World’s Largest Bondholder Shorts U.S. Treasuries

The Obama regime has been printing money like crazy for the past two years and finally investors are starting to panic:

World’s Largest Bondholder Shorts U.S. Treasuries

This past weekend it was revealed that Bill Gross, manager and co-founder of the $1.2 trillion Pimco family of bond funds, began shorting U.S. government treasuries. It is a startling development because it shows that the world’s most sophisticated investors are losing faith in America.

Last month, Gross revealed that his premier total return fund sold all of its U.S. government treasuries—a couple of hundred billion’ worth! The announcement shocked market commentators, with one analyst claiming the move was akin to Hershey’s getting out of the chocolate business.

Now it is revealed that Gross has not only sold his whole position, but he is doubling down by borrowing and selling treasuries from other investors, with the strategy of paying them back later when the treasuries plunge in price.

For many bond investors, U.S. treasuries are considered the new gold standard—the safest of investments. No more, says Gross. They are grossly overvalued and set for a major crash.

Why is Gross so negative? In essence, it is because the world’s largest economy is acting like Zimbabwe. Instead of balancing its budget by bringing tax revenues and spending into alignment, the Federal Reserve is monetizing the debt by creating money out of thin air.

In December, the Federal Reserve embarked on a second round of “quantitative easing,” which is really just a complicated term for Zimbabwe-style money printing. Since then, approximately 70 percent of all government spending has been provided by money brought into existence by fiat by the Fed. Over the past two years, the Federal Reserve has become the biggest lender to America—dwarfing even the Chinese and Japanese.

Without the Fed’s funny money, Republicans and Democrats would not be bickering over how to cut $60 billion in spending—it would be more like how to cut $1.5 trillion.

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One thought on “World’s Largest Bondholder Shorts U.S. Treasuries

  1. Pete

    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!

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