Gross Eliminates Government Debt From Pimco's Flagship Total Return Fund

Gross Eliminates Government Debt From Pimco's Flagship Total Return Fund

www.bloomberg.com

Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., eliminated government-related debt from his flagship fund last month as the U.S. projected record budget deficits.

Yields on Treasuries may be too low to sustain demand for U.S. government debt as the Federal Reserve approaches the end of its second round of quantitative easing, Gross wrote in a monthly investment outlook posted on Pimco’s website on March 2.

Gross in his February commentary urged investors to reduce holdings of Treasuries and U.K. gilts and buy higher-returning securities such

(visit the link for the full news article)

I'm not going to lie and pretend to say I'm an economist, so let me ask those more educated than I, what does this mean? I have to believe this is going to be a trickle effect with other investment companies. How great of an effect will this have on our economy? Is this big news that's bound to escalate the collapse of our dollar, or is this not that big of a deal?

www.bloomberg.com (visit the link for the full news article)

edit on 9-3-2011 by DaveakaRNG because: typo

Is this an indication of growing sentiment that the US dollar is becoming less attractive and that combinedf with low interest rates means returns are too low and so government debt is dumped? I wonder what happens if other holders of the debt also begin dumping, what adverse impact this could have.

reply to post by DaveakaRNG


good drop our debt we've saved the western world like twice from ze germans.. The dollar is doomed to fail anyway. as humans we shouldn't let our governments debt destroy us.

reply to post by DaveakaRNG


Bill Gross is a serious dude in the asset management business, one of the biggest. He's gone out of public debt before and I would view his move simply that he views other debt instruments a better investment than US government debt. His job is to generate returns and he'll do what he needs to do to generate the highest return he can. Is the dumping of the bonds significant? Yes, in so far as it singles that one of the smartest investors in the world thinks it will (and the US economy in general) under perform relative to other debt instruments, at least in the short-term.

Gross is a bell weather investor. Look for other bond funds to dump US debt now. Also don't be surprised if he buys a ton in a few months - again he's looking to generate a return and if he thinks US debt is cheap and offers a decent return at any given time, he'll buy it.

At the other end of the argument is that the US is not broke and there is very little risk of defaulting on the debt. According to the article, the US is in a great position because it has the reserve currency so can print as much money as it needs to pay down on its debt, unlike those poor European countries. It is safe because investors and the market do not indicate that they are concerned with the US unable to pay on it debt. The US remains with a AAA credit rating as ihas one of the lowest cost for insuring its debt compared with other countries around the world.


Bond Market Shows Why Boehner Saying We're Broke Is Only Figure of Speech

www.bloomberg.com...

But Standard and Poor's has indicated that to remain a credit AAA rating, there will have to be "a credible plan to tighten fiscal policy" - something clearly most Americans are opposed to sacrificing, though many seem to agree in prinicipal, provided it is someone else wearing the sacrifice.

The article also states:

"You are never broke as long as there are those who will buy your debt and lend money to you,” said Edward Altman, a finance professor at New York University’s Stern School of Business who created the Z-score formula that calculates a company’s likelihood of bankruptcy.

Key words there: "as long as there are those who will buy your debt and lend money to you".

Maybe I'm drawing a long bow, but there are some 'if's' there that if they changed, for whatever reason, the optimistic sentiment in this article would be quickly and profoundly erased.

Are not the creditors the holders of the power in this situation? China being one among quite a few as I understand. What about the OP, is this an indication that investors can abruptly move away from US debt again reverting to the problem this articles disputes?

Isn't monetizing the debt the Fed buying US Gov Debt, that they produced in the first place, with money that the treasury is printing out of nothing but air? That makes a lot of sense if your purposely devaluing our dollar on a grand scale! If you want to completely collapse a nation, this is how it's done!
Zindo

An this - of all recent economic news - is the scariest thing I've seen posted yet.

It's not a small leap from here to a general dumping of U.S. debt by many, many people and organizations now holding it.

reply to post by centurion1211


Agreed.

Very disturbing.

Here is Bill Gross's explanation for pulling out of US Bonds from PIMCO site.