Geithner Vs Gross Round 2: Is The Latest "Market Normalization" Proposal By The Treasury A Warning Shot Fired Straight At Alarmist PIMCO?

Tyler Durden's picture

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Silver Bug's picture

Bill Gross has become the only vocal bond vigilantes, in a time when we desperately need them. Now Gross does have a tendency and a history to talk his books. Now that is much better than Tiny Tim's history, which consist of blatant lies, and nothing else.

Rikki-Tikki-Tavi's picture

Perhaps the issue of mistrust can be addressed by changing the comp package of Timmy, Bernankrupt and all the regional FED presidents to 90% of salary paid in long dated US treasuries vested for 5 years?

Anonymouse's picture

This is a new issue to me.  Is this a penalty above the make-whole amount?  There is a make-whole provision for a broken trade, isn't there?  There should be

michigan independant's picture

So the Guy is walking the turf smacking heads. Better deal than the ruble or renminbi or a news paper wrapping a fish sent to the loved ones.

to promptly eradicate this one side effect of its endless meddling, a far more exciting possibility is that the Treasury has now taken a direct jab at PIMCO, which is certainly Tim Geithner's way of telling Gross to shut up

In the long run there is no unpopular Government but they can be nasty along the way. The SWF Inc. will print it appears.

lolmao500's picture

In other news, this is the week they have to raise the debt ceiling.

Fail2Deliver's picture

The .gov did the same thing when the banks were getting hammeredd by short sellers a few years ago; they outlawed naked short selling. Only for the banks mind you. Game was still on for the poor other companys not so well connected.

Fed needs BUYERS of these bonds. China must have told them to go to hell. Japan surely isn't interested. The Fed will now outlaw all short-selling of .gov bonds. Thus eliminating the Fed competition of selling.

Ned Zeppelin's picture

I would like to hear a layman's version of this story. 

Seer's picture

Too many holes in the dyke, not enough fingers...

The big fish are starting to realize that their feeding habits are colliding.

Buffett/Sokol skirmish small potatoes...

PIMCO merges with Fed (or Fed merges with PIMCO- no idea which way it'll go, but since there is now only consolidation possible [growth is dead], consolidation WILL happen).

ebworthen's picture


Turf war between punks who beat up seniors for their SS checks and shake kids down for their lunch money.


Piranhanoia's picture

After the fact guess?

"You mean in the old days there were places people could, what did you call it, shop?, at different places.  what was that like gramps?

Ura Bonehead's picture

I’ll play along….  The layman’s version is:


Omega Theta Pi House (TMPG) has had the run of campus with impunity and with (unofficial) endorsement of Dean Vernon Wormer (Geithner).  But, for his own reasons the elitist and smooth talking Omega member, Gregg Marmalard (Gross), develops a hint of morals (we assume) and, over a few beers, goes pubic and rats out the Dean and his ruinous ways to the press.


Well, this does not please Dead Wormer or the Omega order.  To seek order, the Dean orders Omega member and campus ROTC commander, Doug Neidermeyer, to shave Gregg’s head and cover his balls in hot sauce.  [Frats do this kind of stuff’]


The (unwritten) Epilogue:


But does this public act to silence dissidences deter the likes of Delta man, John “Bluto” Blutarsky (Tyler D)?  Heavens no!  He steps forward and gives an impassioned speech to rally his fellow Deltas (ZH-ers) to save the day.  Fellow Delta outcasts like Otter, Boon, Pinto, D-Day and Flounder build a rogue parade float into a fighting machine to wreak havoc on Dean Wormer’s annual homecoming parade.


But Gregg survives his ordeal with the help of the Delta boys, Katy and Boob live happily ever after, and Bluto runs off with the stuck-up Mandy Pepperidge (played by Meredith Whitney).


Hope this helps.  :)


“Seven years of college down the drain.”

Miles Kendig's picture


Here it is.  The major players in the servicing and formulation of MBS are busy conducting in depth and belated QC of the each underlying mortgage in each pool.  This process is to determine which mortgages are total junk, partial junk and those that can actually pass court muster.  With $$$ chasing yield these primary TBTF's are reworking pools of mortgages into severely junktified - newly spectacular super senior.  A side effect of this process, besides offloading all the junktified to yeild chasing suckers (echoes of 2005-2008 anyone?) is that there are quality golden opportunities presenting to both long & short the MBS space with heretofore drill down data unavailable to even the road kill known as the PMI's.  Since the former securities have yet to be fully stripped, reworked , pooled et al for proper due diligence by the buy side we have the "like structured" securities gaping hole just waiting for the butt plug of the "Big Boy Letter".  Since PIMCO is "managing" the feds holdings, but BAC, JPM et al are riding the crew to work extra hours on the Déjà Vu road show ( aka the contract strip joints adding a layer of deniability to the TBTF's while providing the ability to say "we don't rightly know for sure at present, but are looking at a variety of alternatives" yadda  yadda  yadda.  So the FRBNY and the TBAC decided to try and get PIMCO to not only suck up the longs on the newly made junktification, but pony up a 3% fee when the TBTF's fail to deliver the reworked crap, sprinkled with just enough Mezz +1 to keep it juicy for PIMCO to margin on speculation the fed will be forced to do another round of MBS QEX. 

THIS is the barrel of the action Ned.


michigan independant's picture

Thanks for the steering wheel on the topic. I assume some buckets will produce and I assume what we will get as the producing class. Again thank you.

The weighted-average maturity (WAM) of a passthrough MBS is the average of the maturities of the mortgages in the pool.

The weighted average coupon (WAC) of a passthrough MBS is the average of the coupons of the mortgages in the pool, weighted by their original balances at the issuance of the MBS.

I assume no (WAC) for the short list.

Convexity is a risk management figure, used similarly to the way 'gamma' is used in derivatives risks management; it is a number used to manage the market risk a bond portfolio is exposed to. If the combined convexity and duration of a trading book is high, so is the risk. However, if the combined convexity and duration are low, the book is hedged, and little money will be lost even if fairly substantial interest movements occur. (Parallel in the yield curve.)

I need help on that Elapsed Coupons old buddy ; )

Minsky broke down the process from stability to instability into three types of debt phases: hedge, speculative, Ponzi.

 The hedge phase describes that buyer’s cash flows cover interest and principal payments for borrowers who obtain a debt to buy an asset. This way, the debt is self-liquidating, fully hedged, so it is a stabilizing factor in this economic phase. The speculative phase is a step further on the risk side. In this phase, cash flows cover only interest payments, but not enough to amortize the principal.

In order to take over failing banks some good banks said they did NOT want to but behind closed doors you know how that goes as weighted. I guess a few hookers will be set on fire.

Theme song as they screw us again.

Who is that in the rear view mirror?

Seer's picture

Climbing aboard UFOs?

Hansel's picture

Is this any different than any other week for the last couple years?  OM

FunkyMonkeyBoy's picture

Who gives a s**t about about this theater.

America is coming to end, it's only a matter of when and how many are going to suffer and whether the perpetrators will get away with it again as history shows they always do. 

tickhound's picture

All right on schedule and by design.

RockyRacoon's picture

It appears to be the jockeying of prime positions on the first few lifeboats off the Titanic.   They could care less about the steerage passengers.   Women and children be damned.

Vlad Tepid's picture

The children in this analogy are being lashed together by TPTB and used as flotation devices.

NOTaREALmerican's picture

HA!   Good one.   The cynism level is unusually good today! 

kumquatsunite's picture

This really fries me; it is irresponsible and a disgrace to this country to say, "America is coming to an end." By your writing here, one can presume you are of a certain age...let's say above 35? If you have children, grandchildren, sisters, brothers, friends, and/or a spouse, to your spouting of prognostications that "America is coming to an end" belies every breath you take. If you actually think so, then saddle up and head for Mexico or wherever. As to me, I didn't participate in any of the ponzi/fraud/scwew our children, take for today like we are third worlders, live in a house that I can't afford, schemes.

The "perpetrators" of this are every single American: the liberals who decided that their self-aggrandizing munificence would drive every company that had to pay taxes offshore where they could offset their stolen, excessive, and redistributed to the mouth-breather, taxes via third world labor. Then there are the conservatives who failed to "conserve" anything, especially a sense of propriety and decency that would have kept this country's "pants" up (moral sense and fiscal sense go hand in hand). Instead, the liberals and the conservatives combined to serve up to our children a miasmic trough of financial calamity, sexual waste (both figuratively and literally...really...oh it's Sunday, no need to be explicit, even the animals haven't performed the kind of acts your children have been told are "normal" in the last decade) and overt acts of indecency that, by all accounts, should have ended careers: really: are women so stupid that flashing their bits is just another way to obtain publicity? Must men go on in the 21st century about "obtaining" a woman? Seriously? That sexual freedom has so worked. Not.

We will revert to the mean, meaning time to learn how to do things for yourself again. My brother always mowed the lawn with a push mower. My mother stood in a hot kitchen cooking Sunday fried chicken (no air conditioning!), and my sister worked as a dishwasher, and none of them complained about doing these things. We are being told we are too lazy to mow our own lawns and too stupid for our children to be given the slots in colleges and universities that we pay for as taxpayers, so engineers, doctors, and educated must be "inshored". Really, funny thought WE went to the moon. Thought WE created computers. Thought WE were the best medical system in the world (at least until affirmative action got ahold of the American Medical Association, and by the way, just who is it letting all those foreign docs practice at our hospitals? More than one-half the doctors at hospitals are now foreign; you can pull up the list of doctors on any hospital website and see who they are and where they are from. What is that about? Can you say foreign docs are more likely to pull the plug on the over-fifty crowd? Hmmmmm...

So, the mess is here and now it is time to clean it up. Here's the rules to start: Erase every tattoo...ohh painful. Too bad so sad. Eat with your mouth closed. STand up straight and sit up straighter. Children should be polite and say "Yes,mam and No, Sir." And above all, if you are an employee, do your job or get out. I don't need you wasting my time with sand bagging me while you are clicking the clock. America will be great again. So kiss China's cheap stuff goodbye and let's save this country! God Bless America and God Bless Donald Trump who is the ONLY guy who has said let's tell China to shove it! Tariffs! Tariffs! Tariffs! That'll bring the cost of gas down real fast.

i-dog's picture

That rant is nothing but a series of regurgitated propaganda ... ending with "Trump is the solution"? WTF?!!

Someone has laced your Geritol with serious mind-altering substances, or it is sending you blind.

unclebigs's picture

So far Gross is Losing His Ass shorting treasuries.  LMFAO!!!!!!!

buzzsaw99's picture

+1 suck it long tbt junkers.

Orly's picture

He never said he was short.  He said he sold them long.  In cash.

Boilermaker's picture

This two assholes are sitting together at Bernak's back yard deck having a top-shelf martini and laughing their asses off together.

abc123's picture

That's definitely "next-level" cynicism.  I like it.

dark pools of soros's picture

remember, PIMCO isn't risking any of Bill's cash - they could be the next Lehman to be sacrificed

DavidC's picture

I'd sooner trust Gross, who has his and his clients' money on the line, even if he does talk his own book, than an intellectual half-wit who won't even pay his taxes despite his high income.

Unravel? Good, let it, it might return the system to some semblance of reality and not hammer people who rely on interest/annuity income, and don't rely on inflation (in other words 90% of the population), to survive this almighty mess.


Gold 36000's picture

Very few people rely on interest income or any form of capital returns.  Most people are always in debt.  Hence inflation and soft money help the high end and the low  end.  It is always the preferred solution.  The small number of people who have self discipline and leave beneath their means are the ones punished.

Majority rule, eh?   Skittle?

Seer's picture

You think that Timmy doesn't have clients?  Sorry, but Timmy's clients are more substantial than Gross's.

As far as "relying" on interest/annuity income, you might want to look long and hard as to what this really means (making money w/o being productive, which, in essence, is the very thing that you're accusing the govt of doing).

DavidC's picture

So you're suggesting that responsible pensioners, who have saved into pension schemes so that they can live in retirement are making money without being productive, despite having been so (in most cases) for the majority of their working lives? I'm not talking of public sector, index linked pensions.


Seer's picture

So, you're suggesting that our children have to pay for this, even if it means their enslavement?

Listen, because I say things that aren't favorable (coated in skittles) doesn't mean that's the way that I want them to be.  It's the way things ARE!

Reality check: 2/3 of the world's population lives on $3/day or less.  These people aren't likely going to retire.  And, That's how it's been for the overwhelming majority of people throughout human history.  This entire notion of "retiring" was perpetuated by TPTB (and abetted by cheap energy) as one big Ponzi.

I've paid into the System.  And I do NOT expect to get anything out.  I recognize that I'm really only paying those who were in the Ponzi first, and that my energy is better spent concentrating on making my own future than in fighting the "injustices" that will be wrought by the failing Ponzi.

If you can explain how interest isn't a Ponzi then you might have a leg to stand on...

robobbob's picture


savings used to fund activities that actually produce a surplus are what built civilization. the problem is that favorable conditions tend to draw the swarms of parasitic locusts who are now eating several generations worth of stocks.

It is not interest per se that is bad, it is maladjusted investment whos end goal is obtaining interest at the expense of creating genuine surplus.

returns chasing returns for the sake of ever higher returns beyond what real productivity can support is the root cause of destruction.

retiring is theoretically possible when surpluses are incrementally stored to provide for future use. The problem is when inflation outstrips those provisions. Its even worse when the those provisions are intentionally being looted. For decades the people have been told to sacriface to fill to government graineries. Now the time is coming when they will be needed, and we're finding out the warehouses are empty.

That said, if tried to warn people for years. few listened.

Harlequin001's picture

The choice is stark. Do I pay into the state pension system and sacrifice my own future or do I walk and look after my myself in the future. This is the consequence if paying into a system that has no assets but is funded by taxation. 'How do I know that when I come to rely on it it will be able to pay?'

Welfare doesn't work, and more so when it is paid for by debt.

We can argue that pensioners provided something or nothing if you will, but the fact is they did not provide the benefits they need to provide this level of benefits now, which is where the fraud is perpetrated. This is a helluva time to find out you have no real retirement fund, but there it is...

You have no adequate retirement fund.

ebworthen's picture


Get the guillotines out of mothballs.

Versailles needs to be handed over to the people.

Rome needs to be sacked.

The heads of the elites need to roll.


Gold 36000's picture

It is time ebworthen.  Don't forget.  fifty percent gasoline.  Fifty percent styrofoam.  It is so sticky it will not come off of anything.  You now have cheap flame thrower material.  Use a three man sling shot.  Remember.

dark pools of soros's picture

can i use that to help start my pellet stove??  not too toxic?

Dr. Impossible's picture ..thats just wrong...anyhow there's 1 more household ingredient(and a lil dab will do ya) you could add to ensure that the fire couldn't even be approached to put it out, muchless extinguished....think about it...if your intent is to do area-of-effect damage....why would you limit it to the splash zone..anyhow, your mix just doesn't burn hot enough/long enough to be fun if your older then 14...AND IF IT AIN'T FUN...DON"T DO IT!!! your just gonna get yourself hurt before you even get out of your garage....shit..i'm gonna say it again DON'T DO IT..and again DON'T DO IT.

..remember Pattons' words... Sun Tsu...Yoda's

a better ploy..just stay nimble on your feet,and keep moving, DON'T WASTE RESOURCES...yet(you'll need them for when the dictators begin arriving in a few years) they'll scramble and neutralize themselves, as you can see, their leaderships confusion has already has left them in a position where they couldn't fight their way outa a wet paper bag...

Racer's picture

Please don't call them elites because they are the opposite of that...

they are leeches

treemagnet's picture

not yet - my greenhouse is just going up and the genset won't be hooked up for another month.....then let 'er rip!

Seer's picture

So much to do, so little time...

treemagnet's picture

you got that right - I've been spending alot of time at and learning loads of shit.  great place with alot more civility and courtesy....of course, this is fight club....

Seer's picture

Good that you're digging in the right places :-)  I didn't get exposed to Martenson until a long time after I'd seen the light: but, he's really good at presenting it all.

I'd offer that the best bit of wisdom is that one should look more to BE than at what others are or are not: spend energies on being what's right and let what's wrong take itself out of the game.

Yeah, I'm not a bit fan of fight club.  As I've noted on many occasions, I come here to see if people are getting "it."  And some of it is an attempt at conditioning (educating) folks in the hopes that they watch out for being programmed to scapegoat others (I've got a wife whose skin isn't white, and who is, at this time, only a "resident" to the US [though she hauls in income from outside the US]).

Have land... have water... have tractor... have financial position reasonably hedged (thanks to years of frugality [no inheritance, no lottery, no social-climber income)... garden is underway... animals coming.  Friends welcome.  Help and get fed, all else get lead...

Dr. Impossible's picture

"spend energies on being what's right and let what's wrong take itself out of the game"


your whole post isn't just wisdom...but genius in words...thats exactly how these battles will be won.

"And some of it is an attempt at conditioning (educating) folks in the hopes that they watch out for being programmed" 

KNOWLEDGE IS Seer...may be the biggest, badest fighter here, if you understand employing what you have spread in this post.