Nothing Fast About Recovery

You don't get a fast recovery,Harvard economist Ken Rogoff points out.It doesn't mean you're about to enter something worse.The larger risk is government debt.There is always a sovereign debt problem after a crisis as spending explodes.He thinks housing prices still have further to fall,but a double dip recession is about as likely as in a random year.He wouldn't say there's an elevated risk of one.
There are fears that slowing Chinese growth and the Euro Zone debt crisis could hinder recovery.As China normalizes and grows,it's going to have bumps like everyone else.To think it's all upside is just absurd.Property prices and leverage are probably the best indicators you're going to have a problem.China cannot keep growing its exports at the same rate it's been doing.At some point,they have to redirect their strategy.
The Euro Zone banking system has moribund banks in it,but it's not gonna get better if there's denial,Professor Rogoff believes.
Results of stress tests of Euro Zone banks are to be released this month.U.S. banks passed a similar test earlier in the financial crisis.
iShares FTSE/Xinhua China(FXI)

Waves of Financial Crisis

Jessica Haverson of MF Global sees the financial crisis as ongoing.The analyst says she believes we can always go lower.It is a crisis that comes in waves.The first wave was the financial freezing of credit;the second wave was the economic expression of the credit freeze;the third and current wave is a sovereign debt problem.
The sovereign debt issue is a rolling crisis.It has rolled from Southern Europe to the U.K.Eventually,it will roll to the U.S. as America faces a day of reckoning with its own debt.
MF Global is now headed by former New Jersey Governor Jon Corzine.Mr.Corzine was also CEO at Goldman Sachs before he served in the U.S. Senate and as Governor.

Recovery Without A Script

Mohamed El-Erian,co-CE0 and co-Chief Investment Officer at PIMCO,said that Friday's employment report was a half-full/half-empty report.It points to long term unemployment going up.There are structural aspects to unemployment.The question is whether you believe levels matter.You really need big changes.Mr.El-Erian doesn't believe there is a playbook to this.What with sovereign debt risk and regulatory shock,you need to reach escape velocity.The question is what you get in the second half of the year.
There is an inventory spillover,Mr.El-Erian pointed out,asking whether it is sustainable.Do balance sheets matter or not?The tug of war between cyclical and structural is very interesting.A tremendous amount of temporary and temporal stimulus is in the system right now.Do you face a hand-off to private demand or structural headwinds which the market isn't comfortable with?
Unfortunately,the crisis has been a balance sheet issue.There are few occasions of a balance sheet shock on top of a cyclical story,as we have now.PIMCO builds portfolios with four different layers:secular;structural;cyclical;and tactical.At this point,there are certain corporate bonds that PIMCO likes,Mohamed El-Erian noted.He was formerly manager of the Harvard Endowment.