When PIMCO sells all of their US Treasuries, you had better listen. PIMCO is the largest bond fund in the world with a $1.2 Trillion under management. They not only just dumped all of their US Treasuries, they went from 5% to 23% cash. So this begs the question, what does PIMCO know that we don’t?
PIMCO is not some random hedge fund. PIMCO has some of the best and brightest minds in the business with Bill Gross and Mohamed El-Erian running company. Recently, PIMCO has hired some big names like Alan Greenspan, Josh Bolton and Neel Kashkari to work for them. PIMCO would not make such a big move, with so much money, if they did not have a good reason for this.
They may see that there will not be any more Quantitative Easing after June.
Or that there could be a huge QE3 package coming that will flood the economy more and more worth less dollars.
Or this could mean that things are so bad right now that there might be a default on the horizon.
Or that bonds and equities are going to take a huge hit.
Or that interest rates are going to sky rocket.
Or that China is going to dump their huge holdings.
Or that we are going to enter a new paradigm.
Or everything at once.
There is a recent quote from Bill Gross that might shed some light on this huge move. Bill Gross said that while Ben Bernanke does not seem to care about headline versus core inflation, PIMCO does.
It is very important to understand that it is the mission of the Fed and the government to understate real inflation, just like they do with real unemployment. (Read my articles on Inflation and Unemployment.) By understating inflation it destroys the real returns of investment like bonds. Who cares if you made 7% when inflation is running at 10%?
I think we are going to have a hyperinflationary depression. This will destroy all paper assets as the Lender of Last Resort (the Fed) meets the Spender of Last Resort (.gov). In this global game of musical chairs, PIMCO might have just taken one step out of the door.
It will be interesting to see what PIMCO does with its cash, because if they do not like US Treasuries, they cannot love the Dollar. Psst Bill, if you want to take 1/10 th of 1 percent of your assets, I know a really good asset at the CRIMEX that will perform really well when this all goes down. Got Silver?