Pimco's Pessimism (by Zacks) >>
Enviado: 23/11/2011 21:17Pimco's Pessimism
Kevin Cook here, still solving the debt crisis while Steve celebrates Thanksgiving with his family on some tropical island. Seems so wrong, it's gotta be right.
Speaking of right, Steve nailed the market break-down. Two weeks ago when I was trading the long side buying the Greek and Italian fear plunges to S&P 1,225, he was busy putting his RTA subscribers into the Small Cap Bear 3X Leveraged ETF (TZA). Between November 9 and 17, he accumulated enough shares to hedge his portfolio and establish a 30% net short position in the market. But since small caps have a higher beta than the S&P, he may be closer to 50% net short the broad market.
I have followed the bright minds from Pimco for years. Gross, McCulley, and now Mohamed El-Erian know their stuff. Even if they get the market wrong, you learn something valuable reading their commentaries. After Greece first became headlines nearly 2 years ago, El-Erian predicted that sovereign debt would be the dominant economic issue of this decade. Yesterday, he said he found conditions "terrifying."
Speaking on Bloomberg after the downward revision to Q3 GDP, he's concerned about "a fragile economy with structural headwinds" including high unemployment, weak housing, and the potential for recession when fiscal deficits are already running so high. "We have less economic momentum than we thought we had and no policy momentum. Unlike Europe, the US doesn't have an engineering problem. It faces a political one."
True, but not terrifying—if you know how to play both sides of the market like Steve. And for a more optimistic look at the economy, be sure to see Dirk Van Dijk's excellent analysis of the GDP revision.
Kevin Cook here, still solving the debt crisis while Steve celebrates Thanksgiving with his family on some tropical island. Seems so wrong, it's gotta be right.
Speaking of right, Steve nailed the market break-down. Two weeks ago when I was trading the long side buying the Greek and Italian fear plunges to S&P 1,225, he was busy putting his RTA subscribers into the Small Cap Bear 3X Leveraged ETF (TZA). Between November 9 and 17, he accumulated enough shares to hedge his portfolio and establish a 30% net short position in the market. But since small caps have a higher beta than the S&P, he may be closer to 50% net short the broad market.
I have followed the bright minds from Pimco for years. Gross, McCulley, and now Mohamed El-Erian know their stuff. Even if they get the market wrong, you learn something valuable reading their commentaries. After Greece first became headlines nearly 2 years ago, El-Erian predicted that sovereign debt would be the dominant economic issue of this decade. Yesterday, he said he found conditions "terrifying."
Speaking on Bloomberg after the downward revision to Q3 GDP, he's concerned about "a fragile economy with structural headwinds" including high unemployment, weak housing, and the potential for recession when fiscal deficits are already running so high. "We have less economic momentum than we thought we had and no policy momentum. Unlike Europe, the US doesn't have an engineering problem. It faces a political one."
True, but not terrifying—if you know how to play both sides of the market like Steve. And for a more optimistic look at the economy, be sure to see Dirk Van Dijk's excellent analysis of the GDP revision.