Pacific Investment Management Co. Chief Executive Mohamed
El-Erian Thursday said he was worried by recent economic data on
both the domestic and global level and doesn't see how corporate
profit growth can be sustained within this environment.
In an interview on CNBC, the Pimco co-chief investment officer
said: "I'm really very worried by the data. Not just in the U.S.
We've had a string of bad data, but look overnight -- Brazil,
France, China and Portugal and Greece -- all of them came in lower
than expected, or they are tapping the brakes, like in Brazil. What
we are having right now is a global growth slowdown."
He said this would hit top-line corporate revenue growth and put
some pressure on profits and make it impossible "to sustain" within
the economic environment.
Balancing what he calls the "structural impairments" of the
economy, he said are lots of cash on balance sheets, especially
among the multi-nationals, tremendous innnovation, and a
manufacturing sector that is beginning to pick up. Nonetheless, he
said he expected the economic "headwinds" would continue until
Washington is able to come up with an overall economic policy that
addresses housing, credit flow, public finance and the employment
situation.
El-Erian noted that his company, with about $1.2 trillion in
investments, had gotten out of its holdings in Greece, Portugal and
Ireland "very early on" and thus was not suffering during the
present European debt crisis.
In response to a query about Pimco's shedding of U.S. Treasurys,
he said "it is stunning how quickly consensus growth rates have
come down from 4% to 2% for one quarter." He said he'd never seen
this happen so quickly, and that if there was a miscalculation, it
was that he expected Pimco to continue to be an "outlier" longer
and now was "consensus", which was very weird for them.
Re-emphasizing that he sees the overall situation with the
economy as much more than a cyclical slowdown, he said,
nonetheless, he felt the government has pumped too much overall
liquidity into the system for there to be another "double-dip" into
recession.
Full story at www.cnbc.com
-Dow Jones Newswires; 212-416-2900