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PIMCO Sells $37 Billion In Treasuries, Adds Bunds, MBS And Cash As Total Return Fund Hits Record In December
Congratulations Bill Gross: PIMCO's flagship Total Return Fund closed December at $202 Billion, representing $70 billion in net inflows, more than the combined inflows of the prior three years. December also saw a curious reshuffling of TRS' portfolio: Gross sold a whopping $34 billion in Treasuries, bringing the total to $64.6 billion from $101.7 billion in November. And while the bond manager surprisngly added $10 billion in MBS (now accounting for 17% of holdings) after selling $95 billion in MBS to the Fed in the previous 10 months, for the first time (probably ever) PIMCO's holdings of Treasuries and MBS accounted for less than half of total holdings.
As was previously noted, Bill Gross notably increased his non-US Developed country bond holdings by $22 billion to $32.3 billion, which is a direct result of his recent purchases of German Bunds.
PIMCO continues to add to cash, and with a cash balance of $16 billion ($2 billion more than November), the firm has the most dry powder since the beginning of the crisis in August of 2008.
Lastly, the firm's high yield holdings jumped by 100% to a record $4 billion in December. Is PIMCO slowly becoming a hedge fund?
A market value weighted analysis of PIMCO's maturity profile indicates that the firm's holdings in sub-1 year maturing securities jumped from 0% to 7%. At least we know one of the window dressers who bought $14 billion in Bills for the EOY effect. Intuitively, the bills will likely be promptly (or not so promptly) converted back into another security form, implying that Pimco's real cash position at the end of 2009 was likely in the $30 billion ballpark, accounting for 15% of assets (obviously this is merely speculation). Just what is Gross waiting for?
Notably, the largest increase in holdings from a maturity perspective occurred in the 5-10 year bucket, where PIMCO added $23 billion in new securities to close the year with holdings of $54.5 billion. The largest holdings continues to be the 1-3 maturity bucket with $84.7 billion, a $37 billion decline from November.
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everytime i shuffle my 401k i end up stuffing moreand more into pimco
DITTO. Capital preservation beats playing the slots in Casino Loco every time.
It sounds like, having shaken hands with the gubbermint, and having shaken down the fedres, he now intends to do battle with both.
Keep your friends close, and your enemies closer...
He likes benny b. because he puts out, that is to say that bb is promiscuous, sleazy, and available anytime. Pimpco calls up the fed chairman at 2 a.m., drunk, hey, you want to meet up at the bus station men's room for a quickie? [/grossness]
Hey what's that website where you can see the odds of certain things happening and bet on them? One of them is Israel attacking Iran before such and such a date, etc? I'd be curious to see what the odds are of Scott Brown victory...Thanks in advance.
Biff
not looking good for cockley.
http://www.intrade.com/
That's it! Thank you my friend.
Huffington Post is reporting Brown won.
Don't know the website but he is expected to win as
his opponent did nothing to campaign assuming it was
a shoe-in due to the Kennedy legacy. Times they are
a changing...
israel gave the US one year from 12/31/09 to resolve IRAN....meanwhile, Israel is practicing air drills nationwide, weekly. They have numerous US warships with anti-missile, missile systems mored in their ports, they are practicing long range bombing runs and have 'the Kingdom's permission (sunnis of course) for unprecedented fly overs, they are still wrangling with Turkey, but they don't really need 'em. Netanyahu has already been to Moscow trying to get the Kremlin NOT to send new SAM systems to their boys in Iran, but I think he came back empty handed.
From the US, I'm not sure of the exact numbers but I believe we have about 60-70 thousand troops in Iraq (to the west) and when the extra 30k show up, we'll have about 60-70 thousand troops in Afganistan (to the west) and the 5th fleet carrier group near the Hormez Straight (to the south) Probably another two carrier groups nearby.
100% chance of Israel striking Iran and Black Gold, Texas Tea, Bloody Tar will be a double before you know it. I will be heavy in RIG prior to this catalyst. I am begging for the dollar to explode and oil and gold to tank.....I want both commodities bad, but I wanna 'em cheap.
Scott Brown was a done deal the day Kennedy gave up his seat.
Pimco did a full press last fall. Large Brokers, knowing they were brimming over with busted out boomers hunkering down in cash, let Pimco in to present to their bigger number clients. Some brokers underwrote the Pimco managed fund fees for a year just to keep their crushed upper end clients happy.
Gotta' hand it to Gross on his timing. Looks like it worked. Cash position is indeed interesting.
LTCM was a powerhouse until they were so big in certain discreet markets (Russian bonds) that they Became the market and in turn the Prey not the Hunter--PIMCO must have the same potential nightmare waiting in the wings and they are dealing with it intelligently.
That isn't quite the full story LTCM was so over
levered they couldn't weather the blips. They got
a blip and the house of cards fell. There was nothing
wrong with the portfolio long term. In fact GS walked
away from the roundtable meeting because they were
all in. Meaning all the others at the table wanted
pieces of the portfolio only Goldman wanted the whole
thing. Not getting it the walked away empty handed.
How do I know? Helps to have friends that were in the
meeting. There was nothing wrong with the quality of
holdings it was the sheer size-too much leverage. Take
note you folks out there.
Thank you. This is why I love this site.
Your welcome. See below where I explained PIMCO's
MBS strategy I hope you like it. Let me know what you
think and if you need further explanation.
Saw that. I'm trying to figure out MBS as time allows re: pricing.
MBS securities are a series of bundled cashflow (with discounting) processes and the job is to determine present value of a series of cashflows at C1, C2, ...
There are so many complications, top of list is that they aren't Independent nor identically distributed.
I'll stop here. Hats off to the guys that price these things.
Pricing takes back seat to A-prepayment history/length
of that history B-as always in real estate location/
quality of the pools. Lastly the speed of the pool of
loans. My guess there is a raft of paper out there to sift thru as the average PM doesn't wants to be bothered with structured product anymore too time consuming. When it comes to fair value the market can dictate/haggle one on one or pay the expert Vranos at Ellington to render his opinion if it means that much to you.
Try telling that to the traders whom have to do
business with them. Like Fidelity they are no fun
to play with and a very difficult account to make
money off of. Pimco is notorious for talking up their
book in the press and gained gorilla status in
some markets long time ago. Old hands at this game.
REMEMBER: PimpCo hired ex-Fed (?possible manipulator and con man?) Kashkari, who at that time was living like the Unabomber in a small shack-like home way out in the boonies. This newfound lifestyle may have been in an effort to escape the mayhem reality of congressional questioning months earlier as a member of the Federal Reserve and then jumping ship from being part of the Fed.
As such, perhaps PimpCo now has some good inside info of the TBTF and both on and off books plan of the Federal Reserve. Furthermore, one might want to take what PimpCo is doing with a higher regard to their possible inside info due to their recent hiring of Kashkari.
These are indeed interesting times.
Yes. Bill is trying to one-up Lloyd with more paychecks to the inside guys.
Who says gubmint service doesn't have its rewards....??
Earnings be damned. It's all about getting further up into Uncle Sugar's ass before he gets diarrea...ha-ha-ha.
LTCM was also leveraged 100 to 1...
Correct their 10 year German govy position was 100 to 1.
That my friends tells the story. I put my clients in
Russia shortly after LTCM +1000 over the ten year. That was 2001 by 2006 they were trading +100.
That's "Bunderful".
private label MBS soon ot make a comeback.
http://online.wsj.com/article/SB1000142405274870456100457501326123998889...
I'd like to check the ingredients in those " Private Label " jumbos. Then throw out all written in Orange County, CA. No doubt a big chunk of it.
The really tasty well-priced jumbo MBS ain't going in an issue like this, no matter what they name it.
Please go easy on the illegal substances it seems to
have clouded your vision. Yes sarcasm but I was nice
about it.
According to the PIMCO web site, the category "Government Related" cand include: Treasuries, TIPS, agencies, interest rate swaps, Treasury futures and options and FDIC-guaranteed corporate securities. So your title is misleading by saying it's all Treasuries.
Don't recall Kashkari working for the FED,rather GS. But of course,working for GS,he probably will get their plans before hand through his buddies in GS,since the two(GS and the FED)are one and the same. But Gross also has FED traders working at his sight(but he doesn't talk to them(lol)). So if anything, Gross's actions are usually intriguing. But frankly I don't find the move into Germen Bunds as stranege. If you have huge ammount of money and you want to diversify out of US,what better place than Germany?. It is the choice between the bad and the worse.
Interim asst secretary for the tsy. saw him testify
OK, CORRECTION:
Being tired of helping doing G-d's Work, Mr. Kashkari left vampire squid Goldman Sachs to become a senior adviser to Hanky Panky Paulson in June 2006. Mr. Kashkari in October 2008 was tapped by Henry M. Paulson Jr., then the Treasury secretary, to run the Troubled Asset Relief Program (TARP) for banksters and thus with hundreds of billions of taxpayer's money to waste was nicknamed Mr. Kash n' Kari.
Don't be confused about the increase in MBS holdings. As
he stated he sold all he could in non-gnma MBS (all?)
Most likely he bought MBS/GNMA with high PSA as a higher yielding form of t-bills. They have short average lives they are paying down rapidly and are a full faith and credit. As they paydown he accumulates cash for a rainy day
reinvesting in same GNMA's or what have you. This high weighting in the front end changes the average life of his portfolio so he buys longer dated tsys. to offset this.
He was a pioneer of this strategy. How confident am I in saying this? Because that is what he did when I covered him.
Thanks 198847...this make sense.
The full faith and credit theme is a consistent one for the Pimco boyz.
Having ffandc in Timmy, Ben, Barney and Barack is a stretch......but it's all that's left now.
Well thank you. Check tommorrow my guess these GNMA's are not around he bought all that was out there. Remember Crescenzi works with him now and he's a great mort
guy read his blog all the time until he was silenced.
But my guess this was Bill's idea. Yup full faith and
credit short in duration juicy yield in the front end
why wouldn't you do the trade? Very low risk and within
the mandate of the offering prospectus. Maybe Gross is
dumb like a fox.
great series of posts, thanks for the insight
To complete the overall picture on his strategy
do a reread on convexity of bullets vs.
amortizing paper. Treasuries have extreme convexity
whereby amortizing paper (mortgages) have negative convexity
in order to remain market neutral you need to keep
these two balanced. Overweigting one side of this
seesaw expresses your conviction on volatility going
forward in a prudent way.
Will someone please answer me where the 70billion in new cas flows came from; more than the last 3 years combined! You know me: I always liking for the players that Goldman is embezzling money through. How are they capable of such cash inflows in this credit climate
God where to begin in this day and age 70bn is a mere
round lot. Who it is meaningless why is the question
you should be asking yourself. Hunt for winning ideas
not who did them. Money in the aggregate looks
impressive but the individual idea behind it is what
matters. Goldman embezzles anywhere they can this
is ongoing phenomenom begun two decades ago.
PIMPco.
meaning?
Pimping ain't easy. Oh wait, it is.
Dear everyone has a price that is a fact of life.
It seems in the financial arena and it's participants
the bar has been set low, so low on the limbo
of life looks like it's time to raise the bar. This
round we handicap those less flexible and see how well
they do. Excuse the weary sound to my mental musing but
when waiting in line for Starbuck's cuppa think about
it start with money is not everything.