Pimco stays negative on bonds after Bin Laden slain
Posted on 03 May 2011 with 5 comments from readers
Pimco CEO Mohamed El-Erian is most worried about the outlook for the US dollar, and this explains his position on bonds:
‘We are out of Treasuries because we find better value elsewhere. It is a value proposition. Any investor has to ask the question, if I own this in my portfolio, is it because it dominates other opportunities? When we look at treasuries at the current price and when we look at the outlook, we think that the current price is a better value elsewhere.
‘There is certain debt in the U.S. that is more attractive, such as high-quality companies, multinationals, that have gotten their act together. We find other opportunities in the world. As we said, it is a global marketplace. There is no reason that you should limit yourself because of a label.’
He says nothing about precious metals, but if bonds and the dollar are going down what will go up?
5 Comments posted by readers:
Why does he sound like like Jim Roger’s understudy?
He’s selling a pragmatic new paradigm. High long term unemployment. He understands real estate, to a point. The end of QE2 has not been priced in.
Gold will continue to go up. He’s buying commodity based economies, preparing for war, it could come quickly. Great intel, great interview.
El Erian is one of the brightest investment minds in the world; like Jim Rogers or Marc Faber, when they talk, we should listen.
So, yeah, in a sense, El Erian is like Jim Rogers, but without the emphasis on precious metals; I suspect that he personally has a high position in the PMs, but the expertise of PIMCO is based on the value proposition in bonds, where ever they may be.
Perpetual QE, but in Stealth:
Regarding QE2, El Erian “hopes” that the FED will realize the global consequences of QE2, which were horrendous. But “hope” is not a strategy, and down deep, I believe that El Erian knows full well that the FED will continue to be the “buyer of last resort” for US Treasuries . . . hell, no one else wants to buy something that will continually lose value!
I’ve written about stealth QE many times on this blog; in brief, the FED’s balance sheet is so extremely large that they now have approx. $700 billion each year in maturing debt that they can roll-over into new purchases of Treasury bonds. This is stealth QE.
And he couldn’t even spit out “gold and silver commodity investment” when asked what PIMCO invests in now that it has pulled out of Treasuries! Of course not! If a professional investor recommends bullion, he loses his take of the individual investor’s success.
I didn’t actually hear the word “war” but the noise from the conference centre was deafening for some words. He did admit that no one can predict what is going to happen in the Middle East, which includes the possibility of war starting over there.
He repeated the old mantra and refrain of more growth and that this is what the US needs. Sure, but as the decades go by, “more growth” is going to be more and more difficult to obtain as more and more people consume less and less available commodities such as oil and food.
The situation in regard to the one nuclear state in the Middle East is deteriorating rapidly in that the Raifa Gate into Gaza is going to be opened permanently and Hamas and Fatah are going to unite together. So, was it not negligent on his part to fail to mention gold and silver for the average investor including the institutions, when war is looking ominously closer?
A soft, unrealistic interview by adoring interviewers, but of little practical value to us investors, I suggest.
It is futile to demean or criticize El Erian’s commentary; he’s the CEO of an extremely large and successful investment firm that specializes in global bonds.
For those of us on this blog who have the good sense to invest in precious metals, how could we possibly expect him to put in a plug for gold? If he echoed the words of Marc Faber or Jim Rogers, many folks would then dump their bonds to buy some gold, a scenario that would be very, very foolish for PIMCO. Ain’t gonna happen.
Likewise, PIMCO and Treasury Sec. Timmy the Charlatan Geithner have had an on-going feud over the past several weeks about the fact that US Treasuries are a bad investment; any mention at all of gold would simply fuel more discord between these two. The difference between these two is enormous; El Erian is very bright and articulate, the other dude is a moron and a charlatan.
But rest assured, since El Erian is of Egyptian heritage, gold holds an honored place among his private investments.
I suggest that it is not futile to criticise El Erian’s commentary since, as a result of doing so, we have had a helpful commentary on El Erian from Obewon – and I am not being sarcastic. Criticism is usually not futile even if it is futile to think that El Erian will behave differently in future by, for example, publicly recommending bullion.
There must be more people following ArabianMoney who do not invest in PIMCO than do. For those who do, we might hope that they will sell some of their PIMCO bonds and invest in physical bullion.
So, to criticise El Erian for not mentioning gold and silver investment is not for his ears but for others to consider and debate.
The criticism of El Erian’s interview could have been expressed better, but to criticise investment in bonds in comparision to g and s is reasonable, particularly if some criticism lands on a company devoted professionally to bonds. After all, it would appear that El Erian does not follow his own CEO advice of excluding other investments than bonds because he is presumed to own gold privately.