Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Boris Johnson Hits Coronavirus Panic Button Again, UK Accelertoing Covid-19 Second Wave - 25th Sep 20
Precious Metals Trading Range Doing It’s Job to Confound Bulls and Bears Alike - 25th Sep 20
Gold and Silver Are Still Locked and Loaded… Don't be Out of Ammo - 25th Sep 20
Throwing the golden baby out with the covid bath water - Gold Wins - 25th Sep 20
A Look at the Perilous Psychology of Financial Market Bubbles - 25th Sep 20
Corona Strikes Back In Europe. Will It Boost Gold? - 25th Sep 20
How to Boost the Value of Your Home - 25th Sep 20
Key Time For Stock Markets: Bears Step Up or V-Shaped Bounce - 24th Sep 20
Five ways to recover the day after a good workout - 24th Sep 20
Global Stock Markets Break Hard To The Downside – Watch Support Levels - 23rd Sep 20
Beware of These Faulty “Inflation Protected” Investments - 23rd Sep 20
What’s Behind Dollar USDX Breakout? - 23rd Sep 20
Still More Room To Stock Market Downside In The Coming Weeks - 23rd Sep 20
Platinum And Palladium Set To Surge As Gold Breaks Higher - 23rd Sep 20
Key Gold Ratios to Other Markets - 23rd Sep 20
Watch Before Upgrading / Buying RTX 3000, RDNA2 - CPU vs GPU Bottlenecks - 23rd Sep 20
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Dot.com Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

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