Bond fund giant Pacific Investment Management Company's (Pimco) chief executive El-Erian said he expected Portugal to be the next euro zone country to falter, according to an interview in German weekly Der Spiegel.
Mr El-Erian also said he expected Portugal's first bail-out package will be insufficient, prompting it to ask the EU and IMF for more money.
But should we believe the Pimco predictions through its mouth-piece El-Erian? Many of their past forecasts have certainly not always been on target.
As one analyst recently wrote about Pimco: "if you have any money invested there, I recommend pulling out, fast".
The fact is Pimco seems to have very little understanding of basic economics and continue to call for policies that are ruinous to the worlds fiscal and monetary health. All they basically represent are run of the mill neo-Classical/neo-Keynesian economists who happen to be very good traders and who often just have been lucky. As Nassim Nicholas Taleb also pointed out in his writings, statistically institutions like Pimco can and will exist at the upper end of the investment advisory spectrum, and you can't tell if they are lucky or smart.
The problem is that when huge trading houses start making statements about a country or a continents economic welfare, they can not only create huge fluctuations in the market place but also influence stock markets in such a way that they mainly benefit their own portfolio of stocks and bonds.
So far no one seems to have classified this posturing as an "unlawful manipulation of the market place by financial or economic thought leaders, through the use of public statements for the purpose of personal/corporate gain and enrichment". In a way it could fall into the same category as insider trading.
Maybe its time for Governments to look into this?
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