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Pimco's Bill Gross, manager of the world’s biggest bond fund, cuts Treasury holdings and...

Pimco's Bill Gross, manager of the world’s biggest bond fund, cuts Treasury holdings and boosted cash to the most since the Lehman collapse in 2008 amid increasing speculation that interest rates will rise. Over the past month, Pimco's Total Return Fund went to cash holdings of +7% from -7%, while Treasury holdings fell to 51% from 63%.
Comments (18)
  • Mark Bern, CFA
    , contributor
    Comments (5074) | Send Message
     
    That is interesting. It appears that a move away from Treasuries could undercut the strengthening dollar if, that is, the move catches on with other institutional buyers. If that happens, Bill could be on the front end of a self-fulfilling prophecy. When demand for Treasuries declines, Treasury must pay higher interest rates to continue attracting the massive amounts of funding for the ever-increasing US debt. Let's hope this one doesn't start rolling down the hill. If it does, the recovery in stocks could be over as well.
    18 Dec 2009, 12:36 PM Reply Like
  • SlingWing9
    , contributor
    Comments (505) | Send Message
     
    I'm holding several MLPs that are skyrocketing. Is that related to this discussion?

     

    I'm also holding TBT, short bonds, and doing ok. This seems to suggest to keep that position. Do you agree assuming Bill Gross is correct?

     

    Foreign investments through ETFs would appear to be the clear winner as well as currency ETFs. Do you agree again assuming Bill Gross is correct?

     

    On Dec 18 12:36 PM Mark Bern wrote:

     

    > That is interesting. It appears that a move away from Treasuries
    > could undercut the strengthening dollar if, that is, the move catches
    > on with other institutional buyers. If that happens, Bill could be
    > on the front end of a self-fulfilling prophecy. When demand for Treasuries
    > declines, Treasury must pay higher interest rates to continue attracting
    > the massive amounts of funding for the ever-increasing US debt. Let's
    > hope this one doesn't start rolling down the hill. If it does, the
    > recovery in stocks could be over as well.
    18 Dec 2009, 02:33 PM Reply Like
  • Larry House
    , contributor
    Comments (1377) | Send Message
     
    SlingWing9, you appear to have some sound positions and a good outlook. TBT could move against you in the short term, but it is hard to see the dollar strengthening for long. If things really start going down hill, there is no good place to hide except in cash. I am using the drop in XOM to build a long-term (I hope) position there. Only time will tell if it is a good move.
    18 Dec 2009, 03:20 PM Reply Like
  • somecatchyphrase
    , contributor
    Comments (262) | Send Message
     
    When Bill Gross speaks, this guy listens.

     

    This is a very ominous move.
    18 Dec 2009, 04:01 PM Reply Like
  • javos
    , contributor
    Comments (7) | Send Message
     
    Lemme see if I've got this straight...the bond market is basically telling Benny and Timmy to go pound sand. They don't think the yield is adequate for the future prospect of inflation. I agree. Not good news for housing...mortgage rates already inching up. If housing takes another leg down,(it will) then banks go back to picking up doo-doo.

     

    So why are Benny and Timmy allowing TARP to be re-paid? Does somebody need the cash worse? Maybe the states?

     

    Getting interesting.
    18 Dec 2009, 04:23 PM Reply Like
  • javos
    , contributor
    Comments (7) | Send Message
     
    You know, you can make money when stock go down, too.
    18 Dec 2009, 04:25 PM Reply Like
  • wowulukgood@yahoo.com
    , contributor
    Comments (111) | Send Message
     
    Bill Gross is a guy I monitor. I made good money in equities during the 1980's and 1990's....and part of the the past decade....but stayed away from a largely stock portfolio over the past decade. I remainded in bonds this year ...yes I missed making a bundle. I am too near retirement to take much risk...and yes...inflation could eat my lunch remaing in fixed income. But.....it takes no genius to realize that the gains in the long bond (2008) and the inflation bond (2009) were remarkable. I was nimble and hit both those fixed income home runs....but it may be a long time before those type of gains surface again. I am now almost in cash...save for some short term treasuries and short term investment grade corporates. I moved before Bill...but undeerstood the undertones about what he has been saying for a while. I will jump back into my fixed income strategy once interest rates rise. Hopefully, again will come the day when my quarterly and monthly interest and dividend amounts make me smile. I can live with 5% annual gains from here on out....and I think it shall come to pass very soon. Although I do not have any investments with Pimco, I attempt to mirror Bill's philsophy via Vanguard Mutual Funds. Vanguard Long Term Treasury and Inflation Protected Securities did me justice....and my next move will probably be a split between Vanguard Total Bond and back to Inflation Bond when the Fed does what they cannot avoid much longer. I may also keep the small amount I now have in the Vanguard Short Term Treasury and Short Term Investment Grade just for a kicker if rates get bumped up quicker than anticipated....we are now long overdue for the "elastic band" effect of keeping rates too low for too long and our creditors want some big time return soon or will stop buying our junk. Thanks Bill
    18 Dec 2009, 05:34 PM Reply Like
  • tedstr
    , contributor
    Comments (80) | Send Message
     
    Watch what Ben does, not what he says. He will stop buying Treasuries long before he says. I belive it is already underway. If the troubled bankls can hang on and not let their new tangible common equity (ie the common they just sold to us retail punters) drop in a pull back, they will survive more bad mortgages to come as housing collapse #2 happens when Ben lets the rates climb.

     

    Good guess on the state help on the way Javos
    18 Dec 2009, 05:54 PM Reply Like
  • tedstr
    , contributor
    Comments (80) | Send Message
     
    Slingwing I too am heavy in some MLPs and mortgage vulture REITs. NOt sure how to read the latest moves.

     

    On Dec 18 02:33 PM SlingWing9 wrote:

     

    > I'm holding several MLPs that are skyrocketing. Is that related to
    > this discussion?
    >
    > I'm also holding TBT, short bonds, and doing ok. This seems to suggest
    > to keep that position. Do you agree assuming Bill Gross is correct?
    >
    >
    > Foreign investments through ETFs would appear to be the clear winner
    > as well as currency ETFs. Do you agree again assuming Bill Gross
    > is correct?
    18 Dec 2009, 05:56 PM Reply Like
  • gotribe
    , contributor
    Comments (162) | Send Message
     
    My variable preferreds are doing very well these last few days. Seems like someone sees higher rates ahead as well.
    18 Dec 2009, 06:31 PM Reply Like
  • barryc
    , contributor
    Comments (2) | Send Message
     
    new abnormal
    18 Dec 2009, 10:20 PM Reply Like
  • xiam
    , contributor
    Comment (1) | Send Message
     
    If he is into cash, I am too.
    18 Dec 2009, 10:21 PM Reply Like
  • JohnDough454
    , contributor
    Comments (29) | Send Message
     
    because Bennie and Timmeh are creatures of Wall Street and Wall Street can't bear to have their salaries capped. Not to mention every winger is howling about gummit control.

     

    On Dec 18 04:23 PM javos wrote:

     

    > Lemme see if I've got this straight...the bond market is basically
    > telling Benny and Timmy to go pound sand. They don't think the yield
    > is adequate for the future prospect of inflation. I agree. Not
    > good news for housing...mortgage rates already inching up. If housing
    > takes another leg down,(it will) then banks go back to picking up
    > doo-doo.
    >
    > So why are Benny and Timmy allowing TARP to be re-paid? Does somebody
    > need the cash worse? Maybe the states?
    >
    > Getting interesting.
    19 Dec 2009, 12:29 AM Reply Like
  • Michael Clark
    , contributor
    Comments (9487) | Send Message
     
    Rates go up...housing takes another stiff dive down. What does Bennie (and the Jets) do for an encore?

     

    On Dec 18 12:36 PM Mark Bern wrote:

     

    > That is interesting. It appears that a move away from Treasuries
    > could undercut the strengthening dollar if, that is, the move catches
    > on with other institutional buyers. If that happens, Bill could
    > be on the front end of a self-fulfilling prophecy. When demand for
    > Treasuries declines, Treasury must pay higher interest rates to continue
    > attracting the massive amounts of funding for the ever-increasing
    > US debt. Let's hope this one doesn't start rolling down the hill.
    > If it does, the recovery in stocks could be over as well.
    19 Dec 2009, 02:21 AM Reply Like
  • Michael Clark
    , contributor
    Comments (9487) | Send Message
     
    Ominous. Rates should have been going up since 2001. Ominous especially for those who have too much debt -- I'd agree with that. More bankruptcies on the way. But we won't be able to start over again until we clean out our debt -- and this means more bankrupticies.

     

    On Dec 18 04:01 PM somecatchyphrase wrote:

     

    > When Bill Gross speaks, this guy listens.
    >
    > This is a very ominous move.
    19 Dec 2009, 02:25 AM Reply Like
  • oldgoldbug
    , contributor
    Comments (142) | Send Message
     
    TLT (92.77) last week gave a major warning signal of the possibility of another downleg in the bond market. With today's low current yields, TLT could drop easily drop 35- 50% and till not be anywhere near the yields in the 80's. Of course, we don't have the blatant inflation of the 70's and 80's either. At least, not yet. The gold market (GLD 109.01) tells us its coming, but most won't believe it until prices are jumping.
    I give Gross credit - it takes a lot of guts to move into cash that yields 0%. Personally I wonder if he has sold enough - he might need to go to 20% cash or more. The heavy buying of 0% Tbills by so many investors indicates maximum concern about the possibility of rising interest rates. I think Schiff has brought up the possibility of an inflationary depression.
    An antsy long term bond market is something to take very seriously.
    One consequence might be to unlock a lot of the cash banks are keeping at the FED, and also increase the velocity of money which could easily start a mad dash for real assets of all kinds. Possible Result - rising prices, falling dollar, rising interest rates. Perhaps the economists amongst us could give us an idea of what that might do to the recovery. (It might not be all bad! but I'm guessing it will be like nothing we have seen before)
    If the dollar is going up out of concern for the value of other currencies, the bond market's refusal to move to the upside is of particular concern.
    Gross probably has this one right.
    19 Dec 2009, 10:33 AM Reply Like
  • Brian Kerman
    , contributor
    Comments (12) | Send Message
     
    Any thoughts what this will do to the Muni market, as of now the
    tax free yields are fairly decent.
    20 Dec 2009, 03:00 PM Reply Like
  • Peter Cooper
    , contributor
    Comments (792) | Send Message
     
    This move makes sense if you think the current dollar rally heralds higher interest rates. In the long run the bond bubble has to burst:
    arabianmoney.net/2009/.../
    21 Dec 2009, 01:43 AM Reply Like
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