Signs Of The Times

If we knew what was going to happen, we’d likely be trading whatever it was we knew about. So we wear our ignorance of the future proudly. But we were interested recently in two events that might point in the same direction, and not a good one for business. First, the Pimco Total Return fund cut its holdings of US government debt to zero. The largest bond fund in the world at $237 billion has no US government debt in its portfolio any more. In a March investment outlook letter Pimco said that it thought the Fed was buying 70% of government debt since QE2 was sprung, which it likened last year to a Ponzi scheme. The Fed is now buying treasuries at $100 billion a month. Pimco said rates may have to go much higher in order to attract buyers. Second, Carl Icahn is returning investor money and said he is unwilling to manage money through another downturn. He is apparently joining Chris Shumway who is returning $8 billion of investor cash and Oaktree Capital which is returning $3 billion of $10 billion it raised. In a letter to investors Icahn said that he did not wish to be responsible to limited partners through another possible market crisis. “While it may sound ‘corny’ to some, the losses that were incurred by investors in our funds in 2008 bothered me a great deal more, in many respects, than my own losses.” We say bully!
-- Paul Marotta