"Mohamed El-Erian Explains Why He Is Now "Mostly In Cash""

From ZeroHedge:

"I am mostly concentrated in cash... because I think most asset prices have been pushed by central banks to very elevated levels. Central banks look at growth, at employment, at wages. They are too low. They don’t have the instruments they need, but they feel obliged to do something; so they artificially lift asset prices... Because they hope that they will trigger what’s called the wealth effect, but there is a massive gap right now between asset prices and fundamentals."

"The Fed has been pushing everybody into the public markets... it makes sense to reduce your exposure to the most trafficked assets."

Reflecting Julian Robertson's warnings from yesterday that, unless The Fed acts to end this bubble, there will be a "complete explosion," El-Erian points out the difference between what The Fed will do and what The Fed should do...

That will probably be the last time Mohamed El-Erian is invited to CNBC for a while. Here is what El-Erian said previously on this topic from the OC Register.
Q. Where is your money? Stocks? Treasuries? Bonds?

A. It is mostly concentrated in cash. That’s not great, given that it gets eaten up by inflation.

But I think most asset prices have been pushed by central banks to very elevated levels.

Q. So we’re nearing a bubble?
A. Go back to central banks. Central banks look at growth, at employment, at wages. They are too low. They don’t have the instruments they need, but they feel obliged to do something. So they artificially lift asset prices by maintaining zero interest rates and by using their balance sheet to buy assets.

Why? Because they hope that they will trigger what’s called the wealth effect. That you will open your 401k, see it has gone up in price, and you’ll spend. And that companies will see their shares are going up and they will be more willing to invest. But there is a massive gap right now between asset prices and fundamentals.
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The West fell in love with the wrong growth models 10 years ago. It fell in love with finance as an enabler of prosperity. The whole society fell in love with leverage and credit as a way of prospering. We were entitled to accumulate debt! People bought homes they could not afford. Governments borrowed money that they could not pay back....MORE