Former PIMCO wheeler-dealer is against freedom of the financial press: Why, you might sell before he does

PIMCO's Bill Gross wakes up to the wall hit by TCMDO, but not fully

Others saw this in April 2013.

Here's Bill Gross in September 2014:

The current outstanding total [credit] approximates $58 trillion and has been expanding at an average annual rate of 2% for the past five years, and 3.5% for the most recent 12 months. Put simply, if credit needs to expand at 4.5% per year, then the private and public sectors in combination must create approximately $2.5 trillion of additional debt per year to pay for outstanding interest. They are underachieving that target in the U.S., which is the reason why GDP growth struggles at 2% real or lower and nominal GDP growth seems capped at 4.5% or lower. Credit creation is essential for economic growth in a finance-based economy such as ours. Without it, growth stagnates or withers.

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What Bill Gross doesn't seem to appreciate is the gravity of this slowdown historically to total credit expansion of just $1.14 trillion annually. TCMDO, total credit market debt outstanding, in the post-war DOUBLED every 6 to 11 years until 2007. That implies that normal credit expansion until 2007 was between 6% and 11% PER ANNUM. At 8.5%, an average level, TCMDO should grow well in excess of $4 trillion annually at these levels. 4.5% isn't going to cut it. And the actual 2% or even 3.5% is a catastrophe compared with the historical record.

By 2013, according to historical norms, TCMDO could have already reached $100 trillion if it matched the fastest pace on record under Jimmy Carter and Ronald Reagan. Instead it's stuck at $58 trillion in 2014.

The system has hit the wall. Decades of economic shrinkage, to borrow Chris Whalen's phrase, lie ahead, and we're already in the first one.

Incidentally, nonfinancial corporate debt has grown on average $567 billion annually between 2010 and 2014, accounting for about 50% of the average increase in TCMDO. And in 2013, corporations bought back something like $600 billion worth of their own stock. 

Vanguard's VTSMX Now The World's Biggest Mutual Fund, Edging Out PIMCO Total Return

From the story here:

For the year, the Pimco Total Return Fund has had outflows of about $33.2 billion. The fund, which is managed by Pimco co-founder and co-chief investment officer Bill Gross, is still the world's largest bond fund [at $248 billion], Morningstar said.

The Vanguard Total Stock Market Index now holds the title of world's largest mutual fund with $251.1 billion, according to Morningstar.

Still Think You Can Predict Bond Market Sell-Off? You're Already A Month Late.

NAV of total bond market is already down almost 2% in a month.

So says James B. Stewart here in The New York Times, who notes Bill Gross of PIMCO fame manages a corporate bond/MBS fund which is already down well over 10%:

The sell-off in fixed income began slowly on May 10, an otherwise uneventful day with no obvious catalyst for any change in sentiment. It picked up steam when Fed sources didn’t step forward to calm markets. Then, in comments to Congress on May 22, Mr. Bernanke said, “We could in the next few meetings take a step down in our pace of purchases.”

That set off alarm bells, in contrast with his prepared text, which gave no suggestion that the Fed’s policy would change so soon. And then, the minutes of the Fed’s May meeting suggested that some Fed governors were prepared to start tapering off bond purchases as soon as the Fed’s next meeting, which will be June 18 and 19. Near-panic selling in some markets ensued.

. . . the simplest and safest approach [may be] simply to park funds in a low-volatility money market fund and accept near-zero returns.

In Passive v. Active Management, Vanguard Is The Winner And Still Champion

So says Robert P. Seawright, here:

[O]ne of every three dollars invested in mutual funds and exchange-traded funds through the first four months of ... 2012 has gone to Vanguard, according to Morningstar Inc. (and as reported by Investment News).  Investment in Vanguard so far this year is roughly $65 billion, nearly four times more than the next closest mutual fund company – PIMCO.  In ETFs, year-to-date through the end of April, Vanguard had gathered $21.6 billion, while BlackRock’s iShares collected $13.3 billion and State Street added $7.2 billion. As always, Vanguard focuses on passively managed index funds and ETFs. 

David Stockman Hates America

David Stockman's latest screed against PIMCO reveals what a creature of his age he has become:

"Housing is a commodity like furniture and automobiles, and inducing citizens to buy more of it is no business of the state."

In truth everything is a commodity to people like David Stockman, and that he'd much prefer a world which puts more people into that category, as the tenants of landlords, says it all.

Without realizing it, he puts his finger on the problem with what has happened in America in our lifetimes. Everything got commodified, not just our jobs, and now our mortgages, but our very selves. It happens to people who forget where they came from, who they are, and God. That we let the vampires get a hold of the American dream and make a bundle off it is only the most acute and visible example of it. It is almost quaint how Stockman likens what's happened to indentured servitude, as if his remedy doesn't resemble the same.

With mortgage securitization, the American dream got carved up, packaged and sold off to the highest bidder like so many sausages at the meat counter. But the intangible assets of four walls and a piece of ground mean nothing to David Stockman. Privacy, peace and quiet. Some flowers for the table and tomatoes for the pasta, the companionship of pets and a place to bury them when they're gone. The sound of the wind blowing through the trees. The glory of a red maple leaf against a blue sky. The goldfinch, the bluejay, the robin, and crows as big as coons. The snowman standing where bright green grass once called you to mow it. Where families gather to give thanks once a year for our many blessings, in spite of it all.

If that makes me a slave, I'll own it. Someone's banking on it, and not just Bill Gross.