Banks can borrow for nothing (0%), expand their loan book by 2.5% (by the end of January 2018) and get an extra 40 bps kicker from the ECB. Get your “chicks for free.” OK, maybe not “chicks” but certainly “money for nothing.” What they are not saying is that the banks are in trouble. Let’s hope the banks can find some qualified and motivated borrowers.
This next quote pretty much sums it all up for me, “In the last three years plus, central banks have had little choice but to do the unsustainable in order to sustain the unsustainable until others do the sustainable in order to restore sustainability.” – Mohamed A. El-Erian, The Only Game in Town: Central Banks, Instability and Avoiding the Next Collapse (Random House, 2016)
I spent a few days earlier in the week in Scottsdale, Arizona. I was invited to present on portfolio positioning and best execution at the 20th annual IMN Global Indexing and ETF Conference. One of the big highlights for me was El-Erian’s keynote presentation.
Today, I share with you my notes from Mohamed El-Erian’s speech. Mohamed is Chief Economic Adviser at Alliaz and a frequent economic and market source for major financial media. He is humble, balanced and brilliant. I have listened to my recording of his presentation several times. Stop-start-rewind-replay-rinse-repeat. Fun for me and well worth the effort.
In short, he puts the odds for a good outcome at 50/50 saying he, “hates to say that.”