(Bloomberg) -- In an interview with the Orange County Register, Mohamed El-Erian was asked about everything from life after Pimco to where he is currently putting most of his money. Rather than putting most his money in stocks or bonds, El-Erian reveals that most of it is actually sitting incash. And the reason is simple: pretty much everything else has gotten too elevated.
Q. Where is your money? Stocks? Treasuries? Bonds?
A. It is mostly concentrated in cash. Thats 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 were nearing a bubble?
A. Go back to central banks. Central banks look at growth, at employment, at wages. They are too low. They dont 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 whats called the wealth effect. That you will open your 401(k), see it has gone up in price, and youll 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.The full interview is here.
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