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El-Erian On Whether The World Is Near A Tipping Point

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Mon, 03/21/2011 - 12:53 | 1082116 Alcoholic Nativ...
Alcoholic Native American's picture

An Unlimited budget Utopia.

Imagine if all treasuries got bought, all toxic garbage got bought. Imagine if 700 billions was just the tip of the iceberg.

Can you imagine it?

Mon, 03/21/2011 - 14:02 | 1082439 LowProfile
LowProfile's picture


Per Rickards, the maturing debt the Fed now owns can be used to buy $750B annually.  Instead of retireing it, they will simply purchase more debt. 

You cannow expect a minimum $0.75T bid on the market annually.

Mon, 03/21/2011 - 14:22 | 1082500 Alcoholic Nativ...
Alcoholic Native American's picture

Can't turn down guranteed returns even if projections calculate in QE.....1,2,3,4, yea right, the system is broken.

Mon, 03/21/2011 - 14:47 | 1082550 Thomas
Thomas's picture

Rickards math is wrong. It argues that the banks balance sheets will not increase, which implies that the Central Banks will not be monetizing anything. Such balance sheet stability would be great, but ain't gonna happen. It's akin to saying that your interest payments on your credit card will be used to pay off new purchases.

Mon, 03/21/2011 - 18:45 | 1083581 smlbizman
smlbizman's picture

due you mean how my whole life policy used to work?

Mon, 03/21/2011 - 12:50 | 1082119 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Sugar is gross.

Mon, 03/21/2011 - 13:35 | 1082317 Oh regional Indian
Mon, 03/21/2011 - 19:22 | 1083687 knukles
knukles's picture

El-Erain's missives have become more dense than Fuckushitnme's radio-nucleotide emissions.

Mon, 03/21/2011 - 12:52 | 1082120 williambanzai7
williambanzai7's picture

This guy would have much more cred if he was not with PIMPCO. Who knows what card he is playing.

Mon, 03/21/2011 - 12:55 | 1082137 Herd Redirectio...
Herd Redirection Committee's picture

Yeah, exactly, his intelligence gives him cred, but his associations clearly indicate you can't fully trust the man.


"The Day The Standards Died"

Mon, 03/21/2011 - 12:51 | 1082125 DutchTreat
DutchTreat's picture

I am going long ink, printers and trees.

Mon, 03/21/2011 - 14:10 | 1082460 mr. mirbach
mr. mirbach's picture

isn't fiat currency printed on cotton rag printing stock?  Too late to buy cotton fx? Or is that one of the reasons cotton fx is up?

Mon, 03/21/2011 - 14:45 | 1082546 DutchTreat
DutchTreat's picture

You're probably right in respect of USD and may be a reason cotton skyrocketed. Thanks to Ben the Cotton Picker!

The fiat currency I use to buy my (soon to be priced at 1 million EUR) bread is made of paper (and (non)-precious metal).

Now that I come to think of it: I should probably also go long Ames (www.ames.com) as soon, everyone will switch from a wallet to one (or more) wheelbarrow(s).

Mon, 03/21/2011 - 15:37 | 1082833 GubbermintWorker
GubbermintWorker's picture

Digital man, that's how they make money now! Paper money is so  passé!

Mon, 03/21/2011 - 15:16 | 1082695 Dirt Rat
Dirt Rat's picture

Go long on Crane Paper. They provide the paper for the banknotes, among other things. I used to use Crane paper for my hardcopy resumés.

Mon, 03/21/2011 - 12:52 | 1082130 Herd Redirectio...
Herd Redirection Committee's picture

You never can tell with El-Erian, he is clearly a smart guy, but it seems he is 'in too deep', or in other words, he has been compromised, and is giving us the best kind of disinformation, the kind that is 98% true!

Check out the latest from the Capital Research Institute "The Day The Standards Died":


We have spent a lot of time discussing the Gold standard and what it means to have the world reserve currency here at the Capital Research Institute. But today we want to look at something a little different, but just as crucial: the importance of accounting standards. OK, OK, I am hearing the yawns already, just bear with me! When the Financial Crisis hit in late 2008 not only did Capitalism die, when the Government decided bankrupt firms (of their choosing) should no longer be exposed to the risk of failure! The history books are going to be speechless on that one, and will simple relate: “It seemed like a good idea at the time!?!?” But what may have slipped under a lot of (non-accounting) people’s noses was that accounting standards were also effectively removed at that time. The most important of which were mark-to-market accounting rules.

Mon, 03/21/2011 - 15:02 | 1082613 HedgeFundLIVE
HedgeFundLIVE's picture

a few things everyone should know about AT&T's proposed acquisition of T-Mobile http://bit.ly/ih0YVn

Mon, 03/21/2011 - 12:55 | 1082138 Tulli
Tulli's picture

Portugal is near a tipping point: the main opposition party PSD will vote on Wednesday against austerity measures version 4.0 to be presented by the government to parliament.

The government is expected to fall as a consequence.

The rationale presented by PSD can be found here: http://www.psd.pt/?idc=4&idi=79230

As it turns out, if they get elected they prefer to go for a bailout now, rather than procrastinate.

Kool aid forever.

Mon, 03/21/2011 - 12:57 | 1082148 SilverRhino
SilverRhino's picture

We're fucked.

Mon, 03/21/2011 - 12:58 | 1082159 Tail Dogging The Wag
Tail Dogging The Wag's picture

US Army 'kill team' in Afghanistan posed for photos of murdered civilians

Commanders brace for backlash of anti-US sentiment that could be more damaging than after the Abu Ghraib scandal


The original article with three (3) pictures from Der Spiegel


Mon, 03/21/2011 - 13:16 | 1082245 InconvenientCou...
InconvenientCounterParty's picture

memes are more powerful than bullets. When you hear about "winning hearts and minds" this is what they are referring to.

This hurts deeply on behalf of struggling Afgans and the altruistic young pepole in harms way. 

The "truth justice and the American way" meme, must be defended from within, which means eye-for-an-eye.

Mon, 03/21/2011 - 13:01 | 1082172 plocequ1
plocequ1's picture

Go long Gideons and Jack Daniels.

Mon, 03/21/2011 - 13:04 | 1082184 themosmitsos
themosmitsos's picture

Tyler I call BULLSHIT. I'll bet we see they BTFD in TSYs in huge size

Mon, 03/21/2011 - 13:05 | 1082185 Larry Darrell
Larry Darrell's picture

The world passed the tipping point in 2008.

It's just taken this long for the downhill slide to commence.

Think about sitting in the front of the rollercoaster.

You cross the top of the hill, but you don't start the acceleration to the bottom until the rest of the coaster cars come over.

We here on ZH have known we crossed the apex long ago.  We just didn't know how many cars were behind us before the full fledged descent could commence in earnest.

Mon, 03/21/2011 - 13:12 | 1082226 fragrantdingleberry
fragrantdingleberry's picture

El Erian for President...of Egypt!

Mon, 03/21/2011 - 13:11 | 1082228 SWCroaker
SWCroaker's picture

Um, when I look at a chart of the money supply, I see the Fed has been "Quantitative Easing" without an official recognition of it since, oh, about 1913.  When Hank P was our Sec Treas, we got all wrapped up in the amount of $750B.  When the Bloomberg FOIA data finally came out, it appeared that the Fed had actually been moving around $12T.

If a Fed printer eases in the woods, but there is no offical label for the MSM to report it, does it really happen?

Mon, 03/21/2011 - 13:19 | 1082250 SDRII
SDRII's picture

The myth of inflation "rates" no longer matter when absolute numbers become asphyxiating/unmitigatable/unmanagable 

Mon, 03/21/2011 - 13:23 | 1082278 Cursive
Cursive's picture

Taking all this into account, our inclination is that the hurdle rate for introducing a QE3 will prove to be very high, and rightly so.

Ben Bernanke:  How's SPX 950 for a hurdle rate?

Mon, 03/21/2011 - 13:24 | 1082279 LostWages
LostWages's picture

It's hard to trust a man talking his book. 

Mon, 03/21/2011 - 13:59 | 1082413 Sophist Economicus
Sophist Economicus's picture

Or that sports a mustache that rivals Stalin's

Mon, 03/21/2011 - 13:36 | 1082319 squexx
squexx's picture

All this shit going on, and of course the market is up 200 points just now. I want to kill every Wall St fuck I can!

Mon, 03/21/2011 - 14:03 | 1082443 Sophist Economicus
Sophist Economicus's picture

Really?   Need directions or do your superhero powers breakdown when it comes to crossing rivers?

Mon, 03/21/2011 - 13:36 | 1082330 falak pema
falak pema's picture

Hat tipping point to Poutin?

Leg tripping point to Q-daffy. If we can find his legs in his bunker.

Butt tipping point in Yemen, Bahrein?

Head tipping points in Angola, Gabon?

Tooth picking point on WS?

Shit tipping points in Fukushima?

Tit tickling points when they turn the light out in Tokyo?

Brazilian babe tipping points if O'b and CEOs go nuts doing the mega contracts samba?


Mon, 03/21/2011 - 14:10 | 1082467 slaughterer
slaughterer's picture

So when do the insitutionals start selling off equities in fear of a stop in QE?  What is the precise time line here? Do we have another "Jackson Hole" type event to pin on our calendar as a type of one-day "binary event" or will the erosion be spread across April and May as the funds slowly "front jog" the QE discontinuation and plunge?   Please, Mr. El-Erian, you should know. 

Mon, 03/21/2011 - 13:46 | 1082365 DR
DR's picture


El-Erian says:
“The data on mutual fund flows suggest that, in the last few months, investors as a group have stopped allocating massively to emerging market bonds

Gross says in todays Bloomberg article:
“Pacific Investment Management Co. says investors should buy company debt in Russia, Brazil and other emerging markets where rising wages..”

Pimpco is trying to front run a flow back to EM…

Mon, 03/21/2011 - 13:51 | 1082386 DR
DR's picture

"Do you see a national sales tax in the future to pay for this?.....

Should such actions not be forthcoming, we suspect that the answer to your questions will be yes, yes, and yes."

Ouch....sounds like Pimpco believes a VAT is backed into the cake!

Mon, 03/21/2011 - 13:52 | 1082387 Saxxon
Saxxon's picture

QE until the shithouse blows into the air.

They will buy treasuries and whatever else is necessary, to stay in power.  They will call it something else; or call it nothing.  They will tell whatever lies are necessary.

Sorry, closed loop now.

The people are just flocks; and these gauges that El Erian uses are measurements of the nutritional value of what goes into their pens and crowded cages.  The likes of Mr. El Erian are untouched.


Mon, 03/21/2011 - 13:54 | 1082406 ghostfaceinvestah
ghostfaceinvestah's picture

Looks like we need to attack Chile next


Obama arrives in Chile on Monday, where protestors will greet him with demonstrations demanding apologies for the United States' support of President Agusto Pinochet in the 1970s and 1980s.

Early Monday morning, a small explosive device blew-out the windows of a U.S. cultural institute in Viña del Mar, on the Chilean coast. There were no reported injuries and no group claimed responsibility for the blast.

Mon, 03/21/2011 - 23:25 | 1084706 Real Estate Geek
Real Estate Geek's picture

Chile--because three wars aren't enough.

Mon, 03/21/2011 - 13:56 | 1082417 Eagle1
Eagle1's picture

I used to compete with PIMPCO when I managed the Marine Investment Management Co. back in the mid 80's. Certainly, some of what they say at the senior level can be self serving...but you cannot begrudge their performance. They were sharp then and are sharp now.

It all boils down to the fact that we are fu**ed pretty much no matter how you look at it and one's investment strategy should be formulated accordingly.



Mon, 03/21/2011 - 18:07 | 1083435 Calmyourself
Calmyourself's picture

George, I did not manage a large fund, so how do you adjust with no timeline for the Fu**ed portion of the party.  Money to invest but none to burn by being early in..

Mon, 03/21/2011 - 14:05 | 1082452 Stuck on Zero
Stuck on Zero's picture

Fukushima will be Japan's excuse to dump US Treasuries.  "So solly." 

It will be Bernanke's excuse for QE III.  "So needed." 

Mon, 03/21/2011 - 15:12 | 1082667 tiger7905
tiger7905's picture

Definitely agree Fukushima makes a great excuse, see these comments by Pento on how this will play out.


Mon, 03/21/2011 - 14:11 | 1082469 zenmeister
zenmeister's picture

Waaaayyyy too credible....

Mon, 03/21/2011 - 14:15 | 1082478 tradewithdave
tradewithdave's picture

Wrong.... Here's El-erian's quote; "Since global balances need to add up."

Ummm... since when are we operating in a vacuum and if that's not what he meant, what's to say that GAAP revisions and and new lifecycle accounting, new carbon credits, etc. are not two other ways to unbalance his assumption of global balances? The entirety of economics as an academic practice, based on efficient distribution of scarce resources, is being brought into question.  What model of "add up" is he talking about exactly; The new one as measured by his stated demise of the Smithian liberal Anglosphere?

This statement, unless it's a set-up, makes me want to at least reevaluate one aspect of my previous opinion on the PIMCO/Goldman cage fight.  Is it possible that the surprising regularity of the El-erian editorial feed has possibly been established for the purpose of well-timed and selective disinformation in anticipation of the inevitable reset button?  What would the motivation be otherwise?  It's not just a new economic paradigm... it's a new religion and President Obama is "calling you dude." http://tradewithdave.com/?p=5780

Dave Harrison


Mon, 03/21/2011 - 15:07 | 1082642 da sharkster
da sharkster's picture

Dave, can you clarify the Pimco/Goldman cage fight for me...seems Pimco bailed on Treasuries and Goldman is shorting them? Seems like they are on the same side?

Mon, 03/21/2011 - 14:34 | 1082522 sbenard
sbenard's picture

From John Mauldin's newsletter this weekend, he has a very good inside-the-Fed source to suggest that QE3 is on its way:


I come to the end of the letter with a brief note on a very worrisome conversation I had yesterday with Martin Barnes, editor of the esteemed Bank Credit Analyst. Martin is one of the people I call when I want to know what the Fed might do. I guess I was looking for assurance that the Fed would not do QE3. I did not get it.
“Look, John” (insert Scottish brogue as I paraphrase), “if the Fed sees the economy rolling over into recession they will put their mandate for employment ahead of their mandate for stable prices.”
“But that would mean higher inflation in the face of a slow economy.”
“And?” he shot back. “That would just be the price of trying to increase employment, in their minds.”
“But at some point you have to bring out your inner Volker!” I intoned. “What about the future?”
The conversation continued, but I never got my warm and fuzzy assurances. For the record, another round of QE, unless there is a true liquidity crisis (and the last QE did not qualify!), would be a disaster, at least from the cheap seats where I sit. There are all sorts of inflationary and stagflationary consequences, none of which I like.

Mon, 03/21/2011 - 14:57 | 1082585 6 String
6 String's picture

Taking all this into account, our inclination is that the hurdle rate for introducing a QE3 will prove to be very high, and rightly so.

No, the hurdle rate is only there at all because the pressure Bernake is starting to receive...from Congressman like Ron Paul, to Richard Fisher, and many more.

So, their will be a QEIII. But not until things start to unravel in the summer. The Fed doesn't want things to unravel too close to June 30th...that way they can claim the "see we needed that QE shit" in time to ram in another few rounds...

So, Pimco is just waiting for the unravel part. Since they admit their isn't enough money to fund our ongoing deficits means they think treasuries will go bidless and chaos will ensue. It can't mean anything esle.

Thus, QE3 by August/Sept.

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