Home > Main > How’s that U.S. Treasury Call doin’, Bill Gross?

How’s that U.S. Treasury Call doin’, Bill Gross?

August 2, 2011

Ouch.

Just a reminder, I said it would be time to get out of the long U.S. Treasuries when Bill Gross capitulates.

He hasn’t done it yet, but it can’t be far away now.

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  1. Tom Hickey
    August 2, 2011 at 10:46 am

    His latest letter:

    Kings of the Wild Frontier
    • Nothing in the Congressional compromise reached over the weekend makes a significant dent in our $1.5 trillion deficit.
    • In addition to an existing nearly $10 trillion of outstanding Treasury debt, the U.S. has a near unfathomable $66 trillion of future liabilities at “net present cost.”
    • Aside from outright default, there are numerous ways a government can reduce its future liabilities. They include balancing the budget, unexpected inflation, currency depreciation and financial repression.
    …..
    By using these four life rafts available to U.S. and other AAA sovereign borrowers, one can almost imagine a half century from now, that they remain solvent – although chastened perhaps with a lower credit rating. Based on historical example at Moody’s and Standard & Poors, it just might take 50 years for them to downgrade U.S. credit, but be that as it may, you and PIMCO as savers and savings intermediaries can take precautionary or even retaliatory measures to preserve purchasing power. Favor countries with cleaner “dirty shirts” and higher real interest rates: Canada, Mexico, Brazil and Germany come to mind. Shade equity and fixed income investments away from dollar based indexes towards those of developing nations with stronger growth prospects. Purchase commodity based real assets before reserve surplus nations do. And above all, don’t be lulled to sleep by Congressional law makers that promise a change in Washington. The last change I believed in was on Election Day 2008, and that turned out to be more fiction than reality. Davy Crockett, where are you? You may have been drinkin’ whiskey in those Congressional Chambers and those “bars” may have been half fiction, but you were a coonskin hero of a forgotten age, a hero the likes of which we have yet to see in 21st century Washington. We’re stuck with the new Kings and Queens of a wilder frontier.

    • beowulf
      August 2, 2011 at 11:37 pm

      Davy Crockett, where are you? You may have been drinkin’ whiskey in those Congressional Chambers and those “bars” may have been half fiction, but you were a coonskin hero of a forgotten age, a hero the likes of which we have yet to see in 21st century Washington.

      That’s because slave trading is now a felony you idiot.

      He made only $100 in the transaction, so he included Adeline, a slave girl, for another $300. It wasn’t much but canvassing required ready cash.
      http://books.google.com/books?id=_b9SZrUMy3MC&lpg=PT138&dq=l&pg=PT138#v

      Ha, these days Congressmen wait till after the campaign to sell out their constituents. I suppose that’s progress, though Bill Gross may disagree.

      • beowulf
        August 2, 2011 at 11:46 pm

        “The 13th Amendment Option” was designed to thwart the same people as the “14th Amendment Option” was– people like Bill Gross, oops I mean, people Bill Gross likes.

        118 USC 1590 – Trafficking with respect to peonage, slavery, involuntary servitude, or forced labor
        (a) Whoever knowingly recruits, harbors, transports, provides, or obtains by any means, any person for labor or services in violation of this chapter shall be fined under this title or imprisoned not more than 20 years, or both.

  2. August 2, 2011 at 11:33 am

    U.S. Treasuries are performed well as expected by most MMTers. I must say that the debt ceiling brouhaha played out almost exactly as I thought it would — It was a big distraction so that Obama wouldn’t be able to boost the economy. Default was never likely given the underlying goals of the Republicans.

    Thanks to the MMT community for helping me to maintain my sanity and economic health in times like these…

  3. Peter D
    August 2, 2011 at 8:26 pm

    What a cognitive dissonance Gross must be experiencing! Today at work I saw him on CNBC complaining how the spending cuts were all illusory and minimal and then in the next breath admitting that they are a drag on the economy. Do these people use their brains at all?

  4. October 24, 2011 at 12:33 pm

    According to Zero Hedge, countries outside of the U.S. dumped 74 billion dollars in U.S. Treasuries, most of it over the weekend:

    “Over the weekend, we observed the perplexing sell off of $56 billion in US Treasurys courtesy of weekly disclosure in the Fed’s custodial account (source: H.4.1) and speculated if this may be due to an asset rotation, under duress or otherwise, out of bonds and into stocks, to prevent the collapse of the global ponzi (because when the BRICs tell the IMF to boost its bailout capacity you know it is global). We also proposed a far simpler theory: “the dreaded D-day in which foreign official and private investors finally start offloading their $2.7 trillion in Treasurys with impunity (although not with the element of surprise – China has made it abundantly clear it will sell its Treasury holdings, the only question is when), has finally arrived.” In hindsight the Occam’s Razor should have been applied. Little did we know 5 short days ago just how violent the reaction by China would be (both post and pre-facto) to the Senate decision to propose a law for all out trade warfare with China. Now we know – in the week ended October 12, a further $17.7 billion was “removed” from the Fed’s custodial Treasury account, meaning that someone, somewhere is very displeased with US paper, and, far more importantly, what it represents, and wants to make their displeasure heard loud and clear. (Source)

    Undoubtedly, the Chinese and other countries have recently discovered that Italy and Greece, with smaller debt to income ratios than the United States, are less riskier and carry a higher rate of return. This is because, unlike the US, the Rothschild/Rockefeller bond rating agencies have trashed their country’s debt ratings, forcing them to pay a much higher interest rate than U.S. Treasuries. Hey, if you take the risk, you might as well earn the reward!

  5. beowulf
    October 24, 2011 at 3:56 pm

    “Over the weekend, we observed the perplexing sell off of $56 billion in US Treasurys courtesy of weekly disclosure in the Fed’s custodial account

    That’s terrible! Say, when they sold those Treasuries, what were they paid with in exchange?

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