Exclusive: Bill Gross Is Now Short US Debt, Hikes Cash To $73 Billion, An All Time Record

Submitted by Tyler Durden on 04/10/2011 14:41 -0400

A month ago, Zero Hedge first reported that Bill Gross had taken the stunning decision to bring his Treasury exposure from 12% to 0%: a move which many interpreted as just business, and not personal: after all Pimco had previously telegraphed its disgust with US paper, and was merely mitigating its exposure. This time, in another Zero Hedge first, we discover that it is no longer business for Bill - it has now become personal (and with an attendant cost of carry). In March, Pimco's flagship Total Return Fund (TRF) has now taken an active short position in US government debt: -3% on a Market Value basis (or $7.1 billion), and a whopping -18% on a Duration Weighted Exposure basis. And confirming just what PIMCO thinks of US-related paper is the fact that the world's largest "bond" fund now has cash, at a stunning $73 billion, or 31% of all assets, as its largest asset class on both a relative and absolute basis. We repeat: cash is more than PIMCO's holdings of Treasurys and Mortgage securities ($66 billion) combined. To paraphrase: in March PIMCO was dumping everything related to US rates (see chart below). This is the first net short position that PIMCO has had in Government-related debt since the Great Financial Crisis of 2008, and going positive in February of 2009 only after it became clear that the Fed would commence monetizing US debt one month later. This is the closest that Gross has come to making a political statement and is now without doubt putting his money where his mouth is. The only event that could possibly derail Gross' thinking is a huge market crash forcing a rush to Treasury safety. Alas, as has been made all too clear recently, US debt is no longer the safe haven it once was. Which begs the question: when will the TRF break out a "gold" asset holdings line item.

Premarket Summary: Inflationary Hysteria

Submitted by Tyler Durden on 04/10/2011 19:36 -0400

One word (well technically two) can describe what is going on in the electronic pre-market arena right now: inflationary hysteria. Gold is at a new record, wheat is surging, corn is at highest since 2008, crude at a new 30 month high, silver is at $41.10 - a new fresh post Hunt high, beans surging, etc, etc, etc. Essentially everything is bid, following news first reported on Zero Hedge that PIMCO is betting the farm that either inflation is about to go parabolic and force bondholders to dump everything, or that the Fed will have no choice but to pursue another round of QE, sending gold to $2,000 and unleashing the Weimar endgame.

 

 

 

China Lashes Out At US "Hypocrisy", Blasts US Human Rights "Double Standard" In Pursuing "World Hegemony"

Submitted by Tyler Durden on 04/10/2011 12:50 -0400

In what can only be described as a stunning deterioration in foreign relations between the world's two superpowers, following Friday's release by the US State Department of the annual report on human rights, which expressed sharp criticism of the human rights records of China, North Korea, Cuba and Belarus, among others, China decided it has had enough. Less than 48 hours later, it has lashed back at the US with a report that is making headlines at every government controlled, and otherwise, media in mainland China, which makes a mockery of the US double standard when it comes to human rights, and exposes US "hypocrisy" which China (rightly many would claim) asserts is merely a pretext for continued US attempts at world "hegemony". As Xinhua reports on its front page, "The Human Rights Record of the United States in 2010 was released by the Information Office of China's State Council, or cabinet, in response to the Country Reports on Human Rights Practices for 2010 issued by the U.S. Department of State on April. The U.S. reports are "full of distortions and accusations of the human rights situation in more than 190 countries and regions including China. However, the United States turned a blind eye to its own terrible human rights situation and seldom mentioned it," China's report said." The war of words hits a new all time record: "The United States has taken human rights as "a political instrument to defame other nations' image and seek its own strategic interests," the report said. While illustrating a dismal record of the United States on its own human rights, China's report said the United States could not be justified to pose as the world's "human rights justice." "However, it released the Country Reports on Human Rights Practices year after year to accuse and blame other countries for their human rights practices," the report said. These moves fully expose the United States' hypocrisy by exercising double standards on human rights and its malicious design to pursue hegemony under the pretext of human rights, it said. The report advised the U.S. government to "take concrete actions to improve its own human rights conditions, check and rectify its acts in the human rights field, and stop the hegemonistic deeds of using human rights issues to interfere in other countries' internal affairs." While that last sentence may not be an explicit warning for the US to shut the hell up and focus on its own dirty laundry, or else, it sure does sound like one.

Chinese Imports Surge To Record $152 Billion In March Despite "Weak" Yuan As $140 Million Trade Surplus Posted

Submitted by Tyler Durden on 04/10/2011 12:31 -0400

Despite relentless calls that the Chinese currency is undervalued, and that it really is China's fault that Brent is nearly at $130, in March the world's fastest growing economy posted an import number of $152 billion: an absolutely monthly record. Still, this was almost precisely offset by total exports which at $152.2 billion represent the third highest monthly total ever (following only November and December of 2010), and leading to a trade surplus of $140 million, in essence implying that the CNY is rather correctly priced (at least per the Politburo's calculations of imports and exports). This is substantially stronger than the consensus which was looking for a trade deficit of $3.35 billion in March, arguing that following February trade deficit which came at a multi year high, in part blamed on the Chinese New Year, the country is once again in aggressive inventory restocking mode. A detailed look at China's two main trade partners, the US and EU, shows that exports to the US surged back to $25.1 billion from $15.8 billion in February, while imports from the US were $12.1 billion. Yet despite a strong euro, it is the EU that exported a record amount of goods to China in March: an all time high of $19 billion. Still, this was more than offset by $28.5 billion in imports from China for a trade surplus of $9.5 billion with the European Union. Ironically, it was the Rest of the World (excluding the US, EU, Japan, ASEAN, Korea, Hong Kong, Australia and Taiwan) which benefited the most, after it exported a record amount of goods to China, or $53.9 billion in March. At least someone (who actually has worthwhile goods to export) is seeing their economy grow, regardless of just how undervalued, or fairly priced, the CNY may be.

 

 

 

With Its Economy On The Mend, Iceland Stuffs Bankers For Second Time

Submitted by Tyler Durden on 04/10/2011 11:15 -0400

In a shining example of how it can be done, Iceland, for the second time in as many years, by popular vote refused to provide up to $5 billion to Britain and Netherlands banks. The just completed referendum once again rejected a $5 billion Icesave debt deal, pushed on Iceland by its European banking brethren. "The debt was incurred when Britain and the Netherlands compensated their nationals who lost savings in online "Icesave" accounts owned by Landsbanki, one of three Icelandic banks that collapsed in late 2008." And while Iceland PM Johanna Sigurdardottir did a brief Mutual Assured Destruction tour claiming "economic and political chaos could follow" we can't help but think we are witnessing the early stages of Europe's most flourishing economy over the next decade, while all other countries in Europe fail one after another due to their inability, unwillingness and cowardice to force bankers to experience, gasp, losses for fear of "reprisals." As for the "isolation" that Iceland is threatened with experiencing should it give banksters the finger, we are certain it is just a matter of a few months before some enterprising hedge funds, scrambling for yield career risk offsets, decide to take on the role of the IMF or of repeatedly insolvent Dexia, and lend directly to Iceland.

 

 

 

The Only Two Charts That Matter For The US, And A Q&A On The Fiscal "Debate" From Goldman Sachs

Submitted by Tyler Durden on 04/09/2011 22:25 -0400

Lately, there has been a lot of chatter by virtually everyone with some soapbox to stand on, about this and that. That's swell... if mostly irrelevant: by now everyone should be aware that only two charts actually matter, both of which are painfully self-explanatory.