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US Treasurys Dumped, Pimco Sees Value In Emerging-Market Bonds
NEW YORK (Dow Jones)–The valuations on U.S. Treasurys are not attractive in a historical context and Pacific Investment Management Co. is moving money toward emerging-market debt, said the fund’s founder Bill Gross in an interview on Thursday with CNBC.
Reports came out on Thursday that the bond-fund giant had dumped all of its holdings of U.S. government bonds. Gross said better valuations can be found elsewhere, where yields are not artificially boost by Federal Reserve purchasing.
“The overvaluation [in Treasurys] has been dependent on the purchasing power of the Fed,” said Gross, who does not believe there will be a third round of “quantitative easing.”
Pimco did not participate in Thursday’s 30-year auction nor Wednesday’s 10-year auction, Gross said, though both were considered well-received.
The fund still owns about Read more…
Inflation Group Says U.S. Cities Will Be Like Egypt in Four Years
The National Inflation Association has issued a chilling new advisory in which it warns that the inflationary time bomb being created by the policies of the Federal Reserve will lead to American cities experiencing similar chaos currently unfolding in Egypt by 2015.
Egyptian dictator Hosni Mubarak has been in power for three decades and in that time has managed to handle all manner of threats to the stability of his regime. But it was the huge unrest sparked by soaring food prices that finally led the Egyptian people to launch a revolution which is likely to see Mubarak forced out of office for good.
“Food inflation in Egypt has reached 20% and citizens in the nation already spend about 40% of their monthly expenditures on food. Americans for decades have been Read more…
Quantitative Easing Causing Food Prices to Skyrocket
As I’ve previously noted, interest rates have risen both times after the Fed implemented quantitative easing.
Graham Summers points out that food prices have also skyrocketed both times:
In case you’ve missed it, food riots are spreading throughout the developing world Already Tunisia, Algeria, Oman, and even Laos are experiencing riots and protests due to soaring food prices.
As Abdolreza Abbassian, chief economist at the UN’s Food and Agriculture Organization (FAO), put it, “We are entering a danger territory.”
Indeed, these situations left people literally starving… AND dead from the riots.
And why is this happening?
A perfect storm of increased demand, bad harvests from key exporters (Argentina, Russia, Australia and Canada, but most of all, the Fed’s money pumping. If you don’t believe me, have a look at the below chart: Read more…
Fed chief expects high unemployment, economic growth in 2011
Vicki Needham
Unemployment will remain high, the nation’s economy could expand by 4 percent and interest rates may need go up, Federal Reserve Bank of Philadelphia President Charles Plosser said Monday.
“If economic growth in the United States continues to gain traction and the prospects begin to look ever better, it might be time for us to begin thinking about how do we begin to gradually take our foot off the accelerator,” Plosser told reporters after a speech at the Central Bank of Chile in Santiago, according to news reports.
Plosser said he may favor a rate increase if economic growth necessitates a change.
“It might. I’m not going to rule that out,” he said.
The central bank has said that it plans to keep short-term interest rates low for an “extended period.”
During Monday’s speech, Plosser also predicted that the U.S. could grow between 3 percent and 4 percent this year.
The Fed’s plan to purchase $600 billion in government debt will probably continue through June while the nation’s 15 million unemployed look for work, although Plosser didn’t rule out pulling the stimulus funds back earlier.
“It could end earlier if economic conditions call for it, but right now I’m not sure that that’s the most likely outcome,” he told reporters. “It obviously creates challenges for some countries because of appreciating currencies. But I think that will pass. Those are short-run issues.”
Plosser has expressed concern about whether the Fed’s quantitative easing, also known as QE2, will spur economic growth while lowering the jobless rate that has remained above 9 percent for 20 months.
“Monetary policy is not going to be able to speed up the adjustments in labor markets or prevent asset bubbles, and attempts to do so may create more instability, not less,” he said.
“Expecting too much of monetary policy will undermine its ability to achieve the one thing that it is well-designed to do — ensuring long-term price stability.”
QE2 has brought harsh criticism from some lawmakers on Capitol Hill who argue that the plan could devalue the dollar and cause inflation.
QE2 Reality Check
The Federal Open Market Committee (FOMC) announced on November 3, 2010 that it would purchase longer-term Treasury securities at a pace of $75 billion dollars per month through the Federal Reserve’s Permanent Open Market Operations (POMO) facility by the end of the second quarter 2011 and potentially beyond. The Quantitative Easing Two (“QE2”) program, championed by Ben Bernanke, chairman of the U.S. Federal Reserve, is expected to total at least $600 billion — and may well total more, if Bernanke and the FOMC deem it to be necessary.
Currently, QE2 is expected to continue until the end of 2011, i.e. up to $1.2 trillion, although there is ongoing policy debate within the Federal Reserve amidst growing fears that the policy may backfire.
Chart courtesy of Shadow Government Statistics |
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