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Dheeraj Grover
Dheeraj Grover
Articles (493) 

Mohamed El-Erian: 'Stunned' at Capital Leaving Euro Zone

August 13, 2012 | About:

Mohamed El-Erian of PIMCO discusses Europe's debt crisis and key changes he will like to see before there is any resolution.

-- There is a one in three chance that the euro zone will break up in the next 6 months.

-- Key things he would like to see before the euro zone debt crisis can be resolved: better understanding of what the ECB is capable and willing to do, what they will buy and when, and secondly, what will be the conditions attached (what they expect Spain and Italy to do) and finally, what ECB will do to minimize subordination.

-- Spain has done a lot and has embarked on a major fiscal adjustment program that is bearing fruit. Spain has embarked on a bank reform program along with structural reform and together, that package of steps IMF will support. But the bad news is the IMF supporting a country sends a signal for the private investment community to disengage, and that is problematic as that draws capital out from the country.

-- Why is capital flying out of the euro zone? Three reasons: too much debt in the wrong places, too little growth and a lot of political bickering. If these three issues persist capital will continue to flow out of Europe.

-- A lot of capital is going to the U.S.

Here is the video:

About the author:

Dheeraj Grover
I am an individual investor with deep interest in the field of value investing. My ideas and thinking is inspired by highly respected value investors like Ben Graham, Warren Buffett, Walter Schloss, Bill Ruane and Tweedy Browne

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