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Breakfast With PIMCO’s Mohamed El-Erian
On the way back from a funeral in Los Angeles last weekend, I thought I would take a walk down Nostalgia Lane and have breakfast at the historic Langham Huntington Hotel, the venue for my senior prom.
I was half way through my eggs benedict in the Terrace Room when, who sits at the next table, but bond giant PIMCO’s brilliant CEO and co-CIO, Mohamed El-Erian. That’s the last time he makes that mistake. I proceeded to grill him on the long term prospects for the global economy.
Mohamed anticipates “a bumpy journey to a new normal”. Developed countries will see sluggish economic growth, high structural unemployment, increased regulation, and constant pressure for private sector deleveraging. Emerging economies will maintain the breakout stage of their development phase. They will deliver high economic growth, strong currencies, and increasingly close the income gap with the developed world.
Policymakers have embraced initiatives designed to boost asset prices, divorcing them from economic fundamentals. The impact on Main Street has fallen well short of expectations. Interest rates have been repressed. The dollar has also seriously weakened. The net effect has been a double edged sword. “Good” asset price inflation has created a hugely positive wealth effect, while “bad” inflation has created a new tax on individuals in the form of higher commodity and energy prices.
Mohamed thinks we will see an uneven and faltering economic recovery over the next five years. He is sticking with his long term growth rate for the US of 2%. Investors face a particularly devilish challenge in that much of our past returns have already been borrowed from the future. Inflation will return. Commodity prices will rise. Yield curves will steepen. High dividend stocks will prosper. Many emerging market currencies will be appreciate.
El-Erian has one of the best 90,000 foot views out there. An Egyptian national, he started out life at the old Salomon Smith Barney in London and went on to spend 15 years at the International Monetary Fund. He joined PIMCO in 1999, and then moved on to manage the Harvard endowment fund. His last book, When Markets Collide, was voted by The Economist magazine as the best business book of 2008. He regularly makes the list of the world’s top thinkers. A lightweight Mohamed is not.
His final piece of advice? Engage in “constructive paranoia” and structure your portfolio to take advantage of these changes, rather than fall victim to them.
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
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Too bad MHFT is a dude, MEE might have given him a little of what DSK gave the maid.
wow such an uninsightful article and it comes with disgusting visions of gay porn. did he walk over to the table and give him a blow job underneath? All Ihad to read was IMF lolololol.
at least this one was worth it for the comments..
Great, so you can write off your breakfast against your taxes while others starve. You 2 can also share a snack at the gates of Hell before you enter.
If "Big Moh" is so good, why does he go on TV?
Nothing new here. El-Erian has been saying the same thing on CNBC, Bloomy's and other interviews. Nothing new from Madhedgefundtrader either. Just proves he records these programs because the El-Erian language is identical. So even if he had that beakfast , El-Erian just mouthed the same. You be the judge if you can trust MHFT
This guys has wedged himself into some high profile, high paying jobs....look where he's having breakfast. This is where his talent is, getting paid. Of course some of that stuff may happen or not, the guy likes to write and people listen to him, he's op-ed-ing around, writing, speaking and Getting Paid. Again, gotta hand it to him. Get paid big to do what you actually like to do and have no daily PL to justify.........genius.
So you actually ate eggs with El-Erian?
El-Erian is the World's leading promoter of the "muddle-through" recovery theory. I like how he expertly lays out the details of doom and gloom, yet for him, it's no biggie, but just another opportunity to extract wealth from shills.
that's the problem with the madhatter's articles. He doesn't do enough name dropping, bragging or ass kissing
Fiction. At breakfast? comon. I figured it would be in first class on a flight from somewhere to nowhere. MHFT is getting more creative.
I was taking at dump at London's Heathrow airport when a I saw a some shiny black Italian leather poke underneath the stall. It was tap tap tapping away...when I jotted a note on the TP and passed it under the stall that said "meet me in the Virgin Airlines super luxury lounge" where I normally have my funtime rendevous. I waited there at a table with the finest bottle of Bud Light Ice available when who walks through to my table to meet me, but David De Rothschild. I figured I could postpone the gay stuff in order to pick this super geniuses brain, but he insisted that I suck him off first so I said "I am the Mad Hedge Fund Trader and I'd love to." Then he said "let me give you some more hot tips in addition to the one you just sucked, buy carbon credits they are a awesome investment...also be scared of the muslims and pay more taxes to drop bombs on muslims because they are brown and they are tribesmen and live in caves and these tribe like cave people want to blown up civilization so pay more taxes and austerity...gotta do it! We are all interconnected so no point in not killing lots of people. Trust me CNN is awesome and Anderson Cooper is the best for keeping up with world events. Buy index mutual funds as they are the only way to true wealth!"
phew...after hearing this I had to order a regular Bud Ice, this breaking news was a real eye opener.
So there you have it, I am an awesome hedge fund dude who breaks all the rules and I get you info from the best sources in the world. BTW Cass Sunstein is awesome.
brilliant
lol
LOL
So it looks like commodity prices drop in the emerging countries because of stronger currencies.....whereas commodities increase in price in the developing countries because of weaker currencies.....
This is the question.....
"El-Erian has one of the best 90,000 foot views out there."
Funny, I can't see shit from 90,000 feet away.
I can, but they are always the arriving storm clouds.
Well, there are inumerable strategies, but one is selling default protection against countries to generate income. It's like selling puts on Apple - because if you have half a brain, they expire worthless. Another way is to replicate a portfolio with bond futures and invest the cash in a short term credit fund. You mimic a bond fund but with a much higher yield on the "cash" component. Check out the top holdings on their funds, a lot of them don't own "bonds" but list their top holdings as Treasury Bills - a sure sign that they loaded with derivatives rather than real bonds.
Mohammed speaks with silver tongue:
"Inflation will return. Commodity prices will rise. Yield curves will steepen. High dividend stocks will prosper. Many emerging market currencies will be appreciate."
Oil, food and the PMs are going higher...much higher.
Anal Fetke,
Say's HyperDeflation first, then HyperInflation last............
Double screwed.
The traders have already gutted the profits of the pms for years and years and years to come. The inflation will come as we switch back from the slave labor of China to making our own work for their bread (as it should be!) and as we end the blackmail babies of welfare and disability (babies had to work the system endlessly, without remorse or concern for their raising, their welfare, or their future). But again, the pms have been gutted of their profits; they are done for...plus we have doubled the population of the world and there are lots more important things: rice, wheat, hog bellies, memorial day cookout!
God Bless America! Take her back, dust her off, shine her up! No habla espanol!
He spent 15 years at the IMF, how smart can he be? Wasn't it on his watch that Harward Endowment blew up? Oh, that's right, he parachuted out of there into a second tour at PIMCO when he realized his marks were "optimistic". "New Normal"? Meh! Stocks are up 100% since he coined that puerile phrase. Oh yeah, and his buddy Bill G. is short bonds from 6 points lower. How's that workin' for ya, Bill? These guys are at best the herd, and more often a contrary indicator. The only insight they have is how to game the mutual fund system with derivatives so their numbers look good. Have PIMCO run a portfolio without swaps, and they generate NEGATIVE alpha.
how do they use swaps to their benefit?
If inflation is returning and interest rates are going to go up, how do high dividend stocks prosper? If I'm discounting the future cash flows and my discount rate is rising, those stocks are in trouble IMO. In the 1980's and 1990's utility stocks were some of the best performing because interest rates were DROPPING.
Seems instead of current high dividends the choice should be companies able and willing to raise their dividends with inflation.
I didn't see where interest rates were going up. That's the problem. Higher rates could kill inflation. Instead you'll need dividend stocks to outpace the inflation and beat the 1% intro CD rates. I agree with your second point.
CALM makes chicken eggs and has > 6% yield. If hyperinflation sets in, they can reprice instantly.
Geez, I get goose-bumps reading what Mohammed has to say. He must have an IQ of 250. We are so ignorant that we are unworthy to kiss his feet.
You don't know Jack Sheet! ROTFLOL...IQ 300.0009 min
I need an esquire to File Suit in Federal Court Against the U.S. Government.. more over the President of the United States of America. Pro Bono in the name of Fight Club!
The Law Suit is for breach of the Constitution for bringing home the U.S. Army and now Training the U.S. Army to operate Against "We the People".
Who wants to get some T.V. face time for themselves and for Tyler here.. we want warm bodies to educate we have to up our visible profile.
I am looking for feedback and ideas to make as big a splash as possible! so if you have something that will help, speak up! even if you think its small! speak up! every little thing matters and helps! SO PLEASE!!! Speak Up!
JW,
You (and I) and those you can enlist, have a Representative and two Senators. Start with that.
However, those people in Congress have to address the reality that exists there. They may need to save their constructive "firepower" for situations that they can influence. It is best to get informed as well as possible about the issues they have before them. What you ask for may not fit within the things they have to address.
I am thinking to keep it out of the political spin cycle.. that we do the whole checks and balances of the judicial side of things.
enforcement of higher law.. of the constitution, verse Obama.. the supreme court is mostly republican.. so we have ground to stand on.. I did not just throw this out there without thinking about it a LIL first! lol
I am just trying to get the ball rolling.. I want the best ideas to be the ideas we use.. this is not an ego exercise for me. I want to effect some real change and I want to up Zero Hedges Profile so that we can garner more followers / participants of fight club!
my email for this is james_edward_workman@YAHOOdotCOM
Set fire to yourself in the capital rotunda?
Not a big enough splash? How about wearing a pink tee shirt and screaming during a speech by a conservative world leader in Congress?
Hey man, we are headed to an Argetine/Cuban police state and there is nothing that you can do about it. Enjoy the oppression.
This is 1 Mohamed you can Profit from........
I bought silver 10 yrs ago...been profitting from the 'other' mohammed's for a while now.
For MHFT,
How was the Hollandaise sauce? I have a stepdaughter that lives in the area. It is not easy to find places that actually know how to make really good really good Hollandaise.
I wonder if they ate bacon for breakfast?