Gross: AP, IRS? Ask not what you can do for your country, ask what your country can do TO you.
— PIMCO (@PIMCO) May 16, 2013
When the head of the world's largest bond fund starts paraphrasing war-time phrases, you know nothing is what it seems...
Gross: Never have investors reached so high in price for so low a return. Never have investors stooped so low for so much risk.
— PIMCO (@PIMCO) May 14, 2013
It seems to us that this can only end one way and the fight on the beaches this time will be between economic reality and central-bank-inspired mass hypnosis.
The Bernanke Chicago speech became little more than a side show Friday. He did say the Fed was keeping a watchful eye on yield risk-taking given ZIRP. He’s a little late to that observation methinks.
Bill Gross Tweets "Bond Bull Market Dead" Even As PIMCO Loads Up On Most Government Bonds In Three YearsSubmitted by Tyler Durden on 05/10/2013 12:08 -0400
The blue line in the chart below? That's the total holdings of Government (cash and derivative) securities of PIMCO's flagship $293 billion Total Return Fund. At a net exposure of 40% of total fund AUM, or roughly $117, PIMCO has not been more bullish on Treasury and Agency securities since July 2010, when Gross was selling into the QE2 Jackson Hole preannouncement panic. If also is the first time since the summer of 2010 that the fund holds substantially more government-related securities than MBS. Why is this notable? Because moments ago, Gross used his now favorite public service distribution medium, twitter, to announced that "The secular 30-yr bull market in bonds likely ended 4/29/2013." Uhm. No.
Gross: Central bank credit & hope for real growth drive risk markets. Both must continue to support current prices.
— PIMCO (@PIMCO) May 8, 2013
Currently, central banks around the world are walking in lock step down a dangerous path of money creation. Led by the Federal Reserve and the Bank of Japan, economic policy is driven by the idea that printed money can be the true basis of growth. The result is an unprecedented global orgy of currency creation. The only holdout to this open ended commitment has been the hard money bias of the German-dominated European Central Bank (ECB). However, growing political pressure from around the world, and growing dissatisfaction among domestic voters have shaken, and perhaps cracked, the German resolve. While German capitulations in the past have been welcome occurrences, in this instance the world would be better served if the Germans could stick to their guns. However, it seems presciently, that the ECB is looking for ways around Germany's oppostion to outright monetization by securitizing SME loans and buying ABS directly on to their own balance sheet.
Gross: Dow hits 15,000 & PIMCO’s internal Corp & Hi Yield Index hits all-time yield lows. Thanks Chairman #Bernanke! Got any more?
— PIMCO (@PIMCO) May 7, 2013
The world is awash in contradiction with stocks rising to new highs as interest rates reflect a slowing economy. It is an upside down world according to PIMCO's Mohamed El-Erian. As Lance Roberts annotates, the moustaced maestro explains individuals are both excited and anxious. They are excited by the rally in the markets as they see their portfolios increase in values but at the same timed overwhelmingly concerned about the economic future. It is a world with an enormous contrast between the markets and the real economy. That is the world we are navigating and it is incredibly unusual. This is why it is an unloved rally. His discussion at the recent Strategic Investment Conference is about a simple framework to reconcile these issues. The long term view matters greatly - but the short term matters also.
Gross: World awash in money. Fed buys 85 billion per month. BOJ 75 billion. ECB hints at neg interest rates. Don’t buy – sell risk assets.
— PIMCO (@PIMCO) May 2, 2013
“… current policies come with a cost even as they act to magically float asset prices higher…, a bond and equity investor can choose to play with historically high risk to principal or quit the game and earn nothing." Bill Gross, PIMCO
The highlights from Bill Gross' monthly letter: "The past decade has proved that houses were merely homes and not ATM machines. They were not “good as money.” Likewise, the Fed’s modern day liquid wealth creations such as bonds and stocks may suffer a similar fate at a future bubbled price whether it be 1.50% for a 10-year Treasury or Dow 16,000.... if there are no spending cuts or asset price write-offs, then it’s hard to see how deficits and outstanding debt as a percentage of GDP can ever be reduced.... Current policies come with a cost even as they act to magically float asset prices higher, making many of them to appear “good as money”. And the take away: "PIMCO’s advice is to continue to participate in an obviously central-bank-generated bubble but to gradually reduce risk positions in 2013 and perhaps beyond. While this Outlook has indeed claimed that Treasuries are money good but not “good money,” they are better than the alternative (cash) as long as central banks and dollar reserve countries (China, Japan) continue to participate....a bond and equity investor can choose to play with historically high risk to principal or quit the game and earn nothing."
When Spanish bonds traded at yields above 7% last Summer, the world's central banks went into a whirlwind to proclaim that these levels did not represent reality (in spite of the depression-era style economic data the nation was spewing). Fast forward nine months, the data is worse and getting worserer but yields - through the guiding hand of Draghi, the self-referential buying of domestic banks, and the BoJ's risk-is-no-object reach for anything non-JPY denominated - have crushed to 4.3% pre-crisis levels. Meanwhile, a few thousand miles south, the nation of Rwanda is issuing its first international debt today at a 7% yield (to the Japanese we are sure) as over 90% of the world's sovereign bond markets are at or near all-time low yields. But, the smart money is leaving, as PIMCO notes, "this central bank-inspired rally has made the markets expensive... relative to fundamentals"
Since reams of Powerpoint presentations, or pages of PDFs seem to pass most 'investors' by these days, PIMCO's Bill Gross' new chosen media appears to be Twitter's 140 characters. He is on a roll of soundbite superbness. Today's headline suggests just four little words we should all be aware of: "Bubbles are getting Bubbly."
— PIMCO (@PIMCO) April 24, 2013
In his increasingly ubiquitous manner, the bond king has reduced his thesis to 140 characters, summed up in just two words... Sell Euros
Gross: Expect an ECB cut soon but will it lead to real growth? Doubtful. Euro needs to go down. Sell Euro.
— PIMCO (@PIMCO) April 23, 2013
It seems sometimes there is no need for a 300-page Powerpoint presentation.
"Tough Slog" or "The Unimaginable"
Gross: The world looks 4 a new Keynes but w/ hi deficits & 0% rates there is only a long tough slog ahead @ best & the unimaginable @ worst.
— PIMCO (@PIMCO) April 21, 2013