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PIMCO's Total Return Fund Sells Over $80 Billion Of Mortgage Securities To US Taxpayers Year-To-Date

Tyler Durden's picture




 

Bill Gross' PIMCO is selling mortgage securities like there is no tomorrow. In October, the Newport Beach firm's Total Return Fund held the lowest amount of mortgages in recent (or distant) history: at 16% of the total $193 billion in fund total net assets, securities backed by the housing bubble (v1 and/or v2) accounted for a record low $30.8 billion of all holdings. In January the same fund held $113 billion of these securities: the firm has now disposed over $80 billion of mortgage-backed toxic securities. And who is the buyer: you dear taxpayer, courtesy of Ben Bernanke and Wellington Asset Management, which has taught the Fed all it needs to know about conducting secret Bill Gross bailouts away from the public's eye. As to what price these transactions occurred at, well, that is one thing you will never know so long as Barney Frank and other idiots in the Congress and Senate refuse to provide the level of Fed transparency demanded by Ron Paul and Alan Grayson.

Some other observations: the Total Return Fund bought over $30 billion in government related securities in October alone, an increase of 36% monthly, and the gov't class is now at an all time high of $121.3 billion, or 63% of all holdings. Since January, when the fund had a net short position in TSYs, the TRF has purchased over $120 billion in government-related securities. Investment grade securities also reached a high of $34.7 billion in October, after dropping to as low as $14.5 billion in January. One under-represented class: High Yield, of which the fund held a mere $1.9 billion. And if you are searching for who may be one of those evil culprits shorting the dollar, look no further than Fashion Island: Pimco was short $13.5 billion in cash and equivalents in October.

An analysis of the market-weighted maturity by product demonstrates that the fourth branch of government is a huge fan of 1-3 year maturities, holding over 60% of all securities in this bucket. A distant second is the 3-5 year bucket which in 2008 was PIMCO's preferred maturity group. And the 5-10 year bucket which hit 80% of holdings in November 2008 is barely scraping 10%.

 

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Mon, 11/23/2009 - 23:17 | 140166 Anal_yst
Anal_yst's picture

the negative "net cash" position, does that necessarily indicate a short cash trade or could it be something else (margin borrowing?)

Mon, 11/23/2009 - 23:42 | 140189 Marla Singer
Marla Singer's picture

What's the diff?

Tue, 11/24/2009 - 01:49 | 140290 Anal_yst
Anal_yst's picture

Intent (or lack thereof)?

Tue, 11/24/2009 - 00:03 | 140212 Anonymous
Anonymous's picture

from Bloomberg (doesn't help much)

Cash and equivalent securities comprised negative 7 percent of holdings in October. These assets can include commercial paper, short-term government and mortgage-backed securities, short-term company bonds and money market derivatives.

The fund can have a so-called negative position by using derivatives, futures or by shorting.

Derivatives are financial obligations whose value is derived from an underlying asset such as debt, stocks or commodities. Futures are agreements to buy or sell assets at a later specific price and date.

Tue, 11/24/2009 - 14:30 | 140748 jd2iv987
jd2iv987's picture

what does it matter? exchange one shitty investment for another...

Mon, 11/23/2009 - 23:34 | 140179 Assetman
Assetman's picture

Good work.

At least as of recently, Bill Gross and his PIMPCO guys haven't been terribly shy in showig the public where they aren't.

And as much as we may not like that "4th branch of government", their changes in duration and non-agency bias tells you a whole lot about the big "gift" the Federal Reserve have given them-- and everyone else dying to dump crap paper at par. 

That highly likely includes foreign central banks.

Tue, 11/24/2009 - 07:26 | 140358 Anonymous
Anonymous's picture

Sure it does - anyone holding mortgage paper can become the new super secret primary dealer. It even comes with a decoder ring that spells out the message from Ranger Ben - "Buy More Treasuries".

Mon, 11/23/2009 - 23:46 | 140194 BlueStreak
BlueStreak's picture

He'll plow all that money back into real estate when it gets cheap, and judging by how he's doing it, I'd say the bottom for real estate values is 36ish months out.

Full Disclosure - Pimco "investor" via 401k

Tue, 11/24/2009 - 00:38 | 140244 JohnKing
JohnKing's picture

hmmm ... fed buys toilet paper for money, is it still money?

Mon, 11/23/2009 - 23:52 | 140204 Comrade de Chaos
Comrade de Chaos's picture

"Full Disclosure - Pimco "investor" via 401k"

 

as if 401K's provide much choice, hell if you have PIMCO available, you are one of the lucky few.:)

Mon, 11/23/2009 - 23:53 | 140205 tom a taxpayer
tom a taxpayer's picture

Sickening.

Out of control. 

Outrageous!

We need a law that requires +50% of taxpayers to sign on before Bernanke/Wellington commit taxpayers to filthy deals like the $80 billion to PIMCO.

Oh, and you smug bassturds at PIMCO, the prosecutors will be coming for you eventually.

Tue, 11/24/2009 - 00:41 | 140248 Anonymous
Anonymous's picture

There is a law for that, it's your birthright. You pay door admission every year around April or so. Management is just about to change the posted rates.

Are you ready for this because it's going to hurt to enter through the doors of the great casino.

Tue, 11/24/2009 - 00:58 | 140260 Cursive
Cursive's picture

By the time public opinion has turned enough to matter, if I were Bill "Bond Whisperer" Gross et al, I'd be more worried about pitchforks than prosecutors.

Tue, 11/24/2009 - 04:40 | 140339 Anonymous
Anonymous's picture

Go long on pitchforks

Tue, 11/24/2009 - 00:19 | 140225 Anonymous
Anonymous's picture

I too buy PTRAX in my 401k. Oh the humanity, this whole market is a clusterf*ck or a snake eating its own tail.

Tue, 11/24/2009 - 01:46 | 140288 Anonymous
Anonymous's picture

Total Return is now a $192B fund that in gold terms has provided negative returns for every trailing year for the past 18 years. Don't believe me, run it on Bberg. An empire of nominal return generation for the past 18 years that has made Bill Gross a multi-billionaire. Nice they could repay Greenspan in employment for the Fed's largesse to PIMCO.

Thu, 11/26/2009 - 00:39 | 142923 Anonymous
Anonymous's picture

sorry but Redspan belongs to John Paulson now

Tue, 11/24/2009 - 02:04 | 140298 Shiznit Diggity
Shiznit Diggity's picture

You can't blame Pimpco for dumping MBS. They just gettin while the gettin's good. Anybody holding MBS should be doing likewise. You don't need to be clairvoyant to see which way mortgage rates will head once the Fed stops buying MBS, which is why the Fed will extend its MBS purchasing program.

Tue, 11/24/2009 - 04:22 | 140334 phaesed
phaesed's picture

Seriously....

Did you think Bill Gross and El-Erian were dumb? They've played both sides of the fence like it was a game of Blackjack and the dealer is being forced to hit.

Bill Gross is better than Buffett ever was and will probably continue to be considered one of the greatest until the next Depression comes.

He knows when to walk away.

Tue, 11/24/2009 - 06:15 | 140344 Anonymous
Anonymous's picture

The firm has certainly not disposed over $80 billion of mortgage-backed securities.

Instead, the firm has been disposing over $80 billion of mortgage (or any other asset for that matter) un-backed "securities" (hot air) in exchange for them not turning vigilante (and writing funny reports on top).

Against the remaining 17%, they have successfully managed to locate the notice.

Tue, 11/24/2009 - 06:27 | 140345 FreeStateYank
FreeStateYank's picture

Ahh, THAT's why Bill announced his 'committment' to Treasuries? Snake.

Tue, 11/24/2009 - 06:39 | 140347 Anonymous
Anonymous's picture

I slaps dem bitches at the Fed to make sure they aint been holding out on me.

SweetDaddyMacBill@PIMPCO

Tue, 11/24/2009 - 08:10 | 140373 Handle with care
Handle with care's picture

Hey, if some lunatic came wandering into your neighborhood offering to buy your broken appliances for the full new retail price, wouldn't you rush to sell as many as you could find to him before the poor sad old lunatic has lost all his money?

 

Or you might think that exploiting the situation is immoral, but then you wouldn't be a Financial master of the universe either so your opinion wouldn't count.

Tue, 11/24/2009 - 08:33 | 140388 Jim B
Jim B's picture

Uncle Benny B, I have some stocks that I Lost my B#^$& on over the last several years.  Like the banks, GS, PIMCO, and the rest of the alphabet, I refuse to mark them to market.  I think the FED should buy them, nevermind, I forgot I am not a connected hack of the US financial system.

Tue, 11/24/2009 - 08:53 | 140391 DavosSherman
DavosSherman's picture

I'd ask if these people have kids, but demons don't bear children. Great world we are leaving our kids.

Great read!

Tue, 11/24/2009 - 11:21 | 140483 Anonymous
Anonymous's picture

I too have PTRAX and GS.

Disclosure: Long on Bernanke.

Tue, 11/24/2009 - 13:10 | 140626 Anonymous
Anonymous's picture

So, some items that I can't quite reconcile from the majority opinions proffered commonly by Zerohedge commentors and posters:

1) The FED is getting raped by Pimco - who is essentially selling them garbage in exchange for USD.
2) PIMCO is then plowing those funds, and more, back into Treasuries
3) The fiat USD is worthless, the country is f*cked and everyone who is anyone knows it is enlightened, and those that do not - will find out once the Fed is exposed for buying all this crap - killing the USD and . (e.g. 'Pitchforks unite!!!')

Why, if all of this is so obvious, and Pimco is so revered as taking advantage of the government - would they turn around and buy treasuries valued in soon-to-be worthless USD and at terribly low rates?

I mean, anyone can see that the crap they, and everyone, has sold to the Fed will eventually undermine the Fed's balance sheet, this and the policy of Quantitative Easing and our inevitable debt burden, will inevitably lead to inflation, which will immediately devalue the relative value of their doubled-down USD purchases (and at such a nominal yield).

So why would anyone make such a huge bet in the country they so obviously must know they just relegated to a frothy-mouthed, pitchfork-clinging, economics-understanding populace?

Tue, 11/24/2009 - 13:26 | 140645 Anonymous
Anonymous's picture

So, some items that I can't quite reconcile from the majority opinions proffered commonly by Zerohedge commentors and posters:

1) The FED is getting raped by Pimco - who is essentially selling them garbage in exchange for USD.
2) PIMCO is then plowing those funds, and more, back into Treasuries
3) The fiat USD is worthless, the country is f*cked and everyone who is anyone knows it is enlightened, and those that do not - will find out once the Fed is exposed for buying all this crap - killing the USD and . (e.g. 'Pitchforks unite!!!')

Why, if all of this is so obvious, and Pimco is so revered as taking advantage of the government - would they turn around and buy treasuries valued in soon-to-be worthless USD and at terribly low rates?

I mean, anyone can see that the crap they, and everyone, has sold to the Fed will eventually undermine the Fed's balance sheet, this and the policy of Quantitative Easing and our inevitable debt burden, will inevitably lead to inflation, which will immediately devalue the relative value of their doubled-down USD purchases (and at such a nominal yield).

So why would anyone make such a huge bet in the country they so obviously must know they just relegated to a frothy-mouthed, pitchfork-clinging, economics-understanding populace?

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Anonymous's picture

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