Photo: via PIMCO
This week, bond god Bill Gross just made a super-long bet on the long end of the yield curve, coming right after a historic rally in fixed income.It was a gigantic shift from his stance earlier this year, when he bet against Treasuries — a bet that famously worked out badly for him.
The interesting thing about this is that his short bet got TONS of attention (including a big story in The Atlantic), whereas his new long bet is only getting a little.
The funny thing about this is that in terms of implication for the economy, the new long bet is much more significant. Going super-long on the long end of the curve implies that Gross thinks yields will collapse even more, which would likely happen in a major economic collapse of some sort.
Shorting Treasuries, conversely, was a very bullish bet on the economy, as Treasuries fall when the economy is improving (or at least lately that’s been the pattern).
And so really this new bet should be getting tons of attention for what it says: If it pays off, that will be very ominous. Yet it’s hardly getting a peep from most people.
The reason is: When people hear “Short Treasuries” they actually hear “Short America” even though that’s not what it means, and so they freak out.
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