I mentioned one of the biggest mutual funds, Pimco, and its continual pessimistic outlook on treasury debt, in my “I Love Lucy” blog post over the weekend. Pimco is upping its bet that treasuries will drop in value.
(Reuters) - PIMCO’s Bill Gross, the manager of the world’s largest bond fund, raised his bet against U.S. government-related debt in April to 4 percent from 3 percent, according to the company’s website on Monday.
While this is a modest increase in Pimco’s negative treasury bets, the article mentions that this is the plan for Pimco, to gradually ratchet up the position.
But even so, I am still guardedly pessimistic because of the speech that Speaker Boehner gave at the club of New York:
So let me be as clear as I can be. Without significant spending cuts and reforms to reduce our debt, there will be no debt limit increase. And the cuts should be greater than the accompanying increase in debt authority the president is given. We should be talking about cuts of trillions, not just billions. They should be actual cuts and program reforms, not broad deficit or debt targets that punt the tough questions to the future. And with the exception of tax hikes — which will destroy jobs — everything is on the table. That includes honest conversations about how best to preserve Medicare, because we all know, with millions of Baby Boomers beginning to retire, the status quo is unsustainable.
Boehner understands the seriousness of the problem. But the math will force taxes up eventually. He is wrong about that. When you realize that to balance the budget with cuts alone means a cut of 42%, you see the need for tax increases. I do not see Social Security being cut that much, and every time you exempt a part of the budget from cuts the result is that the cut must be more severe elsewhere. The reductions in spending increases that Ryan proposed to Medicare were not well received.
Eric Anderson, in his blog “Universe of Lies,” drew an analogy of being in a car headed for a precipice. While all Boehner is suggesting is that we slow down as we head for the cliff, even that is progress.
We will see over the next few months if we have politicians or statesmen. I am guardedly pessimistic.