Time To Get Out Of Your Bond Fund Investments

The elite aristocracy has at least on rule of morality:   they consider it to be in poor taste to not warn in advance of doing something horrible to the middle class .  Here, middle class is defined as anyone not rich enough to own his/her own politician – that probably means you.

The latest warning involves what is likely an the eventual onset of a huge derivatives blow-up in a one or several large bond mutual funds.   There are reasons I believe that this event may be closer than any of us realize.

Pimco, Fidelity and Blackrock manage by far the largest amount of money in bond funds. In fact, I would bet good money that when the accident occurs, the White House will deem each of those as “Too Big To Fail” and find cause to bail them out using your money.

I know for a fact that Pimco’s Total Rate of Return fund is loaded with hidden derivatives risk.  Did you know that?  Does your financial advisor know that.  I’d bet that 99.5% of the advisor world does not know this.  I know because I know of a study that was done which spent a month pulling apart all of the data and information available on Pimco’s Total ROR bond fund.   I was told that it is a derivatives train wreck waiting to happen.

The money management world is “monkey see/monkey do.”  So it’s a good bet that most, if not all, big bond funds are loaded with dangerous derivatives.

So here’ s your warning:   GET OUT OF YOUR BOND FUNDS NOW

And be thankful that the elitists at least consider it rude not to signal a “heads up” before they flush the toilet when you are in the shower.  This is your chance to side-step the water before getting scalded badly.

5 thoughts on “Time To Get Out Of Your Bond Fund Investments

  1. Hi Dave ,
    But is it not true that when Cyprus had bail ins, the deposits were taken but the bond holders were spared?

    I already have money in gold and a little in bonds.

    Thanks for your thoughts and blogs great help Dave.

    1. No. Bondholders took pretty hefty haircuts. I think the depositors were at least treated as senior claims to the bondholders, but I’m not sure – I don’t remember.

      The size of the financial catastrophe that will hit the U.S. will dwarf what happened in Cyprus.

      The issue here is changing the rules of the game ex post facto. Investors put money into bond funds under the terms that there would be daily liquidity. Bail-ins are not changing the rules. Depositors in banks have always been accounted for as creditors to a bank. Look on any bank balance sheet. “Deposits” are under the liability side of the ledger. Depositors have always been bailed out the rules have always been that they COULD be treated as creditors.

      1. Legally, bank depositors have been unsecured creditors for hundreds of years. They are legally inferior to a bank’s secured creditors.

        But when a bank goes bust, it may not repay either type of creditor, secured or unsecured.

        There is an exception to this rule for a third type of creditor, one with a form of super-priority in a bankruptcy situation. This type of creditor is known as a derivatives counterparty.

        According to Harvard law professor Mark Roe (writing in the Stanford Law Review), a derivatives counterparty “can seize and immediately liquidate collateral, readily net out gains and losses in their dealings with the bankrupt, terminate their contracts with the bankrupt, and keep both preferential eve-of-bankruptcy payments and fraudulent conveyances they obtained from the debtor, all in ways that favor them over the bankrupt’s other creditors.”


        For a commercial bank like JP Morgan Chase, Citigroup, and Bank of America, which house retail banking, investment banking, and gambling in the derivatives market all under one roof (contrary to Glass-Steagall, R.I.P.), the implication of the foregoing is clear: when (not if) your bank goes tapioca, your savings and checking accounts will be looted in order to pay your bank’s derivatives counterparties.

        At that point, your only recourse comes in the form of FDIC insurance. As of its latest quarterly report, the FDIC has $49 billion in its insurance fund, which is supposedly sufficient to cover $6124 billion in insured deposits.


        Best of luck getting your dough out of that mixer if it breaks, although I suppose you can count your lucky stars that there’s $3798 billion sitting in UN-insured FDIC accounts (i.e., in excess of $250K), which belongs to the first victims in the next meltdown.

        Many people seem to think that there won’t be any more bailouts because they’ve been written out of the law and replaced by bail-ins.

        This is insane. There is no such thing as law any longer. Of course there will be more bailouts. The wishful thinkers have simply misread what the TPTB are telling us with their bail-in campaign: that in the next meltdown, the criminal elite is going to take all your marbles, whether they’re located in private bank accounts or in public treasuries.

        They’d take your gold too, if they could, but unfortunately many people lost it in boating accidents or melted it down in to golf clubs and left the country on vacation.

  2. I read an article in the last month that all the past economic tools used to gauage the bond market will no longer work as the market is heavily manipulated. I can’t seem to be able to find that article, unfortuately. I thought I post it on your blog but haven’t found it.

    Thanks for the video, Dave, as I have been watching this area very closely. I totally agree with you.

  3. The Ukraine gas has been cut off so the news from Bulgaria is starting to get serious on the two month count down to default.

    Bulgaria’s central bank appointed two administrators for three months to manage Corporate Commercial and suspended the bank’s management, central bank Governor Ivan Iskrov said at a news conference in Sofia today. The lender faced an “enormous run on funds” in the past week, Iskrov said. The development comes before Bulgaria starts investor meetings in Europe on June 23 for a possible euro bond sale.

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