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Bill Gross Has Record $60 Billion Short Cash Bet Fed To Proceed With MBS Monetization
Following the release of its November fund statistics, Pimco's Total Return Fund has once again reaffirmed it is betting on imminent QE by the Fed in the form of MBS monetization, a trend it started two months ago as we pointed out. And with a record $60 billion short cash position, or 25% of the entire fund $242 billion AUM, they better be right this time (he did the same thing in Jan-Feb... that did not work out too well). It is amazing to consider that back in April, Gross was long $90 billion in cash: a $150 billion swing! The TRF's 43% holdings of MBS is an increase of 5% compared to October, the most since December 2010, but still just half of the 86% held in February 2009 in expectation sof MBS monetizations by the Fed as part of QE 1. Just as notable is the near record effective fund duration, which at 7.46 was the second highest ever, just a modest drop from the 7.58 in October. What is most curious is that Gross, for the first time as far as our records go, is completely out of the 0-3 year maturity range. Which makes sense: after all the Fed has telegraphed there will be no money made in that band of rates until mid-2013, a deadline which will likely soon be extended.
Needless to say, this continued telegraphing of MBS as being the proud recipient of Fed purchase tickets has propmted Citi's MBS strategist Inger Daniels to say that when the Fed announces QE3, it will "likely focus on agency MBS" and could see up to $700 billion by the end of 2012. Daniels forecasts that the Fed will make MBS balance sheet expansion based upon following constraints: i) must impact mortgage rates: while "difficult to quantify" impact of QE3, estimate $700b program may reduce primary mortgage rates ~25bps; ii) Fed ownership must not exceed 1/3 of fixed rate MBS market: $700b QE3 would result in balance sheet holding ~$1.527t of $4.629t fixed rate MBS market; iii) Coupon-by-coupon ownership not to exceed QE1 levels: by end of QE1 Fed held 77%, 66% of 30-yr 4s/4.5s, respectively. Could expand balance sheet by $700b and stay under 55% ownership of any 30-, 15-yr coupon and lastly, iv) Fed does not consume too large pct. of monthly issuance: $700b program lasting ~8-9 months would take down ~80% of gross issuance, was 100% of gross monthly issuance during QE1 (as summarized by Bloomberg). Naturally, Citi does not exclude Treasurys also being bought in tandem with MBS a la QE1.
In the meantime, here is the stunning portfolio snapshot of Gross, and his duration distribution. Can you say "all in"?
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Merkel's hesitation is Gross's salvation...The FED steps in to replace inexistent ECB printing. Or so he bets!
TMV Bitchez!
Somehow I feel they always forget a P in this company"s name.
PimPco. Gross, some might say? Yes yes, pun, lowest form of humor...etc.
Here is an interesting point. If NWO is the plan, gubbermint paper might be the only game in town left standing after the shoot-out at the I'm OK Corrall. So, those that plan to stay in the game, might do in-ordinately well, if for no other reason, that will be the only security with a counter-party (at all) and a functioning system (Hah!) to trade them in.
ORI
/the-plan/
Libertarians have been successful in bullying Bernanke into adopting a weak, pathetic and impotent monetary policy. Professor Bernanke needs to rediscover himself, and reawaken his profound ability for spurring confidence in the recovery and in the American dream.
FINALLY!!!!! An establishment hack is owing up to the fact that the libertarian philosophy is taking a hold in the hearts and mind of the people. However, the effect is misplaced, as the Bernank is simply working harder to disguise his efforts of a strong moneitization process. $29.616 TRILLION in bailout funds is, by no means, a weak monetary policy. Impotent? - Yes. Weak? - No way in hell.
You want him to monetize more MF'er?
http://www.ritholtz.com/blog/2011/12/bailout-total-29-616-trillion-dollars/
Fuck you and the fiat you rode in on.
He was being and always is SARCASTIC!
Sure. I still want to get points out in return and also vent some anger.
I always vote MDB up so his brilliant SARC/ posts don't disappear under a tsunami of negative votes!
Its Heads I win, tails you lose! that's subtlety of three man ponzi.
.
You can measure the success of the libertarian ideology on deregulation and privatization. I mean, that banks became ever less regulated, is not because the goobmint suddenly became Marxist... And there was Reagan and the Problem Is the State, and stuffs.
There's a mainstream libertarian "tatemae" going around: no regulations, no taxes, laissez faire, and shit. But it's being proposed by those who are in "honne", simply fascists. Rich people who control the political process for their own benefit. And all the useful idiots who follow them actually thinking they will comply with the libertarian ideal. They'll comply with it in deregulating and privatizing. Once they have it all, that's when the libertarian dream is over and you get welcomed to Mogadishu.
LOL. Haven't seen you around in a while, it's always good to end a depressing article with a chuckle.
Bill?
Its Benny. Listen
We are about to buy another swatch of America
With this batch of newly printed Benja's.
I thought you should you. Is the short position in place?
Good.
Why is it that i cant be both long and short in the same account
But yet Joe Corzine through his web of BD 's and ICM's
Is allowed to be both long and short in regards to repos and reverse repos.
Its like he really has no market opion at All!
If his gross is 11, so he may be long 5 and short 6 or long 6 and short 5.
As the world turns that number gyrates between 5 and 6.
Joe makes a million tranactions and a million commissions each day as the sun rises,
He dosnt care if his net long or net short. Just churn the accounts and burn the toxic soverigns up and try to keep the book balanced to 50/50.
In a way he was always heged.
Thats called "match book" accounting.
Well of course. We can't have the DXY popping over 80 and continuing with plans to boost exports by double. Kill ($) Bill part __ to commence shortly...
You can simple tell by the name That Pimco will bw in the winners circle.
Bankers like programmers are lazy in naming thinfs and oftrn guce insight into these names.
Ex. MF Global. Sounds like mother fucker. So you know its going to end badly.
Pimco is on the pimp. It will end well.
AIG. American Insurance Group. (boring) so you know it was a fronr and will end badly.
Goldman Sachs. Soulds like the man holding the gold gets Sached.
Gross has been a great fade. I suspect he will continue to be.
He is the biggest book-talker out there. Tread with caution when dealing with this snake.
I lost all respect for him when he was trying to frighten everyone out of treasury bonds so that his functional short would succeed, and he even lied about being net short or was clintonesque.
Tyler proved he was holding what was functionally equivalent to a short position when he gross claimed not to be.
One last crash in December before the big (and final) QE pump announced in Jan.
So if PIMCO is wrong and gets squeezed its armageddon?
Gross has brass balls. It should be noted that he's betting OPM (other people's money) FYI.
Desperation sometimes looks like brass balls.
Being fed inside information can look like brass balls too.
When will there be a price break out btween paper and physical pms? When will pms (physical) get their due respect?
Never
Never say never...
The day that happens (not if but when) is the day that paper as medium of exchange will generally perceived as 2nd tier currency.
Gold, silver, copper, art, fuel, generators, diesel trucks, tractors and cars, livestock, canned food, agreable land will all be ACCEPTED in exchange for one another. Paper's value is fleeting.
To suggest that this time is different is bullshit, Bob.
If capital markets completely breakdown and we return to a barter-n-trade society then yes.
In that situation you are better off with guns, food and oil/gas.
Cpaital makrets have indeed broken down at their fundamental levels. A liquidity crisis simply means morons aren't buying the shit those hucksters are selling. The fact that liquidity has to be constantly injected into the capital markets indeed tells of the broken nature of them. $29.616 TRILLION, so far, from the Fed - based on what we know thus far. Could be a shit load more really.
'Could be a shit load more really.'
Benny has a quadrillion dollar bill waiting for you if you guess the correct amount.
When the speculative long position in paper contracts goes to 0, and the offsetting commercial paper short position goes to 0. At that point the bullion banks will have as much physical gold as they can get their hands on, at which point they'll pull the plug on the bond market and revalue.
Yes. The is the ULTIMATE transfer of wealth that TPTB have always pursued. Got physical? Some things never change, he who has the gold makes the rules.
After over a 300% return in less than 3 year I am confused, is this a rhtorical question? Seems like the last few years PM's have gotten a lot of respect. Unfortunately, if you are refering to a gamed paper market and the physical market, there is no comparison and the next time physical PMs get "respect" will be when the confiscation begins.
Not till $24.75ish silver come mid jan. They'll push hard to crack $25 but they will fail... or possibly even sooner.
i dont think 2011 was too kind to Gross, i think 2012 may be even worse
I think 2012 will be bad for the majority of fund managers.
Go back to the mailroom, Bill ;-)
Gross cannot be in the 1 - 3 month sector as it does not pay enough to cover his fees. It would drive the fund to negative net returns.
This (you beat me to it Augustus)
I know.
Why pay someone to be conservative in FUBAR markets when they can go out and lose 50% with a few bad trades in a year.
Sarc off /
He still holds long maturity and duration. Implies to me that he still is waiting for Armageddon. To his credit, he does see a lot of the problems out there that we here have been talking about. Imagine being a bond fund manager and knowing what's coming, first in all credits ex-treasuries and then ultimately Treasuries also. Scarey.
Why do you find it curious they are completely out of 0-3Y range? Think about it. How many investors are happy to pay PIMCO 50 bps to buy a UST2 yielding 23bps. They have to swing for the fences or they can no longer justify their fees.
That was the point: guaranteed "ZIRP thru mid-2013"
Or, alternatively...if a Treasury default panic strikes it's yields in this region that will blow moonward.
Having an average duration of 7.5 years ( ~10yr part of the curve) makes sense in terms of steep roll down returns...
this is a stupid bet, he will lose on it in 2012
but, on the other hand, being TBTF territory, that might be the plan?
ORI
Gross should go long Gold and Silver take delivery and forever change
the dimensions of the worlds financial system.
I am sure that he would get a visit from the mafia should he try taking delivery of that much physical gold and physical silver.
That is some serious wealth being put on the line.
It's somebody elses wealth, it doesn't belong to him so it's all good.
Gold is getting taken to the woodshed. I wonder how much Paulson is getting squeezed. To bad for him. Good for me as I add to my physical.
And who is buying all this gold. Lost and gone forever, dreadful sorry, Clementine.
Remember the coodinated liquidity ease a few days ago? I have an instinctive feeling that there is something brewing again - we may see a coordinated QE by US/EU/China/Japan
Nah - they want "deflation" to continue until the banks have foreclosed upon 90% of the nations homes, businesses, family farms, city parks ... The bankers have not yet had their fill. Not even close.
Hey, every fund manager blows up at least once.
This would be his third major speculation that hurt his returns compared to an "appropriate" benchmark.
Gross has become a speculator instead of an investor.
Bad trades come in threes, that would be their 2nd bad trade. F#$% them.
Gross is past his prime.
He is now swinging wildly at the ball hoping for a homer.
He also likes to compare his returns to the wrong index. He was essentially an international bond fund for a while comparing himself to a usa only index or reference.
You never want to be in a position where you have to make such a big aggressive swing in your portfolio in order to redeem yourself.
Sophisticated players cant really use his total return fund in a diversified portfolio construction because his betas and rhos are all over the place due to his big swings in assets.
I sold 200k of PTTRX and took a 600 dollar loss. Even Gross now is gambling. Where in the world can someone go to get a safe return?
Isn't longer duration what you want if you are expecting (been told, actually) that short term rates are pinned at 0% for the next 2 years? There is roll down here. It might be painful in short term respects, but I am not sure what else a bond fund is supposed to do given the Fed's actions.
Made one of the worst calls in recent history when he sold out right before QE.
He will be burned very hard if there is a deflation.
Prepare for round three of TBTF or is it round four? I can't keep track anymore. BUY THE DIP is all I know anymore.
wheres robo turd today and all his bull hype
Has Geithner given Gross the same "wink and nod advice" he gave Jon Corzine?
Didn't Jon Corzine go "all in" on European sovereigns? Jon Corzine ended up stealing 1.6B of client funds. Well actually JPM and other counterparties did when they claimed MF Globals "collateral", but Jon Corzine stoile the client funds and put it up as collateral at JPM, et al.
Gross is different because the funds are "his" to invest. But there are a lot of Pension funds in his Fund ...are there not?
If pension money is going "all in"...what are the4 real socio-financial risks here? TBTF...perhaps...but if Pimco goes down....well y'know...
Looking at the first chart I finally realised what "$60 Billion Short Cash Bet" meant. For the equally terminologically challenged, Gross has borrowed $60bn to buy MBS & govt bonds (after holding most of the funds assets in cash earlier in the year).
This is a big bet, but the ratio of MBS to govt bonds is only ~4:3. So isn't this really a bet on monetization generally, rather than *MBS* monetization?
MBS (Mortgage Backed Security)
Could we occasionally expand our acroynms? Thanks.
It's funny you picked the most obvious one.
you guys are so fucking good at what you do
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