Pimco Offloads $40 Billion In Treasurys, As Frontrunning Fed Creates Billions Of Profits; Gross Does Not Expect QE 2 On Sept. 21; Pimco's "Fed Frontrunning" Tell Exposed

Tyler Durden's picture

As we pointed out last month, in June and July Pimco raised its allocation to government bonds to the highest ever, or 63% and 54% of its then-$239.3 billion Total Return Fund. As a reminder this is when the 10 year was well above 3%, and which proceeded to plunge in yield (soar in value) in August, as the sheer panic of QE Lite (and what it means for QE 2) enveloped the market, and when the Hindenburg Omen correctly predicted a 5% drop in stocks beginning in August 12. Stocks have now risen by over 7% in September, which was to be perfectly expected considering the market has seen $10 billion in redemptions (don't ask... bizarro), yet bonds have only gradually sold off, and as rumors of QE persist, the 10 Year continues to be just off its all time tights. This may change now that it has been made clear that Pimco sold over $40 billion in UST bonds in the month of August, just as bonds reached all time highs. Yet to get the sense of urgency behind Gross' earlier actions, consider that the bulk of the purchases were done on margin (pink line in chart below) as the fund borrowed $35 billion in June (and $29 billion June), using all the borrowed cash to fund Treasury purchases. And since the cash repo rate would have effectively wiped out the carry profits on the bonds, it is now blatantly obvious that Gross was very well aware there would be a massive capital appreciation in Treasuries beginning some time in July or August (cough QE Lite cough), and was actively buying all he could on margin in advance of the move. That's right, ladies and gents - we have just discovered Bill Gross' frontrunning "tell" - 1-2 months before every Fed intervention, he loads up the securuity that will benefit the most from any particular round of QE using borrowed cash. As the effective duration of the fund increased substantially in June and July it is obvious that Gross was buying up the long end of the curve, expecting a major flattening of the curve. Which, once QE Lite was announced, is precisely what happened. Incidentally, this purchasing on mega margin was repeated by Gross just once before: when Pimco's holdings of MBS surged from $80 billion to $113 billion in January 2009... just before Ben Bernanke announced QE1. What a series of lucky coincidences!!!

One wonders just how much insight into Ben Bernanke's actions the Newport Beach man had to take such a major gamble on the 30 Year at a time when it was already approaching record lows. Hopefully, one day when someone is combing through the ruins of Fashion Island's world's once largest credit fund and uncovers the phone logs, they will be kind enough to inquire how many calls to and from the Liberty 33 trading desk were made by the man with the 7 Bloomberg monitors.

Anyway, Gross' fund is now back to its boring old self: its TSY exposure is just 36% of total, as MBS has increased to the highest since September 2009, just before QE1 ended.

This time we have decided to frontrun Bill Gross, who is now frontrunning the Fed - Pimco has once again begun loading up on the security class that benefited the most from a "Big Bang" type of QE announcement - MBS. We expect the September announcement to show this class allocation to have grown to at least 25 (and much more if Gross is once again buying on margin).

And the fact that Gross did not use margin cash to bid up MBS means that the Fed will most certainly not announce QE2 next Tuesday. MS was correct in recanting. Whether this will be the case next month, as Gross looks at the November Fed meeting is unclear. If he does though, we will "guess" that his track record of predicting major Fed moves will move to 3 out of 3.

Pimco holdings by product type:

Pimco holdings by maturity and average fund duration:

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traderjoe's picture

The streets in DC use letters? - m'fer's!

nope-1004's picture

They're all a bunch of white collar criminal whores.

Most people make an honest liviing, and the money in their bank didn't arrive from insider knowledge or front-running.  But Bill Gross now shows us he's another ponzi whore.

What a loser.  Wonder what this sociopath could actually do in the real world if separated from the corrupt Obama team?

I'm simply calling them as they are.  Geithner, the little pric, needs a good ass-wuppin'.  The constant two-faced lies coming from these psycho freaks "running" our country is truly sickening.

I for one hope the whole fucking thing implodes.  I know I can take care of my family no problem.  And I look forward to pissing on these jerks as they beg in the streets, MF'ers.



LeBalance's picture

Please aim somewhat higher in the chain of command in order to have any challenge from the game you will be tracking.  The exposed fools are puppets to the power and as such have developed zero ability to fight back.  They will be thrown as sacrifices at the first need and their backstory as bad actors is being written now.

As if this story would have come to light for any other reason.

Ricky Bobby's picture

Front Running? That's fucking outright collusion.

Bringin It's picture

+100 Points.  Perp walk starts when?

MarketTruth's picture

Perp walks???  ROFL!!!!  Never will happen. Greed is not only good, it is fully legalized and NO ONE ever goes to jail. NEVER.

Of course they should be sent to China for 'proper' laws mean they literally get executed. Maybe this is why the USA hates China, as they are no longer buying dollars, instead hoarding/buying gold and banksters get death penalty. Of course th USA can;t allow that in "The Land Of Freedom". More like freeDUMB.

kathy.chamberlin@gmail.com's picture

freeDUMB. that is really good.

the last chart is really pretty, chart art. look at it a second time, nice wonderful colors used graphically.

andyupnorth's picture

Collusion? Insider trading? That's the whole purpose of the Federal Reserve!

Mactheknife's picture

"Psychic" Wild Bill bitchez!

Buckaroo Banzai's picture

but but but... Bill Gross can't be a crook!

putbuyer's picture

I was wondering what was driving TBT.  And now Bill Gates reveals why he is such a fuck'n ahole. http://marklevinshow.com/goout.asp?u=http://www.breitbart.tv/bill-gates-...

Chemba's picture

Bill Gates is speaking truth.  If you can't understand his point of resource allocation then you're one of the masses of asses that can't handle truth.

LeBalance's picture

When someone can pay for a service that service provider merely expands the availability of the service to provide it.  It is *predetermined* in this case sited that the elderly somehow have a lesser right to a service they can pay for because they have lesser years left to live.  Total horsecrap.  What will they deliver to humanity during that time?  Miracles!  Every person deserves to receive what they can pay for or receive via charity and the goodwill of their progeny and community.

In addition, to create a structure of Administrators that decides for *wards of the State* that they can be summarily cut off from service *even when service is available as charity* is a sick testimony to our fascination with the bottom line.  Charity is available from every single physician that walks the Earth.  They are required to work a certain number of hours in that capacity.

They are walking you to Soylent Green acceptance.

Mr. Gates is one of the movers and shakers behind GAVI the world wide vaccination organization.  (1) Vaccines do not function as advertised, it is a smokescreen hoax. (2) What they do function as is as euthanizers of the world's population.  Everything from thimerasol to recent GM sterilizers are in those happy little injectible slow death vials.

Mr. Gates does have a valid point of view.  From his perspective and the perspective of his masters (yes, he is a made man and probably a clueless puppet as well) NSSM 200 is what they are marching toward realizing.  That would be the eradication of the vast majority of the useless (in their eyes) eaters on this planet.

Mr. Gates is certainly speaking his truth.  *His,* and maybe yours.

Not mine.

fiftybagger's picture

"From his perspective and the perspective of his master"




+ 1 trillion



Bringin It's picture

This is a kind of false dichotomy.  We don't have to get so dramatic.  Yet.

Why don't we start by cutting the useless insuraunce companies out of their turn at the trough?

Isn't that a lot easier?  But off topic?


I'm really enjoying the topic.  Is this what you call the smoking gun?


zaknick's picture

Gates is a scumbag and yes, they are carrying out ethnic cleansing and genocide; him , CFR, Rockefeller, the usual suspects.

New_Meat's picture

LeB-as a young lad, I got scared of the Malthus argument; read his book, read Erlich, read a bunch more.  Learned to do experiments.  Read Popper.  Saw that the "population collapse" thesis was continually invalidated.  Then Clancy did a great book (at so many levels) e.g.

http://www.allreaders.com/topics/info_764.asp and


somewhere in there, saw Chrichton's statements.

"They are walking you to Soylent Green acceptance."

I was in a meeting with a number of Canadians today, talking about a mutual friend who had a heart attack.  "He had to leave the meeting last week to see the Cardiologist." and the answer was "He has enough tax-delivery left in his working life to pay for the visit."

You, SIR, are spot-on.

- Ned


Arkadaba's picture

Sorry what exactly are you saying? Sounds like BS to me. 

I have experienced both U.S. HMO and PPOs and Canadian health care and I will take Canadian health care over both.  Not really sure what you are getting at ....


Mad Mad Woman's picture

Well said. I don't trust anything Bill Gates sez anymore. Can't stand the man. He has a multi-billion dollar corporation, with lots of computer genius's, and they can't put out a decent product that works like it is supposed to. I am sick & tired of security breaches and the dozens of "patches" to fix said breaches in their programs. WTF?

Spalding_Smailes's picture

No, I'm sure he could find other ways to cut cost ...

Its like when a township builds everything under the fucking sun, parks, new firehouse, police station, everyone gang raping the city on the back of the credit monster.

Now that the township is broke, it tries to pass tax hikes (in the name of save the teachers jobs), but only 20% of that tax hike will go toward teachers(if passed) but the other 80% is going to plug other holes so they can save their fucking jobs after 10 years of mismanagement ...

With the waste that goes on in the heath care industry and he tries to correlate between a person on his/her death bed and teachers?

Wow, what a total tool corporatist fuck.


Hephasteus's picture

He's just simply willing to talk about why doctors will continually day after day, month after month, year after year, decade after decade continue to employ strategies and tactics that have 0 percent efficacy, or continue to employ tactics that have 3 percent efficacy and have no fucking clue why it works in the 3 percent.

These are not real choices or real resources. It's a mind game. You don't have to lay off teachers and firefighters to give a million dollars to 10 doctors who fuck around for 3 months as they are independant creative spirits which have nothing to do with each other. Besides the fact they are shoved into the same economic system and given an artificial connection and boundry. The doctor assholes are just going to divert the money from the teachers and educators to yacht builders and dudes who call them up on the phone and ask them to invest 100k in something stupid which they ask 2 questions about and then write a check. And yes Dr. Brister sat me down once and pulled 2 tiny tiny pieces of rust out of my eye and it took 10 minutes and used about 5k worth of equipment. Then proceeded to charge me $250 bucks and then said god bless me. And if he ever needs me for anything in any lifetime. I'm going to drill his asshole like gay convict.

tamboo's picture

dr wu will see you now, he's pretty entertaining even when

he goes off topic, which is often.

"The major causes of disease in the West are Jews and Jewish physicians."
                                                                       -- Dr. Wu Tao-Wei


bugs_'s picture

Don't need to time the market, just need to time the Fed.

(or be on Deep Shah's speed dial)

SpeakerFTD's picture

Bill Gross.  Blankfein.  Paulson.  The list goes on.

These guys make the Russian oligarchs look like rank amateurs.

espirit's picture

Gives new meaning to "trickle down effect."

Mad Mad Woman's picture

LOL!!    Great comment.

Battleaxe's picture

So is the Easter Benny.

Bringin It's picture


[Except the caveat regarding the observervation and the outcome acording to Heisenberg.]

breezer1's picture

no shame, no conscience. nice work if you can get it.

sweet ebony diamond's picture

My question of the day for Ben:

if Goldman Sachs has been identified as big-time negligent in their dealings with customers (see recent SEC settlement for background), why do you continue to use them as a supplier?

or to put it another way - what is the fucking fantasy world you live in?

RockyRacoon's picture

Oh, but Goldman is experienced and has all the machinery in place to perform the theft -- I mean sales expertise -- to get the job done.  Thieves run with thieves.  The honor among thieves is not reserved for the lower classes.

Catullus's picture

I'd like to see if bill gross shows up on cnbc for the next fed announcement.

RockyRacoon's picture

Hubris will take him down.  I've seen him be a bit smug about some of the business done by him and his associates.  He will not be able to resist showing his inside knowledge at some time and that will be used against him when the gallows is warmed up.

kathy.chamberlin@gmail.com's picture

from a females perspective. you all, are talking about warren buffett, bill gross, bill gates and i will throw in john chambers. these men seem so effeminate to me. plus they talk with a high pitch unmanly voice. not that it matters, just notice these things about men.

Monkey Craig's picture

the fix is in....the treasures go to the insiders as usual

on another note, I would definitely check out the documentary "Hacking Democracy" - same theme, different players

Hall 9000's picture


Elizabeth Warren to lead Consumer Financial Protection Bureau, unofficially

9/15/2010 09:22:00 PM – CalculatedRisk 

From the NY Times: Warren to Unofficially Lead Consumer Agency

“Elizabeth Warren, who conceived of the Consumer Financial Protection Bureau, will oversee its establishment as an assistant to President Obama, an official briefed on the decision said Wednesday evening.

The decision, which Mr. Obama is to announce this week, would allow Ms. Warren, a Harvard law professor, to effectively run the new agency without having to go through a potentially contentious confirmation battle in the Senate.”

“I think Ms. Warren is an excellent choice.”



"Time to stand up for what you believe in.”

 Tyler Durden 





Bolweevil's picture

She's got a job until 11/06/2012 (or whenever the Mayan calendar ends?).

Xedus129's picture

December 21st, 2012 or 23rd (Some people claim)

Village Idiot's picture

a glutinous and Gross Buffet.

silvertrain's picture

  There all using there status to self deal...

Village Idiot's picture

"There all using there status to self deal..."


Crooked dealers get shot--in the movies anyway.

scratch_and_sniff's picture

64bln, ha. The sickness of it, the sickness.

Jake Lamotta's picture

Hey Tyler- good article.  I wanted to take a moment to say THANK YOU  cause i can tell by your posts that you are relentless in keeping them coming for us to read!  I know this is no easy task and you must work 25/7 to get them to us.  THANKS DUDE!

Village Idiot's picture

Good stuff, Tyler. How does this crew throw a party when the time is right?