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Bill Gross Explains How To Escape A Sinking Ship

Tyler Durden's picture


It is unclear if the florid analogy in Bill Gross' latest monthly letter, namely a "sinking ship" or at least a seaborne vessel on the verge of being one, is suppoed to represent the US economy, the bond market, or the Fed, but whatever it is, Bill, who is in the business of making money when bonds go up and vice versa and who nearly sank a ship while a naval officer, appears confident no ship is sinking. Yet. "The U.S. economy is not sinking, nor are the majority of global economies. Their markets just had too much risk, and in PIMCO’s opinion, too much hope for a constant QE and for the growth that it would produce. In effect, the ship was top heavy with too little ballast."

Sure it is, but while it inspired many a monthly letter bashing the Fed's ruinous policies not for Gross but for the 99%, it led to a record Total Return Fund AUM and record fees. What Bill is more confused, and even angry by, by is the dramatic bear flattening in the bond curve which was the most dramatic move in the past few weeks: not so much the move in equities, not the shift in credit spreads, not the vol in FX. Why is he surprised: because not even he had any idea to what extent everyone else was also frontrunning the Fed on a very levered basis. Which is why the TSY curve belly exploded as it did, wiping out billions in P&L form Gross and many comparable bond managers. Next comes the raging into the void by PMs who did not foresee precisely what they were warning about...

As for the economy, or bond market, or whatever, maybe not sinking, but certainly taking on water as Bill admits when he tell Bernanke's "cyclically oriented Fed" that "structural headwinds – demographic, globalization, and technology influences – that have had and will continue to have dampening effects on domestic and global growth."

However, what is lost on Bill is that as we explained yesterday, the Fed is far more concerned with collateral extraction as per the TBAC. Which means the upcoming Tapering episode will come, but following yet another very violent market reaction (has anyone seen what is going on in MBS?), it will immediatley unleash the UNtaper, and even more QE, and with it wipe out any pretense that eligible "quality" collateral (or lack thereof) matters when the S&P goes back into triple digit territory.

Because if the merest hint of just a slowdown in monetization leads to this... "Without the presence of a “Bernanke Put” or the promise of a continuing program of QE check writing, investors found the lifeboats dysfunctional. They could only sell to themselves and almost all of them had too much risk. A band somewhere on the upper deck began to play “Nearer, My God, to Thee.”... Imagine what would happen in 2014 or 2015 when the market suddenly finds itself facing a grim cravasse in which some 1000 S&P Fed-injected points are about to be "priced-out."

That said, whle Gross' piece brings up many questions, it certainly answers one: on whose side the Newport Beach bond manager is: "PIMCO, and the bond market have sailed some rough seas over the past few years. So has Chairman Bernanke. We’re all in thisi one together it seems."

Well, if one excludes some 99% of America's, and the world's, population Gross is absolutely correct...

* * *

From PIMCO's Bill Gross:

July Outlook: The Tipping Point

I’ve spun a few yarns in recent years about my days as a naval officer; not, thank goodness, tales told by dead men, but certainly echoes from the depths of Davy Jones’ Locker. A few years ago I wrote about the time that our ship (on my watch) was almost cut in half by an auto-piloted tanker at midnight, but never have I divulged the day that the USS Diachenko came within one degree of heeling over during a typhoon in the South China Sea. “Engage emergency ballast,” the Captain roared at yours truly – the one and only chief engineer. Little did he know that Ensign Gross had slept through his classes at Philadelphia’s damage control school and had no idea what he was talking about. I could hardly find the oil dipstick on my car back in San Diego, let alone conceive of emergency ballast procedures in 50 foot seas. And so…the ship rolled to starboard, the ship rolled to port, the ship heeled at the extreme to 36 degrees (within 1 degree, as I later read in the ship’s manual, of the ultimate tipping point). One hundred sailors at risk, because of one twenty-three-year-old mechanically challenged officer, and a Captain who should have known better than to trust him.

We survived, and a year later I exited – the Diachenko and the Navy for good – theirs and mine. I think I heard a sigh of relief as I saluted the Captain for the last time, but in memory of those nearly tragic moments, let me reprint an article posted on wikiHow, outlining exactly how to go about abandoning ship should you ever venture into the South China Sea or anywhere close to Davy’s infamous locker. The article is a bona fide and serious attempt to instruct would be passengers in a Titanic-like disaster. I found it, however, as comical as yours truly pretending to be a chief engineer in 1969. Judge for yourself…

wikiHow: the how to manual you can edit

How to Escape a Sinking Ship

The Basics: Before Setting Sail

1. Understand the mechanics of a sinking ship. Water usually enters the lowest point of a ship first, the bilge area.

2. As more and more water enters the ship, it will start to heel significantly. From this point on, sinking will occur quickly. Abandon ship.

If Sinking is Imminent

1. Think about your sense of etiquette. What will you do if push comes to shove?

2. If you’re in charge of the sinking ship learn how to send a Mayday. Read “How to call Mayday from a marine vessel” on the attached internet link.

3. Stay calm and don’t panic.

4. If you see someone with fear, yell at them.

5. While still on deck, watch for catapulting objects coming your way. Large items can kill you.

Abandoning Ship

6. Find a lifeboat. The best scenario is to enter a lifeboat without getting wet.

7. If jumping off the ship, always look first.

8. If you survive, be ready for the reality that others may have perished. Seek counseling.

Counseling indeed! If only I knew then what I know now: wikiHow, not experience or damage control school, is the best teacher. So, should bond investors abandon ship? And who to believe? The captain of the Fed, the co-captains of the USS PIMCO, or just trust your instincts? Well there is no wikiHow moment to guide you in this case, although it’s true that yours truly, PIMCO, and the bond market have sailed some rough seas over the past few years. So has Chairman Bernanke. We’re all in this one together it seems.

Immediate analysis of the past 6 weeks’ market action would argue that in late April, both the Fed and PIMCO observed that bond markets were approaching a tipping point. Yields were too low, prices too high, both for investors’ and the economy’s own good. The Fed’s Jeremy Stein had written a research paper outlining the risk. I, in fact, had written a March Investment Outlook outlining Governor Stein’s paper, and to be fair, PIMCO had been warning of high seas for what seems like an eternity. “Never,” I tweeted, “have investors reached so high for so little return. Never have investors stooped so low for so much risk.” True enough, history will likely record.

It will also record however, that the risk was not only in narrow credit spreads and emerging market debt/equity markets but at the heart of the credit system itself: U.S. Treasuries. What supposedly old salts like yours truly didn’t suspect was that all bonds, and yes, equities too were at risk of heeling over based upon a rather perfect storm, one that forecasters everywhere found difficult to fathom.

The forecast for bad weather as I’ve mentioned was becoming more rational with every increase in asset prices. If all markets were being artificially supported as PIMCO claimed and the Fed confirmed, then someday, someday that support via quantitative easing would have to be withdrawn. But the dark clouds seemed to be far off on the horizon. Investors worldwide piled on the leverage – not just in high yield or equity space – but in Treasuries as well. If the Fed (and BOJ) were going to keep writing checks at one trillion per year, then these two central banks alone might be buying 70-80% of all developed market future supply. The fear was that there might not be enough for others, not that there was too much leverage.

Well, that started to change with the May 22nd taper talk and, of course, with the Fed’s June 19th statement and Chairman Bernanke’s press conference. In trying to be specific about which conditions would prompt a tapering of QE, the Fed tilted overrisked investors to one side of an overloaded and overlevered boat. Everyone was looking for lifeboats on the starboard side of the ship, and selling begat more selling, even in Treasuries. While the Fed’s move may ultimately be better understood or even praised, it no doubt induced market panic. Without the presence of a “Bernanke Put” or the promise of a continuing program of QE check writing, investors found the lifeboats dysfunctional. They could only sell to themselves and almost all of them had too much risk. A band somewhere on the upper deck began to play “Nearer, My God, to Thee.”

Well I go too far in my sinking ship metaphor, but you get the point, I hope. The U.S. economy is not sinking, nor are the majority of global economies. Their markets just had too much risk, and in PIMCO’s opinion, too much hope for a constant QE and for the growth that it would produce. In effect, the ship was top heavy with too little ballast. Guess I should have known, huh?

Well where does the ship go from here? Should you as a bond investor jump overboard and risk the cold money market Atlantic Ocean at near zero degrees? We don’t think so – and not because we want to keep you on board – we just don’t think so. Why not?

1) The Fed’s forecast of the economy which prompted tapering panic is far too optimistic. If 7% unemployment is tapering’s final port of call, we simply think that we’re much further away than the Fed’s compass would suggest. We argue for structural headwinds – demographic, globalization, and technology influences – that have had and will continue to have dampening effects on domestic and global growth. The Fed, we would argue, is too cyclically oriented, focusing substantially on housing prices and car sales. And speaking of housing, since mortgage rates have risen by 1½% in the last six months and the average monthly check for a new home buyer is up by 20–25% as well, then as I tweeted several weeks ago, “Mr. Chairman are you serious?” Growth will be negatively influenced.

2) Inflation, according to the Fed’s own statistics is running close to a 1% pace. The Fed has told us that they “target,” “ target” 2% and for the next 1–2 years are willing to accept even 2½% until they reverse engines. Fed Governor Bullard of the St. Louis Fed was in our opinion correct where he dissented from the majority decision several weeks ago, citing the distant shores of 2%+ inflation and the seeming inability to even move in that direction.

3) Yields have adjusted by too much. While T.V. and the press focus on 10-year Treasuries at 2.55% as their guiding star, subjective stabs by yours truly or anyone else are difficult day to day. The technicals, as Mohamed has written, can dominate while the fundamentals are flushed to second page priorities. When analyzing the fundamentals though, I like to point to a “North Star” that is as permanent as possible within the context of current market instability. Tapering aside, if the Fed has consistently informed the market that its policy rate – Fed Funds at 25 basis points – will stay there for a substantial period of time even after the end of QE, then to my eye, Fed Funds will not increase until at least mid-2015 and even then subject to a consistently strong economy that produces 2%+ inflation. I wonder if we can get there in this decade to tell you the truth. But the beauty of this North Star Fed Funds sextant is that it can be rather directly observed in futures markets, either for Fed Funds or for Eurodollars, which are a close companion. Right now, Fed Funds futures markets are predicting a 75 basis point yield in 2015, and Eurodollars validating a similar conclusion. That would suggest a mispricing, despite the obvious caveat of professional observers that some of the 75 is a surcharge for potential volatility. In any case, if frontend curves are up to 50 basis points cheap, then intermediate curves – the 10-year Treasury – may be as much as 35 basis points too cheap. They belong in our opinion at 2.20% instead of 2.55%.

So there you have it, fellow passengers and paying clients. Don’t jump ship now. We may have reached an inflection point of low Treasury, mortgage and corporate yields in late April, but this is overdone. Will there be smooth sailing tomorrow? “Red sky at night, sailors delight?” Hardly. Will you be able to replicate annualized returns in bonds and stocks for the past 20–30 years? Hardly. Expect 3–5% for both. But sailors, don’t panic. And like wikiHow suggests, if you see someone that’s afraid, “yell at them!” Yell, “This ship’s going to make it to port,” Fed, PIMCO, and PIMCO co-captains willing. Those icy Atlantic money market waters are likely to be with us for a long, long time. Have a cocktail, tell the band to stop playing dirges, because you’re gonna be just fine with PIMCO at the helm.


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Sat, 06/29/2013 - 10:44 | 3705928 Ignatius
Ignatius's picture

"Yeah, that's a great story, Bill, but just one question:  Do you own physical gold as savings?"


Sat, 06/29/2013 - 10:56 | 3705943 kito
kito's picture

I do!! I do!!!!! ooo me!!!! Me!!!

Sat, 06/29/2013 - 10:59 | 3705949 Winston Churchill
Winston Churchill's picture

Not a terible sailor then ?

Make you unusual in these parts.

Sat, 06/29/2013 - 11:03 | 3705952 THX 1178
THX 1178's picture

Shameless plug for PIMCO/Bonds passed off as sincere analysis. YAWN. Next...

Sat, 06/29/2013 - 11:28 | 3705979 francis_sawyer
francis_sawyer's picture

Oh Billy Billy Billy... OooooH Billy Billy Billy... This is a biggie!


Sat, 06/29/2013 - 11:58 | 3706024 Big Slick
Big Slick's picture

so the takeaway message is that fortunately things are worse than the Fed thinks?


Sat, 06/29/2013 - 12:43 | 3706073 FL_Conservative
FL_Conservative's picture

No, the takeaway is that "we're all in this together so, by all means (dear Chairsatan), please keep up with the QE so I can keep hitting my fund return targets by front-running your treasury purchases and people think I'm a fucking genius".  Who gives a shit about what happens when the fucking titanic sinks?  As long as he makes his money in the meantime.  Fucking self-serving asshole.  I don't give 2 shits what that fucker thinks any more.

Sat, 06/29/2013 - 14:02 | 3706167 markmotive
markmotive's picture

The sheer panic I keep hearing from investors about the bond market crash is enough to tell me this is overdone. Maybe Treasuries aren't a 'buy and hold' investment, but you might make a couple bucks going long for a while.

Bond King II, Jeff Gundlach of DoubleLine, says this is overdone:

Sun, 06/30/2013 - 10:50 | 3707590 espirit
espirit's picture

Article should have been named "How to Sink a Ship".

...peeps pay for this advice?

Sat, 06/29/2013 - 11:26 | 3705982 malikai
malikai's picture

What's Bill gonna buy when Benocide's heir owns the whole market?

Sat, 06/29/2013 - 12:37 | 3706064 Stock Tips Inve...
Stock Tips Investment's picture

Bill Gross is a smart and clever Fund Manager. However, he is part of a market that has been manipulated for 36 years. What do you think can happen now that starts the way back? I would not be in the place of Bill Gross ... and less on-site customers.

Sat, 06/29/2013 - 13:10 | 3706108 PiratePawpaw
PiratePawpaw's picture

based on his quotes from himself, he was an idiot.

Am I to believe he got over it?

Sat, 06/29/2013 - 14:22 | 3706197 THX 1178
THX 1178's picture

Bond markets's been rigged since 1913. Thats the Fed's job: control demand for bonds.

Sat, 06/29/2013 - 11:29 | 3705988 bank guy in Brussels
bank guy in Brussels's picture

From Doug Noland's latest, on Gross and his ilk:

« I don’t believe the market misunderstands the Fed as much as the Fed and market participants for years have misunderstood market risk.

The sophisticated market operators will now work to "distribute" risk to the less sophisticated ...  The "sophisticated" surely don’t want to be in a situation where they’re fighting the "unsophisticated" to the exits.

The vast majority of derivative market insurance written requires some degree of "dynamic" hedging – i.e. selling of instruments to generate sufficient cash flow to pay on market insurance contracts sold/written. »

In other words, a Ponzi

- Doug Noland, Credit Bubble Bulletin, Prudent Bear

Sat, 06/29/2013 - 17:39 | 3706178 deKevelioc
deKevelioc's picture

Noland is a much more reliable than Gross is.  I'm sick of Gross, and I have been for a very long time.  He plays the participant, when, in fact, he is an in-the-loop piece of garbage.  Do you think for one damn minute that a guy who controls nearly a trillion of sovereign paper hasn't been privy to anything the Fed and ECB are up to?  He's a running joke, along with Soros; Gross just has a better personality and proper American accent.

Sun, 06/30/2013 - 12:46 | 3707801 Colonel Klink
Colonel Klink's picture

Everyone keeps spelling it wrong, it's PimPco!

Sat, 06/29/2013 - 11:35 | 3705997 crazyjsmith
crazyjsmith's picture

Gross did own Gold, but he apparently lost it in a bad boating accident.

Sat, 06/29/2013 - 11:54 | 3706019 CrashisOptimistic
CrashisOptimistic's picture

Gross owns things far superior to gold.

He is the pre-eminent collector of rare postage stamps in the world.

These can be placed in an envelope in his shirt pocket and walked onto an airplane (Mohammed would have the Gulfstream so he has to fly First Class commercial that day).  Stamps won't xray.  They are not monetary instruments and don't have to be reported for the $10,000 maximum transfer.

Gold would be seen in the most cursory xray.  Stamps aren't.

So off he goes to Singapore and his safety deposit box there.  The IRS requires reporting foreign bank accounts.  A safety deposit box is not one.

It is no coincidence that there are so many stamp dealers in Zurich.

Sat, 06/29/2013 - 12:24 | 3706044 malikai
malikai's picture

There are riots everwhere. Bernanke was killed by a group of teenagers looking for food. Obama is still alive but in hiding, rumored to be dead. Half his cabinet has either fled or been killed in varous attacks against government institutions. Yesterday, 50,000 police opened fire on 2 million protesters in DC, killing over 1000. The Army has been called in, but overseas quagmire, mass desertions, and widespread looting have crippled domestic forces.

And Bill's gonna count on his stamp collection?

Sat, 06/29/2013 - 14:09 | 3706179 mjcOH1
mjcOH1's picture

Well....they're durable.   They're easily dividable.   They're universally recognized.   They have intrinsic utility.   They've been an accepted medium of exchange for thousands of years.   So, sure.



Sat, 06/29/2013 - 14:37 | 3706215 CrashisOptimistic
CrashisOptimistic's picture

Given your scenario, no one in his right mind would trade food for yellow metal.

Bill will count on his stamp collection to get money moved out of the US, and then with the local currency buy farmland.  When your scenario unfolds, he has the ultimate value item -- calories.

Yellow metal did nothing for him, or anyone else.  Its window of civilization level is very narrow.

Sun, 06/30/2013 - 16:09 | 3706242 FEDbuster
FEDbuster's picture

"Yellow metal did nothing for him, or anyone else.  Its window of civilization level is very narrow."

In the book "The Road" when the bunker full of canned food, ammo and gold coins is found, guess which of the three items was left behind as useless?  Let's hope things don't get that bad

Sat, 06/29/2013 - 13:12 | 3706109 PiratePawpaw
PiratePawpaw's picture

God I hope that was sarcasm.

Sat, 06/29/2013 - 14:04 | 3706171 GMadScientist
GMadScientist's picture

There are no $500 hookers; only $500 johns.

Sat, 06/29/2013 - 17:27 | 3706428 spine001
spine001's picture

Thanks for the tip, here is a tip back: Why did Bernanke talk about Taper? Jeremy Stein gave us the answer on January 2013 "Putting it all together, my reading of the evidence is that we are seeing a fairly significant pattern of reaching-for-yield behavior emerging in corporate credit. However, even if this conjecture is correct, and even if it does not bode well for the expected returns to junk bond and leveraged-loan investors, it need not follow that this risk-taking has ominous systemic implications." and "Indeed, in some cases, it may be that the only way to achieve a meaningfully macroprudential approach to financial stability is by allowing for some greater overlap in the goals of monetary policy and regulation."

Clear isn't it? They decided that they had to intervene now and test the waters. I have been saying this before, but was just guessing based on past behaviours I have observed, now I'm convinced that my previous assertion was right on target :)

Sun, 06/30/2013 - 10:43 | 3707572 espirit
espirit's picture

Taper Trash Talk was an induced correction that would not normally have occurred, to take PM's down and also feed the hedgies to keep them from starving to death.

Meh, overanalyizing the Matrix will drive you craaazzzy!!!!

Sat, 06/29/2013 - 14:14 | 3706190 Wile-E-Coyote
Wile-E-Coyote's picture

You know with all these boating accidents I think I will invest in a submarine.

Sat, 06/29/2013 - 22:41 | 3706994 mt paul
mt paul's picture

bullion stealing beavers ...

Sat, 06/29/2013 - 12:43 | 3706078 williambanzai7
williambanzai7's picture


Sat, 06/29/2013 - 22:42 | 3706997 mt paul
mt paul's picture

imbrace the ocean ..

Sat, 06/29/2013 - 14:24 | 3706199 scrappy
scrappy's picture

This way to the lifeboat friends.

Woman and children first, of course.

40 Ways to lose your future.

All of the "Primers" from the Automatic Earth.


Sat, 06/29/2013 - 10:47 | 3705932 Divine Wind
Divine Wind's picture




Excellent article.

Excellent analogy.

Sat, 06/29/2013 - 11:00 | 3705946 Bananamerican
Bananamerican's picture

he's enriched himself on the backs of our diminished standards of living....that's just Gross

Sat, 06/29/2013 - 15:45 | 3706274 zerozulu
zerozulu's picture

We are now poor and no freedom either. wtf.

Sat, 06/29/2013 - 11:16 | 3705965 Salah
Salah's picture

He's talking about the Obama Administration.   Gonna be fun this Fall, when Saturn transits the Magic Negro's Natal Neptune, and the world sees he ain't wearing no spandex.

Sat, 06/29/2013 - 13:02 | 3706098 Landrew
Landrew's picture

Race is not what is wrong with O'Bummer! You can make the comment without the racism and you would be stronger for it. Now you sound like a trailer park goof.

1. More secretive then NIXON!

2. Puppet of Robert Rubin!

3. In bed with big Pharma.

4. Best friend of banksters.

Do I need to keep going?

Leave the racists comments in your head, that makes for a better argument. 

Sat, 06/29/2013 - 12:19 | 3706042 Debt-Is-Not-Money
Debt-Is-Not-Money's picture

The best (and quickest) way to leave a sinking ship is to follow the rats!

Sat, 06/29/2013 - 12:35 | 3706061 Rustysilver
Rustysilver's picture


The probem is that rats have no safe place to go.

Sat, 06/29/2013 - 13:17 | 3706117 PiratePawpaw
PiratePawpaw's picture

Never "misunderestimate" the rats.

Sat, 06/29/2013 - 13:23 | 3706123 Debt-Is-Not-Money
Debt-Is-Not-Money's picture

RS- Great analogy on where to "invest" our retirement money, no?

Sat, 06/29/2013 - 13:15 | 3706112 PiratePawpaw
PiratePawpaw's picture

You beat me to it. +1

Sat, 06/29/2013 - 10:50 | 3705937 SilverIsKing
SilverIsKing's picture

It should now be apparent to all why owning physical gold and silver is a must.

With all the market gyrations recently and bond yields moving higher, the shiny stuff just sits there disinterested in what's going on. Unaffected by all the bullshit. When things get much worse, and they will, the metals will still just sit there doing what they do best.

Sat, 06/29/2013 - 11:07 | 3705956 Pareto
Pareto's picture

+1 ......the metals will just sit there doing what they do best......preserving value.

Sat, 06/29/2013 - 13:26 | 3706124 PiratePawpaw
PiratePawpaw's picture

My rule of thumb has been to remove $ from the equation and compare commodities.

Historicly an ounce of gold is worth about 15 barrels of oil.

Historicly 1/10 ounce of silver is worth about a gallon of gas or a gallon of milk or a lb of hamburger.

Not perfect, I know; but a reasonable guideline.

That puts gold around 1450 and silver around 40.

Ill check again in 100yrs to see if the next 100 holds true to the last.

until then, I will buy metals when I can get them for less than the historical avg.

Sat, 06/29/2013 - 13:32 | 3706134 PiratePawpaw
PiratePawpaw's picture

I also look at the ag/au ratio. historicly it has ranged from 8/1 to 35/1. 

50+/1 has only been a relatively recent phenomena.

I personnaly think 40/1 is reasonable.

Sat, 06/29/2013 - 10:54 | 3705941 Midasking
Midasking's picture

The only way to win is not to play - Joshua 

If you like liberty you might like this

Sat, 06/29/2013 - 11:12 | 3705963 shovelhead
shovelhead's picture


Nah. Too many independent decisions to make that could go wrong.

High quality oppression is far more comforting. You can't make a mistake if you do what you're told.

But thanks for sharing.

Sat, 06/29/2013 - 10:59 | 3705948 kito
kito's picture

Bill gross is a shit talking establishment pig....the minute the world goes to hell....and his investments plunge to the depths of center earth....he will be tweeting for everybody to remain calm....bonds are safe!!! Bonds are safe!! Duck you gross!!!!!

Sat, 06/29/2013 - 11:20 | 3705973 caimen garou
caimen garou's picture

that is what the establishment pigs are screaming now along with  msm shit talking heads,btfd! I sleep well at night knowng I'm out of the casino! I went to rehab and am at 100% recovered...out of debt!

Sat, 06/29/2013 - 11:28 | 3705985 resurger
resurger's picture


Fuck that piece of shit

Sat, 06/29/2013 - 11:56 | 3706023 Bay of Pigs
Bay of Pigs's picture

"Fed Governor Bullard of the St. Louis Fed was in our opinion correct where he dissented from the majority decision several weeks ago, citing the distant shores of 2%+ inflation and the seeming inability to even move in that direction."

I quit reading right there. Why listen to this buffoonery and outrageous bullshit? 

Sat, 06/29/2013 - 11:14 | 3705964 RaceToTheBottom
RaceToTheBottom's picture

I have lost a little confidence in Gross.  His being in a position of authority and not knowing some basic ship knowledge has direct translation into his perceived knowledge of the Bond world...


Sat, 06/29/2013 - 12:31 | 3706055 kito
kito's picture

gross will never tweet the truth when it adversely affects his precious holdings........................he is a shill for the fed and the govt......................

Sat, 06/29/2013 - 12:37 | 3706066 RSloane
RSloane's picture

I absolutely hate grapes, they are very bad for you and I admonish you not to eat them, which is why I eat them every chance I get.

Sat, 06/29/2013 - 11:18 | 3705968 Inthemix96
Inthemix96's picture

And they say the police are not thick do they?

I got pulled over today after coming back from my earlier job and the daft fucking copper went through the whole shebang.

He then said, birth date sir, I said, 12th of October, he said, what year sir, I said, every fucking year you daft cunt.

Thick as a butchers fucking block.

Sat, 06/29/2013 - 13:36 | 3706138 PiratePawpaw
PiratePawpaw's picture

I went to school with a girl born on Feb 29, so hers was every 4th year.

I think she is 15 now........

Sat, 06/29/2013 - 13:58 | 3706165 Bastiat
Bastiat's picture

Thanks for a good laugh.

Sat, 06/29/2013 - 15:52 | 3706282 TheMeatTrapper
TheMeatTrapper's picture

Here in the land of the free, home of personal liberty; that would get you arrested, thrown in jail and charged with "obstruction". It would probably cost you several thousand dollars in fines, fees and lost wages. 

That's why the terrorists hate us - for our freedoms. 

Sat, 06/29/2013 - 11:19 | 3705971 ebworthen
ebworthen's picture

37 Degrees to Starboard!

Abandon ship!


If mortgage rates don't come down all those levered MBS's are going to sink the ship come Winter.

Sat, 06/29/2013 - 11:23 | 3705976 Professorlocknload
Professorlocknload's picture

So there you have it, fellow passengers and paying clients. Don’t jump ship now.


There we have it. Don't jump ship until the crew has taken off with the life boats.

Sat, 06/29/2013 - 13:15 | 3706113 noless
noless's picture

Exactly, over the intercom: "an impromptu complimentary banquet for all guests is being held in the lower hall, all are encouraged to attend."

Sat, 06/29/2013 - 11:26 | 3705983 disabledvet
disabledvet's picture

panic selling when there is a panic might not be the worst idea...but it does say you didn't do your homework prior to. i didn't see the Fed doing a 180 on everything they've said for the past 5 years...but hey, there are some real bad people and this is how they ply their trade. the losses i sustained seemed pretty minimal so "what's the problem to being with and what are the news one's that are being created here?" (obviously i don't have a problem with the existing program anymore.) well...the obvious problem is that this huge run up in rates will slow the economy...possibly pushing it into recession. it's devastating to any and all means there's even less cabbage for fooling around with than there was before. that says start buying treasuries to me. (if it was good during the sell off at the beginning of the year then it should look better now, right? obviously if i've done my homework...and i have...then now is not the time to abandon ship either.) i agree with John Mason at SA..."somebody just lost it" and the target was the Fed. were the markets responding too? sure...but the whole taper thing couldn't have been timed any worse as well. "you're fired" move along. to the points trying to be made here...namely..."is there enough liquidity and growth without inflation in the USA to truly start paying down that deficit"...obviously there is no math here...nor even a claim that's its even happening...not even Bill Gross talks about that actually and interesting enough...but in fact the deficit(s) are coming down and coming down quite dramatically. the pure falsity that "Obamacare is going to cost a fortune" is already made lie by how the markets have responded: "here's you hospitals with no patients Republicans." in other words "the money will be recycled back into the economy and we'll call it health care." ironically this is bearish for not just treasuries but ALL debt as well as "what's the incentive to hold onto debt if the fear of default is waning"? and the answer of course is "there is very little reason to do that." hence...the sell off. but we're dealing with AMBITIONS here as well..."people in a hurry" as they say...and that says to me...sure "QE." so as i read this article ('THE HORROR! THE HORROR!') it gives me a very powerful reason to long treasuries and possibly even debt in general. in other words what is being said here is that many things are going to go wrong if the government proceeds to manipulate the paper...something i don't disagree with at all. hence "bullish on treasuries." of course the program could still be unwound as which case "time to cut the losses and look for greener pastures." Obviously insofar as Bill Gross is concerned "his job is not to sit in cash all day." if the folks who's he's made a fortune for decide "it's time to panic here" then THEY'RE the stupid ones not him. HE'S NOT PAID TO BE 100% IN CASH. obviously i would explain things thoroughly as possible of course. i've tried that here...but this is just a trade for me and an experimental one at that. i find it intriguing (to myself as is my wont) that the trade just got more interesting "on the news of you lose." we'll see what next week brings...treasury yields really could shoot up...and yes i do have selling point. but as with any great trade "it starts making money immediately" and since no trade will do that forever "it gives you confidence when the inevitable sell off materializes." i said i was being greedy here! "now my mind casts a gaze on Japanese rates" whereas before i was just happy with nickels and dimes.

Sat, 06/29/2013 - 11:49 | 3706014 gmrpeabody
gmrpeabody's picture

Have a lot of free time, do you...?

Sat, 06/29/2013 - 12:42 | 3706076 kito
kito's picture

back off of disabled vet....hes...well....a disabled vet.................

Sat, 06/29/2013 - 14:27 | 3706202 Wile-E-Coyote
Wile-E-Coyote's picture

Wow what a wall of words, I went dyslexic reading that.

I do hope you are going to go around your English teacher's home and give him or her a good slap.

Sat, 06/29/2013 - 14:35 | 3706212 PiratePawpaw
PiratePawpaw's picture

paragraphs, spacing........makes written ideas more palatable.

just a thought.

Sat, 06/29/2013 - 11:31 | 3705993 chunga
chunga's picture

Do us a favor Capt. Gross.

Start up a cruise ship company and take all your wall street cronies to Davey Jones locker you prick.

Sat, 06/29/2013 - 11:36 | 3706001 FleaMarketPete
FleaMarketPete's picture

So a 3% decline is a panic now?

Sat, 06/29/2013 - 13:35 | 3706137 Landrew
Landrew's picture

I solve problems for a living and your comment tells all. It's not the 3% move that is the problem. It's what THEY are afraid of that is the problem. I have only my guess as to what the root problem is. Derivatives I believe are what keeps them All up at night. Not just derivatives in bonds but all markets. The leverage is so high on everything from 50% margin money in equities to CDS sitting on every balance sheet in the financial world. For years now every single company chart looked the same, then every index looked the same and now all traded anything looks the same. The bubble is so big no one can see it because we are ALL in it. The world financial markets are like the dark energy/matter we see the influence of but can not (yet) measure it. Check out the Dark Energy Camera DeCam for the most interesting photos of the universe yet.

Self promotion but, none the less incredible what we humans can do working together.

Sat, 06/29/2013 - 14:15 | 3706192 mjcOH1
mjcOH1's picture

"So a 3% decline is a panic now?"

Did you not get the memo that valuations shall only increase?

Sat, 06/29/2013 - 11:38 | 3706006 besnook
besnook's picture

talking his book as usual but he does have a point. the fed has to inject a semblance of reality(rising interest rates) before it can get back on course(lol) with its mission to qe its way out of this storm.

at some point reality really takes over and interest rates rise into a rogue wave that topples the poseiden into the abyss.

Sat, 06/29/2013 - 11:40 | 3706008 nmewn
nmewn's picture

Staying with the analogy...

Go below deck and check for rot (if wood) and rust (if metal). The best captain in the world can't keep your ass out of the water if the vessel is unseaworthy from structural deterioration.

And you sue the owner(s) of the ship, not the captain if you find yourself adrift and good luck with that, you're the owner(s) ;-)

Sat, 06/29/2013 - 11:56 | 3706021 francis_sawyer
francis_sawyer's picture

"Does anyone know where the love of God goes

when the waves turn the minutes to hours"...


Sat, 06/29/2013 - 11:59 | 3706026 nmewn
nmewn's picture

The wreck of the USS Jekyll Island ;-)

Sat, 06/29/2013 - 12:51 | 3706085 RSloane
RSloane's picture

Ugh. Format challenged. Disregard.

Sat, 06/29/2013 - 12:03 | 3706030 Professorlocknload
Professorlocknload's picture

"Ain't no such thing as the devil, it's jus' god when he's drunk...."

Sat, 06/29/2013 - 11:48 | 3706012 Professorlocknload
Professorlocknload's picture

  And WTF is this?   and even then subject to a consistently strong economy that produces 2%+ inflation.

  Soooo, this apparatchik believes the indication of a strong economy is one that produces devaluation of the currency?

 We're doomed.

Sat, 06/29/2013 - 11:52 | 3706016 Fuku Ben
Fuku Ben's picture

USS Titanic?

Sat, 06/29/2013 - 21:22 | 3706841 RECISION
RECISION's picture

Actually... looks like the 'Rena'.

Sat, 06/29/2013 - 11:56 | 3706022 BadDog
Sat, 06/29/2013 - 12:00 | 3706027 the grateful un...
the grateful unemployed's picture

think i can help mr G out, since disciplined sailors don't run to one side of the boat and panic. the way to instill discipline is to convince the sailors (investors) you know what you're doing. confidence is achieved by running a turnkey political and economic leadership (done and done). captain bush captain obama, both went to captains school.

every time the market tries to flounder, you pour in more ballast (liquidity?) the naysayers never see the ballast being removed, so they speculate that someday the ship will sink under its own weight. not so because the nature of ballast is flow, not volume, ballast flows in, ballast flows out when its no longer needed. ballast is more like electricity, and gee isn't that what the phantom electronic ballast really is, just electricity?

but swinging wildly back and forth will not endear you with the cooks. yes we have structural problems, but misestimating the cyclical rhtyms, which pushed the normal business cycle off center point, when china started running the engine of the economy. the inflation which causes recessions didn't show up (when they thought it would, and so everyone thinks the business cycle is a thing of the past, or we can handle it like we did with the old model, when the US was a vertical economy in many ways) we're in a new ocean. China isn't the new world its the 51st state.we can't just cut them loose.

i recall an abandon ship drill, in the SOUTH CHINA SEA, on the deck of the carrier. the yeoman went looking for the lifevests, and he came back with enough for about 1/3 of the division. chief, where's the lifevests?? "Don't worry", he said, "if this was the real thing, 1/3 of you would be all that's left..."


Sat, 06/29/2013 - 12:19 | 3706041 csodak
csodak's picture

I assume this meant to say income is down not up in the italic quote below from the article above. Mortgage rate data comes directly from the markets.not that it can't be manipulated, but income is purely gov't statisticians plugging in the x value to get to their desired Y "And speaking of housing, since mortgage rates have risen by 1½% in the last six months and the average monthly check for a new home buyer is up by 20–25% as well, then as I tweeted several weeks ago, “Mr. Chairman are you serious?”"


The fact that we've been screwing the middle and lower classes so the upper class retains a feeling of wellbeing through the overleveraging of the economy is a controlled economy, nothing more than fascism with mocracy..."fascismocrocy" there it is I've coined the phrase to the new economy.


Fascismocracy-an economic system where the rich control the government through corporations in order to enslave the middle and lower classes through debt as a replacement for lower income while leveraging the media to intimidate through fear that they are getting screwed for their own welfare. Reference USA 1980 to ?

To add: this is to all the weak ass investors or otherwise known as the Jack "ASS" Welch class who are happy to ridicule the middle and lower classes for not being industrious enough...stop demanding the government teet and let the market 'FREE' market that you proclaim your such and advocate of determine your competency as a business leader/investor.

Sat, 06/29/2013 - 12:37 | 3706067 Jake88
Jake88's picture

Rather extremely disengenuous Bill. You know damned well tapering has nothing to do with improved economy or inflation rates and the yields adjusted too much argument...Please Bill. I do thank you, however, for announcing the top in bonds and the beginning of the bear market in bonds. That was mighty decent of you. You saved my butt.

Sat, 06/29/2013 - 12:38 | 3706069 Yen Cross
Yen Cross's picture

    I saved this article from the Financial Times. Not only is the article itself ridiculous, most of the comments look they were written by halfwit noob pikers, brainwashed by their masters. Have at them fellow ZHers. Gold bears eye fall towards $1,000 level -

Sat, 06/29/2013 - 12:59 | 3706093 Sutton
Sutton's picture

What he meant to say-"Ben, we have a sick consulting contract waiting for you if you stop this taper talk"

Sat, 06/29/2013 - 13:02 | 3706097 PiratePawpaw
PiratePawpaw's picture

Follow the rats.

Sat, 06/29/2013 - 13:04 | 3706099 giggler123
giggler123's picture

and we trust him now?

Sat, 06/29/2013 - 13:06 | 3706102 Rustysilver
Rustysilver's picture

Wasn't Greenspan doing consulting work for Bill Gross. You would think that he would have some inside knowledge.

Sat, 06/29/2013 - 13:16 | 3706116 short screwed
short screwed's picture

If sinking is immenent...

6. Spend final hours rearranging the deck chairs. This will give the appearance of control of the situation and competence.

Sat, 06/29/2013 - 13:22 | 3706119 buzzsaw99
buzzsaw99's picture

If Gross were the least bit genuine this is the maritime analogy he would have used:


Pimpco is a leaking trash scow, laden to the gunwales with festering garbage. All the other scows are in the same condition. If even a minor tempest brews from the noreast we start taking on water and the head backs up first thing. With no place to take a crap we stick our bare ass out the porthole and take a runny shit all over everyone.

Sat, 06/29/2013 - 17:20 | 3706413 Baldrick
Baldrick's picture

And his song wouldn't be Nearer My God To Thee, but Godsmack's You Cry Like a Bitch.

Sat, 06/29/2013 - 13:56 | 3706164 Stuck on Zero
Stuck on Zero's picture

Gold makes a terrific ballast when you're in a storm at sea.


Sat, 06/29/2013 - 14:23 | 3706196 mjcOH1
mjcOH1's picture

Unfortunately it sucks hopium right out of the air and doubles in density, usually over the deapest point in the channel.

Sat, 06/29/2013 - 14:10 | 3706182 tempo
tempo's picture

tapering robots, millions of full time good paying jobs are eliminated each year with automation and robots. Yes, there are big economic winners for computer geeks, but for most its 2 part time jobs and unending debt. Central banks can't stop QEing as automation is just beginning and the trillions in funding is necessary to keep consumption stable and avoid social unrest. Talk of tapering is unrealistic, QE will be expanded until inflation starts up big time. My guess 2015.

Sat, 06/29/2013 - 14:11 | 3706185 Bastiat
Bastiat's picture


Central banks sell record sums of US debt High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email to buy additional rights.

Holdings of US Treasuries held at the Fed on behalf of official foreign institutions dropped a record $32.4bn to $2.93tn, eclipsing the prior mark of $24bn in August 2007. It was the third week of outflows in the past four.

Sat, 06/29/2013 - 15:03 | 3706248 buzzsaw99
buzzsaw99's picture

feral hogs

Sat, 06/29/2013 - 14:12 | 3706189 Smuckers
Smuckers's picture

com'ack....come ack.....Come back! come back...!   Come BAck!  COMe BAck!!


Sat, 06/29/2013 - 17:07 | 3706391 robertocarlos
robertocarlos's picture

The Nina, an 80 foot schooner, went down so fast the crew did not manage  to activate the emergency beacon. Then again who is going to save you when the wind is 80 knots and the waves are 8 meters high.

Sat, 06/29/2013 - 17:13 | 3706399 Stuck on Zero
Stuck on Zero's picture

The best way to abandon ship is not to have to abandon it.  First close all the watertight doors and bulkhead openings. 


Sat, 06/29/2013 - 17:19 | 3706411 robertocarlos
robertocarlos's picture

Serious question, do those containers float?

Sat, 06/29/2013 - 17:20 | 3706415 Aurora Ex Machina
Aurora Ex Machina's picture

Mr Gross doesn't understand what the ship really is.

Every summer, something strange and wonderful happens high above the north pole. Ice crystals begin to cling to the smoky remains of meteors, forming electric-blue clouds with tendrils that ripple hypnotically against the sunset sky. Noctilucent clouds-a.k.a. "NLCs"-are a delight for high-latitude sky watchers, and around the Arctic Circle their season of visibility is always eagerly anticipated.

News flash: This year, NLCs are getting an early start. NASA's AIM spacecraft, which is orbiting Earth on a mission to study noctilucent clouds, started seeing them on May 13th.

"The 2013 season is remarkable because it started in the northern hemisphere a week earlier than any other season that AIM has observed," reports Cora Randall of the Laboratory for Atmospheric and Space Physics at the University of Colorado. "This is quite possibly earlier than ever before."

The early start is extra-puzzling because of the solar cycle. Researchers have long known that NLCs tend to peak during solar minimum and bottom-out during solar maximum-a fairly strong anti-correlation. "If anything, we would have expected a later start this year because the solar cycle is near its maximum," Randall says. "So much for expectations." [NASA]


You'll want to know some basics, such as the coverage from their initial discovery in the 19th C (hint: much farther North, much rarer), the reasons why they form (largely water vapor, which is up there due to methane and other compounds that are broken down) and concepts such as teleconnection.

Moscow; UK; Canada; Germany; North Atlantic; USA.


Oh so Pretty. But, feel free to ignore a global phenomenon, nothing to see here.

Mon, 07/01/2013 - 05:25 | 3706747 trader1
trader1's picture

There is evidence that the relatively recent appearance of noctilucent clouds, and their gradual increase, may be linked to climate change.[47] The author of this study, atmospheric scientist Gary Thomas of the Laboratory for Atmospheric and Space Physics at the University of Colorado has pointed out[1] that the first sightings coincide with both Krakatoa and the nascent Industrial Revolution, and they have become more widespread and frequent throughout the twentieth century, including an uptick between 1964 and 1986. The connecting of global warming and noctilucent clouds however, remains controversial.[1] Gary Thomas may have penned his paper after Wilfried Schröder, who might hold the distinction of being the first to explain noctilucent clouds as "indicators" for atmospheric processes (Gerlands Beiträge zur Geophysik, 1971, Meteorologische Rundschau 1968–1970.[48]

Climate models predict that increased greenhouse gas emissions cause a cooling of the mesosphere, which would lead to more frequent and widespread occurrences of noctilucent clouds.[45] A competing theory is that larger methane emissions from intensive farming activities produce more water vapour in the upper atmosphere.[11] Methane concentrations have more than doubled in the past 100 years.[2]

Tromp et al. also controversially, suggest that a transition to a hydrogen economy, and this resulting in an increases of the free hydrogen concentration of the atmosphere by 1 ppm, would increase the number of noctilucent clouds.[49]



whoever junked this post in all seriousness, takes him/herself too seriously.  just chill.


Sat, 06/29/2013 - 23:02 | 3707025 Element
Element's picture



OMG! ... you're scared of pretty fucking clouds now?

Let's see, the observation contains two seasons, and one is said to be 1-week prior to the first, but due to this EXTREME variability in just two data points, the author strongly suspects this is the earliest seasonal on-set of such clouds in all of the past 4 billion years of earth's history? ... and for this reason some sort of 'ship' is involved?

OMG!!!! ... the sky's falling!! .... DERP!

jfc ... what a fucking clown .. get a life aurora ... you pathetic idiot

Sun, 06/30/2013 - 16:04 | 3708205 Aurora Ex Machina
Aurora Ex Machina's picture

Again, I think you're misunderstanding my point. You also seem to think NASA climatologists don't know what they're talking about, which puts you in a certain fraction of the population (do you like Indy 500?).


Fear is not part of my reaction.

Sun, 06/30/2013 - 19:06 | 3708616 Element
Element's picture

So it's my fault that I continually miss your ever-idiotic cryptic talking-points, eh?

Here's a hint dumb-dumb: If you have something to say, stop being a trite-jerk, posting dreary boring 'mysteries' for people decipher as you come off as a tedious complete wanker.

If you have something to say, it's simple, you say it clearly and write it clearly, and in plain-English, so that no one can possibly mistake the meaning, intents, contents and implications of your communications.

Otherwise it's not communication, it's just some idiot wasting my time. And while on the subject of time-wasting, stop posting your dreary youtube videos at me. I have not watched even one of them, not one. I don't even bother as you're an established serial time-waster and exhibit the typical habits of a consummate bullshit-artiste and trenchant con-man.


Somehow I don't expect that to change.

Mon, 07/01/2013 - 19:45 | 3711868 Aurora Ex Machina
Aurora Ex Machina's picture

I'd be careful of playing that card.

All Angels love homo sapiens, but not all Angels are your friends. Now there's a quandary: if the Angel of Death self-destructed to prevent it's mission, where's the logic? Did it love mankind or hate it? Michael or Gabriel, isn't that the rub?


The red haired woman in the corner of the hotel bar was the most successful war correspondent in the world. She now had a passport in the name of Carmine Zuigiber; and she went where the wars were.
Well. More or less.
Actually she went where the wars weren't. She'd already been where the wars were. (Good Omens - Oh, that link is NSFW btw)



Anyhow, dribble dribble, moil and tribble.

Tue, 07/02/2013 - 01:53 | 3712919 trader1
trader1's picture

what a beauty!

(by the way, didn't mean to infer anything about "destroying angels" in that link to the song in previous post. it is a complete coincidence. i just really dig trent reznor and his musical talent)

Mon, 07/01/2013 - 19:25 | 3711797 Aurora Ex Machina
Aurora Ex Machina's picture

Here's a hint in a free online forum: If you don't like it, don't fucking read it. You're not getting paid (or are you?) to read or reply to my posts.


Magical pixie time.

Sat, 06/29/2013 - 17:28 | 3706429 spine001
spine001's picture

Why did Bernanke talk about Taper? Jeremy Stein gave us the answer on January 2013 "Putting it all together, my reading of the evidence is that we are seeing a fairly significant pattern of reaching-for-yield behavior emerging in corporate credit. However, even if this conjecture is correct, and even if it does not bode well for the expected returns to junk bond and leveraged-loan investors, it need not follow that this risk-taking has ominous systemic implications." and "Indeed, in some cases, it may be that the only way to achieve a meaningfully macroprudential approach to financial stability is by allowing for some greater overlap in the goals of monetary policy and regulation."

Clear isn't it? They decided that they had to intervene now and test the waters. I have been saying this before, but was just guessing based on past behaviours I have observed, now I'm convinced that my previous assertion was right on target :)

Sun, 06/30/2013 - 01:22 | 3707170 kito
kito's picture

You are not the first to observe the what happens next????

Sat, 06/29/2013 - 20:53 | 3706800 bugs_
bugs_'s picture

how to escape your sinking ship

1) sell your toxic assets to the central bank

2) once your ass is saved, give sage advice to the serfs

Sat, 06/29/2013 - 22:35 | 3706978 mt paul
mt paul's picture

how to escape your sinking ship....


with the cute little galley wench

Sat, 06/29/2013 - 22:49 | 3707014 mt paul
mt paul's picture

another way to escape your sinking ship


is to do so

with the 3rd ex wife

lashed to the mast ..

Sun, 06/30/2013 - 16:49 | 3708316 dragoneyes74
dragoneyes74's picture

Here's the trillion dollar question for Bill Gross: if you remove the Fed from the picture entirely, and survey the situation in the US in terms of its debt load, the politicial stalemate and inability to resolve its fiscal issues, the unfunded liabilities, the structural unemployment problem, and the overall burden of debt on the citizens...what would be the interest rate you would demand on a loan to the gov't given that risk profile?  Whatever number you come up with I'm sure you can add a couple hundred basis points on an overshoot from overleveraged selling when the Fed actually does pull out of the market.  Take that interest rate and factor it into the debt service cost for the US gov't and consider how dramatically that reduces its ability to continue distorting GDP thru excessive pubic spending.  

Now tell me the sinking ship is not already beyond repair.  And explain to me how there isn't a barber in the lifeboats giving haircuts to all who wait too long to abandon ship.  


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