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If you are like me, trying to figure out what is going on and what is going to happen in Europe is a fruitless effort. So I listen to the likes of Pimco’s El-Erian who has the time and the brainpower to think the issues through.
Then after listening, I go back to trying to find companies that are trading at half or less of what a profit motivated acquirer might be willing to pay a couple of years from now… and trying to tune out the emotions that drive the market behavior.
El-Erian comments on the recent news out of the EU that has the market rallying:
- He thinks that there is good reason that the markets are excited, but doesn’t think that this is a breakthrough to really get through the mess.
- He is worried that investors will use this rally as an exit, and the markets will quickly reverse course.
- He just spent nine days in Europe and people are very nervous and the economies are slowing very rapidly.
- El-Erian thinks that the flight to safety will continue and that Treasury rates are going to stay very low.
- Pimco is staying invested in quality and avoiding risk.
- Germany’s Merkel has a tough task because the average German does not yet feel the pain of all this, so for her to take the steps necessary would cost her a chance at reelection.
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