Value Architects Q1 2016 Macro Commentary

Value Architects Q1 2016 Macro Commentary

“I’d call it a new version of voodoo economics, but I’m afraid that would give witch doctors a bad name. -Geraldine Ferraro
Some years ago, Mohamed El-Erian the former CEO of PIMCO, one of the largest investment management companies in the world, as well as the former head of the Harvard Endowment developed the phrase, ―the new normal‖ as a depiction of the economic conditions that have followed the crisis of 2008.
In a speech that El-Erian presented to the IMF (International Monetary Fund) in 2010, he supported this depiction based on three hypotheses:

First, the international monetary system suffered a ―sudden stop‖, the adverse impact of which is still being felt today. 

Second, the causes of the crisis were many years in the making and included balance sheet excesses, risk management failures at virtually every level of society, antiquated infrastructures, and outmoded governance and incentive systems in both the public and private sectors.

Third, the dynamics coming out of the crisis management phase: particularly the combination of deleveraging, re-regulation, debt overhangs and structural challenges in key industrial countries are interacting with an accelerating secular realignment of the global economy to create what at the time Fed Reserve Chairman Ben Bernanke correctly called an ―unusually uncertain outlook.