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Results 101–150
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Why Good Companies May Get Even Cheaper for Awhile
by Mohamed A. El-Erian of PIMCO,
Should investors buy good companies trading at historically attractive prices? According to conventional wisdom, this simple question has an equally simple answer - "of course" - that is supported by the vast majority of historical cases. But before acting on conventional wisdom, investors should ask themselves why so many unthinkables have turned into reality over the last few months. By doing so, they would be forced to consider important qualifiers arising from historic structural changes buffeting the global economy and, therefore, financial markets.
Volatility Is With US for Awhile Longer
by Mohamed A. El-Erian of PIMCO,
There were three culprits for last week's market dramatic sell-off: first, yet another downgrading of the outlook for global growth, including in the form of a stark warning from the Federal Reserve on "significant" downside risks (and, for an institution that selects its words very carefully, significant translates to something nearer to horrid); second, recognition that this situation increases the challenges facing policymakers who, for the large part, have been MIA for way too long; and third, a worrisome amplification of the crisis in Europe.
Countering the Contagious West
Despite their strong fundamentals, emerging countries still feel vulnerable in the face of the Wests economic weakness, policy shortfalls, and political paralysis. Moreover, they know from experience that there are no easy and immediate solutions to the Wests debt overhang and structural impediments to growth. And they have no illusions about the potential for effective global policy coordination. In such circumstances policymakers in emerging markets will eschew boldness for prudence. They will hope for a short winter for the global economy, but they will plan and position for a long one.
Market Preview - What to Look for This Week
by Mohamed A. El-Erian of PIMCO,
Global markets again find themselves in the uncomfortable back seat of a car driven erratically by policymakers. The hope is that policy responses in both America and Europe will enable them to build on last week's solid gains and, thereby, improve the outlook for jobs and economic growth. This can happen if most/all of what follows materializes. Top-down issues are still important drivers of markets. It is not a comfortable place for markets given the recent history of recurrent policy shortfalls and debacles. Yet it is also reality for now.
Time for a Smaller and Stronger Eurozone
by Mohamed A. El-Erian of PIMCO,
The euro should, indeed must, be saved. And it can be saved provided Europe is willing to make hard structural and institutional decisions. The time has come for the eurozone -- Germany and France in particular, but also Austria, Finland and the Netherlands -- to decide how they would like European integration to evolve; and they need to do so quickly. They have two conceptual choices: restore stability to the current, heterogeneous zone; or opt for a smaller but stronger one.
The G-7 Disappoints Again
by Mohamed A. El-Erian of PIMCO,
Unlike recent G-7 meetings of finance ministers and central bankers that were essentially ignored, there was quite a bit of interest in the one held this past weekend in Marseille. That interest turned out to be misplaced, however, as the G-7 delivered little of substance yet again. The G-7 issued a communiqu whose disappointing lack of content contrasts sharply with the deteriorating health of the global economy, the intense risks ahead, and legitimate policy confusion. The G-7 is fortunate that it is not required to justify the expenses of its meetings in terms of what is achieved.
A Powerful Obama Speech
by Mohamed A. El-Erian of PIMCO,
At long last, President Obama did enough this evening to upgrade the quality of the nation's economic debate. He presented a credible program that is focused on the right structural areas. Now he must strengthen it and complement it with a sensible fiscal component; and Congress must discuss it in a cooperative and constructive manner. A lot is at stake, especially for those that have been jobless for too long but also for American society as a whole. Let us hope that Washington is, collectively, able and willing to follow through.
The Changing Landscape of Global Investing
by Mohamed A. El-Erian of PIMCO,
National and global realignments are fundamentally and durably changing the global investment landscape.
Investors face the challenge of recalibrating some of the traditional parameters that are key to managing risk and delivering returns.
There are also implications for investment management firms which are yet to be sufficiently reflected in the thinking and actions of the industry as a whole.
Tuesday's Market Preview Is Not Pretty: El-Erian
by Mohamed A. El-Erian of PIMCO,
Again, already fragile U.S. markets will be influenced by developments on the other side of the Atlanticand in a week in which there is great anticipation for President Obama's "mission critical" speech on the American economy. Europe's deepening debt and growth crisis amplifies the importance Obama's effort to deal with America's deepening unemployment and growth crisis; and does so by raising both the stakes and the challenges for the President. Tighten those seat belts. It will be a bumpy and volatile week as markets are held hostage to policy developments in both America and Europe.
Why Washington Urgently Needs to Break America's Negative Feedback Loop
by Mohamed A. El-Erian of PIMCO,
It is tempting to dismiss all this market volatility as just irritating "noise" rather than insightful "signals". But, be very careful before you are opt for this seemingly comforting interpretation. There is a lot in play today that requires a bold response out of Washington. This is not just an American phenomenon. Europe is in a much worse situation. And, if policymakers on both sides of the Atlantic don't get their act together, they will run out of tools that have a chance of being effective circuit breakers. Things could get a lot worse before they get better.
Europes Central Bank at Sea
My sense is that politicians will opt for a weak variant of greater fiscal union, but that, ultimately they will fail to execute it for the eurozone as we know it today. After some considerable volatility, a smaller and more robust currency union will emerge; and, importantly, Europe will avoid the euros demise and a total breakdown of the eurozone. No matter how you view it, the coming endgame will be neither simple, nor orderly. Had the ECB known this at the start of Europes debt crisis, it might have resisted taking so many risks with its balance sheet and reputation.
Policy Dithering Will Further Fuel the Crisis
by Mohamed A. El-Erian of PIMCO,
The world economy is now in the grips of a damaging feedback loop involving deteriorating fundamentals, lagging policy responses and destabilised financial markets. If policymakers do not act boldly, and do so in a globally-coordinated fashion, the world risks tipping into a prolonged recession with worrisome institutional, political and social consequences.
Unprecedented Fed to the Rescue
by Mohamed A. El-Erian of PIMCO,
After Mondays gut wrenching 635 point fall, the Dow Jones index surged an impressive 430 points on Tuesday. In the process, investors experienced a wild 640 point intra-day roller coaster! Gold prices set another record while Treasury yields fell sharply, with the 2-year closing at an eye popping 0.2% and the 5-year at an equally stunning 1.0 percent. Tuesdays combination of unusual, if not unprecedented, market moves had a lot to do with the Fed. Once again, the institution came to the rescue of an equity market under severe pressure, and did so in a bold manner.
U.S. Downgrade Heralds a New Financial Era
by Mohamed A. El-Erian of PIMCO,
There will be endless debate on whether S&P, the rating agency, was justified in stripping America of its AAA rating and even attaching a negative outlook to the new AA+ rating. But this historic action has now taken place, and the global system must adjust. There are consequences, uncertainties, and a silver lining. Not so long ago, it was deemed unthinkable that America could lose its AAA. Indeed, risk free and US Treasuries were interchangeable terms so much so that the global financial system was constructed on the assumption that Americas AAA was a constant at the core.
Making Sense of Thursdays Violent Market Sell-Off
by Mohamed A. El-Erian of PIMCO,
Technical factors played a role in Thursday's unsettling market moves, including the disorderly across-the-board collapse in the price of risk assets in the final hour of trading and the related surge in U.S. Treasurys. But they were not the cause. Rather, they amplified three factors that will determine the fate of markets in the weeks ahead. First, it is now undeniable that the U.S. economy is weakening across the board. The second factor relates to confidence. Markets are worried that policymakers will not be able to put the economy back on the right path. And then there is Europe.
America Will Avoid Default But There's A Lot More to Do
by Mohamed A. El-Erian of PIMCO,
Politicians are taking an important step this weekend to remove the threat of a debt default and to focus more credibly on problems facing the economy. We should thank them for that. But we should also remind them that their work is far from done. Washington should waste no time in redoubling efforts to remove the multiple policy uncertainties and structural impediments that stand in the way of restoring America on the path of high growth and plentiful job creation. Anything short of that will imply further economic and social deterioration, and a greater erosion of America's global standing.
Why Global Debt Dramas Recur
by Mohamed A. El-Erian of PIMCO,
Neither Europe nor America can sustain the sort of economic recovery that would make a meaningful dent in their debt dynamics. As a result, different governments are opting for different approaches, including harsh austerity, financial repression and, in one case, a potential debt restructuring.
De-levering pressures will be with us for years, and governments will mix and match from the menu of options. Accordingly, periodic debt dramas will recur. And we all need to understand the dynamics and the likely choices governments will make going forward.
The 'how' undermines the 'what' of the debt ceiling debate
by Mohamed A. El-Erian of PIMCO,
I am confident that Washington will find a way to compromise on a mini-deal, rather than a grand bargain, that raises the debt ceiling and avoids a debt default. They may even manage to evade a downgrade of the nations vaunted AAA credit rating, though this is more uncertain. But fiscal solvency is not merely a function of deficits and debt. It is also highly sensitive to economic growth: The lower an economys growth rate, the higher a budget deficit is likely to be, the larger the debt accumulation, and the greater the need for yet another round of fiscal austerity to safeguard solvency.
Europe Must Consider Radical Options
by Mohamed A. El-Erian of PIMCO,
Europe has been applying a liquidity solution to a solvency problem. The approach, which has bought time, is near exhaustion as it has failed to improve debt sustainability, restore access to markets and put in place the conditions for sustainable growth. Time is approaching for a radical change, with policymakers potentially facing two options. They could opt for greater fiscal union to include cost-effective guarantees and transfers, rather than just loans, in exchange for individual countries sacrificing a significant amount of national sovereignty.
America Needs a Grand Bargain, But All It?s Getting Is a Mini Deal
by Mohamed A. El-Erian of PIMCO,
To address its economic woes, America needs to transition from a series of ad hoc measures to a more holistic policy approach. Aided by President Obamas personal and highly visible involvement, politicians are likely to meet the August 2nd debt ceiling deadline. A "grand bargain" can serve as the catalyst for unifying diverse policy actions into clearer, more comprehensive drivers for growth and medium-term fiscal sustainability. This would intensify pressure on other systemically-important parts of the world-particularly Europe and China-to join the US in striking their own grand bargains.
America and Britain's Economic Policies Will Soon Be Similar
by Mohamed A. El-Erian of PIMCO,
?By imposing austerity programs,t he U.K. is hoping to free up resources that can be devoted to pay down debt. The U.S. is hoping to create resources to pay down debt via economic growth ? an approach that can have disappointingly narrow feasibility. Other options include restructuring or defaulting on debt, inflating out of it and imposing financial repression by paying creditors less than they deserve.
Is Europe?s Debt Crisis a ?Lehman Moment? for America?
by Mohamed A. El-Erian of PIMCO,
Europe?s debt problem is a headwind for what remains a disappointing U.S. economic recovery.
There is now broad-based recognition of America?s persistent economic weakness. The Federal Reserve has been forced again to revise downwards its growth projections for both 2011 and 2012.
In order to avoid a repeat of the total Lehman paralysis in the face of an external shock to the U.S. economy three conditions must be met: a banking system that remains robust, no disruptions to money market funds and limited blockage to the plumbing of the country?s payments and settlement system.
Five To-Do's for the IMF's New Managing Director
by Mohamed A. El-Erian of PIMCO,
Circumstances have catapulted Christine Lagarde into the role of leader of the IMF: the world?s most influential and fastest-responding multilateral institution. Lagarde will need to hit the ground running if her tenure as IMF managing director is to be an inspiring story of institutional transformation. She should waste no time in establishing a legitimate selection process for the next managing director that is truly based on merit. She must strengthen the analytical robustness of the IMF?s response to debt crises, and prepare the Fund?s balance sheet for the risk of future impairment.
On Governments as Portfolio Managers
by Mohamed A. El-Erian of PIMCO,
Energy markets are focusing intensely on the price impact of today?s International Energy Agency decision to release oil supplies.
Governments (and central banks) getting pulled deeper into markets as portfolio managers, as opposed to regulators and supervisors.
Policymakers are trying to differentiate between good and bad inflation ? namely, enhancing the former and countering the latter.
What's Weighing Heavily on the Markets
by Mohamed A. El-Erian of PIMCO,
Balance sheets and other structural problems will repeatedly impact headlines (and weigh on markets) unless policymakers alter their course. European policymakers and the IMF have spent the last year treating Greece?s predicament as a liquidity problem as opposed to what it is: a solvency and growth crisis. By ignoring the basic issue of Greece?s solvency, some previously pristine balance sheets are now contaminated. In the U.S., political dithering (and bickering) is complicating the country?s ability to deal effectively with structural impediments.
America?s Dangerous Debt Ceiling Debate
by Mohamed A. El-Erian of PIMCO,
?In today?s polarized environment in Washington, Republicans and Democrats are unwilling to compromise ?too early.? Such political paralysis on key economic issues is increasingly unsettling for the U.S. private sector, and for other countries that rely on a strong U.S. at the core of the global economy.
Understanding Recent Market Movements
by Mohamed A. El-Erian of PIMCO,
Despite massive fiscal and monetary stimulus, the U.S. economy has frustratingly failed to gain proper traction.
The U.S. economy faces structural impairments in housing, credit, public finances, and the functioning of the labor market.
The situation in Europe is another factor undermining market sentiment.
Structural problems require structural solutions that are adopted within a clearly communicated overall vision.
U.S. Must Move Beyond Financial Band-Aids
by Mohamed A. El-Erian of PIMCO,
Structural problems require structural solutions to improve the labour market, housing, credit and medium-term fiscal sustainability. Some analysts will encourage investors to look through these ?temporary and reversible? factors. We should not. The U.S. lost its edge in educating, training and retooling its labour force. This slippage has been extremely costly.
The Danger of Emerging Market Inflation
by Mohamed A. El-Erian of PIMCO,
If left unchecked, high and accelerating inflation in emerging markets will have growing adverse economic, social and political effects. In addition to undermining overall growth and resource allocation, emerging market inflation imposes a very heavy burden on the poor and erodes political unity. Emerging economies will tap multiple policy brakes as they seek to counter mounting inflationary pressures. And they will continue to grow, but not enough to pull up decisively the sluggish advanced countries.
Secular Outlook: Navigating the Multi-Speed World
by Mohamed A. El-Erian of PIMCO,
It is a world that heals slowly and unevenly, and remains structurally impaired. Balance sheets, both across and within economies, are still out of equilibrium. We expect advanced economies will face sluggish growth and persistently high unemployment over the secular horizon. Emerging economies will achieve higher growth but face recurrent inflationary concerns. We do not expect policymakers to boldly address structural problems. By targeting negative real interest rates, they will pursue financial repression that undermines the ?real return? contract that savers expect.
Strauss-Kahn Allegations Are Consequential for the Global Economy
by Mohamed A. El-Erian of PIMCO,
Should Strauss-Kahn be forced to step down, this would catch the IMF with a selection process for the top position that is still overly dominated by politics.
The allegations facing Strauss-Kahn are serious and will take time to be investigated properly. In the meantime, they have caught Europe still without a sustainable solution to the debt crisis in its periphery.
Understanding Japan?s Disasters
by Mohamed A. El-Erian of PIMCO,
Japan?s reconstruction challenge will likely be more difficult than after the Kobe earthquake. Negative wealth and income effects this time around will be more severe, and the recovery process will probably take longer and be more complex. Japan's disasters will add to the global economy?s headwinds.
World Near Tipping Point?
by Mohamed A. El-Erian of PIMCO,
Much of the potency of policy responses has been used up in the successful efforts since 2008 to avoid global depression. The longer the persistence of supply disruptions, the greater the risk of core inflation increasing. Questions about the end of quantitative easing in the U.S. pose a challenge for policymakers.
Japan Will Recover
by Mohamed A. El-Erian of PIMCO,
Japan has the ability to recover economically from these horrible natural disasters. Japan?s immediate focus is on the enormous human suffering, and rightly so. Attention also turns towards the extent of the damage to the economy and its reconstruction and rehabilitation plans. The good health of Japan is central to a robust global economy that generates lots of jobs and enhances productivity.
Differentiated Change in the Middle East and North Africa
by Mohamed A. El-Erian of PIMCO,
For two months, developments in the Middle East and North Africa (MENA) have taken most by surprise. What started as an protest in Tunisia has developed into a regional phenomenon that has toppled regimes and is threatening others. Indeed, every day seems to bring an historical event that is changing the region and impacting the global economy. Governments across the globe have spent weeks playing catch up in the midst of unthinkable developments in MENA. They have organized emergency evacuations of citizens and constantly responded to realities on the ground, including the violence in Libya.
The Global Economic Impact of this Weekend's Developments
by Mohamed A. El-Erian of PIMCO,
In the short run, regional developments will be stagflationary for the global economy. In the next few days, markets will react to the changed outlook for the region and the global economy. Over time, market apprehension is likely to give way as the impact of greater long-term stability in a key part of the world is felt.
Viewing Chairman Bernanke?s Remarks Through the Lens of Emerging Economies
by Mohamed A. El-Erian of PIMCO,
Bernanke's comments will raise eyebrows among policymakers in emerging economies. His remarks highlight persistent differences in analysis that complicate policy discussions. International cooperation will not materialize unless advanced and emerging economies converge on a common analysis of the key issues. My hope is that the G-20 meeting will take an important step in this regard, and do so by recognizing that there is more than one perspective to today?s global challenges. I fear, however, that this may not materialize as yet.
Spain Is Not Greece and Need Not Be Ireland
by Mohamed A. El-Erian of PIMCO,
Spain?s success is of acute relevance to the rest of the eurozone. Unlike Greece, Spain does not have a direct public finance crisis. Spain is where Ireland was a couple of years ago, but is clearly keen to avoid Ireland?s experience. To avoid a bad outcome in Spain (and the rest of the eurozone), additional, significant and highly visible progress needs to be made within the next few weeks.
Nice Speech, But Now Obama Must Act
by Mohamed A. El-Erian of PIMCO,
The president left no doubt that tackling unemployment was a priority. Success on this would also facilitate the medium-term budget reform that he is targeting. Mr. Obama must make clear jobs creation can no longer depend simply on stimulus, federal government hiring, and the hope that previous drivers (such as construction) will return.
Europe Is Running Fast to Stand Still
by Mohamed A. El-Erian of PIMCO,
The sequencing of Europe?s debt crisis is depressingly similar ? the plot stays the same, with a slightly different cast depending on the country in the spotlight. Yet, judging by the run-up to the meeting of European Union finance ministers in Brussels on Monday, European officials seem intent on repeating it over and over again.
Germany in a Lose-Lose Situation
by Mohamed A. El-Erian of PIMCO,
The problem is that Germany's current approach ? centered on dealing with liquidity problems now and solvency centered later ? is not working.
A liquidity approach that delays the day of reckoning may be good regional politics, but it's bad economics. It does not restore sustainable growth to the periphery, and it exposes the core to contamination. Rather than simply doubling up on a faltering liquidity approach, the time has come for Germany to lead a more holistic solution focused on addressing the periphery?s debt overhang and competitiveness problems.
Ireland Rescue Is Not a Game Changer
by Mohamed A. El-Erian of PIMCO,
Ireland's new liquidity package does little to deal with its debt overhang, or to reduce the embedded cost of its debt. Instead it aims to introduce stability into market conditions. It took time for Europe to recognize the severity of the peripheral debt crisis. Now it is also recognizing that liquidity support (while necessary) may not be enough.
Irish Crisis Demands New EU Response
by Mohamed A. El-Erian of PIMCO,
Advanced economies are not wired to operate at elevated levels of sovereign risk. The longer these spreads persist, the greater the decline in investment activity and employment. If things are left as they are the risk of further social unrest will rise, while tax revenues will collapse at a time when budgets are already under enormous strain. The policy responses of eurozone governments were supposed to buy a few years of calm, but ended up by delivering only a few months. A more effective and credible approach is now needed.
We've Voted. What's Next For the Economy?
by Mohamed A. El-Erian of PIMCO,
With the two chambers of Congress split between Democrats and Republicans, the conventional wisdom likely to be repeated over the next few weeks is that political gridlock is good for the economy. While often true, that is not the case today. Democrats and Republicans must meet in the middle to implement policies to deal with debt overhangs and structural rigidities.
The Fed Feels Compelled to Experiment
by Mohamed A. El-Erian of PIMCO,
Judging from the minutes of the September 21 Federal Open Market Committee meeting, it is virtually a foregone conclusion now that the Federal Reserve will announce on November 3 that it is re-engaging in 'unconventional policies.' As a body, the FOMC recognizes that the benefits of quantitative easing come with potential costs and risks, including unintended consequences. Despite this tricky and uncertain balance, it feels compelled to act.
Stalled Post-crisis Reforms Must Be Restarted
by Mohamed A. El-Erian of PIMCO,
In the early part of this crisis, swift coordinated global policy action saw a painful economic collapse replaced by employment gains and greater financial stability. However, the marked failure to continue coordinated action reflects two critical weaknesses that now must be taken seriously: an insufficient appreciation of the mix of post-crisis forces; and a growing void at the center of the international system. For the IMF this means acting on long-standing governance and representation problems ? and doing so by going well beyond what is being currently contemplated.
Beyond Brinkmanship: A Better Economic Path for the U.S. and China
by Mohamed A. El-Erian of PIMCO,
It is in virtually no country's interest - including that of the United States - for China's economic development to derail. China is the world's strongest growth engine, its largest creditor and its biggest trade partner. Rather lecturing China on its exchange rate, the United States should be doing more to push its European allies to allow a larger Chinese voice in multilateral forums. Beijing, in turn, should think carefully about how it can help the United States and the global economy to bridge the hole of balance-sheet repair.
An Interesting Week Ahead
by Mohamed A. El-Erian of PIMCO,
The failure to reduce risk spreads in peripheral European countries means that the public sector bailout is not working. The list of industrial countries wishing to depreciate their currencies is not matched by a list of emerging economies happy to let their currencies appreciate significantly. As a result, foreign exchange tensions are mounting, and the price of gold has been driven to a new record level. This week will shed light on whether policymakers can do anything to deal with these two issues.
Judging Obama, Geithner and Goolsbee
by Mohamed A. El-Erian of PIMCO,
The Obama Administration's announcement Wednesday of its new economic policy initiative will be closely watched by markets and will likely impact equity and bond valuations around the world. A disappointing performance today would be met with even greater market skepticism, higher 'self-insurance' by households and companies and further disappointment among America's friends and allies.
Results 101–150
of 167 found.