Gross' Compares Bondholders To Slowly Boiling Frogs, Explains How PIMCO Is Profitable Despite Treasury Short Position

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Wed, 06/01/2011 - 08:35 | 1328006 francis_sawyer
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Wed, 06/01/2011 - 08:53 | 1328065 BlackholeDivestment
Wed, 06/01/2011 - 10:46 | 1328560 Mountainview
Mountainview's picture

I feel some heat at an unusual place...

Wed, 06/01/2011 - 08:35 | 1328010 oogs66
oogs66's picture

If Bill keeps this up he may be kicked off Ben's inside information speed dial.

Wed, 06/01/2011 - 08:36 | 1328015 oh_bama
oh_bama's picture

Well it seems bill's relationship with the fed is not getting anywhere..

he used to be a friend of most of the fed people


Wed, 06/01/2011 - 08:38 | 1328020 Tense INDIAN
Wed, 06/01/2011 - 08:37 | 1328025 Long-John-Silver
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I've put Fried Frog Legs on tonight's menu. Side Salad and Hush Puppies along with gallons of Sweat Tea will round it out. A 1oz Silver round will take care of the meal and gratuity. Dress casually as always.

Wed, 06/01/2011 - 08:46 | 1328041 DavidC
DavidC's picture

Do you actually MEAN Sweat Tea? Yuck!!!


Wed, 06/01/2011 - 08:48 | 1328060 Long-John-Silver
Long-John-Silver's picture

If you've ever been to a Southern Fish or Frog fry after Memorial Day you would understand why we call it Sweat Tea. You drink the Tea and it shows up on your forehead immediately. 

Wed, 06/01/2011 - 18:47 | 1330660 DavidC
DavidC's picture

Ah! Thanks for the clarification Long-John.



Wed, 06/01/2011 - 08:40 | 1328027 trav7777
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why doesn't his bitch ass actually go and do something PRODUCTIVE with the funds instead of sitting around whining for free yield through paper shenanigans.

Gross should really try to go EARN that yield.

Wed, 06/01/2011 - 08:49 | 1328052 Bob
Bob's picture

He's a victim of all that repression, it sounds like. 

Wed, 06/01/2011 - 10:16 | 1328377 4shzl
4shzl's picture

Gross "earns" his keep by LYING: he trash-talks Treasuries while PimPco's traders accumulate zero-coupon 30yrs.  LYING pays very, very well.

Wed, 06/01/2011 - 08:43 | 1328032 TooBearish
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Gross is trading with out a stop which is hubris of the first degree- his short in the 5yr note futures is more than 2points against him - its gunna be awesome when he flips position at 1.50 calling for 1.25 5yr yield.....

Wed, 06/01/2011 - 08:50 | 1328053 Boston
Boston's picture

That's exactly what I was thinking he might do!  As I was loading up at 2.0%, I was thinking of the catalysts that could ultimately drive it down to even 1.0% (near last fall's lows).

And a Bill Gross flip flop is on my list of possibilities.

He really blew it on this one!


Wed, 06/01/2011 - 08:46 | 1328054 HpDeskjet
HpDeskjet's picture

Yep, without QE3 (at least for a month or 5-6), the government will be forced to cut spending => both inflation and growth will drop fast. Holding bonds for the next few months is not stupid... Longer term (if the printing presses are started again) Gross can be right

Wed, 06/01/2011 - 08:42 | 1328039 Boston
Boston's picture

Thanks Bill.

As soon as the 10 year crashes through 2.5% (3.0% now), I'll take up your advice and exit (or fully hedge) my long position (which is 50%+ of the portfolio).

In the meantime, I'm enjoying the ride.....which began at 3.6%.

Wed, 06/01/2011 - 09:00 | 1328040 Mercury
Mercury's picture

Whatta we gonna do about it? “Frogs of the world unite,” as Lenin might have said" and urges bondholders to be properly compensated for their risk by switching out of "rich" fixed rate into "cheap" floating rate exposure.

Yes but a "risk off" trade triggered by the end of QE2 (and articulated yesterday on ZH) could drive even more funds into (fixed rate) Treasuries which would push yields even lower (and prices higher).

A few different ways this could break in the near/medium term even though there is probably only one end game...

Wed, 06/01/2011 - 08:50 | 1328055 bigwavedave
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i've commented before here on ZH about how PIMCO moves their exposure. They are a like a big tanker negotiating a storm. BG himself is fond of sailing analogies. They are making good money in all their funds. They are not short much of anything. Remember that all boats need to sail into the wind. That is where the traction is. I'm of the opionion that BG is bang on. They are a smart consensus group of thinkers and dont change tack often. They have to be early as I have said before because they are BIG. Short? They are short the USA not net short anything.

Wed, 06/01/2011 - 09:16 | 1328111 topcallingtroll
topcallingtroll's picture

You should spend more time in a sailboat.

Running with the wind is the fastest. Sailing tight sheets close hauled into the wind is slow torturous, and gives you a headache and a pounding, not the good kind.

But Bill is definitely sailing into the wind. Maybe the hard slow way will be the right way in the end.

Wed, 06/01/2011 - 09:45 | 1328251 disabledvet
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Wed, 06/01/2011 - 09:19 | 1328133 TooBearish
TooBearish's picture

Really - so how do you explain the -650k institutional short in FV note futures?

Wed, 06/01/2011 - 08:49 | 1328062 monopoly
monopoly's picture

I think he will win. Just taking some time. Nice ADP report.

Wed, 06/01/2011 - 08:55 | 1328075 Downtoolong
Downtoolong's picture

God I hate it when I find out I’ve been thinking like Bill Gross, especially since most of my moves come from my gut and not the infinite dissection of bond value and rate minutia he gets into. I’ve been shifting out of my total bond fund (mostly treasuries) into short-term corporate bonds for six months now, anticipating the price collapse in treasuries that he is talking about. But, thanks for the heads up Bill, better late than never.

Wed, 06/01/2011 - 08:58 | 1328077 Caviar Emptor
Caviar Emptor's picture

Frog went a courtin' and he did ride, uh-huh
Frog went a courtin' and he did ride, uh-huh
Frog went a courtin' and he did ride
With a sword and a pistol by his side, uh-huh uh-huh uh-hu

Wed, 06/01/2011 - 08:59 | 1328082 topcallingtroll
topcallingtroll's picture

You populists and anti-rich ought to agree with this.

Somebody is going to lose during this rebalancing.

Do you prefer to risk bondholder returns not keeping up with inflation, or do you prefer increasing unemployment and general suffering of poor people in a depression.

People in debt and the bottom 50 percent in general fare worse under depression than mild inflation. Inflating out of ones problems makes bondholders and savers ( the rich) pay.

Wed, 06/01/2011 - 09:16 | 1328123 HpDeskjet
HpDeskjet's picture

You are right, but the "inflation-route" has been tried the last 2 years and it failed miserably... It only accomplished oil prices at $100+ that kill "the recovery" while U6-unemployment did not improve at all.

US has just to bite the bullet of reducing government spending, cutting entitlements, cutting medicare etc. and face the accompanying depression that has been kicked down the road 2 more years

Wed, 06/01/2011 - 09:18 | 1328132 topcallingtroll
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You are probably in the top half of the income scale and dont have significant debt.

Wed, 06/01/2011 - 10:59 | 1328631 MachoMan
MachoMan's picture

Even in your inflationary "less worse death" scenario, wages are stagnant...  so that debt isn't getting repaid anyway. 

Wed, 06/01/2011 - 09:53 | 1328270 BobPaulson
BobPaulson's picture

I sortof thought the can kicking has been more like 30 years.

Wed, 06/01/2011 - 11:03 | 1328659 MachoMan
MachoMan's picture

Probably more than that (since our last collapse), but less obvious...  Hopefully all the pressure built up in the meantime doesn't cause an exponential increase in the devestation of collapse...   

Wed, 06/01/2011 - 09:01 | 1328083 Life of Illusion
Life of Illusion's picture


Now he wants to calm nerves and say it’s a process not an event.

Too bad politically he could not purchase gold when it was below 1k or other hard assets.

In 5 years he will act like his call was spot on. Gold will be over 3k oz.


Wed, 06/01/2011 - 09:20 | 1328135 buzzsaw99
buzzsaw99's picture

He finished with the pimpco rendition of It Ain't Easy Being Green.

Wed, 06/01/2011 - 09:30 | 1328179 BobPaulson
BobPaulson's picture

Thanks for these kinds of posts. This is where I learn stuff on ZH.

Wed, 06/01/2011 - 09:38 | 1328195 casey13
casey13's picture

It seems like many want to milk the last few percentage points of this move before exiting. Bill Gross has a huge fund and can not be nimble so he has exited a little early. He is not wrong and playing this move for a little more can be a dangerous game when you are dependant on governments especially foreign ones for support. A currency crisis is almost inevitable at some point when it starts it will be fast and the bond exit funnel will be very small.

Wed, 06/01/2011 - 10:15 | 1328392 blindman
blindman's picture

London Banker
"In October 2008 the global financial markets crashed. The story in the media is
that it was a panic caused by the insolvency of Lehman Brothers. This is not the truth -
or at least not all of it. The crash actually followed a $2 trillion margin call by these
four global banks on their prime brokerage clients and OTC counterparties - effectively a
30 per cent increase in required margin. It was the margin call that forced liquidation
of global portfolios of all asset classes - and particularly the high quality, most
liquid asset classes."
comment and links.....
leverage margin call doomsday opaque
derivatives.. - paper scam. ongoing
dr. strangelove written all over it.
Max Keiser NAPK???= PEY?O TPA?Z? (drugs, banks
and the Crisis, Greek subs)
According to the 2rd qtr. OCC Derivative Report, the 5 largest holders of derivatives
(commercial banks) hold 97% of all derivatives.
There is still over $1000 TRILLION in bad paper sitting out there according to the Bank
of International settlements!
November 8th, 2009
The Doomsday Machine in Dr. Strangelove
all right, this is too much information.
i couldn't easily find the european exposure/participation in the derivative deal.
or london but it is probably substantially likewise fictitious?
"the whole point of a doomsday machine is lost if you keep it a secret
why didn't you tell the world, ey.?" dr. strangelove.

Wed, 06/01/2011 - 18:24 | 1330584 Anonymouse
Anonymouse's picture

There was this other frog who instead of being tossed into a pot of hot water was left to cool its heels in a pitcher of cold milk. Unable to jump out, he churned and churned

A Chritopher Walken classic:




Wed, 06/01/2011 - 19:26 | 1330768 unum mountaineer
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Long bond over dxy...thats easy to see. Debasement of the dollar is so visible

Wed, 06/01/2011 - 19:26 | 1330769 unum mountaineer
unum mountaineer's picture

Long bond over dxy...thats easy to see. Debasement of the dollar is so visible

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