Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Covid and Democrat Blue Wave Beats Gold - 15th Jan 21
On Regime Change, Reputations, the Markets, and Gold and Silver - 15th Jan 21
US Coronavirus Pandemic Final Catastrophe 2021 - 15th Jan 21
The World’s Next Great Onshore Oil Discovery Could Be Here - 15th Jan 21
UK Coronavirus Final Pandemic Catastrophe 2021 - 14th Jan 21
Here's Why Blind Contrarianism Investing Failed in 2020 - 14th Jan 21
US Yield Curve Relentlessly Steepens, Whilst Gold Price Builds a Handle - 14th Jan 21
NEW UK MOT Extensions or has my Car Plate Been Cloned? - 14th Jan 21
How to Save Money While Decorating Your First House - 14th Jan 21
Car Number Plate Cloned Detective Work - PY16 JXV - 14th Jan 21
Big Oil Missed This, Now It Could Be Worth Billions - 14th Jan 21
Are you a Forex trader who needs a bank account? We have the solution! - 14th Jan 21
Finetero Review – Accurate and Efficient Stock Trading Services? - 14th Jan 21
Gold Price Big Picture Trend Forecast 2021 - 13th Jan 21
Are Covid Lockdowns Bullish or Bearish for Stocks? FTSE 100 in Focus - 13th Jan 21
CONgress "Insurrection" Is Just the Latest False Flag Event from the Globalists - 13th Jan 21
Reflation Trade Heating Up - 13th Jan 21
The Most Important Oil Find Of The Next Decade Could Be Here - 13th Jan 21
Work From Home £10,000 Office Tour – Workspace + Desk Setup 2021 Top Tips - 12th Jan 21
Collect a Bitcoin Dividend Without Owning the King of Cryptos - 12th Jan 21
The BAN Hotlist trade setups show incredible success at the start of 2021, learn how you can too! - 12th Jan 21
Stocks, Bitcoin, Gold – How Much Are They Worth? - 12th Jan 21
SPX Short-term Top Imminent - 12th Jan 21
Is This The Most Exciting Oil Play Of 2021? - 12th Jan 21
Why 2021 Will Be the Year Self-Driving Cars Go Mainstream - 11th Jan 21
Gold Began 2021 With a Bang, Only to Plunge - 11th Jan 21
How to Test Your GPU Temperatures - Running Too Hot - GTX 1650 - Overclockers UK - 11th Jan 21
Life Lesson - The Early Bird Catches the Worm - 11th Jan 21
Precious Metals rally early in 2021 - 11th Jan 21
The Most Exciting Oil Stock For 2021 - 11th Jan 21
Financial Market Forecasts 2021: Navigation in Uncharted Waters - 10th Jan 21
An Urgent Message to All Conservatives, Right-Wingers and Patriots - 10th Jan 21
Despite Signs to the Contrary, Gold Price at or Near Top - 10th Jan 21 -
Ultimate Guide On The 6 Basic Types Of Index Funds - 10th Jan 21
Getting Vaccinated at TESCO - Covid-19 Vaccinations at UK Supermarket Pharmacies and Chemists - 10th Jan 21
Cheers for the 2021 Stock Market and These "Great Expectations" - 9th Jan 21
How to Plan Your Child With Better Education - 9th Jan 21
How To Find The Best Casino - 9th Jan 21
Gold Is Still a Bargain Buy - 8th Jan 20
Gold Price Set to Soar as Hyperinflation Looms - 8th Jan 21
Have Big Dreams? Here's How to Pay for Them - 8th Jan 21
Will the Fed Support Gold Prices in 2021? - 8th Jan 21
Stocks trading strategies for beginners - 8th Jan 21
Who is Buying and Selling Stocks in 2021 - 8th Jan 21
Clap for NHS Heroes 2021 as Incompetent Government Loses Control of Virus Again! - 8th Jan 21
Ultimate Gaming and Home Working PC System Build 2021 - 5950X, RTX 3080, Asus MB - Scan Computers UK - 7th Jan 21
Inflation the bug-bear looking forward through 2021 - 7th Jan 21
ESG ETF Investing Flows Drive Clean Energy to Fresh Highs - 7th Jan 21
5 Financial Market Surprises in 2021 - 7th Jan 21
Time to ‘Reset’ Your Investment Portfolio in 2021? - 7th Jan 21
Bitcoin Price Collapses almost 20% at the start 2021 - 7th Jan 21
Fed Taper Nervous Breakdown - 6th Jan 21
What Will the U.S. Dollar Ring in for 2021? - 6th Jan 21
Stock market frenzy- Ride the bandwagon but be sure to take along some gold coins - 6th Jan 21
Overclockers UK Custom Build Gaming System Review Heat Test and Final Conclusion - 6th Jan 21
Precious Metals Resuming Bull Market, Gold, Silver, GDX Trend Forecasts 2021 - 5th Jan 21
Trump’s Iran-COVID-Gate Anniversary  - 5th Jan 21
2021 May Be A Good Year For The Cannabis / Marijuana Sector - 5th Jan 21
Stock Market Approaching an Important Target - 5th Jan 21
Consumer Prices Are Not Reflecting Higher Inflation; Neither Is The CRB - 5th Jan 21
NEW UK Coronavirus PANIC FULL Lockdown Imminent, All Schools to Close! GCSE Exams Cancelled! - 4th Jan 21
The Year the World Fell Down the Rabbit Hole - 4th Jan 21
A Year Like No Other for Precious Metals… and Everything Else - 4th Jan 21
The Stocks Bull Market is Only Half Completed - 4th Jan 21
An In- Depth Look At Gold Price Trend - 4th Jan 21
Building America Back After a Dark Covid Winter - 4th Jan 21
America's Dark Covid Winter Ahead - 4th Jan 21
Buy a Landrover Discovery Sport in 2021? 3 Year Driving Review - 3rd Jan 21
Stock Market Major Peak in Early April 2021 - 3rd Jan 21
Travel and Holidays 2021 - Flight Knight Cabin Bag Review - 3rd Jan 21
�� Happy New Year 2021 Fireworks and Drone Light Show from London and Sheffied - BBC�� - 2nd Jan 2
The Next IMMINENT Global Catastrophe After Coronavirus - 1st Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Bill Gross, Master of Monetary Psy-Ops

Interest-Rates / US Bonds Apr 12, 2011 - 12:57 PM GMT

By: Ashvin_Pandurangi

Interest-Rates

Best Financial Markets Analysis ArticleEvery so often, and more often than not, a rumor emerges in the blogosphere about a significant development, seemingly adverse to the interests of the U.S. federal government, being manufactured by the government to further solidify their control over the masses. Sometimes these rumors are plainly absurd on their surface, and sometimes they are just too perfect to be true. The nature of these "psy-ops" is that they are nearly impossible to verify with any direct evidence until well after the fact, so we must rely on indirect logical analysis and a bit of intuition.


Personally, I always find it curious when a piece of news that pops up into the public domain just doesn't seem to fit in with the systemic realities that I otherwise perceive. It could be that I am simply taking these realities for granted and it is time to re-evaluate them, but it could be that they don't fit because they were never intended to. A report last month from Zero Hedge showed that PIMCO had reduced the Treasury exposure of its Total Return Fund (TRF) from 18% to 0%, and a more recent report has shown that it actually has a net short position on Treasuries. [1].

Pimco is the world's largest bond fund, and its manager Bill Gross has been quite vocal over the last two years about the U.S. Treasury's massive and unsustainable deficits. He was so vocal about it that he decided to load up on Treasuries and make a killing from February of 2009 until July of last year, with only a few brief respites in between. That's just the type of person Bill Gross is - he's a shark wading in the deep blue waters of Wall Street, and, like most other ones, he's an "insider trader".

He went on a Treasury-buying binge in February 2009, just in time to fully ride the coat tails of the Fed's QE operations that commenced in March and monetized $300B in long-term Treasury debt. [2]. No one in the public domain knew about the existence of this program in February, or the extent to which it would be carried out. It's not about economic fundamentals and it's certainly not about principles or "what's right", it's only about money and, specifically, lots and lots of money.

Now, the TRF is net short Treasuries and many people are convinced that its short position is, in fact, nothing short of a prediction by Gross that the Treasury market will soon collapse. Indeed, he seems to be at least betting that rates will increase significantly in the short-term. Perhaps that is true or perhaps he is making a bad bet, but perhaps we should also be wary of such plainly advertised convictions. After all, the insider "beltway" encompassing Wall Street and Washington has two lanes running in both directions.

If the Fed has a hidden agenda, then it would not hesitate to use Gross and his bond fund to pursue it, and if there's any institution with a hidden agenda, it's the Fed. At the beginning of 2009, the prospect of the Fed launching operations to monetize the federal debt was a radical one, unexpected by all but the most well-connected money managers.

By this time, QE has been going on for so long and with such force that it has become a standard routine. It has even gotten to the point where mainstream publications, such as the Wall Street Journal [3], are accusing the Fed of directly influencing the eruption of bloody revolutions in foreign countries. The Fed needs to maintain integrity in the U.S. Treasury market above all else [4], but it is also needs to maintain a semblance of integrity in its own house.

It's in the process of walking a delicate tightrope, and the rope it struggles to walk has increasing amounts of slack. With additional QE to supplement the MBS prepayment re-investments and QE2 operations, both of which are currently winding down, the Fed risks stoking the fires of social and political chaos which constantly threaten to consume it. This dynamic is the result of primary dealer banks selling newly issued Treasury coupons to the Fed at scheduled times and walking the profits down the beltway into equity and commodity markets. The Fed must now fear that further hot money speculation in commodities will make gas and certain foods unaffordable for not only the poor Tunisian people, but for the average American energy guzzler as well.

Without additional QE, however, the Fed loses all control of U.S. asset markets, and, by proxy, asset markets the world over. So what it really needs is a sort of timeout, in which it can engage in an immature display of wild-eyed frustration, erratically flailing its hands up in the air, shouting, "We're Done!". Then, it can sit back and watch fear set in the eyes of investors worldwide, as they realize that no more QE means no more over-valued equity and commodity markets. And no more of those means no more towers of leveraged capital producing unspeakable returns 24/7, day in and day out. Instead, all of that imaginary capital will be squashed down into a dime-sized pancake and will return nothing but the foul odor of putridly stale losses.

It is at that point when senior editors at the Wall Street Journal will abandon their offices and go running to the Fed with their guts in hand, furiously apologizing in one breath and then begging for more QE in the next.

"You see, Mr. Bernanke, our subscribers have been calling en masse to cancel over-priced yearly subscriptions as their investment capital continues to get wiped out in the stock, commodity and real estate markets. For Christ's sake, man, we need your help!"

The systemic fear generated from crumbling markets worldwide will first serve to attract scared capital into the Treasury market, as it still remains the only place to go for people with sums of money that won't fit under any mattress. Besides, the only real difference between the U.S. dollar and short-term Treasury bills or notes is that the latter could potentially give you a fixed income over their duration. The fear will then serve to further justify Treasury asset purchase operations by the Fed, the ongoing sociopolitical destruction in the Middle East be damned. So how does Pimco and Bill Gross fit into all of these deceptive monetary tactics? Well, the fact that TRF currently holds a record 38% of its assets in dollar-denominated cash is a telling one. [5].

Every investor knows that the best and quickest way to make money is to own something that virtually no one else does, right before it gets hot and takes off towards the moon and the stars. An unexpected end to QE operations will send the dollar soaring, and as mentioned before, all asset markets plunging except for the U.S. Treasury market. Bill Gross may have dumped all of his Treasury exposure for now, but has any other major financial institution or money manager followed his suit? Has the Fed announced any plans to sell its Treasury holdings back into the primary or secondary markets?

Of course not. These institutions are not worried about rates surging outside of their control anytime soon, and will be glad to make a few extra bucks from higher interest payments (paid by taxpayers) before the "rush to safety" really gets underway. I suspect that, by that time, there would have been a significant reversal in the Treasury holdings of TRF and the superficial justifications for the investment decisions of the omniscient Bill Gross. Perhaps he will continue to have minimal exposure to U.S. Treasuries throughout the year, as a partial hedge to his fund's enormous cash holdings, but that certainly should not be taken as an absolute bet against the Treasury market.

Gross is merely a beltway insider with a purpose, which happens to coincide with the purpose of every other insider and elite - to preserve the dollar-based financial system. He is the magician's assistant, distracting the audience in the front with a short-con while the magician sets up the long-con behind him. The bad cop who beats the suspect over the head and tells him he has one last minute to confess before the entire case is blown wide open, followed by the good cop who enters the room and promises they will go easy on the suspect and recommend leniency to the judge, as long as he just tells them where all the money is hidden. Once again, it is not about enforcing the law or finding justice, it's only about using deception to drive all of that money out of its hole and into their hands.

Besides, did anyone really think that the world's biggest bond fund was about to unconditionally give up on the world's biggest bond market (which just so happens to support every other U.S. bond market, and foreign ones as well)? Personally, I think Bill Gross is going to continue doing what he does best - speaking in half-truths and pretending like he cares about day-to-day developments in the U.S. fiscal situation, while carting his millions in compensation to undisclosed personal bank accounts around the world. That is one financial shark who cannot survive outside of the deep waters, and his next feast of flesh will be no less filling than the last.

Ashvin Pandurangi, third year law student at George Mason University
Website: "Simple Planet" - peakcomplexity.blogspot.com (provides unique analysis of economics, finance, politics and social dynamics in the context of Complexity Theory)

© 2011 Copyright Ashvin Pandurangi to - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules