Kudos to Krugman for attempting to explain to Pimco’s Bill Gross that return on capital is not something that can be taken for granted.
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The Telegraph’s Willard Foxton notes the online black market portal Silk Road has been experiencing some serious outages the last few days. The problems may be linked to a hacker and extortion attempt. The portal, rather ironically for an illicit website, is now offering a reward for information leading to the arrest and conviction of whoever is behind the attempt.
Though Silk Road has been experiencing other problems too, not least the hyperdeflationary effects of the Bitcoin rally: Read more
…the UK is a must to avoid. Its Gilts are resting on a bed of nitroglycerine. High debt with the potential to devalue its currency present high risks for bond investors. In addition, its interest rates are already artificially influenced by accounting standards that at one point last year produced long-term real interest rates of 1/2 % and lower. Read more
Pimco’s Total Return Fund, managed by Bill Gross, now holds Treasuries to the greatest extent since July 2010, departing from sharp cuts to its holdings in 2011, Bloomberg reports. Holdings of US government debt rose to 38 per cent last month from 30 per cent in December. The fund gained 2.13 per cent in January, beating almost all of its peers, according to Bloomberg data. Gross nevertheless faces rising doubts that the $250bn Total Return Fund has become too big to manage and too reliant on derivatives, says Reuters in a special report.
Pimco’s Bill Gross has increased his holdings of Treasuries to the highest level since July 2010, a year after banishing US government debt from the world’s biggest bond fund, reports Bloomberg. Mr Gross boosted the proportion of US government and Treasury debt in Pimco’s $250.5bn Total Return Fund in January to 38 percent from 30 per cent in December, according to a report placed on the company’s website. He raised mortgages to 50 per cent, the highest since June 2009, from 48 per cent in December.
Presented without comment:
Where do we go when we die?
We go back to where we came from
And where was that?
I don’t know, I can’t remember
Virginia Woolf, “The Hours” Read more
Pimco’s flagship bond fund, the world’s largest, experienced annual outflows for the first time in its history in 2011, according to research group Morningstar. The FT reports the $240bn Total Return Fund run by Bill Gross had attracted fresh investor capital every year since its inception in 1987, and it success has played a central role in the growth of the asset manager based in Newport Beach, California. However, Mr Gross ranked behind more than two-thirds of his peers last year, following a high-profile bet that US government debt would fall in value. Investors pulled $1.4bn from the Total Return Fund in December, taking outflows for the year to $5bn, according to Morningstar. Since November 2010, Pimco has seen a net $13.7bn pulled from its flagship fund.
Bill Gross has made a big U-turn in the investment strategy of his $242bn fund after a high-profile bearish call on the US Treasury market backfired, the FT says. After largely exiting US bond markets in February on fears of a spike in inflation, the Pimco bond manager began reversing course in the summer. More recently, he has placed a big bet on lower long-term interest rates that radically shifts the composition of his fund. he move, revealed by Pimco this week, comes after a humbling year for a fund manager often feted for his investing acumen and influence on the bond market. His flagship fund has produced a return of just 1.9 per cent for its investors so far this year, leaving him ranked 552 out of his 604 peers according to Lipper, a research house.
Bill Gross has made a big U-turn in the investment strategy of his $242bn fund after a high-profile bearish call on the US Treasury market backfired, triggering deep underformance by the world’s largest bond fund, the FT reports. After largely exiting the US Treasury bond market in February on fears of a spike in inflation, the Pimco bond manager has reversed course, placing a big bet on lower long-term interest rates that radically shifts the composition of his fund. The move, revealed by Pimco this week, comes after a humbling year for a fund manager often feted for his investing acumen and influence on the bond market. His flagship fund has produced a return of just 1.9 per cent for its investors so far this year, leaving him ranked 552 out of his 604 peers according to Lipper, a research house. By comparison, the Barclays US aggregate bond index has returned investors 6.7 per cent year to date.
Bill Gross, manager of the world’s largest bond fund for Pimco, has admitted that it was a mistake to bet so heavily against the price of US government debt in an FT interview. Gross emptied his $244bn Total Return Fund of US government-related securities earlier this year in a high-profile call that has backfired as the bond market has rallied. As of Monday, Pimco’s flagship fund ranked 501th out of 589 bond funds in its category. See also FT Alphaville.
Pimco has used this week’s fall in Italian bond prices to load up on the country’s debt from an underweight position, according to the fund’s head of fixed income portfolio management, says Reuters. The sell-off underrated Italy’s institutional strength and was exaggerated, Pimco said. Meanwhile the Total Return fund managed by Bill Gross upped holdings in US “government-related securities” in June for a second consecutive month, moving its overall position back to zero, says the FT. Gross had argued before the end of QE2 that yields were likely to rise.
Has Bill Gross ditched his “long-short-long position” on US Treasuries?
Pimco on Tuesday published the latest holdings of its flagship Total Return Fund. The statistics are accurate as of 30 June. They show that Gross has increased TRF holdings of Treasuries to 8 per cent from the 5 per cent listed at the end of May. Read more
Apologies for the public school levels of surname chicanery in the title but a couple of big hitters have weighed in before the Fed Chairman’s special appearance on US Markets Live on Wednesday.
Richard Koo, chief economist at Nomura Research Institute and analyst-in-chief of “balance sheet recessions“, writes in his latest note that the Fed’s lack of options today is reminiscent of the BoJ’s predicament a decade ago. Read more
You may remember Bill Gross’ sage advice to “buy cheap bonds” and his amphibious explainer:
All right fellow frogs, so we’re being repressed and shortchanged in order to allow Uncle Sam to balance its books. Whatta we gonna do about it? “Frogs of the world unite,” as Lenin might have said, and so here’s where I harken back to Mark Twain and my second lesser-told frog story. There was this other frog who instead of being tossed into a pot of hot water was left to cool its heels in a pitcher of cold milk. Unable to jump out, he churned and churned those frog legs until eventually the milk turned into butter and the hardened butter allowed him the platform to leap to froggy freedom! Well, let’s get churnin’, fellow frogs. Read more
Bill Gross lost billions of dollars after loading up on debt issued by Lehman Brothers in the years ahead of its bankruptcy in 2008, the WSJ says. Pimco’s $3.4bn-plus losses were revealed in investment disclosures filed to Lehman’s bankruptcy court. The fund bought at face value before the crisis, leaving it with $4.5bn in holdings when Lehman collapsed and the bonds’ prices fell to 6 cents on the dollar. Pimco crystallised the losses soon afterward, during a year that saw the fund post a 4.32 per cent return on bets that Treasury prices would rise. The Lehman bonds have since recovered to around 25 cents as creditors haggle over how to liquidate the bank.
US government debt notched up stronger gains in May than dollar-denominated private sector debt for the first time in six months, the FT says. The strong performance of Treasury debt flies in the face of the expectations of many investors, with big bond buyers such as Pimco reducing holdings of Treasuries on expectations of underperformance. Instead, yields on US government bonds have hit record lows for the year. On Wednesday, the benchmark 10-year US Treasury yield fell below 3 per cent for the first time since December. Meanwhile, FT Alphaville reports that Pimco’s Bill Gross is recommending investors ‘don’t buy expensive bonds’ in his latest allegory-riddled investment outlook.
Pimco’s Total Return Fund has increased its short bet on debt related to the US government from 3 per cent to 4 per cent, Reuters reports. The move is small but indicates that Bill Gross has not swerved from going bearish on Treasuries on inflation concerns. despite a small rally in the market. Treasuries have returned 0.7 per cent so far in May, says Bloomberg. Pimco dropped its US government holdings to zero earlier this year, including in Treasuries, Treasury futures and options, Tips and agency debt. The fund has meanwhile also increased its cash holdings to 37 per cent in April from 31 per cent, the WSJ says.
Bill Gross, manager of the world’s largest bond fund, is now actively betting against the value of debt issued by the US government, the FT reports. Pimco’s $236bn Total Return Fund held minus 3 per cent of its assets in government related securities at the end of March, down from zero the month before, according to a report issued by the company on Monday. Pragmatic Capitalism says Pimco’s latest move is eerily reminiscent of what happened during the first bout of US quantitative easing, when Bill Gross predicted surging UST yields. He top ticked the market to the day and yields immediately tanked.
Bill Gross, manager of the world’s largest bond fund, is now actively betting against the value of debt issued by the US government, reports the FT. Pimco’s $236bn Total Return Fund held minus 3% of its assets in government related securities at the end of March, down from zero the month before, according to a report issued by the company on Monday.
The world’s biggest bond fund has cut its holdings of US government debt to zero for the first time since early 2008, in the latest sign of growing expectations of rising interest rates, reports the FT. The move by the $237bn Pimco Total Return fund follows warnings by its fund manager Bill Gross of rising bond yields as the Federal Reserve nears the end of its massive “QE2″ bond buying programme. Treasury prices actually rose on the news, prompting MarketBeat to ask: “Is this a case of ‘buy’ on the ‘selling news’?” and to conclude that, for all of Pimco’s size – it has $237bn in its Total Return fund – it is not that big compared to the total US government debt market. It also reflects the “shifting issues at play in the Treasury market”.
The world’s biggest bond fund has cut its holdings of US government-related debt to zero for the first time since early 2008 in the latest sign of increasing investor expectations of rising interest rates, reports the FT. The move by the $237bn PimcoTotal Return fund follows warnings by its fund manager Bill Gross of rising bond yields as the US Federal Reserve nears the end of its massive bond buying programme, known as quantitative easing, or QE2.
* Money has become the economic and political wedge for profound changes in American society.
* Perhaps the most deceptive policy tool to lessen debt loads is the “negative” or exceedingly low real interest rate that central banks impose on savers and debt holders. Read more