Bill Gross Has Record $60 Billion Short Cash Bet Fed To Proceed With MBS Monetization

Following the release of its November fund statistics, Pimco's Total Return Fund has once again reaffirmed it is betting on imminent QE by the Fed in the form of MBS monetization, a trend it started two months ago as we pointed out. And with a record $60 billion short cash position, or 25% of the entire fund $242 billion AUM, they better be right this time (he did the same thing in Jan-Feb... that did not work out too well). It is amazing to consider that back in April, Gross was long $90 billion in cash: a $150 billion swing! The TRF's 43% holdings of MBS is an increase of 5% compared to October, the most since December 2010, but still just half of the 86% held in February 2009 in expectation sof MBS monetizations by the Fed as part of QE 1. Just as notable is the near record effective fund duration, which at 7.46 was the second highest ever, just a modest drop from the 7.58 in October. What is most curious is that Gross, for the first time as far as our records go, is completely out of the 0-3 year maturity range. Which makes sense: after all the Fed has telegraphed there will be no money made in that band of rates until mid-2013, a deadline which will likely soon be extended.

Will The US De-Couple? Or Is It Time To Re-Couple?

Maybe, but not in the way everyone seems to think.  Haven't we already decoupled? Sure, but maybe we will just finally catch up to the rest of the world.  The US stock market has outperformed the world this year.  It seems just as easy that we decouple by other markets outperforming - especially since most people talk about the opposite occurring. We have decoupled, so I would be worried about re-coupling, or that we decouple in a bad way.  The "decoupling" theory seems very priced in global stock markets so be careful using this as a reason to get too bullish.

European Financial Credit Sending Worrying Signals

We warned on Friday that the strength in equities was divergent from any of the higher beta risk-on trades and today has seen this divergence grow even larger as European credit markets are selling off considerably even as stocks maintain some semblance of extending-and-pretending. Subordinated financial credit has now retraced over 62% of the rally from 11/25 to 12/7 and XOver (the European high yield credit index) has retraced 50% of that rally. The broad European equity index tracked by Bloomberg has lost significantly less, seemingly ignorant of the stress (EUR-USD basis swap widest in two weeks) as we see even Main (the European investment grade credit index) now starting to drop notably. If, as we have experience cycle after cycle, credit anticipates and equity confirms, then it seems to make sense (especially given the concerted weakness in metals which suggests some kind of margined selling or cash-need desperation) to at worst hedge long equity beta.

Cashin On The Anniversary Of Bank Of The United States' Failure, The Start Of US Bank Runs And The Great Depression

Art Cashin recalls how it all started 81 years ago. Naturally, it "ended" with World War 2. Will history rhyme, or will "this time be different"?

Intel Cuts Q4 Revenue Guidance By $1 Billion On Hard Drive Supply

Mayhem Monday is the new Merger Monday, with the latest a la carte addition courtesy of Intel, which just cut Q4 guidance.

BTPs Yielding 1% More In Two Days Since LCH Margin Cut

In what will likely be the fastest margin cut-to-hike about face, we note that since CC&G (and then subsequently LCH) cut margin rates on Italian debt last week, 10Y BTPs are now trading over 100bps higher in yield and 110bps wider in spread (and CDS +120bps). Both long-and short-term, it seems a margin hike is just around the corner, as we warned last week on the CC&G announcement, and with the ECB now a little less aggressively rerisking their already debt-laden balance sheet, it seems once again managers used the SMP-indiced better prices to cover stuck longs.

ETF And Central Bank Gold Lent To Banks Being Relent Into Market?

With concerns about liquidity and solvency in the European banking system, there is lending and possibly even selling of gold by banks to raise much needed cash. This may be creating short term weakness in gold bit is bullish for gold in the long term. The FT reported last week that “gold dealers” said that banks – “primarily based in France and Italy – had been actively lending gold in the market in exchange for dollars.” The key question is who is lending and is their lending simply liquidity driven - to raise dollars or euros? John Dizard, who frequently comments on gold in the Financial Times wrote on Saturday that, “Gold market people say European commercial banks are being driven to lend gold for dollars at negative interest rates just to raise some extra cash for a few weeks. There’s not a lot of transparency about where the banks are getting the gold they are lending out, but it could be lent to them by either their national central banks, or by gold exchange traded funds.”

Iran Military Practicing Straits Of Hormuz Closure

And just in case a brutal reminder that nothing is solved in Europe is not enough, here comes Iran:
IRAN MP SAYS MILITARY TO PRACTISE CLOSING STRAIT OF HORMUZ TO SHIPPING; IRANIAN MILITARY DECLINES TO COMMENT - RTRS

Greek 5 Year CDS Over 10,000 bps (100%)

For anyone wondering why CDS pricing shifts to a points upfront methodology from running spread once said spread passes 1000 or so bps, look no further than the Greek 5 year today, where the 5 Year CDS is shown with a mid-price of 10,115 bps, being offered at 10,418. Now if there was a one to one equivalency on the CDS and bond curve, this would imply a bond price in cash terms that is negative. And since this would be quite impossible to be achieved, even for Greece, this is a perfect example of why spread in CDS terms becomes promptly irrelevant due to the shapeshift in the default curve past the 16% or so discount from par threshold. And while in practice this means that CDS could in theory go up without an upside limit, for all intents and purposes this is irrelevant as the DV01 in the 100% range approaches zero.

Moody's Unhappy With Friday Euro Summit, To Review Ratings, Warns Of "Multiple Defaults And Exits By Euro Area Countries"

The main weight on the EURUSD this morning is not only the virtual certainty of S&P cutting Europe's AAA club, after it called Europe's bluff and Europe revealed a 2-7 offsuit, but a report just released from Moody's which said that the rating agency looked at the European abyss, and did not like what it saw at all. As a result, Moody's has warned that it was review the ratings of all EU countries in Q1 as the summit has failed to produce "decisive policy measures" (we emphasize this for our friends at Bloomberg TV). It says: "As a result, the communiqué does not change our view that the crisis is in a critical, and volatile, stage, with sovereign and bank debt markets prone to acute dislocation which policymakers will find increasingly hard to contain. While our central scenario remains that the euro area will be preserved without further widespread defaults, shocks likely to materialise even under this 'positive' scenario carry negative credit and rating implications in the coming months. And the longer the incremental approach to policy persists, the greater the likelihood of more severe scenarios, including those involving multiple defaults by euro area countries and those additionally involving exits from the euro area." The result, as one can imagine, a surge in Italian and Spanish yields, and redness across the screen.

Some Parts Of The Chinese Economy Are Going To Have A Hard Landing

Admin at Jim Rogers Blog - 10 minutes ago

Some parts of the Chinese economy are going to have a hard landing. The Chinese for two years now have been tightening up. They have raised interest rates six times. They have raised reserve requirements a dozen times. Just recently they started to loosen this up a little bit but they are trying. They are trying to bring down real estate, they are trying to make real estate developers go bankrupt so you are going to have a hard landing to use your terms in things like property in China. But other parts of the Chinese economy are going to continue to boom: water treatment, agricultur... more » 

 

 

 

  

Felix Zulauf - Watch Out for These Events in 2012

Eric De Groot at Eric De Groot - 37 minutes ago

The flight to liquidity illustrates the growing stress as the 2012 panic cycle approaches. U.S. Dollar Index ETF Felix Zulauf, I think the periphery goes into depression. When you look at a country like Greece, it’s now been in recession for three years. GDP is probably down 15% from the top. The stock market is down 90%, which is the equivalent of 1929 to 1932 in the US. This is... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

 

 

 

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Gold: The Downside Exists If...

Admin at Marc Faber Blog - 58 minutes ago

In my view the downside exists if money printing by government is insufficient to revive or maintain credit growth at this level and you have a credit collapse. One day there will be a credit collapse, but I think we aren’t yet there. Before it happens they’re going to print. - *in etfdailynews.com* *Related: SPDR Gold Trust ETF (GLD), Newmont Mining (NEM), Barrick Gold (ABX)* *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.* 

 

 

 

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There’s Not Many Countries That Should Be AAA

Admin at Jim Rogers Blog - 1 hour ago

There’s not many people that should be AAA anymore, maybe Finland, maybe China. I can’t really think of many countries that should be AAA anymore. - *in Globe & Mail* *Jim Rogers is an author, financial commentator and successful international investor. He has been frequently featured in Time, The New York Times, Barron’s, Forbes, Fortune, The Wall Street Journal, The Financial Times and is a regular guest on Bloomberg and CNBC.* 

 

 

 

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Silver Investors Will Make A Lot Of Money

Dave in Denver at The Golden Truth - 20 hours ago

I MF Global'd (i.e. embezzled) this video from http://www.zerohedge.com/this morning. For those who have not watched it yet, it is a great explanation of why there will be a massive move higher in silver at some point in the near future (don't ask me for a timeframe). We know the market for large deliveries of physical silver is getting very tight per the Sprott Asset comments that they have to wait several months for delivery when they buy a large amount of silver. It certainly calls into the question the reliability of the "reported" silver inventories on the Comex. Currently ... more » 

 

 

 

 

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