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Mohamed El-Erian explains why Japanese QE is going wrong and questions the importance of US jobs data

Posted on 08 June 2013 with 2 comments from readers

Making sense of the US jobs data is a struggle for even the best minds in the business, so we turn to one of the world’s biggest investors.

Mohamed El-Erian, CEO and co-chief investment officer at Pacific Investment Management talks about the May US employment report, Federal Reserve and Japan central bank policies and Pimco’s strategy. El-Erian, talking with Betty Liu and Dominic Chu, on Bloomberg Television’s ‘In the Loop,’ also discusses the US relationship with China.

Posted on 08 June 2013 Categories: Banking & Finance, Bond Markets, Global Economics, Investment Gurus, US Dollar, US Stocks, Video Channel

2 Comments posted by readers:

Comment by James M - 09 June 2013

Ok, so let’s review some ‘real’ facts on housing: lumber prices (and panel board) began dropping in the 2nd week of April, and continued heading south. Canadian lumber exports to China are (also) dropping like a rock. Canadian producers are praying that dimensional lumber prices (the stuff they build houses with south of our border) will soon find the floor. (source Madison Lumber Reporter). It’s against this backdrop that Betty Liu asks Mohamed El-Erian if he buys into the story that housing is going to lead the US economy out of the swamp. El-Erian dodged the crazy question by repeating the party-line that housing has stabilized. Next he get’s truthful stating that ‘…this is NOT the sector that going to pull us out…”.

Correct Mohamed.

El-Erian then politely explains to Betty that its about jobs and corporations spending money first (which creates jobs, after which people then buy houses).

I don’t know about you folks, but personally I just love these interviews with Mohamed El-Erian. He’s got to be the most influential speaker in the game; the guy that coined ‘the new normal’. You have to listen to El-Erian carefully because he skates around the hard facts, couching the blunt truth in diplomatic language in order to make the bitter pills easier to swallow. What he said about housing is a case in point. He went on to say (translated into simple language) that people have to feel good, so that they will borrow more. In order to feel good, corporations need to spend money, and we-the-sheeple need to accept that higher unemployment is the new normal.

My take-away is that there is no tapering anytime soon. Central banks are buying time (means printing money). Currency wars will continue, gold will head north.

Its going to be a VERY interesting 3rd quarter, wouldn’t you say?

Comment by obewon - 09 June 2013

Well Said, James M., my Canadian e-Bud !
Mohammed knows how to get his points across, by not offending Bloomberg or his intended audience in the process. Unlike so many others in his business, he does not intentionally deceive the general public, and that is a very admirable quality.

On the FED’s So-Called “Tapering” Propaganda:
Let’s be honest with each other; every word that is uttered by the FED has a very profound impact on the world, on global markets, and on the sheeple. When members of the FED (i.e. other than the great Wizard, Mr. Bernanke!) speak, they are merely “testing” the market’s reaction. That’s their only purpose. No one knows this more than the Great Wizard himself, who very much wants to extricate himself from the total mess that he, himself, has created . . . history will not be kind to him.

Bottom Line:
There is now virtually no end to QE8! Perhaps the FED will do a little “tapering” when hell freezes over.

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