In the world of giant bond funds, imitation of trades just may be the sincerest form of flattery.
Just two days after DoubleLine’s Jeff Gundlach told Bloomberg and CNBC that he was taking profits in high risk assets, including corporate profits, building a buffer and loading up on VIX as a surge in volatility was his “highest conviction trade” (and correctly so, as just one day later VIX soared from 10 to 17), that “other” bond titan, Pimco said it was doing precisely the same.
Speaking to Reuters, Pimco’s chief investment officer, Dan Ivascyn, said on Friday that his firm which which oversees more than $1.6 trillion of assets “has built up an above-average cash position firmwide and has held S&P put options as geopolitical and military risks mount.”
The former should not come as a surprise: three weeks ago we reported that according to Bank of America, the cash allocation among the bank’s high net worth private clients (i.e. rich retail investors) had fallen to the lowest on record as institutions were liquidating stocks to increasingly more euphoria retail investors, which obviously meant that those on the other side of the trade – in this case selling institutions like Pimco – were building up their cash reserves, because contrary to CNBC’s constantly erroneous reporting on the topic for nearly a decade, there is no such thing as “cash on the sidelines” and every time someone buys a stock or any other risk assets, someone else sells it and pockets cash proceeds.
This post was published at Zero Hedge on Aug 11, 2017.