P I M C O: Q E 2 Will Have Little Effect

[Realistbear]

http://www.telegraph.co.uk/finance/economics/8063303/Pimco-sells-US-Treasuries-ahead-of-QE2.html

Pimco sells US Treasuries ahead of QE2

Pimco, manager of the world’s largest bond fund, is selling US Treasuries in the expectation that a fresh helping of economic

stimulus from the Federal Reserve will have little impact.

Published: 1:01PM BST 14 Oct 2010

The Federal Reserve bought $300 billion of Treasuries last year under the QE policy and is expected to buy another round.

His comments echoed worries over record-low Treasury yields that has seen demand for US bonds decline as investors seek higher returns in commodities and equities.

"

There is practically no interest rate, so everyone is rushing into commodities and the stock market," Ronald Leung of Lee Cheong Gold Dealers in Hong Kong told Reuters.

Pimco believes developed economies will suffer

slow growth

and below average returns and is focusing on sovereign debt in emerging markets, such as India and China.

There is a lot of rushing into gold/commodities, equities which suggests a nasty crash is getting quite close--if Buffett is right about the nature of herd investment strategies.

Time to go to a bit more cash I think. IF QE2 is going to have zero impact it suggests deflationary forces are stronger than inflationary forces. PIMCO are worth listenng to as the Bond market is quite large and Gross et. al. can sometimes make the market--or at least impact it quite substantially.

Edited October 14, 2010 by Realistbear

[Zzzzzzzzzzzzzzzzzzzzzzzzzz]

Very interesting - thanks - QE2 is incredibly risky vis a vis confidence and fundamentals.

Edited October 14, 2010 by gruffydd

[General Congreve]

I think what he's trying to say:

1. Is the bond market is about to implode

2. The US dollar is about to get r@ped along with all the other fiat currencies that hold dollar reserves to back them (ummm, everywhere).

So, you go long cash Bear, but I'll stick with gold. And if you don't own gold then commodities and equities are probably a better place to be than cash, in that order. But please bear in mind that if you own Grain/Oil/Wheat/Copper ETFs and equity funds, chances are they are held by a financial institution on the brink of collapse, so they provide no better (possibly worse) protection than cash. Plus please remember that even if you own shares directly, companies usually keep their financial reserves in banks. If these go t1ts, what happens to the company's balance sheets?

[The Masked Tulip]

I am actually of the opinion now that the property bubble is what will cause the collapse of our universe, nothingless, then a big bang and the creation of a new universe.

[leicestersq]

I think what he's trying to say:

1. Is the bond market is about to implode

2. The US dollar is about to get r@ped along with all the other fiat currencies that hold dollar reserves to back them (ummm, everywhere).

So, you go long cash Bear, but I'll stick with gold. And if you don't own gold then commodities and equities are probably a better place to be than cash, in that order. But please bear in mind that if you own Grain/Oil/Wheat/Copper ETFs and equity funds, chances are they are held by a financial institution on the brink of collapse, so they provide no better (possibly worse) protection than cash. Plus please remember that even if you own shares directly, companies usually keep their financial reserves in banks. If these go t1ts, what happens to the company's balance sheets?

It might be worth considering where you get your food and water from. Companies probably, who have their money in the banks.

Your gold might not buy anything worthwhile if it crashes good and proper. You gotta hope for a sort of neutron bomb of a crash, that wipes out currencies but leaves the real economy standing.

Aint gonna happen.

[headrow]

What amazes me is how many people think that the stock market rose after QE1 that it will do so with QE2. I can see the private investor getting sucked in and left with huge losses that will take years to gain back.

[Realistbear]

I think what he's trying to say:

1. Is the bond market is about to implode

2. The US dollar is about to get r@ped along with all the other fiat currencies that hold dollar reserves to back them (ummm, everywhere).

So, you go long cash Bear, but I'll stick with gold. And if you don't own gold then commodities and equities are probably a better place to be than cash, in that order. But please bear in mind that if you own Grain/Oil/Wheat/Copper ETFs and equity funds, chances are they are held by a financial institution on the brink of collapse, so they provide no better (possibly worse) protection than cash. Plus please remember that even if you own shares directly, companies usually keep their financial reserves in banks. If these go t1ts, what happens to the company's balance sheets?

"We may be facing a situation similar to where, in the world of physics, matter and anti-matter cancel themselves out. The fact is that most of the western currencies are trying to devalue their currencies to gain a larger share of the dwindling export markets and if they all succeed in this the status quo viz. respective currency values will remain extant. What we will likely have then is the surprise result that many economists seem to think is impossible, massive deflation on a scale that would make even the Japanese toes curl. Given the state of the bond markets and shrinking interest rates on a gobal scale, such could well be the outcome as the bonds lock in and currencies do likewise."

I have to agree.

[General Congreve]

It might be worth considering where you get your food and water from. Companies probably, who have their money in the banks.

Your gold might not buy anything worthwhile if it crashes good and proper. You gotta hope for a sort of neutron bomb of a crash, that wipes out currencies but leaves the real economy standing.

Aint gonna happen.

I see your point, with total collapse it's not going to be "Yay, loads of money cos I got gold, let's go and buy loads of stuff straight away."

Of course there will be chaos and there will be temporary supply issues for most while the economy adjusts, which is why I keep enough food to keep me going for at least a month, so I don't have to queue at a supermarket come the time there's major panic.

But in the chaos, ways will be found, i.e. there was a thriving black market when Russia's economy collapsed. I think they're a functioning economy again now aren't they?

If it is all out collapse (which we are edging towards with increasing speed), then when the dust settles and economies start to be rebuilt, those holding the gold will be laughing longest and hardest.

[Zzzzzzzzzzzzzzzzzzzzzzzzzz]

what's happening to gold at the mo?

[Realistbear]

what's happening to gold at the mo?

I suspect they are selling 1,000 ton a minute given the ETF action (ETFs represent physical--or so they say).

[General Congreve]

"We may be facing a situation similar to where, in the world of physics, matter and anti-matter cancel themselves out. The fact is that most of the western currencies are trying to devalue their currencies to gain a larger share of the dwindling export markets and if they all succeed in this the status quo viz. respective currency values will remain extant. What we will likely have then is the surprise result that many economists seem to think is impossible, massive deflation on a scale that would make even the Japanese toes curl. Given the state of the bond markets and shrinking interest rates on a gobal scale, such could well be the outcome as the bonds lock in and currencies do likewise."

I have to agree.

What needs to be understood is that in the West at least government debt and personal debt of the indebted voting masses is off the scale. Deflation, and thereby a strengthening of cash, will make those debts mushroom. The consequence? Spiralling unservicable debt all round, leading to crashing markets, trashed banks and a deflationary collapse.

The western governments have two choices, let that happen, default on their debts cos they can't pay them, get voted out by the public cos they've al gone broke and have their banks (which control their govts. anyway) go bust (they will obviously do all in their power to stop this - and they can, cos they run the system). Or they can print and try to manage a gradual inflationary stealth default (you know this is already happening) and deal with the law of unintended consequences, which will most likely mean a hyperinflationary collapse.

They'll go the second route, but Pimco will still be right, cos there will still be massive global deflation, if the currency you hold cannot be debased that is.

Edited October 14, 2010 by General Congreve

[General Congreve]

I suspect they are selling 1,000 ton a minute given the ETF action (ETFs represent physical--or so they say).

Would that be this ETF action?

http://www.google.co.uk/finance?client=ob&q=LON:BULL

Look, ETF's are sketchy anyway. The whole market is sketchy cos it's been polluted 100 ounces to one by paper gold.

I read recently that JPM (the largest short of the big banks who are desperately trying to suppress the price to keep their paper ponzi wealth stealing scheme going) are now trying to corner all new gold coming to market over the coming years, by forward buying as much mine production as they can. Why? Cos there's a squeeze on the market, big holders of paper gold are demanding delivery of real metal, threatening to blow the whole leveraged paper market to pieces, sending physical gold (the real wealth) shooting to the moon where it should be (due to all the currency debasement over the last 40 years). If they can secure all the production to fulfil current delivery demands for physical, they can keep the lid on things for a bit longer.

Edited October 14, 2010 by General Congreve

[General Congreve]

Well, Realist Bear, please enlighten me to why I am wrong, I'd really like to know, because I don't want to get crushed by a crashing gold market if I am wrong.

Edited October 14, 2010 by General Congreve

[Realistbear]

Would that be this ETF action?

http://www.google.co.uk/finance?client=ob&q=LON:BULL

Look, ETF's are sketchy anyway. The whole market is sketchy cos it's been polluted 100 ounces to one by paper gold.

I read recently that JPM (the largest short of the big banks who are desperately trying to suppress the price to keep their paper ponzi wealth stealing scheme going) are now trying to corner all new gold coming to market over the coming years, by forward buying as much mine production as they can. Why? Cos there's a squeeze on the market, big holders of paper gold are demanding delivery of real metal, threatening to blow the whole leveraged paper market to pieces, sending physical gold (the real wealth) shooting to the moon where it should be (due to all the currency debasement over the last 40 years). If they can secure all the production to fulfil current delivery demands for physical, they can keep the lid on things for a bit longer.

Gold buying has reached fever pitch since this farticle was written, $4.22BN in May and thirty times that amount in September perhaps. You would have thought the price would have spiked hugely this past summer?:

http://etfdailynews.com/blog/2010/06/22/twice-as-much-money-went-into-the-gold-etf-gld-than-into-500-of-the-u-s-s-largest-companies/#more-14715

Twice As Much Money Went Into The Gold ETF (GLD) Than Into 500 Of The U.S.’s Largest Companies

June 22nd, 2010

Leave a comment “So where are the masses putting their money today? Look no further than gold. According to Bloomberg, the SPDR Gold Trust (NYSE:GLD) ETF took in

$4.22 billion worth of new money in the month of May alone

, thus increasing its asset base by nearly 10%. For reference, the next highest was the S&P 500-tracking SPDR Trust (NYSE:SPY), which took in $2.4 billion,” Todd Wenning Reports From The Fool.

Wenning goes on to say, “In other words, investors put twice as much money into gold than into 500 of the U.S.’s largest companies, which by the way generate actual cash flows, unlike gold. I understand investors grew nervous about Europe in May, but there’s something a little off about that two-to-one ratio. The hedge fund Woodbine Capital’s October 2009 investor letter did a superb analysis of this gold rush, which according to them follows all three criteria of a bubble”

Edited October 14, 2010 by Realistbear

[R K]

IF QE2 is going to have zero impact it suggests deflationary forces are stronger than inflationary forces

Oh it'll have an impact - Just not much in the US (Depending what they actually DO rather than SAY they'll do).

[General Congreve]

Gold buying has reached fever pitch since this farticle was written, $4.22BN in May and thirty times that amount in September perhaps. You would have thought the price would have spiked hugely this past summer?:

http://etfdailynews.com/blog/2010/06/22/twice-as-much-money-went-into-the-gold-etf-gld-than-into-500-of-the-u-s-s-largest-companies/#more-14715

Twice As Much Money Went Into The Gold ETF (GLD) Than Into 500 Of The U.S.’s Largest Companies

June 22nd, 2010

Leave a comment “So where are the masses putting their money today? Look no further than gold. According to Bloomberg, the SPDR Gold Trust (NYSE:GLD) ETF took in

$4.22 billion worth of new money in the month of May alone

, thus increasing its asset base by nearly 10%. For reference, the next highest was the S&P 500-tracking SPDR Trust (NYSE:SPY), which took in $2.4 billion,” Todd Wenning Reports From The Fool.

Wenning goes on to say, “In other words, investors put twice as much money into gold than into 500 of the U.S.’s largest companies, which by the way generate actual cash flows, unlike gold. I understand investors grew nervous about Europe in May, but there’s something a little off about that two-to-one ratio. The hedge fund Woodbine Capital’s October 2009 investor letter did a superb analysis of this gold rush, which according to them follows all three criteria of a bubble”

$4.22 billion? Compare that to the trillions of paper claims to wealth out there being steadily debased, a drop in the ocean. I'll grant you the tide is turning with increasing velocity, but this is the early stages of the real bull market.

While fiscal mismanagement exists on a global scale, gold will go from strength to strength, huge gains from here are pretty much baked into the cake anyway without further currency debauchery.

Plus Woodbine Capital seem to be looking at some nominal criteria for a bubble, missing the bigger picture completely. If everything was business as usual but gold was having a massive run up, I'd might be inclined to agree we were in a bubble phase (i.e. like tech stocks obviously were), but we are so far from business as usual we may as well be living on Mars.

Edited October 14, 2010 by General Congreve

[ken_ichikawa]

It might be worth considering where you get your food and water from. Companies probably, who have their money in the banks.

Your gold might not buy anything worthwhile if it crashes good and proper. You gotta hope for a sort of neutron bomb of a crash, that wipes out currencies but leaves the real economy standing.

Aint gonna happen.

Which is why a bow a shot gun and lots of ammo is MUCH better as an investment.

[Guest spp]

Did you decide to keep hold of those Silver coins RB?

Cash is trash!

[Toto deVeer]

I am actually of the opinion now that the property bubble is what will cause the collapse of our universe, nothingless, then a big bang and the creation of a new universe.

I'm beginning to conclude that careful investment in US real estate might prove to give good returns.

[Realistbear]

Did you decide to keep hold of those Silver coins RB?

Cash is trash!

Still have them and not sure if I would sell or not. One of the Morgan Silver $ is a rare SF mint jobby that shold always be worth a lot more than the amount of silver content.

The world is in a mess and there are herds of Elephants sitting in a lot of different living rooms at the moment. I think we are just waiting to see which one goes on the rampage next.

[happyhaddock]

$4.22 billion? Compare that to the trillions of paper claims to wealth out there ...

Aye, OK