Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
How to Play Interest Rates in US Real Estate - 20th Aug 19
Stocks Likely to Breakout Instead of Gold - 20th Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 20th Aug 19
WAYS TO SECURE YOUR FINANCIAL FUTURE - 20th Aug 19
Holiday Nightmares - Your Caravan is Missing! - 20th Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

U.S. Economy Having Difficulty Gaining Traction According to PIMCO's El-Erian

Economics / US Economy Apr 27, 2012 - 02:33 PM GMT

By: Bloomberg

Economics

Best Financial Markets Analysis ArticleBloomberg TV's Betty Liu spoke with Mohamed El-Erian of PIMCO, who said that the Federal Reserve is likely to provide additional assistance if the economy weakens further, but there is "no immediate need" to do so.

El-Erian also said that the U.S economy needs to add 250,000 to 300,000 jobs every month if we are to "seriously start reducing unemployment to something that is acceptable," but that "the labor market is cooling off and doing so too early."


El-Erian on today's GDP numbers coming in softer than expected:

"The level is softer, 2.2 versus what was expected, 2.5. More importantly is the composition. What surprises on the upside was personal consumption, but unfortunately that came on the back of dissavings. The personal savings rate has gone down from 4.5% to 3.9%. That raises the question of how long we can consume as a society by saving less? What we really want to see go up, business investment, ended up coming down. Whether you look at the level or the composition, this signals we are an economy that, unfortunately, is having difficulty getting traction and the engines are not sustainable engines. It's interesting. Business investment just saw a gain of 1.4%, a drop from what we saw in the prior quarter."

On job growth in the U.S.:

"We certainly will not see enough job growth. We're still stuck at 8.2% with over 5 million Americans unemployed. It is particularly bad among the young. That is not good news. We need a very vibrant labor market and we are not getting that. It speaks to other things, which is the need to reform certain elements. We need labor retooling and retraining. We need education reform. We need public finance reform. There are things that need to be done that are not being done, therefore the economy is going forward but much slower than what is needed...Every month, we need to create between 250-300,000 jobs if we are to seriously start reducing unemployment to something that is acceptable from a society perspective. We are not there yet. There are indications that the labor market is cooling off and it is doing so too early. We need to continue to focus on that."

On whether we'll see necessary job growth at any point this year:

"It is unlikely. What I worry about most is that we will repeat what we saw in 2010- 2011, where we started the year off strongly and then come the second and third quarter, it slows down and we lose the momentum that is so important to sustain a really good recovery."

On whether we have already seen the momentum for the year:

"It's hard to say. You have these really big uncertainties, like Europe, out there as well which speaks to a fundamental investment theme. Rather than try to go for the headliner, do the work at the company level. If you talk to our equity portfolio managers, they're really excited about certain companies that share the following characteristics. They have good cash buffers. They have high operating margins. They have low financial leverage. They are exposed to growth areas. That is where we should focus including not just the corporate but the sovereigns."

On Bill Gross' stating on Apple that, "'if our stock market and economy is so dominated by one stock and its daily fluctuations, be careful":

"This speaks to something that we have been looking out for a number of years now which is how to formulate good indices. Whether it is on the equity side and particularly on the debt side at a time when sovereign debt is exploding, this notion of market capitalization, where the bigger you get, the bigger your weight in the index, the more people have to allocate to you. When you get beyond a certain point that becomes counterproductive. We have been looking at indices, and we have a launched a whole set of them that says let's look at a different way to weight countries. We do it by GDP, which we think captures better the potential of an investment instead of market capitalization which, beyond a certain point, can become distorted."

On his near to medium-term outlook for the U.S. stock market:

"I think cautious. We have had a really nice rally in the first quarter. We have basically been paid forward, on the assumption that we can sustain this recovery and the assumption that tranquility can be maintained in Europe. Both of these assumptions are under question, so I would be careful and go back to what I said earlier. Rather than focus on the markets as a whole, be very differentiated. There are certain stocks, sovereigns, that will do well, and others that simply do not have enough cushion to navigate a more bumpy road."

On how long it will take the market to go down if volatility isn't expected in the short term:

"The role of policymakers is huge in sustaining valuations that are above fundamentals and in sustaining correlations that are historically strange. Policymakers are playing a very important role. When you look at policymaking, you have to distinguish between the willingness to do something, the ability, and effectiveness. I do not think there's any question that policymakers are willing to do whatever it takes to maintain market valuations high in order to hand off a healthy economy. That is what the market believes. The more difficult question is effectiveness."

On whether the Fed will make a move if the economy deteriorates:

"Yes, I do. I do not think there is an immediate need now, but if we continue with this weakening trend the Fed will come back in to try and sustain this market and economy."

On whether the markets should be moving down since there are signs of economic slowdown:

"You can make either case. On the macro, you can make the case the market is too high. On the micro, which is the strength of the company, you can say the market can go further. It is interesting that this market has absorbed eight two-notch downgrade for Spain, which a few months ago, this market would not have been able to. This is a very delicate balance."

On whether Spain is too big to bail:

"You do not want to be in a position where you need to both fund the government and the capitalization of the banking system because these two things can be large. Can we fund both of these things? I will say let's not go there...it means that everything has to be done by Spain and by Europe to make sure that Spain can finance itself. That Spain can retain access to the markets."

On whether the 25% austerity cuts are realistic:

"That's the big question. We're looking at a 24% unemployment rate and S&P just told us that they expect the economy to contract by 1.5%. They expect the debt to GDP to go up to 90% by 2015. It is not going to be easy and that is why everyone needs to keep their eye on Spain. Let's not forget what happens on May 6th. There are a whole host of elections in Europe."

bloomberg.com

Copyright © 2012 Bloomberg - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules