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by Al Martin

Pimco’s Bill ‘Wrong Again’ Gross Says Sell US Treasury Bonds

(3-14-11) Bill Gross has reportedly sold all of Pimco’s Treasury Bond holdings, and it’s just more self-destructive behavior on his part. Just look what he’s done since 2008. Everything he’s done has been wrong. First he started buying mortgage-backed bonds in 2008 when everyone was selling them. After all he wrongly assumed that he would get bailed out by the Fed buying these toxic securities. However the Fed never said that directly. It was just an assumption. The Fed wasn’t just going to let everyone just buy bonds and then take them out at a 30% premium. That was never going to happen.

      So why is Bill Gross so wrong? First he bought mortgage-backed bonds at a time when the smart Money was selling them. Next he starts touting – and buying – munis, just before the municipal bond market collapsed. Now we hear that PIMCO has sold all of its US Treasury Bond holdings as of Tuesday night (March 8) – the day before a major rally in US Treasury Bonds began. This was thanks to 2 auctions where we see demand for long-dated Treasury Bonds (10 and 30 year bonds) the highest in years.

      So where did he park the money from the Bonds? I have no idea. But what I know is he’s become like the Electro LaLa Land CLP Trader, i.e. like a Colored Light Trading Service subscriber.

      Let’s say he starts with 100,000 and he puts it into something. It goes bad and goes to 80,000. Then he puts 80,000 into something else and that goes bad, so he gets 60,000 back. Then he puts the 60,000 into something else and that goes bad, so he gets 40,000 back. And on and on.

      But Bill Gross’s PIMCO Omni Fund, which is a very specialized kind of fund, is not his big fund. The big fund is the PIMCO Total Return bond fund. That’s the flagship fund and he is just destroying the performance of this fund by these repeated mistakes.

      And Bill Gross is not the only one. George Soros keeps pooh-poohing the Gold – and yet the gold keeps marching higher. At least Soros is appropriately disingenuous, meaning he pooh-poohs the Gold all the time -- yet public documents show that the Soros fund continues to buy it.

      We are now seeing this phenomenon by fund managers across the planet – including some of the old mainstays -- who are losing the performance that they had for years and years. The reason this is being done is because none of them understand what is happening. They keep following the old model and they don’t want to face the facts.

      You hear this on CNBC and Bloomberg all the time. They keep using these old models to justify being long equities and short bonds and they try to be short the commodities. Why? Because fund managers have always hated the commodities.

      This is the cluster-fuck of desperation that fund managers do to avoid facing the truth. The truth is pretty simple – as we have been writing about this. The planet is financially exhausted. We are beyond the pale or however you want to describe it. We are beyond the point of no return, fiscally speaking. All the G-20 nation states are financially exhausted now – and in fact there is nowhere to go but down.

      That’s the reality they don’t want to face. They think if they start investing that way, they will only exacerbate the decline, which is something they don’t want Joe Six Pack to be blaming them for. It’s because of this deeply entrenched bias which has always existed in this industry. They tell Joe he’s got to be long everything – all of the time – and if it goes down you just buy more of it. They tell Joe you can’t be short because it’s not patriotic and its only for professionals and its not for you. Now is the time to be short and nobody wants to be short because of the implications.

      If you’re a fund manager, how do you become short and then tell Joe – oh, you can’t short because you’ve been taught not to short. You have to be long because you have to be long – in order for us to get short.

      This just shows the desperation to maintain the long established status quo, as Joe has been taught to be continuously long stocks and long bonds and that you’re long throughout your life. You buy ‘em and die with ‘em. This is the “Buy and die” investment strategy. They say -- don’t worry Joe you don’t have to worry because stocks always go up – over the long term. And don’t worry Joe – real estate always goes up in value – not even over the long term.

      Joe was always told – hang on to your house, buy real estate partnership shares because there’s never been a point where every 10 years, real estate is always worth more than it was 10 years before. Now we are seeing the lie and the fallacy of that kind of thinking, since in 2011, real estate prices have fallen back to 2001 levels.

      These fund managers get hoisted by their own petard and they are desperately trying to cling on to the old ways of measuring recessions. This time around, none of that is true as it was in the past.

      They’re all still trying to be long stocks and short bonds and short commodities, the traditional trade that they’ve always tried to put on. But it doesn’t work anymore. The reason why Bill Gross doesn’t want to hold on to Treasuries anymore is because when the Fed backs out of QE 2, since the Fed has been the largest singles purchaser of Treasury Bonds and QE 2 ends in June, Treasury Bonds are going to drop dramatically because if you take the Fed bid, aka, the Bernanke Put, out of them, the reality of the situation is that when QE 2 ends and Treasury Bonds begin to fall, there’ll be a QE 3. Real quick.

      What we are seeing is a seminal change. We haven’t seen this kind of change really since the 1930s and the Great Depression.

      The seminal change is an economic environment in which there are both inflationary and deflationary forces on the planet at the same time. What you really don’t know is how genuine the Bill Grosses and George Soroses of the world really are. They say what they say because they have to – and because they have their own personal interests to protect.

      This is particularly true with Bill Gross, where most of the investors in these funds are old people, who have always bought into this idea of “buy and die.” Imagine what would happen to the PIMCO funds if Gross came out and told the world – I’m shorting because it’s the right thing to do because everything is falling apart.

      Of course it wouldn’t happen. This guy would probably be charged with negligent homicide or something. Because 50,000 old people would drop dead of a heart attack.

      But it would be so much easier if he told the truth. A crash is coming and US Treasuries are the instrument of last resort in a fiscally deteriorating world.

      In other words, if US Treasury Bonds get defaulted on and the US Treasury has no choice but to default and declare a force majeure on interest payments, which would amount to a default, then the whole planet’s economy would collapse five days later.

      US Treasury Bonds are the ultimate signal of what’s happening because they are the last best most liquid and most secure investment.

      This reminds me of the time when Will Rogers started buying GE stock in April of ’32 at $3 a share. When asked about how he felt about buying General Electric shares at $3, when everyone else was selling, he used to say on his radio shows – Let’s put it this way. If General Electric goes out of business, the country’s out of business.

      The same thing can be said about US Treasury Bonds. If US Treasury Bonds go out of business, the planet is out of business…

      So don’t listen to these money market managers who are nothing more than a collection of the Five Great Pillars of the Markets -- Floor Barkers, Hot Sheet Hucksters, Retail Wirehouse Touts, Financial Media Shills, and GovLieSpeak.

    * AL MARTIN is an independent economic-political analyst with 25 years of experience as a trader on NYMEX, CME, CBOT and CFTC. As a former contributor to the Presidential Council of Economic Advisors, Al Martin is considered to be a source of independent analysis for financially sophisticated and market savvy investors.

After working as a broker on Wall Street, Al Martin was involved in the so-called "Iran Contra" Affair as a fundraiser for the Bush Cabal from the covert side of government aka the US Shadow Government.

His memoir, "The Conspirators: Secrets of an Iran Contra Insider," ( provides an unprecedented look at the frauds of the Bush Cabal during the Iran Contra era. His weekly column, "Behind the Scenes in the Beltway," is published weekly on Al Martin, which also publishes a bimonthly newsletter called "Whistleblower Gazette."

Al Martin's new website "Insider Intelligence" ( will provide a long term macro-view of world markets and how they are affected by backroom realpolitik.


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