Pimco's Observations As The US "Reaches The Keynesian Endpoint" - The QE2 Ponzi Scheme Is "Nothing But A Profit Illusion"

Tyler Durden's picture

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4shzl's picture

Gross is obviously buying Treasuries. When your AUM and ego is this large, headfakes are all you have going for you.

Boston's picture

Yup, he's looking for better prices to buy.

But it's not working.  Just look at the 10-year over the last 2-3 weeks: going UP in price almost every day.

And if prices continue to rise, he might be forced to buy. What's THAT gonna to do yields?


topcallingtroll's picture

Negative alpha Bill is about to Peter Lynch himself. Last rant of a bondtard who has lost his touch.

Highrev's picture

In the process, the Fed has kept the demand for U.S. Treasuries high, perhaps deceptively so, attracting with its redolence many classes of buyers, including households, banks, pension funds, insurance companies and foreign investors.

The movement into this “everything else” that was prompted by QEI and QEII can be visualized by looking at concentric circles, with the riskiest assets at the perimeter of the circles . . . the Fed’s zero interest rate policy, or ZIRP. It created a “house of pain,” an investment climate in the money market so punishing that it drove investors to seek refuge in other assets.

There's a blatant inherent contradiction there. Can't have your cake and eat it too.

Mercury's picture

No, the top quote is in reference to longer maturity treasuries which have been in rally mode for ~30 years, most recently artificially juiced by QE 1 & 2.

The bottom quote refers to <1yr maturity (the only area that the Fed has direct control over) "money market" instruments which have been yielding near zero for some time now (thanks to ZIRP).  Some investors/savers have been seeking out higher yielding (and riskier) places to park their money as a result.

trav7777's picture

I have to come to the same conclusion.  Either the Fed pissed in his flakes or else he's got a conundrum in terms of the expected return of his AUM.  He can't make his numbers on the pisspoor yields that the UST is paying.

So he has to hope for better absolute returns in deflation.  He wants austerity so he can be a "wizard" and lock up bonds at higher coupons and keep TRF humming along before his flock deserts him.

Gross doesn't fucking care about the country; he cares about making his numbers.  Funny how the assholes who profited the most from the bond runup are now demanding that their cash become more worthful.

Highrev's picture

So he has to hope for better absolute returns in deflation.  He wants austerity so he can be a "wizard" and lock up bonds at higher coupons and keep TRF humming along before his flock deserts him.

That's what I'm thinking too.

And a few more "war games" won't hurt either.


Cleanclog's picture

 Ultimately, the U.S. must own up to its past sins and let the deleveraging process play itself out. It can’t pretend that previous levels of demand for goods and services can be restored simply by turning on the Fed’s printing press.

With REAL deleveraging, will either beget hyperinflation or must restructure debt.  

KickIce's picture

But isn't that the trap?  With austerity cometh default and a whole lot of hurt on the economy in general.

Geoff-UK's picture

Gross is obviously buying Treasuries--concur.    Bernake told him already.  He'll surf the wave as capital runs screaming into Treasuries once Ben announces QE2 is going to end.

Expect prices for silver and gold to drop in the short-term.  BTFD.  QE3 will start about 5 minutes after Gross dumps his position.

Is it even POSSIBLE that Bernake would resist implementing QE3 if the stock market tanks and both political parties start sharpening guillotines from Bernake's temporary tight money policy?

WaterWings's picture

"The good thing about socialism is that at a certain point, they shoot each other."

Yuri Maltsev

Stalin looked harmless once.

long juan silver's picture

We're fortunate Ron Paul has no adult children

Richard Head's picture

Your posts are the equivalent of finding a turd on the sidewalk.

Ruffcut's picture

Useless posts on another blog.

ivars's picture

2 pictures are better than thousand useless words. They tell the story of the USA near term future, easy to understand.

Drag Racer's picture

did the fit hit the sham?

Caviar Emptor's picture

The Fed misunderestimated global growth. They used 20th century calculus to solve 21st century problems.

They were fighting the last war: what should have been done during the Great Depression of the 1930s was used as their guide and model. 

In applying the wrong measures in a changed world they created a novel economic phenomenon in the US: Biflation, which threatens to be undermine the economy far more severely than if they had allowed deflation to cause a reset. 

Alcoholic Native American's picture

CEO bonus profits are no illusion my friends.  They really are making off like bandits.



SME MOFO's picture

an excellent point

the effects of ppt qe pomo are a nice backwash on the repriced executive options.  fortunes have been made with no discussion.  inflation makes you rich if your options are 500 handles in the money even if the dollars are worth a third as much.  this needs to be thought about more...

Commander Cody's picture

QEI and QEII were necessary solutions at a time when the U.S. financial system was on the brink, ...

Many say this but I'm not buying it.  So, after all the juice dries up who is left holding bag?   No doubt it cannot be the fascists who rule but the peons.  Look forward to austerity, depression, joblessness, reduced or eliminated entitlements.  The banksters will still skim off the top and feed their trolls in CONgress.  Sheesh.

Alcoholic Native American's picture

The U.S. has been disrupted dismantled and defeated

Praise Allah.

Abitdodgie's picture

You are right ,all this "war" against terrorism and our Government did it for them ,Destroyed America , who cares people like being slaves it gives them a warm fuzzy feeling knowing there master is looking after them. If this was not the case then we would be rebelling and going against the Government , I would say it was more a case of the stockholm syndrome.

Spastica Rex's picture

Darn tootin.

Austerity is for the suckers.

JeffB's picture
Why You've Never Heard of the Great Depression of 1920 | Thomas E. Woods, Jr.


Number 156's picture

What a whore.

Hes positioning himself for the day when the torches and pitchforks come out. I believe that not only was he a participant in the great ponzi, put an insider as well. This guy is Bruce Bigalow male Gigolo working Washington DC.

Bringin It's picture

He's positioning himself for the day ...

Yes, but what timing.  I was looking for the hammer that would be thrown at PM's/Commodities. 

That's a sledge-hamma'.

g speed's picture

Ben spoke to the bankers about two years ago (if I remember) and told them to get cash. I often wondered why. My first thought was to pay down debt but that seemed to go against the fractional system- My second thought is use the cash to buy up assets-- that seems more in line with wealth accumulation which the banks like. If the above blog speaks true then devaluation of assets is just around the corner and the banks will have their holiday picking up assets for less.  (buy low)

MachoMan's picture

The banks that did increase cash and pump it into distressed assets (other failed banks, etc.) had a short boost to earnings/position, but now many of the inhereted skeletons are banging on the closet door.  Often, the transitions aren't perfect and whatever liabilities that could be transferred were and are now lead weights. 

The concept of hoarding cash only works when the assets you can purchase (banks' portfolios are limited mind you) are open to the entire gambit...  and, most importantly, you not only choose wisely, but you time the purchase correctly.  The banks are not stocking up on "real" money/assets...  they're stocking up on depreciating bullshit with an endless amount of liabilities attached.  The simple fact is that there is little way out except to toss out the traditional investment and operational paradigms and begin anew, forged in a much stronger alloy.

Ben was directing banks to become even more systemically important (consolidating the industry) so that the proverbial gun to congress' head would be that much bigger.  I think we're long past the point of death should the gun fire, but for whatever reason, each time the gun gets bigger, they pretend to be more scared...  strange.

Snidley Whipsnae's picture

Good points. In addition the banks are going to be forced to purchase treasury instruments going forward, as mentioned in this interview from Warton by Proff Herring and Taleb...

"Taleb: That is true. But I'm looking at ... what would be the worst thing that can happen to us. The U.S. has to raise $1.5 trillion for next year, okay? We're going to have to find buyers. We have some domestic savings -- a few people willing to spend. Okay? The rest of the world may buy some. And then we have no buyers. So they have to call Bernanke to come and do his quantitative easing again.

Herring: And we have a set of rules developing for banks that will require them to buy bonds, which is a bit worrisome the world over.

Taleb: Yes, instead of lending.... This is what I call the situation of failed options or not being able to find buyers and then having to fudge things so they can play that game. The rest of the world would see it and I would say, "Okay, I'm not touching that currency."

Herring: That's surely going to be a hard landing.

Taleb: Definitely. That would be a rude awakening. In my new book Anti-Fragility I look at a few things.... You keep postponing the blow up, but the longer you wait, the worse it gets. But we have solutions. One of the solutions is to cut right away. Clean out the cancer right away.

Herring: Do we have the political will to do that?

Taleb: No."


ghostfaceinvestah's picture

I agree, I think Benocide knows the end of QE2 will pull the rug out from under the asset markets, and now that his banks are flush with cash, they are ready to take advantage.  I have been slowly moving to cash the past couple weeks, and will continue, and then eventually go short, very soon.

MachoMan's picture

Unless they managed to eliminate significant amounts of debt, their cash is already spoken for...  further, deflation will not allow them nor their debtors to repay any credit owed...

Basically, there has not been enough time nor organic growth since they were last hanging off the edge of the abyss...  the FED did everything it could to buy them more time, but it could not buy enough (like we all knew).

The entities aren't going to be buying shit...  the entities are saddled with liabilities...  rather, it's the principal actors of the fraud (individuals) who will purchase distressed assets and prosper...  they may also create new entities, not saddled with debt or other liabilities (for example, mortgage putbacks).

Snidley Whipsnae's picture

Right, the banks are going to have gov paper shoved down their throats and will have no cash. None to lend, none to buy 'depressed assets'.

Meanwhile, PMs are a great alternative... if you are listening Bill G...

trav7777's picture

this shit caused the last Holocaust.

A sliver of one clan ended up, through their control of the monetary machinery, with ownership of the entire nation.

We must hope that we get someone like Putin who only levies his sword against the sliver, and not the entire group.

Monday1929's picture

Who is that "clan"? Blaming your favorite "clan" again? Loser.

Henry Chinaski's picture

QE + ZIRP = effectively negative interest rates.  This negatates the time-value of money assumption upon which the financial system rests. 

Troy Ounce's picture


Thanks PIMCO....a bit late...don't you think?

We knew this shit already 2 years ago. There is no way back now.

You should have opened your mouth when it was necessary, you useless piece of paper.


Life of Illusion's picture


Gross is just pissed off being such a public politically correct image prevented him purchasing gold a few years ago.  This covering his ass talk will go on for while before Fed pulls the plug and we get deflation.

Calmyourself's picture

Sure, the Fed will get religion and stop the QE and we get deflation, you bet. They will not print to save their positions, their wealth, their skins and their lives.. Yes, yes they will.. No one in a position of power has the balls to go deflationary while there remains a press and a single helicopter.