Mohammed El-Erian is out with his interpretation of the events of the last two days in a guest post over at FT Alphaville. And to longtime PIMCO/El-Erian watchers, you won't be surprised by too much.
The market is moving sharply between risk on/risk off. A deflationary trap will prove to be difficult if we get stuck in one. Economists are downgrading their estimates for the economy. More volatility is on the horizon.
El-Erian reiterates his previous forecast that there's a 25% chance of deflation, which doesn't sound too bad, but then he finishes with...
And if you are still wondering on this last issue, ask yourself the following question: would you accept a lift from a person who has a one-in-four chance of getting into a really bad car accident?
(For what it's worth, while this is great rhetoric, you could quibble with the analogy. If he had asked, instead, whether you'd bet even money on a gamble with a 75% chance of paying off, your answer would be different.)
