As everyone else has been cheering the revival of the housing bubble, one person has been busy offloading a significant portion of his exposure to housing: Bill Gross. And the direct sponsor of billions of dollars hitting Mr. Gross' Wells Fargo banking account, why, the US taxpayer of course, courtesy of the Fed's printing press which continues keeping prices artificially high. With the Fed en route to purchase nearly one and a half trillion in Agency and MBS paper (for now), it has found eager sellers in the face of PIMCO. MarketWatch reports that PIMCO sold $30 billion in agency paper in September alone, and has sold over $80 billion year to date.

Total Return Fund's holdings of mortgage-related securities fell from 38% of the portfolio on Aug. 31 to 22% on Sept. 30, the latest date for which figures are available. On July 31, 47% of the fund was in mortgages -- the fund's largest category holding at that time.

The fund's assets under management on July 31, Aug. 31 and Sept. 30 were $169 billion, $177.5 billion and $185.7 billion, respectively.

The last time Total Return Fund had less allocated to mortgages was Feb. 28, 2005, when the level was 19%. The fund's assets under management at that time were $75.8 billion.

PIMCO is not shy in disclosing it is more than happy to take US taxpayers for the proverbial ride:

"Pimco's significant overweight to high-quality, agency mortgage-backed securities has recently been strongly positive for returns. With MBS valuations having richened substantially, and the Federal Reserve's mortgage-purchase program slated to end in March of next year, Pimco plans on moving to an underweight in an effort to benefit from an expected cheapening of agency MBS."

PIMCO's Total Return Fund had about $120 billion in MBS, or 86% of total holdings, on February 28. The number has declined to a meager $40 billion at September 30. A Price/Yield for an indicative Fannie 30 Year 5% MBS, indicates that on average the price for comparable securities has risen by about 200 bps, ignoring the current yield. Therefore, PIMCO has likely made well over $1 billion in profit on the $80 billion in mortgage-related securities it has sold off. The invoice to the US taxpayer is already in the mail and is expected to be paid for at some point in the next decade when demand for US securities drops off a cliff once the Fed stops monetizing.

As to whether the market is aware of Gross' stealthy offloading of MBS, and how it may react to this action:

[Deutsche Bank analyst William] Chepolis said he believed that Wall Street banks were likely big buyers of Pimco's sell-off. "Banks like the zero credit rating. ... No one knew Pimco was selling until they announced it," which suggests that it had lined up deals with a few banks. Finally, Chepolis pointed out that he's in agreement with Pimco's new approach. "I would be in favor in scaling back a little -- maybe not everything, but certainly taking profit off the table."

As always, PIMCO, which itself is a key participant of virtually every Fed and Treasury program as an agent, manages to eek out a decent living, while stuffing Uncle Sam with the worthless refuse, whose true worth will only become evident once (if ever) the printing presses are shut.