Mr. Bond, Pimco’s Bill Gross, doesn’t like bonds so much anymore.

Gross, who manages the $200 billion Total Return Fund at Pacific Investment Management (Pimco) told CNBC on December 7 that Treasuries are over-valued given the odds that inflation and interest rates are headed up.

That wasn’t just talk. Gross increased the cash position in his fund to 7% in November from a negative 7% in October, Bloomberg reported today. (The fund can go to a negative cash position by using derivatives, futures, or short positions.)

That’s the most cash Gross has held since Lehman Brothers collapsed in 2008.

Treasuries have had a tough December, turning in a 1.1% loss for the month so far. That would be the worst monthly performance since April, according to Bank of America’s Merrill Lynch unit.

And worse could be ahead.

Right now the Fed funds futures market is pricing in a 41% chance that the Federal Reserve will start to raise interest rates by June. That’s up from a 36% chance a month ago.

Gross also cut his holdings of mortgage-backed securities to 12% from 16%. That’s the lowest level in the data on Pimco’s website, which stretches back to 2000.

Gross’s relative bearishness on bonds contrast sharply with continued bullishness by individual investors on stocks. The latest weekly data on investor sentiment from the American Association of Individual Investors (AAII) shows bearishness among individual investors at 28.4% is at its lowest level since April 2008. Bearish sentiment indeed dropped in the most recent week from 35.4%.

The AAII sentiment levels are commonly regarded as contrary indicators with high levels of bearishness thought to signal a rally in stocks and low levels of bearish sentiment thought to signal a market top.

That may be overstating the case, but there isn’t any doubt that a high level of bearishness means there’s more cash—fuel for rising stock prices—on the sidelines. A low level of bearishness indicates that more investors are already all in.

It will be interesting to see next week if the drop in stocks this week has turned more investors bearish.