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Mohamed El-Erian – Putting It All Together
In Part IV of the series of reports from the 10th annual Strategic Investment Conference, presented by Altegis Investments and John Mauldin, Mohamed El-Erian ties together the views of the previous presenters. You can read the previous presentations by clicking the links below. Part I: Niall Ferguson – The Great Degeneration Part II: Jeff Gundlach – Why Own Bonds At All Part III: A. Gary Shilling – Six Realities [...] from FT: Officials from around the world gathering for the semi-annual meetings of the IMF and World Bank should go beyond the important issue of how individual countries emerge more quickly from their malaise. They should also spend time on the implications of the new global economic configuration for the west’s ability to project and deploy economic power Read more from FT: The US monthly figures are eagerly anticipated for more than the insights they provide into the health of the economy. These days they also serve as an indicator of the direct impact of congressional dysfunction, the evolution of experimental policies from the Federal Reserve and trends in income inequality. Read more Pimco’s El-Erian: Stock Market Rally Is ‘Artificial’ The impressive stock market rally is “artificial,” being driven by central banks’ super-low interest rates, says Mohamed El-Erian, CEO and co-CIO of Pimco. Going forward, the market will need more “genuine growth” in the form of strong corporate balance sheets and robust economic activity and less “assisted growth” from central banks, El-Erian writes in a blog for CNBC. That transition will probably occur in the [...] from FT: Has Cyprus reignited the regional debt crisis, pushing the Eurozone to the brink of collapse and risking a potentially destabilizing change in the geopolitical order? Or is the country, with only a million people and accounting for 0.2 per cent of the region’s GDP, a small problem that could be solved within days? These are the two dominant narratives for Europe’s latest woes. And after being caught by surprise by developments on [...] from FT: Few would have predicted the Vatican would beat the International Monetary Fund in electing a non-European as its leader. The considerations that reportedly led to the selection as Pope of Argentina’s Jorge Mario Bergoglio will resonate well with those who feel the IMF has been increasingly short-sighted in holding on to an outdated nationality-based approach for selecting its managing director. Read more from FT: Today’s world of dysfunctional politics is one that pushes central banks further away from their comfort zone and excludes the best possible responses. The resulting inconsistencies can only be resolved through a more comprehensive policy approach that deals directly with the West’s challenges of too little growth, too much debt, and too polarised a political discourse. In the meantime, central banks will have no choice but to opt for [...] from The Daily Bell: A divided government no longer benefits the U.S. economy as it did in the past, said Mohamed El-Erian, CEO of fund giant Pimco. In the past, indecisiveness and political stalemates in Washington prevented policymakers from passing laws that got in the way of the private businesses, which were otherwise free to go to work with Washington out of their hair. “It was once fashionable to argue that a [...] GE’s Jeff Immelt: “We’ve Definitely Seen A Slowdown In The Fourth Quarter”
from Zerohedge: In what is likely the fist major under the radar profit warning of the current quarter, GE chief, and Obama Job Tzar, Jeff Immelt warned during GE’s annual outlook meeting held earlier in Manhattan that the “economic uncertainty” in the current quarter has resulted in an investment “pause” that has resulted in a slowdown of corporate sales. Put [...] PIMCO’s Bill Gross told Bloomberg Television’s Betty Liu on “In the Loop” today that the Federal Reserve’s latest round of monetary stimulus will enable Treasury to issue debt for no cost. Gross said, “what really happens, and this is critically important, is that the Treasury issues bonds and the Fed buys them and then it remits interest to the Treasury…It basically means that the Treasury is issuing debt for free…Inflation is [...] from FT: For the first time in a very long time, average Egyptians feel empowered and able to influence the destiny of a country that they now own. To outsiders, this comes across as loud and messy. And it is. But it is also an indication of Egypt’s new checks and balances and, more broadly, its bumpy journey towards a vibrant democracy. Read more  Another ‘Black Friday’ has come and gone. And it has left us with further evidence of the complete madness of the populace of our nation. America has been dealt a fatal blow by corporate greed, Bankster malfeasance and the insidious nature of collectivism – and it’s all been done to us by design. This is the Madness of a Lost Society, one last ‘fair warning’ for those with the eyes [...] From FT: Despite a courageous public stance by the International Monetary Fund, European officials failed again on Tuesday to deal with the critical issue of Greece’s debt sustainability. If this continues, they will undermine yet another bailout package for Greece and suffer further erosion in credibility, especially in the eyes of their own citizens. They also risk seeing another hard-fought cash infusion do little more than buy a few months for [...] From FT: There is nothing better than the widespread perception of a close election for the full spectrum of “experts” to get carried away with what might occur under alternative outcomes. And carried away they were. Many argued that the two presidential candidates would implement meaningfully different economic policies and, thus, trigger different market reactions. But now that the election outcome is known, it will soon become apparent that the main risk [...] From FT: Compared to previous natural disasters, the compensating factors for the economy from reconstruction after Hurricane Sandy may not arrive as soon as expected, or be as comprehensive in reach. Federal, state and local budgets are already stretched, undermining their ability to assist uninsured businesses and households, which is critical for limiting the damage from the hurricane to economic activity Read more From FT: If Greece is to remain a eurozone member, we need greater emphasis on official debt forgiveness. If the objective is to safeguard Greece’s wellbeing outside the eurozone, there must be greater emphasis on returning Greece to a national currency while keeping the country in the European Union. Instead, Greece and the troika have opted again for the muddled middle – one that talks about sustainable eurozone membership but does [...] From FT: If you want to cause major discomfort at a meeting of European policymakers, just try mentioning “OSI”, or official sector involvement. The notion that official creditors may need to accept a reduction in their contractual claims on Greece is anathema to many. Yet the issue will surface repeatedly, given the current overly-constrained approach to solving Greece’s deep problems. Read more The Federal Reserve and Chairman Ben Bernanke not only are willing to tolerate inflation but actually are trying to create it, with a “mess” left behind for their successors to clean up, Pimco’s Mohamed El-Erian told CNBC. The reason, the Pimco CEO said, is that the risks outweigh the rewards as the central bank tries to stimulate an economy that still is foundering three years after the financial crisis recession ostensibly [...] From FT: Through both its actions and what it refrained from doing, the Federal Reserve confirmed on Thursday that it is operating in policy purgatory: incapable of delivering the good economic outcomes it desires, yet unable to exit from an experimental policy stance that risks a widening array of collateral damage and unintended consequences.
‘QE3 will start either in September or December…’ Good discussion from Friday. Pimco’s Mohamed El-Erian on the extrememly weak August jobs report, the Fed, ECB money-printing, Treasury demand, the fiscal cliff and Congress. Federal Reserve Chairman Ben S. Bernanke is betting the new U.S. economy is the same as the old one as he lays out arguments for more stimulus to revive it. He made that diagnosis last week in a rebuttal to those who blame an 8.3 percentunemployment rate on structural shifts in the economy wrought by the financial crisis and who contend joblessness is permanently elevated. “I see little evidence of substantial structural change in recent years,” [...] From FT: There is great interest in the annual symposium of central bankers that starts tomorrow, and rightly so. Whether it is in Europe or the US, central bankers continue to carry most of the policymaking burden, and do so deep in experimental territory. There is no better place to discuss central banking than Jackson Hole, in Wyoming.
From FT: On the surface, it seems strange: Spain is offered large loans at below-market interest rates, coupled with significant additional support by a regional central bank willing to buy the country’s government debt on the secondary market. Yet the government is reluctant to officially request this help. From FT: The Fed’s attempt to overcome its policy dilemma has little chance of succeeding given the degree of political dysfunction in Washington. It is only a matter of weeks until, once again, Fed officials will feel compelled to act, and despite full knowledge that their measures will have limited effectiveness in delivering desired outcomes. From FT: Look for the Fed in the next few weeks to go further in revising down its job, growth and inflation forecasts for 2012. Given the institution’s dual mandate of price stability and maximum employment, this will inevitably raise expectations of additional policy activism. Having exhausted long ago the effectiveness of traditional monetary policy tools, the Fed has no choice but to consider another mix of unconventional measures – specifically, additional [...] From FT: Leaders now understand that, especially in the aftermath of the global financial crisis, the eurozone cannot survive on the basis of monetary union alone. It also urgently needs greater fiscal, banking and political integration. They recognise that, to succeed, all this should be supported by growth-enhancing policies. From FT: Pity Ben Bernanke and his colleagues on the Federal Reserve’s main policymaking committee. Once again they felt compelled to do something to be seen as countering a renewed slowing of the domestic economy that is compounded by a deepening European crisis and less buoyant emerging economies. But in continuing to act on its own, all the Fed will do is buy some time that will again be wasted by [...] From FT: In welcoming signs of responsible contingency planning, it is important to distinguish between what central banks can deliver and what they are incapable of doing. In the context of today’s complex crisis in Europe, these critical institutions have essentially been reduced to the role of fire brigades. From FT: So far, emergency European funding has been impossible to exit. Rather than act as a catalyst for crowding in private capital needed to restore growth, and financial viability, public money has provided the private sector with the possibility to exit programme countries at a much lower cost; and exit it did. As a result, governments have become highly dependent on official aid to cover their budget needs, meet interest [...] June 1 (Bloomberg) PIMCO’s Mohamed El-Erian talks about the May jobs report the global economy & the “fiscal cliff.” – SOURCE From FT: There is only one thing worse than preparing for a crisis that does not happen; and that is not preparing for a crisis that does. It appears that American politicians not only lack plans to deal with adverse European contagion but are also on course to expose the country to additional self-inflicted challenges. Friday’s disheartening data are a timely reminder that these are enormous risks to take with what [...] |
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