Financial advisor Dennis Tubbergen takes a look at PIMCO and its recent activities.

Grand Rapids, MI -- (SBWire) -- 05/02/2011 -- Dennis Tubbergen is a financial advisor, advisor to financial advisors, author and radio talk show host. Tubbergen keeps his clients and readers informed of current financial events by posting on his online blog and writing his financial newsletter, Moving Markets™. One of his recent blogs discussed bond fund giant PIMCO.

“The world’s largest bond fund, PIMCO, has begun to bet against the United States by shorting U.S. Treasuries,” explains Tubbergen. “Shorting Treasuries means that the fund expects bond prices to drop and interest rates to rise.”

Tubbergen refers to a Reuter’s article on April 11, 2011 in which the following statement was made. “The world’s largest bond fund began betting against the United States last month by taking short positions on its debt on expectations the nation’s shaky finances will drive interest rates higher and imperil its triple-A rating.

The article goes on to quote PIMCO’s co-chief investment officer, Bill Gross, as saying in January that the ‘mindless’ deficit spending in the U.S. could result in a weaker dollar and higher inflation. While PIMCO’s $236 billion Total Return Fund included U.S. government debt at 12 percent in January, its percentage of U.S. debt shrunk to zero in February and to minus-three percent in March.

The Reuter’s article also states, “PIMCO expects the lingering U.S. budget deficit and the Fed’s easy monetary policy will fuel faster inflation and hurt the dollar.”

Gross went on to warn the government must find a way to deal with Medicare, Medicaid and Social Security, the largest entitlement programs in the U.S.

“The bottom line here: When the Fed quits buying Treasuries in June, looks like it might be tough to find buyers for U.S. Government debt,” claims Tubbergen. “Only one of two things can happen in my opinion.”

The first thing Tubbergen could foresee is the Fed continues to buy Treasuries, embarking on QE3 (the third stage of quantitative easing), and inflation continues in earnest.

“Can you visualize $10-a-gallon gas?” asks Tubbergen. “Incidentally, it’s my view that wages may not keep pace and economic growth may stagnate, resulting in an inflationary recession or worse.”

According to Tubbergen, the second thing that could happen is policymakers decide to address the gargantuan budget deficits, spending is reduced and the economy contracts as it would have before all this quantitative easing (printing of money) began, resulting in a deflationary environment.

“Neither choice is pretty,” concludes Tubbergen. “But in my view, one outcome is certain.”

Dennis Tubbergen has been in the financial industry for over 25 years and has his corporate offices in the USA Wealth Management Building in downtown Grand Rapids, Michigan. Tubbergen is CEO of USA Wealth Management, LLC and has an online blog that can be viewed at www.dennistubbergen.com. His weekly talk show The Everything Financial Radio Show is simulcast on two Michigan metro stations and also airs to over 600,000 financial advisors, with recent podcasts available at http://www.everythingfinancialradio.com.

The opinions expressed herein are those of the writer and not necessarily those of USA Wealth Management, LLC. This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted. Therefore, no forecast should be construed as a guarantee.

Prior to making any investment decision, individuals should consult a professional to determine the risks, costs, benefits and fees associated with a particular investment. Information obtained from third party resources is believed to be reliable but the accuracy cannot be guaranteed.