|Neel “Mini Me” Kaskari, and his former boss,|
former Treasury Secretary Hank “Dr. Evil” Paulson
Anyway: In his WSJ piece, he ticks off the major concerns that he supposedly has (though bets are good that they’re actually Gross’s and El-Erian’s—Mini Me’s are notorious for having no opinion of their own). Those concerns are:
• Rising fiscal-debt-to-GDP ratio.
• Increasing inflation expectations.
• Reduced Treasury bond demand from abroad.
• Rapid dollar depreciation.
• “Dramatic” steepening of the yield curve.
Now, none of these points are remotely foolish or off-target—on the contrary.
But PIMCO’s Gross famously said that, when the Federal government and/or the Federal Reserve act on the market, you’d better get on their side of the trade, or you’re going to be wiped out.
Now, the Wall Street Journal is not some obscure finance blog which can’t make up its mind about its background. So Mini Me Kashkari didn’t write this analysis for the WSJ out of the blue, or all on his lonesome—it seems fairly certain that this was approved by Gross and El-Erian, who tweeted about Mini Me’s analysis on their Twitter feed.
Clearly, this is a message. What is that message? PIMCO no longer thinks the Federal government and/or the Federal Reserve have control of the situation. In other words, this is the signal that PIMCO thinks the Fed and the government are on the losing side of the trade.
Now, why would PIMCO signal their thinking? Nothing nefarious, The Hourly G thinks it’s just ego on the part of the PIMCO bond pimps—they just want to leave the trail and show that they knew that the Fed and the government were losing their grip.
Like the good traders that they are, they are getting on the winning side of the trade—and they want people to know about it.