Pimco’s El-Erian says U.S. stock market rally has hit a wall

August 18, 2009 by · Leave a Comment
Filed under: Stock Market News 

El-Erian makes a good point that stock valuations are not in-line with actually performance of the underlining companies.   After reviewing some of the numbers, statistics and earnings that have been posted as of late, it looks more and more likely we will have another major correction in the next couple of months.  I just don’t see the earnings continuing to be robust during a recession that the consumer is really tapped out when you look at their debt levels and stagnant incomes.  2009 is has been the worst year for getting a raise in about two decades.

News (Reuters):

Mohamed El-Erian, the chief executive of top bond fund manager PIMCO, on Tuesday said the rally in U.S. stocks had topped out because valuations have shot up too quickly.

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Pimco’s El-Erian thinks Fed to monetize more U.S. debt through treasury purchases

June 12, 2009 by · Leave a Comment
Filed under: Opinion 

Surprise, surprise.  Like we didn’t see this coming.  Interest rates are right back up to the previous levels that was crushing the housing market.  Unless something is done, what should happen, will happen and that means more foreclosures and the lowering of home prices.  Ben Bernanke testified that the Federal Reserve would “not” monetize any more debt that it had already committed too, but I don’t see how that is possible unless we are going to raise interest rates enough to get the foreign participation of investors the U.S. government will need to soak up the trillions of dollar of new debt we will be issuing.

News (Reuters):

The rapid rise in bond yields will force the Federal Reserve to “engage again” in the purchases of U.S. Treasuries and mortgage-backed securities, Mohamed El-Erian, the chief executive of bond giant Pacific Investment Management Co., said Friday.

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Pimco limiting U.S. Treasuries exposure as supply builds

November 5, 2008 by · Leave a Comment
Filed under: Currency News 

Good move on their part.  With the amount of issuing that is going to take place over the next 12 months, I would not want to have too much into treasuries.  Many economist are calling the dollar, “the next bubble to burst”.   Now with President-elect Obama, he needs to get serious about creating jobs in our country.  

I would say infrastructure in our highway system, transportation (rail) and energy should be his priority in reverse order.   These type of projects are great for creating jobs.  I would also do a mix of federal programs and private programs through our bidding process will be a nice balance.  I think we are going to start seeing inflation pick up as soon as people start feeling more confident and that will be are next major crisis.  You really notice inflation when the velocity of money speeds up through economic activity.

Release:

Fund manager Pimco is limiting its Treasury holdings amid expectations the United States will ramp up issuance to pay for a slew of new programs aimed at easing the credit crisis, Chief Executive Mohamed El-Erian told Reuters late Tuesday.

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Pimco’s Bill Gross says America is basically “for sale”

October 3, 2008 by · Leave a Comment
Filed under: Opinion 

I love these type of comments.  Here is some real honesty on the situation we are in.  Because of the reckless lending and over-use of credit for 30+ years.  Now people are over there heads and because they can not keep up with the payments on whatever asset was pledged as collateral.  This puts these borrowers into a distressed situation where the asset now needs to be liquidated to cover the credit loan and that is why Mr. Gross is saying that America is for sale because in effect it is and people who either can gather savings ie: capital or have their own capital are going to profit from this misfortune.  We made our bed so now we have to sleep in it.  Good luck.

Press Release:

he manager of the world’s biggest bond fund said on Friday he is raising cash and waiting for asset prices to become more appealing.

Bill Gross, chief investment officer of Pacific Investment Management Co. or Pimco, said he was raising cash for a time when prices are attractive enough.

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Credit-Default Risk (CDS) Soars After Lehman Brothers Files for Bankruptcy

September 15, 2008 by · Leave a Comment
Filed under: Industry News 

Much uncertainty on Wall Street today. According to Bloomberg, Lehman was a top 10 dealer in CDS or credit-default swaps. First fallout with a major market maker going under is the amount counter-parties are demanding for debt insurance has gone up 50% overnight in many cases.

Bill Gross of Pimco made this comment ““The immediate problem is the derivative default swaps market, in which a plethora of institutional accounts and dealer accounts are at risk,” “It induces a tremendous amount of volatility and uncertainty.”” In this article they stated if a company insured $2 trillion in debt and went under it would induce 36-47 billion dollars in losses. This is not good and we might finally be over the edge with no way back.

CDS Article:

Bond-default risk soared worldwide as the collapse of Lehman Brothers Holdings Inc. sparked concern than the $62 trillion credit-derivatives market will unravel.

Benchmark gauges of corporate credit risk rose by a record in Europe, and traded near an all-time high in North America, driven by a rise in Goldman Sachs Group Inc., Morgan Stanley and American International Group. U.S. two-year Treasuries climbed, pushing yields below 2 percent for the first time since April, as investors sought the relative safety of government debt.

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