tightening occurring yet. I have my portfolio 20% in Grosses TRF, 10% physical bitches,65% gold/silver/oil equities. 5% random 1 beta stocks my wife plays in.

The crash that happened in commodities in summer of 08 should have been seen coming 100 hundred miles away if one was looking at the fed funds tightening and knock on real estate collapse as it occurred in slow motion over a 20 month period.

This new info doesn't change my opinions much...but I definitely already needed more physical.


Wed, 03/09/2011 - 10:44 | 1032799 SheepDog-One
SheepDog-One's picture

QE only thing holding markets up above S&P 666 level as well. Live by the sword die by the sword.

Wed, 03/09/2011 - 10:09 | 1032657 Mad Mad Woman
Mad Mad Woman's picture

Gee, I wonder what Ben told him?  LOL!  You're right.....time to panic!

Wed, 03/09/2011 - 10:29 | 1032736 Bub Ba
Bub Ba's picture

am wondering what Bill told Ben

Wed, 03/09/2011 - 10:39 | 1032776 kridkrid
kridkrid's picture

First 14 seconds of this video:


Wed, 03/09/2011 - 10:08 | 1032658 alien-IQ
alien-IQ's picture

oh my.....

Wed, 03/09/2011 - 10:10 | 1032660 slow_roast
slow_roast's picture

I'll just be over here eating gold and silver; wake me up when it's all over.

Wed, 03/09/2011 - 11:24 | 1032972 geminiRX
geminiRX's picture

This article would also imply that everything gets sold off in the ensuing chaos - including PM stocks and the metal itself. Likely very short lived pain - but still painful.

I still have a hard time believing in a crash in equities when there is not much confidence in the US dollar. Historically, when there is a market crash - the money flows somewhere....and it was typically into the US dollar.  I don't see that happening this time around....

Wed, 03/09/2011 - 10:09 | 1032661 Snidley Whipsnae
Snidley Whipsnae's picture

Will Bill buy back in when interest rates on treasuries are ~ 17%?

Sitting with $54 Billion of cash while the Fed is printing competeing cash isn's such a great investment plan. 

Wed, 03/09/2011 - 15:08 | 1032970 Zero Govt
Zero Govt's picture

Out of the frying pan into the Fire!

.....Gross is wisely getting out of US Govt debt and being is cash is wise too... but moving into equities with this new fund???

He looks like he's setting up for an inflationary scenario with a long equities, short Govt debt strategy whereas if he was a deflationist (like Moi) he'd be staying in cash and dumping the equity portfolio. So despite his shuffling of the pack I still think he's making a (strategic) mistake with equities... unless he's going big-time on the short side! 

Wed, 03/09/2011 - 10:11 | 1032662 Cdad
Cdad's picture it comes...the great betrayal...another one.  And the criminal syndicate known as Wall Street will once again say that they could not see it coming...even as they have been playing Flip that Bond for months.

When the day comes that average Joe finally figures all of this out, beyond being simply outraged at banker bonuses, that will be the day that the Republic will face its greatest test in decades...and maybe a century.

Wed, 03/09/2011 - 10:32 | 1032762 sunny
sunny's picture

When the day comes that average Joe finally figures all of this out,

The average Joe who believes in Intelligent Design, never heard of Peak Oil, had two Suburbans and has a book shelf full of reloading manuals?  Don't plan on the masses rising up in rightful indignation, they can barely read beyond NASCAR programs.  Average Joe still thinks that Republicrats and Democans will save the day.


Wed, 03/09/2011 - 10:41 | 1032790 kridkrid
kridkrid's picture

Yup... Everyone lives in a fantasy... those who live in it and those of us waiting for the day that changes.

Wed, 03/09/2011 - 10:49 | 1032833 ColonelCooper
ColonelCooper's picture

My, aren't we an intellectual bitch this morning.

Wed, 03/09/2011 - 11:10 | 1032928 zaknick
zaknick's picture

Nascar much?


Do NOT follow this link or you will be banned from the site!