Tyler Durden is reporting that PIMCO, the world’s largest bond fund, has taken its holdings of bonds to zero. It’s now holding cash. If this, indeed, proves to be the case it would suggest several things. First, that Bill Gross, PIMCO CEO, doesn’t believe that the Fed will enter into a third phase of quantitative easing (i. e. buying Treasuries) despite the Dance of the Seven Veils that Ben Bernanke and various board presidents have been doing on the subject for the last couple of weeks.
Second, he must believe that when QE2 ends in June it will suck the life out of bonds and equities. That’s a pretty good supposition. Remember the graph I pointed to the other day?
Third, he must not believe that hyperinflation will occur in the near term. It would be very bad to be holding cash if that were the case.
Sounds like practically everything is very, very uncertain right about now.
Technically “Pimco’s flagship Total Return Fund” seems to have taken its “Government Related” to zero. Still that is interesting.
I have some munis and TIPS and so far that combination has been a successful strategy for “government related.” I do actually have a fair amount of cash on the sidelines, should glory days of 30 year treasuries at 15% ever return.
jp –
First – I’m not a financial advisor……..
But I do have a significant amount of wealth with private bankers and receive lots of commentary. If I could be presumptuous, careful with the TIPS. The current implied inflation rate could be light. John Calamos, who is a neighbor and big time convertible/debt advisor recently commented – and I agree – that if acclerating inflation does occur it could come fast and furious. Current TIPS might leave you lightly protected. His view: keep durations short. In light of PIMCO’s move, that means REALLY short!
I hope you are in only the most conservative of muni positions. Between fundamental credit considerations and just the EMF of muni exodus that could be dangerous.
Now, do I have good solutions? Uhhhhhh, er……
Ok, I am a doctor, so you should probably do the opposite of whatever I do, but we are almost all out of bonds too. Feels too bubbly. OTOH, we always leave markets too soon. Sold most of our gold and silver a few months ago.
Steve
My “goverment related bond” exposure is about as low as i’d go. I try not to zero out any asset class. Of course I never got into metals ..
Dave, you watching Bill’s video?
http://www.ted.com/talks/bill_gates_how_state_budgets_are_breaking_us_schools.html
I’d heard about it but hadn’t seen it. Thanks for the link.
I posted that as I started in. It was OK, maybe a little light, but perhaps it will gather some momentum.
At best perhaps Bill focuses the TED crowd on something they’d normally ignore. His message might surprise them more than a more politically centered crowd.
In answer to his question (“Why no scrutiny?”) I think the answer is pretty clear. The action is at the federal level. State and local governments have been stripped of powers and turned into clients to the point where they’re ignored.
It wasn’t always that way.
It could be that voters over-focus on Federal matters. I think Californians seldom turn their eye to state problems, though clearly they should.
jp –
They are admittedly a bunch of doom crazed traders, but zerohedge has a couple posts today on munis you might want to take into consideration.
I promise not to buy any more 😉
I heard the synopsis of Roubini’s muni analysis was “default overrated, problems underrated.” That relates to Bill’s video, of course.
Jest coverin’ yer backside, jp.
Others may disagree, but I found Gates piece light. Tell me something I didn’t already know. And he finishes with an ultra-light “we need to invest in the kids.” Well, yeah, but politicians are so beholden to the old, the unions and their votes.
Remember the old Summertime Blues tune?? “I’d like to help you son, but you’re too young to vote. There ain’t no cure for the summertime blues………”