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Exclusive: Bill Gross Is Now Short US Debt, Hikes Cash To $73 Billion, An All Time Record

Tyler Durden's picture


A month ago, Zero Hedge first reported that Bill Gross had taken the stunning decision to bring his Treasury exposure from 12% to 0%: a move which many interpreted as just business, and not personal: after all Pimco had previously telegraphed its disgust with US paper, and was merely mitigating its exposure. This time, in another Zero Hedge first, we discover that it is no longer business for Bill - it has now become personal (and with an attendant cost of carry). In March, Pimco's flagship Total Return Fund (TRF) has now taken an active short position in US government debt: -3% on a Market Value basis (or $7.1 billion), and a whopping -18% on a Duration Weighted Exposure basis. And confirming just what PIMCO thinks of US-related paper is the fact that the world's largest "bond" fund now has cash, at a stunning $73 billion, or 31% of all assets, as its largest asset class on both a relative and absolute basis. We repeat: cash is more than PIMCO's holdings of Treasurys and Mortgage securities ($66 billion) combined. To paraphrase: in March PIMCO was dumping everything related to US rates (see chart below). This is the first net short position that PIMCO has had in Government-related debt since the Great Financial Crisis of 2008, and going positive in February of 2009 only after it became clear that the Fed would commence monetizing US debt one month later. This is the closest that Gross has come to making a political statement and is now without doubt putting his money where his mouth is. The only event that could possibly derail Gross' thinking is a huge market crash forcing a rush to Treasury safety. Alas, as has been made all too clear recently, US debt is no longer the safe haven it once was. Which begs the question: when will the TRF break out a "gold" asset holdings line item.

And another side effect of the firm's scramble away from debt and into cash is that the effective duration of TRF is now down to 3.6: only the second lowest since the 3.38 posted in December of 2008... when the world was on the verge of ending.

That Bill Gross is willing to risk a surge in redemptions (after all who would be wiling to pay PIMCO to manage a third of their assets in the form of supposedly devaluating cash) in order to make a statement about the credibility of the US government, and specifically the viability of its IOUs, is easily the only thing that the US government has to consider when evaluating the prospects for funding trillions and trillions of US deficits at "acceptable" rates in the absence of further quantitative easing by the Chairman.

If Gross is indeed right, something very wicked this way comes.



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Sun, 04/10/2011 - 14:42 | 1155363 Glasgow Gary
Glasgow Gary's picture

Hatha yoga on the beach at dawn. In the afternoon, shorting more of the 30 year bond.

Bring it on!


Sun, 04/10/2011 - 15:52 | 1155540 A L I E N
A L I E N's picture

Correct me if I'm wrong but aren't they basically predicting more of the same? That Benny must keep rates low and continue some form of QE.  Since QE2 commenced last fall treasuries have sold off and equities/commodities have soared anticipating surging inflation.  If they continued current policy treasuries would continue to sell off.  I would have to assume if there is no QE3 planned(yet) and rates were raised that money would leave commodities/equities and go into treasuries(opposite of now) with the FED put gone. 

Sun, 04/10/2011 - 20:43 | 1156191 LowProfile
LowProfile's picture

That would be correct, but I think the headline "Gross is short treasurys" is missing the bigger story:  Gross is taking a huge long bet on the USD.

And considering

The only event that could possibly derail Gross' thinking is a huge market crash forcing a rush to Treasury safety.

You could argue he's hedging that bet with a treasury short?  Hmm...

Mon, 04/11/2011 - 04:46 | 1156983 ZeroPower
ZeroPower's picture

Gross is taking a huge long bet on the USD.

Exactly, key point.

The author clearly did not miss this fact, but i propose its better to report about the 'apocalyptic' short UST fact as opposed to long USD.

Sun, 04/10/2011 - 23:23 | 1156641 macholatte
macholatte's picture

Unless entitlements are substantially reformed, the U.S. will likely default on its debt; not in conventional ways, but via inflation, currency devaluation and low to negative real interest rates.

-- Bill Gross April 2011

Sun, 04/10/2011 - 16:08 | 1155565 IQ 145
IQ 145's picture

 Exactly; the "US Treasury Bond" as the CME calls the long bond contract, made an absolutely beautiful double top in Sept. and Oct. 2010; and paid enormous profits to anyone who sold off the Oct. Top. This was a multi-year top, and this market is now a multi-year bear market; I couldn't agree with you more; sell the rallies, roll over your positions and allow plenty of time; these things are going back below 100; this contract can be a very significant money maker.

Sun, 04/10/2011 - 16:45 | 1155655 Djirk
Djirk's picture

rates going up.....still solid holdings in munis

Sun, 04/10/2011 - 18:06 | 1155777 New_Meat
New_Meat's picture

pick your muni poisons carefully D. - Ned

Sun, 04/10/2011 - 19:55 | 1156029 yipcarl
yipcarl's picture

You brag about holding Muni's?  Soon you'll be broke.  If you don't think they will default that debt in a heartbeat you're delusional. 

Sun, 04/10/2011 - 20:56 | 1156228 Johnny Lawrence
Johnny Lawrence's picture

You obviously don't understand the muni market.  Yes, you shouldn't buy them blindly in this environment.  But, there are some issuers who are extremely solid.  You just have to know what you're looking for.

Sun, 04/10/2011 - 21:27 | 1156309 Rwbrown72
Rwbrown72's picture

Everything in your spreadsheet assumes that everything in your spreadsheet is not a lie or a "partial" truth. Long hard assets and Tiger Blood!

Mon, 04/11/2011 - 04:48 | 1156985 ZeroPower
ZeroPower's picture


Gross holds a fair amount of munis as well, obvs not the shit ones as im sure his DD is second to none.

Wed, 05/18/2011 - 19:08 | 1289306 yipcarl
yipcarl's picture

Wow Johnny, thanks for the insight. You must 'sell' the shit.  

Mon, 04/11/2011 - 04:18 | 1156964 Djirk
Djirk's picture

I wasn't bragging about my positions just making an observation on the PIMCO holdings...pick you insults carefully

Sun, 04/10/2011 - 14:43 | 1155365 duncecap rack
duncecap rack's picture

Rate hike April 27

Sun, 04/10/2011 - 14:48 | 1155390 CPL
CPL's picture

Yup, double digits...any one want to call it.


I'm looking at 23.4%

Sun, 04/10/2011 - 15:04 | 1155410 duncecap rack
duncecap rack's picture

I know everybody thinks this is full of shit. I have made these sort of comments before and nobody thinks it has any possibility but I have read a lot of hawkish fed official comments recently. I just want ZH'rs to consider a possible shift. Maybe make a hedge against the possibility of a reversal of the dominant trend since Jackson hole. I know they are up to something and that is my best guess.

Sun, 04/10/2011 - 15:12 | 1155454 davepowers
davepowers's picture

it could happen.

after all, the ECB raised rates at practically the same moment Portugal was in que for a bailout.


Sun, 04/10/2011 - 15:19 | 1155469 Spigot
Spigot's picture

DC Rack,

When I first read the ZH article my first thought was "Where duh money GO..?" And I posited that they had to do something with duh cash, ya know? Not sure if, but may have suggested they were going short too...and here's ya go, dudes!

ECB rate hike may have been calculated to be a lagging push on inflation such as what the US Fed did in the 1970's to make the debt problems disolve. They lagged it all the way till they brought Volker in to tbe the 'bad cop'.

If so, then US Fed may also play that gambit. If they think they have sparked enough inflation, then they can chase inflation higher by being free with lending but also slowlty inching up rates as inflation starts to run. (IE - negative interest rates ramping inflation).

IMO they have to get the nominal debt to GDP's corrected. They do not want to let debt imploded (well maybe a little). What they want is to wash away the debt with "controlled inflation".

Whatever! Go POG, POS and POO!

Sun, 04/10/2011 - 18:11 | 1155782 New_Meat
New_Meat's picture


Christopher Robin also approves ;-)

- Ned

Sun, 04/10/2011 - 19:48 | 1155993 Bicycle Repairman
Bicycle Repairman's picture

The 1970s game.  When do we get our "Whip Inflation Now" buttons?

Sun, 04/10/2011 - 15:22 | 1155475 43 Steelie
43 Steelie's picture

I don't think ZH is dimissing a rate hike as a possibility. If there is one, it will be de minimis, superficial and won't do anything to quell the long-term issues with the US and the dollar.


Benny B is no Tall Paul Volcker...nor can he afford to be without massive deflation and default.

Sun, 04/10/2011 - 21:27 | 1156307 Bendromeda Strain
Bendromeda Strain's picture

JPMorgan swap book says "I don't think so, Ben"

Sun, 04/10/2011 - 15:25 | 1155490 tmosley
tmosley's picture

Problem is, there is ALWAYS a lot of hawkish talk.  It's just that there is never any hawkish action.

Sun, 04/10/2011 - 18:12 | 1155784 New_Meat
New_Meat's picture

don't cha' know

Sun, 04/10/2011 - 17:06 | 1155690 mdwagner
mdwagner's picture

Every quarter point adds how much to the federal budget (let alone state and local)?  How can the banks who all borrow short to lend long survive rate hikes?  I don't know how it's possible to hike rates without massive defaults.  I think they'd much rather allow massive inflation than defaults.  Inflation hurts the serfs a lot more than the feudal lords.  Defaults hurt the feudal lords a lot more than the serfs.

I really think it's one or the other.

Sun, 04/10/2011 - 17:34 | 1155740 CPL
CPL's picture

I wouldn't discount it.  So far the idea of shorting ANYTHING is a bad idea where the fed is concerned.


Fuckers are as slippery as a bar of prison soap.

Sun, 04/10/2011 - 21:35 | 1156321 FeralSerf
FeralSerf's picture

Unless/until Bill's cash hoard is in something like Swiss Francs, he's still not really short.  He's only betting that the yield curve will steepen.

It's difficult to short using USDs as the reference when the stock of USDs is increasing as fast as it is.  You might be right that the pig you've shorted is worth less in REAL money, but that doesn't mean it's worth less in USDs.  Too bad we can't use gold as the reference currency instead.

Sun, 04/10/2011 - 18:06 | 1155778 chubbar
chubbar's picture

They could absolutely raise the rates. Here we go, drumroll ....... 1/4 percent raise in rates! WOW! Whoop de fucking doo!

Inflation is 6+%, so the real rate of return is now what?  -5.5%??? That's a fucking good deal?? Who gives a rats ass? We are still sinking into the abyss. Those cocksuckers at the Federal Reserve think we should jump on that insult? Fuck them!

Let them raise rates up to 8%+ or so and I'll think about it. Give us a real rate of return and I'll leave the gold trade and go into bonds. Otherwise, shut the fuck up!

Since that would reveal the bankruptcy of the U.S. gov't in less than a day, I think I'll stay in gold. Let them play their meaningless fucking games with small incremental rate increases. Get back to me when it gets 'real'.

Bernanke, you suck cock!

Sun, 04/10/2011 - 22:09 | 1156459 cosmictrainwreck
cosmictrainwreck's picture

I like the drum-roll...nice touch

Mon, 04/11/2011 - 00:35 | 1156775 narnia
narnia's picture

At what fed funds rate does the $300 trillion interest rate swap market implode?

Sun, 04/10/2011 - 17:22 | 1155714 malek
malek's picture

Marc Faber put it succinctly: As long as rates remain negative by far in real terms (i.e. below inflation rate), any rate hike is meaningless.

Sun, 04/10/2011 - 14:43 | 1155366 props2009
props2009's picture

So has gross bought gold? 

Sun, 04/10/2011 - 15:02 | 1155421 Yield2Greatness
Yield2Greatness's picture

I'd bet on it.  And HUGE like!!!

Sun, 04/10/2011 - 15:03 | 1155425 Renfield
Renfield's picture

Of course. By now, who hasn't?

Sun, 04/10/2011 - 17:08 | 1155694 Al Gorerhythm
Al Gorerhythm's picture

All of those not on the "Who's Whom" list.

Sun, 04/10/2011 - 15:47 | 1155532 SWRichmond
SWRichmond's picture

I don't know about gold, but I'd bet the farm he'd already gotten his T short position before he released his op-ed slamming T's. 

Sun, 04/10/2011 - 21:11 | 1155624 Amish Hacker
Amish Hacker's picture

Consider what would happen if Mr. Gross did decide to make a move into gold. Let's say he took the $73 billion (and remember, this is just his cash---one-third of total assets) and decided to play in the Comex sandbox. Total open interest at the moment is just over 500,000 contracts. Call it half a million contracts of 100 ounces each, or 50 million ounces. At $1,475 gold, that works out to $73,750,000,000. In other words, if the Total Return Fund tried to put its cash holdings into the Comex, it would own the entire open interest.



Sun, 04/10/2011 - 21:36 | 1156332 FeralSerf
FeralSerf's picture

Gross and HSBC+JPM, the two counter-parties.  I like it.  Where's the popcorn?

Sun, 04/10/2011 - 14:50 | 1155394 ohbythebay
ohbythebay's picture

Why do you think the US will be here in a 1000 years ? Rome isn't. None of the EMPIRES exist that should have lasted "1000" years. The US will be lucky to be here as it is now in 10 years...The only way it will survive is through drastic change and WE DONT CHANGE.


We are seeing the fall of the US empire in its LATE stages...The barbarians are already PAST the gate and dining in the White House with the false promise keeper...

Find out who your local banking billionaire is and fall into line early as part of the new class of SERF...All hail King Chase ... they still get to bed our women before marriage ?



Sun, 04/10/2011 - 15:24 | 1155482 Ruffcut
Ruffcut's picture

You have to hand it too gross and his fed cronies, they are always a step ahead of us sheeple. There has to be an endgame plan for all these bankers that are so far up each one's ass.

How about this one. Continue pounding the T's causing a GS "controlled" panic and ole billy boy jumps in to save the day with a 20-30 discount to boot. Make a little coin on the shorts, be out before everyone else and make a good ole fashion killing, on the squeeze.

Sun, 04/10/2011 - 22:43 | 1156556 RockyRacoon
RockyRacoon's picture

You are saying he want to pull a Soros?  Not bad.

Sun, 04/10/2011 - 16:10 | 1155575 Dejean Splicer
Dejean Splicer's picture

I think he meant that israel will be here in 1000 yrs. Her puppet will be dust in the wind, the reference did not go unnoticed.

Sometime you must read between the lines.

Sun, 04/10/2011 - 18:15 | 1155795 chubbar
chubbar's picture

Any chance they'll want to bed our women AFTER marriage? I'm getting pretty frickin tired of the demands and would love a break!

Tue, 04/12/2011 - 09:31 | 1161265 House of Medici
House of Medici's picture


Tue, 04/12/2011 - 09:31 | 1161266 House of Medici
House of Medici's picture

delete dupe

Sun, 04/10/2011 - 21:43 | 1156355 Sofa King
Sofa King's picture

Dude, What the hell are you talking about "Rome isn't"?  I visited there a few months ago, sure the Colussium was closed due to a general strike...but that shit's still there.

Mon, 04/11/2011 - 09:56 | 1157487 Smu the Wonderhorse
Smu the Wonderhorse's picture

The Byzantine Empire lasted more than a thousand years. I once attended a lecture by a Byzantine scholar who said that the standard issue Byzantine coin was worth the same in the twelfth century as in the fourth. Now that's sound money.

Sun, 04/10/2011 - 14:50 | 1155395 Missing_Link
Missing_Link's picture

Bill Gross will get his ass handed over in a plate. 


The United States of America will still exist in a thousand years, and all debt maturities will be honoured.

Yes, the USA will still exist in a thousand years.  What on earth does that have to do with your other two ridiculous statements?

Sorry  ...  I'm only feeding a troll, aren't I  ...

Sun, 04/10/2011 - 14:58 | 1155415 Renfield
Renfield's picture

You are. But you will be forgiven if you just stroll back up there and hit the 'junk' button.

Best reply to a troll is a junk and move on with the real discussion...

Sun, 04/10/2011 - 15:46 | 1155527 Ruffcut
Ruffcut's picture

"Yes, the USA will still exist in a thousand years."

Maybe so, but hankywanker won't be. It's all good.

Sun, 04/10/2011 - 15:56 | 1155546 narapoiddyslexia
narapoiddyslexia's picture

Iceland will still be here in a thousand years. All debt maturities will not be honored.

Sun, 04/10/2011 - 19:38 | 1155951 cranky-old-geezer
cranky-old-geezer's picture

USA as we've known it is already gone.  USA exists in name only now.

Sun, 04/10/2011 - 23:50 | 1156699 hangemhigh
hangemhigh's picture
TO:  cranky-old-geezer
on Sun, 04/10/2011 - 19:38


"USA as we've known it is already gone.  USA exists in name only now."

cog...let me fix that for you.....

USA as we've known it is already gone.  USA exists only as a virtual hologram now.

Sun, 04/10/2011 - 15:02 | 1155429 duncecap rack
duncecap rack's picture

Yes Hamy is a parody of Harry. He doesn't believe any of what he says. I think he believes just the opposite of what he says but does these things to wind people up.

Sun, 04/10/2011 - 16:01 | 1155550 Hulk
Hulk's picture

For which he has been rewarded a prominent place on a zh teeshirt!

Sun, 04/10/2011 - 16:20 | 1155598 doggings
doggings's picture

yes but HamyWanger is only a joke troll, he's impersonating a real one who is sadly no longer with us, the great HarryWanger AAPL salesman and metals troll.

harry left in shame a while back after gold took out 1400 from 1200, when Harry thought it was going back to $800, so Hamy just says what Harry would have.


Sun, 04/10/2011 - 22:48 | 1156565 BobPaulson
BobPaulson's picture

I miss him so, with is absurd posts and stars and stripes icon.

Sun, 04/10/2011 - 18:11 | 1155786 River
River's picture

A thousand years from now there will be no debt, no money, no war.

A thousand years from now we will have evolved beyond the need for money as we understand it today.  All our needs will be met by replicators as boldy go where no one has gone before.  Haven't you seen Star Trek? Sheesh.

Sun, 04/10/2011 - 21:41 | 1156354 FeralSerf
FeralSerf's picture

All our needs will be met by bottomless ATM cards and very attractive (not bottomless) robots.

Sun, 04/10/2011 - 15:09 | 1155438 Pepe
Pepe's picture

1000 years is a long time......

Sun, 04/10/2011 - 15:28 | 1155493 tmosley
tmosley's picture

For some.

Free societies last as long and longer, so long as they remain free.

Sun, 04/10/2011 - 16:46 | 1155658 Rockfish
Rockfish's picture

A 1000 years, Please. In just just the last 200 years we've managed to contaminate our food suppy, burn through most of our fossil fuel, dumb down 90% of the population......... Lets see if how it goes for next 1000 days.

Sun, 04/10/2011 - 18:20 | 1155804 New_Meat
New_Meat's picture


"dumb down 90% of the population"

ya, I get kinda' excited about that.  Until I look at education levels of the "greatest generation" (average like ~8th grade).  And they played kinda' OK.

Burning through food for some stupid idea that consumes more oil than the result produces in energy, then subsidizing the corn production?  That is dumbing down of the top 1%.

1k days?  We b betting on the under.  'course, that is a winna' on the ovah.

- Ned

Sun, 04/10/2011 - 15:18 | 1155470 Lilguy
Lilguy's picture

"...a thousand years"....Well, maybe as the 4th Reich, but not as we know it. 

Sun, 04/10/2011 - 15:37 | 1155512 nkktwotwozero
nkktwotwozero's picture

>The United States of America will still exist in a thousand years, and all debt maturities will be honoured. 


If it happens.


"You're floor...You're floor is now clean." (robot vaccum)


Sun, 04/10/2011 - 17:46 | 1155755 CPL
CPL's picture

Well, it'll look like this though.

Sun, 04/10/2011 - 16:01 | 1155551 Long-John-Silver
Long-John-Silver's picture

So far 10 States have or are in the process of making Gold and Silver legal tender for the citizens of their State. This is quite simply betting that the Government and it's Fiat Dollars will crash.

Sun, 04/10/2011 - 18:19 | 1155807 New_Meat
New_Meat's picture

UT to my knowledge.  But I'm off for a date--what others?  Thanks, - Ned

Sun, 04/10/2011 - 17:25 | 1155697 cbxer55
cbxer55's picture

One more junk and its off to post history! ;-)

Update: its outta here!

Sun, 04/10/2011 - 18:21 | 1155814 New_Meat
New_Meat's picture

dang, I'm a junk virgin.  I'm saving myself for the right "opportunity".  Where the vanquished will vanish. - Ned

Sun, 04/10/2011 - 14:43 | 1155371 Twindrives
Twindrives's picture

The credibility of the U.S government, like that of it's president, is shit.

Sun, 04/10/2011 - 14:47 | 1155387 johngaltfla
johngaltfla's picture

Moody's and S&P have promised to start rating shit within the next 30 days. I'm sure of it.

Sun, 04/10/2011 - 15:10 | 1155447 Pepe
Pepe's picture


Sun, 04/10/2011 - 17:01 | 1155687 Haole
Haole's picture

One CAN eat shit...

Sun, 04/10/2011 - 14:44 | 1155375 Drag Racer
Drag Racer's picture

FED rate rise... (Made in China)

Sun, 04/10/2011 - 14:47 | 1155379 johngaltfla
johngaltfla's picture

He would not have done this without the inside tip off from the Fed. TSHTF in June.....Time to start looking at the triple bear equity ETFs again....

Sun, 04/10/2011 - 14:53 | 1155399 Glasgow Gary
Glasgow Gary's picture

You folks think this is a clue to a FED rate hike? That's funny. Besides, that would only get us closer to more inflation as more capital would flee the long end, and hide at the short end. At the short end, it would turn over more quickly--and also seek inflation protection.

No matter what the FED does now, they make it worse. Reason? Because it's going to get worse and no one can stop it. 



Sun, 04/10/2011 - 22:10 | 1156462 Bobbyrib
Bobbyrib's picture

+1. Raise rates=fucked, Keep rates same=fucked.

Mon, 04/11/2011 - 02:01 | 1156881 Mentaliusanything
Mentaliusanything's picture

But, But ----- Ben said he had "tools" that he could use if the need arose.

Thing is he painted himself into a corner and the tools are way out of reach.

Getting to them is going to be very messy for old Benny Boy.

Someone smells blood in the water and the sharks are circling to take a big bite out of Ben's ASS

Sun, 04/10/2011 - 14:56 | 1155406 Sudden Debt
Sudden Debt's picture

If the gov raises it's rates in the coming weeks/months which it will have to or the dollar is a gonner, Gold and Silver will start a real bull run.

And that is also bad for the gov.

I think you guys call that: "being between the hammer and the rock"

Actions cause consequences.


Sun, 04/10/2011 - 15:15 | 1155462 Muir
Muir's picture

"If the gov raises it's rates in the coming weeks/months which it will have to or the dollar is a gonner, Gold and Silver will start a real bull run."


Ehh..., you may want to rethink that one, angry munchkin.


Sun, 04/10/2011 - 15:30 | 1155501 MsCreant
MsCreant's picture

The two of your avatars together somehow, well, Muir, all I gotta say is ouch!

Sun, 04/10/2011 - 15:45 | 1155526 Muir
Muir's picture

You have a point.


(or two)

Sun, 04/10/2011 - 15:49 | 1155536 taraxias
taraxias's picture

++++ what a visual


Sun, 04/10/2011 - 16:38 | 1155637 slewie the pi-rat
slewie the pi-rat's picture

hi, MsC!  i saw a brief post last night wishing you and yours well and am unsure whether the "reason" was metaphorical, or not.  anyhow, whatever the "facts" +++++vibes from slewie to you and yours.

lol for the ouch, too. 

Sun, 04/10/2011 - 23:04 | 1156596 RockyRacoon
RockyRacoon's picture

Hey, Missy.  What's all this about an oak tree?  Hope you are safe and sound.

Sun, 04/10/2011 - 17:51 | 1155762 Teapot_Dome
Teapot_Dome's picture

higher rates lead to a larger deficit which lead to more QE.  right?  or will it increase bond demand so QE isn't necessary?



Sun, 04/10/2011 - 14:55 | 1155409 Oh regional Indian
Oh regional Indian's picture

That is a huge signal. And clearly what all his "hot-under'the-collar" anti-fed open letter were all about.

But how do you play it? It's been known that governments engineer head-fakes. Even of this magnitude. Bill Gross is not bigger than US Gov and he has lived off an inside the beltway relationship for 30 years of multi-hundred-billion-dollar success.

I'll go contrarian and say massive red-herring. They are desperately signalling a move they simply cannot afford to make. But many aces, all fake, still up the government's sleeve. All still part of the plan.

I would not bet money based on any such signals anymore. The rigging is obvious, the game is now out in the open.

Stay with the hard asset game. Floating crap can sink in a heart-beat.





Sun, 04/10/2011 - 15:02 | 1155428 cossack55
cossack55's picture

As a contrarian first, last and always, I concur. It is THE BIG GAME afterall, and TBG has only two rules: the rules always change and you always lose.

Sun, 04/10/2011 - 15:24 | 1155486 Eally Ucked
Eally Ucked's picture

There are to faces to that problem, first - can they afford rising interest rate with that huge debt and constant issuance of new debt coming on line, second - can they afford to destroy dollar when the whole US economy depends on imports to supply so called "service economy" and military complex. Probably they can go up with interest rate 0.25% or even .5% but that's just fake shot. They're just slaves of their own policies.

Sun, 04/10/2011 - 15:34 | 1155506 Oh regional Indian
Oh regional Indian's picture

Exactly Eally and coss above.

To fight the vicious cycle of compounding interest is a Sisyphus-ian task. And the geniuses at the hlm know it well.

Clearly crack up and boom is the known outcome. or war before it. A different kind of crak-up and boom that...but regardless.

End game signs for sure. The dollar is not intended to be saved.


Sun, 04/10/2011 - 15:46 | 1155528 blunderdog
blunderdog's picture

Given the way the guys inside the Beltway think, I'm wondering if there might not be some real effort to bust everything wide open before the election.  Despite the fact that it's been all downhill on the big picture since Obama took office, plenty of citizens haven't noticed, and the other guys haven't mounted any candidates yet.

That asshole could win a second term.

Sun, 04/10/2011 - 20:31 | 1156157 victor82
victor82's picture

Consider, though. You're the Fed Chair. You represent the banksters.

It's important to deflect the blame of the currency collapse onto the ambitious little ratfuck you propped up back in 2008. 

I think they want to find some Bushie Republican who will play ball for them once they junk Chicago Jesus.

Sun, 04/10/2011 - 20:46 | 1156197 blunderdog
blunderdog's picture

Yes, that's exactly my thinking.  In one way, there's no reason to want to replace Obama, as he's done everything big finance could possibly want, but I think his patrons must realize if social unrest actually becomes a problem because people are too frustrated, they'll need a different shill.

If the masses are driven to desperation by this time next year, they could easily issue the Presidency to Dimon or Blankfein or Bernanke himself, just to get rid of the current guy.  I suppose the question is whether anyone thinks we'll last long enough to enable a second Obama term.

Sun, 04/10/2011 - 23:09 | 1156613 RockyRacoon
RockyRacoon's picture

If things really get bad you think they're gonna put in a rich white guy?  One even remotely connected to the crooks who stirred up this mess?

Come on.  

The guy the restless masses would relate to is a sure thing for another term.

Mon, 04/11/2011 - 00:09 | 1156738 blunderdog
blunderdog's picture

Aw, it doesn't make a lick of difference what he looks like.  The guy who has the most money wins.  Same as every other aspect of life in Emetica.

Mon, 04/11/2011 - 10:14 | 1157558 RockyRacoon
RockyRacoon's picture

Seems like they keep pulling rabbits out of hats.  Next Prez to be a woman?

If we think the world was shocked to see Obama be elected, wait til we see the reaction to a lady POTUS.

Mon, 04/11/2011 - 10:47 | 1157707 ZeroPower
ZeroPower's picture


Sun, 04/10/2011 - 20:01 | 1156045 Founders Keeper
Founders Keeper's picture

[Clearly crack up and boom is the known outcome. or war before it. A different kind of...]---ORI

PIMCO's recent moves has the feel of a 2-part Plan A, with an added Plan B hedge (the hedge is convoluting Plan A). I haven't thought it through yet, but posts like yours helps me to flesh it out. Thanks ORI.

Two things for sure: One, there's a lot of money at stake; Two, money managers at this level work risk-free with rock-solid insider information.


Sun, 04/10/2011 - 23:44 | 1156683 Oh regional Indian
Oh regional Indian's picture

It's what it's about here, eh, Founders? The healthy exchange of ideas considered out there by most. Always happy to play.

And yes, they always have nested plans, the very basis of scenario planning exercises.

In this case though, everyone might be looking at some severe trimming of the hedges. ;-)


Mon, 04/11/2011 - 00:43 | 1156793 Founders Keeper
Founders Keeper's picture

[It's what it's about here, eh, Founders? The healthy exchange of ideas considered out there by most. Always happy to play.]---ORI

Gross is making big moves. Something big in the works.


Sun, 04/10/2011 - 15:22 | 1155474 Lilguy
Lilguy's picture

Do you suppose he's looking at a massive fiasco over the debt ceiling debate?  He really is way out there right now.

Sun, 04/10/2011 - 16:36 | 1155639 sschu
sschu's picture

the debt ceiling debate

This issue is now political, they passed an interim budget.  Next up is debt ceiling and big concessions will be extracted for votes.  I think this is where the statists make their stand. 

How it plays out is anyone's guess right now.


Sun, 04/10/2011 - 15:54 | 1155541 BorisTheBlade
BorisTheBlade's picture

Biggest bond fund turns a bond vigilante, definitely something's up. However, with so much cash and given investment policy of his funds, that's essentially the only game that Gross can be playing, Pimco cannot all over sudden go and buy all the gold available as it's simply not permitted by the prescribed asset allocation.

So, what's the signal in essence? It signals that the entire thing is getting out of hands: only two possible outcomes: rising inflation or the default, or one followed by the other. Whether Pimco has chosen the right moment or not, remains to be seen, but hard asset game is likely to be safe in both outcomes.

Sun, 04/10/2011 - 17:13 | 1155703 Old. No. 7
Sun, 04/10/2011 - 14:59 | 1155413 ml8ml8
ml8ml8's picture


I should just go look this up but don't have the time.  However, I wonder the extent which the TRF bylaws authorize them to hold a spec short position in treasuries.  Otherwise, this is going to have people in the mutual fund world talking about the limits of mutual fund positioning and when something like this amounts to a breach of fiduciary duty.  Remember, PIMCO’s not running a hedge fund, so the fund parameters must specifically authorize them to be short treasuries, something that would be unique to the Total Return Fund, because I can’t imagine many mutual funds that authorize that, at least on a net basis (basically a speculative short position versus a true hedge position).  

And think about all the cash they’ve got.  It’s not easy to park that much cash in investments that don’t involve at least indirect exposure to Treasuries (for example, through money market funds).  Perhaps that’s how PIMCO justifies holding short derivatives—as a hedge against their cash positions--meaning in essence they don't believe on a net basis they are short, just fully hedged.

Sun, 04/10/2011 - 15:11 | 1155446 ouchtouch
ouchtouch's picture

Fine print says anything of less than one year duration is cash equivalent, so he is holding T-bills most likely.

Sun, 04/10/2011 - 15:00 | 1155416 Yield2Greatness
Yield2Greatness's picture

My opinion of Bill Gross, just pegged the meter.  Guys got conviction and the nuts to put them out there.

Sun, 04/10/2011 - 15:01 | 1155417 DutchTreat
DutchTreat's picture


Sun, 04/10/2011 - 17:13 | 1155695 slewie the pi-rat
slewie the pi-rat's picture

lol.  can't argue w/ that, D_T, even if i hafta pay for it!

gross is simply being himself, and how tf he and el-erian get thru this, together, may say as much as anything, if one were actually to think about it. 

i know pimco holds vast sums of public employees' retirement funds.  i also know this TRF is designed for retirement accounts of individuals + (?).  but, i don't know how much pimco's public employees' trust monies are "invested" in TRF, if any, actually.  just ignorant, basically, ok? 

still, that doesn't reflect on what i'm gonna say, next:  tyler is damned right about possible exposure to a flight for safety due to (another) deflationary "down-turn" or other "reason" which the MSM might apply to markets, as daily propaganda of "why" everything MSM is soooo rational.

$73 Bil. is a shit-load of green stamps to be holding in inflationville.  i will not ass-u-me PM's;  nor lack of them.  who fukin cares, unless one is personally invested in this freak-zoo?

if these brainiacs don't like T-paper at these prices/returns, who could possibly blame them, for pete's sake!  BUT: if my math is right, we're talking 284,000 separate $250,000 "insured" accounts, or:  wherever they have this stash, the counterparty risk is astronomical, even if they are using it to start their own banksterism, imv!

if they actually have $71 Bil. in $50's in a vault or as cash, directly under their control, well, good for them!!!  even if "they change the MPC" these guys will get paid.

again, slewie has no facts about what these brainiacs are actually doing w/ their green stamps and the pieces on their chessboard, except what tyler puts up, here, which i'm willing to pretend is true, and to let the zH ideas flow, here, ok?

other than that, i could care less about these douchebags.


Sun, 04/10/2011 - 15:04 | 1155427 Dan The Man
Dan The Man's picture

just cuz I'm a nobody...but how do you 'short' debt?  isn't that like borrowing from a borrower?  And then returning the borrowed funds later at a reduced price?  where its...what...borrowed again?


sorry for my silly questions.  i just don't get the mechanics.

Sun, 04/10/2011 - 15:22 | 1155480 Spigot
Spigot's picture

yeah, its borrowing, selling, rebuying, returning. Hoping you get a positive cash balance out of the deal. And in regards to shorting debt you are hoping interest rates go UP.

Sun, 04/10/2011 - 16:19 | 1155594 IQ 145
IQ 145's picture

 How you short debt; You take a short position on US Treasury Bond contract on the CME; The Chicago Mercantile Exchange.

Sun, 04/10/2011 - 15:05 | 1155431 Lord Peter Pipsqueak
Lord Peter Pipsqueak's picture

I think Bill is taking QE3 as a given, and as ZH'ers know, the next crash, real or manipulated, is unikely to send scared money into treasuries.So the banksters can set up the next crash to panic congress into approving QEX if they like,but treasuries will only have one buyer - Brian Sack.Thus ensuring the further collapse of treauries and the dollar.


Sun, 04/10/2011 - 15:09 | 1155442 Twindrives
Twindrives's picture

Or forcing the take over of 401K plans to buy said Treasury bonds.

Sun, 04/10/2011 - 16:06 | 1155566 Long-John-Silver
Long-John-Silver's picture

The Argentina play. Our politicians will confiscate 401(k) and IRA accounts to "save" Social Security and the Sheeple will not only approve but will rejoice in the streets when it happens because the DOW will be below 5,000. 

Sun, 04/10/2011 - 15:13 | 1155456 Muir
Muir's picture

"QE3 as a given

"as ZH'ers know, the next crash, real or manipulated, is unikely to send scared money into treasuries."


maybe and



Reasonable assumption, worth making a bet if one is so inclined, bet the farm on it? I wouldn't.

Sun, 04/10/2011 - 17:20 | 1155717 slewie the pi-rat
slewie the pi-rat's picture

ok, muir, but check this out, ok? 

what of you & the pipsqueak are both failing to reckon for the poss. of the "crash" being caused by Treasuries?

many solid and cogent thinkers, mostly Austrian-econ, many of whom actually called the last "crash" are pointing to this "goobermint debt bubble" as one really big fukin mother of all bubbles!

please be advised.

Sun, 04/10/2011 - 18:04 | 1155774 Zombie Investor
Zombie Investor's picture

"So the banksters can set up the next crash to panic congress into approving QEX"

I don't think congress has a say.  Ben can do whatever he wants.

Sun, 04/10/2011 - 15:10 | 1155448 pops
pops's picture

Tin futures.

Folks are beginning to wake up and there's going to be a tinfoil shortage.

Sun, 04/10/2011 - 15:16 | 1155458 Spitzer
Spitzer's picture

Shorting US debt is like shorting a hole. You can get fucked.

Shorting financials, even Canadian financials is allot safer way to profit from rising interest rates. I am going short Canadian banks if Gross is short treasuries. The only reason the CAD housing bubble has not popped is because it has not seen rising rates.

Sun, 04/10/2011 - 16:10 | 1155573 narnia
narnia's picture

Long term analysis of this trade (if, in fact, they are shorting LT Treasuries):

Holding a short on a long term instrument is not where you want to be in a hyperinflationary environment.  It's an exercise in balancing comparative worthlessness.  For that reason, I would say PIMCO is betting the Fed & Treasury will choose tightening & default over printing into oblivion.  That will involve allowing banks to disintegrate, depositers to lose their money, pension fund custodians to cry foul, etc. This is a bad bet on the political will those respective institutions.

Short term analysis:

An aggressive rate fed funds rate hike could actually lower long term yields, since it may have an effect of countering pretty pervasive inflation expectations & positive economic indicators.  It would be bad news for the federal government, but any scenario is bad for this entity.

Sun, 04/10/2011 - 15:16 | 1155460 lunaticfringe
lunaticfringe's picture

That master of precious metals investing, Burl Ives, nails it.

Sun, 04/10/2011 - 15:18 | 1155464 Pepe
Pepe's picture

Toto, I don't think we are in Kansas anymore...............

Sun, 04/10/2011 - 15:23 | 1155478 Pepe
Pepe's picture

Profits set to suffer as commodity prices bite: Analysts expect companies to report slower growth in profits .....really??

Sun, 04/10/2011 - 15:26 | 1155492 RobotTrader
RobotTrader's picture

Flat out, this is the most bullish news I've ever heard for "Risk Assets".

No doubt, that huge cash horde is burning a hole in Gross' pocket.

The urge to "put that money to work" in something is going to be irresistable.

Just think of John Hussman, and how me must feel like a total jerk for being "fully hedged" during one of the greatest risk asset booms of our lifetime.

PIMCO's situation is going to be like Hussman's fund x1000.

No way Gross is going to risk embarrassment like Hussman or get ridiculed for underperformance.  Trust me, that guy is going to be buying something.

Maybe INTC or MRK, which now has a yield of 4%.

Maybe CSCO, which will probably be broken up and sold piecemeal.

Maybe WMT, which has been in the same trading range for over 10 years and is now 2x bigger and vastly more profitable than it was in 2000.

Maybe AAPL, which believe it or not, only has a PE ratio of 18, compared to a stock like BIDU, which has a PE of 94, or LULU with a PE of 53.

Maybe gold stocks, which are still horribly undervalued.

Maybe some bank stocks, like WFC, JPM and PNC.

Who knows?

I can guarantee you that if that guy starts to step into some of these names, the footprint will be obvious with huge volume up days.

Bill "Drawbridge" Gross didn't buy a $23 million mansion in Newport Beach and tear it down by being stupid and sitting on the sidelines with depreciating Fiatscos.

Sun, 04/10/2011 - 15:37 | 1155513 Muir
Muir's picture



Sun, 04/10/2011 - 16:03 | 1155554 Infinite QE
Infinite QE's picture

The putz should have bought silver. I am certain he's loaded that mansion with au/ag bought down the road at Tulving!

Sun, 04/10/2011 - 16:09 | 1155571 blindman
blindman's picture

buy high, sell low

Sun, 04/10/2011 - 16:21 | 1155596 FreedomGuy
FreedomGuy's picture

I agree. I don't know what he'll buy but I will buy his fund.

Sun, 04/10/2011 - 17:35 | 1155736 slewie the pi-rat
slewie the pi-rat's picture

lol!  (i hope)! 

maybe he will "invest" in "something"  for "return" as robo, you, and most in-between seem to think.

i dunno, but it does seem to me that gross may be into cash here for a reason:  whatever ROI he and el-e look at, it just is NOT worth the risk they perceive, right now.

actually, as i have saying to the zH "investors & gamblerz" since my first day here, in jan. '11, i honestly believe that this analysis is correct, right now, (ergo, get outa all paper and into PM's via US Mint-produced coins) my 45-yr. record of being almost always completely wrong about this hooey, notwithstanding...

Sun, 04/10/2011 - 18:33 | 1155832 blindman
blindman's picture

more accurate than even the most accurate atomic clock

is..... the broken clock.  twice a day.

i'm with you. 

Sun, 04/10/2011 - 19:50 | 1155995 percolator
percolator's picture

Sorry, Robo, Gross is not going to be buying any equities with that cash because the prospectus of TRF doesn't allow him too.


Sun, 04/10/2011 - 22:30 | 1156511 Richard Head
Richard Head's picture

Robo is a moron.  Why would anyone think a bond fund could buy stocks?  TRF is not a hedge fund.

Sun, 04/10/2011 - 15:29 | 1155497 Dan The Man
Sun, 04/10/2011 - 16:22 | 1155607 Miss Expectations
Miss Expectations's picture

Dan, In case you missed it...Martin's first missive since being released "Hello World"

Sun, 04/10/2011 - 20:24 | 1156132 WaterWings
WaterWings's picture

Thanks, Miss! I forget some of the better sources of info at times. Wonderful.

Sun, 04/10/2011 - 15:29 | 1155499 Bansters-in-my-...
Bansters-in-my- feces's picture

MMM...I thought "cash is trash" ? Does my Dollar, not get smaller ?

It's not to keep.

Thats for the sheep.

Why would he hold so much trash,I mean cash ?

Sun, 04/10/2011 - 17:33 | 1155735 Cash_is_Trash
Cash_is_Trash's picture

Perhaps he'll long the metals!

Sun, 04/10/2011 - 15:36 | 1155505 RobotTrader
RobotTrader's picture

By the way, Gross isn't alone.

Tons of guys are still sitting in cash on the sidelines, or even short the market after that sharp break in the SPX last month.

You have guys like Frank "I totally missed it" Barbera still hunkered into his bunker.

Tim "You have been warned" Wood and Richard Russell still crowing about the "mother of all tops".

Robert "Shampoo" McHuge who has been totally missing the last few months.

Quint Tatro who hasn't posted since his V-shaped reversal on March 27.

Permagloomers like Jim Willie CB who hasn't been heard from in months.

Even the usually bullish Puru Saxena is bearish on emerging markets.

Each and every one of these will be forced to buy something soon before we can have a market top.


Sun, 04/10/2011 - 15:41 | 1155517 Muir
Muir's picture

again Kudos Mr. Robo!


(Then again, if the unthinkable happens and there is no more QE(x) the cash could be king again.

The ultimate fuck you from the market.)


Sun, 04/10/2011 - 17:59 | 1155767 slewie the pi-rat
slewie the pi-rat's picture

if you and robo get a room for yer avatars, slewie would like to just watch, ok?  or, whatever yer little avatars desire, really!  lol.

all seriousness asnide, you morons don't actually think that the peeps  whom robo runs down for being "on the casino sidelines" don't have PM's do ya?  richard russell?  jim willie CB?  either one of these "loserz" could buy/sell this whole site in gold, and prob not even notice the change in the pile! 

you hot shot braniac "traders" who've learned to think you win by contolling risk and paying commissions and taxes on your compulsive churnings of,, well, you're old enuf and wise anuf for me to respect your decisions.  i certainly make mine, so why tf not, ok?

how tf can robo actually read and follow richard r. & jim w., the two with whom i am most familiar, and run them down? 

hubris comes to mind...

the idea that these guys have "missed" something is insane!

so there!

Sun, 04/10/2011 - 16:13 | 1155581 DoctoRx
DoctoRx's picture

Russell has just turned bullish.  He confesses he mistook the 2008-9 crash for a downturn in a structural bear.  Now he says sorry, it's all been a bull market straight along.  (Nothing to see hear . . .)  

Sun, 04/10/2011 - 16:24 | 1155612 IQ 145
IQ 145's picture

 Puru Saxena is an extremely intelligent dude with a huge education; I wouldn't be in a hurry to second guess him if I was you. What if we already had a market top?

Sun, 04/10/2011 - 16:58 | 1155680 DutchTreat
DutchTreat's picture

Saxena doesn't see a top yet:


Sun, 04/10/2011 - 19:10 | 1155901 DosZap
DosZap's picture


Jim Willie had a long article on Kitco, and Dollar Collapse, just a week or two ago.

Sun, 04/10/2011 - 20:31 | 1156163 WaterWings
WaterWings's picture

And if The Jackass is holding physical PMs, as we would imagine, he's doing aaaaaaalright!

I would send his stuff to Fs and Fy, "What was that?" --- Nothing but lulz when sheeple see the Matrix.

Jim Willie Apr 6th 2011

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