PIMCO's Mohamed El-Erian vis­ited with CNBC this morn­ing, and offered his usu­ally inter­est­ing thoughts on the macro econ­omy and invest­ment themes. Inter­est­ingly, he touted pre­cious met­als in this inter­view (rel­a­tive to equi­ties) which is the first time I've really heard him tout them.

8 minute video – email read­ers will need to come to site to view:

• This year's mar­ket gains will need more than an improv­ing eco­nomic pic­ture and investor will­ing­ness to shrug off the Euro­pean debt cri­sis, Pimco's Mohamed El-Erian said. "It's too early to declare vic­tory," the co-CEO for the world's largest bond fund told CNBC in an inter­view Tuesday.
• He out­lined three issues that must be addressed if the 2012 rally is to continue:

1) Geopo­lit­i­cal risk that remains both in Europe and the Mid­dle East.

2) A "hand­off to more sus­tain­able poli­cies" beyond the mon­e­tary eas­ing from the world's cen­tral banks.

3) Get­ting "long-term investors" off the side­lines and putting their money to work in riskier assets than bonds.

• As those head­winds remain, El-Erian advises investors to ded­i­cate a smaller por­tion of their port­fo­lios to stocks and a larger allo­ca­tion toward pre­cious met­als. On bonds, he advo­cates shorter dura­tion, with a tar­get of seven years or less, which is where the Fed­eral Reserve has focused its debt-buying efforts.
• "They're both will­ing and able," El-Erian said of the Fed and other cen­tral banks and aggres­sive mon­e­tary poli­cies. "The issue is the effec­tive­ness. Even the cen­tral bankers are begin­ning to announce that it is not just about the ben­e­fits, it's also about the costs and risks."
• "The cen­tral banks are absolutely com­mit­ted, but we must not extrap­o­late that they will remain highly effec­tive," he con­tin­ued. "They need help. They are a bridge and they have to be a bridge to some­where. So far the other gov­ern­ment agen­cies are on the sidelines."
• "There's more to do," El-Erian said. "It's crit­i­cal that noth­ing be done to inter­rupt this won­der­ful cycli­cal bounce. We want the cycli­cal bounce to trans­late into a sec­u­lar bounce, because that's what the mar­kets need to sus­tain the won­der­ful returns so far this year."
• El-Erian con­trasted the sit­u­a­tion in Europe from the Lehman Broth­ers col­lapse in 2008, and said that while cen­tral banks "have become much more proac­tive" with refi­nanc­ing oper­a­tions, the cur­rent econ­omy may not be as pre­pared for eco­nomic shock. Regard­ing the "Lehman moment," El-Erian said, "If you define it as the econ­omy being able to take the shock, that's in fact a higher risk because we are in a worse place than we were in '08."

Dis­clo­sure Notice

Any secu­ri­ties men­tioned on this page are not held by the author in his per­sonal port­fo­lio. Secu­ri­ties men­tioned may or may not be held by the author in the mutual fund he man­ages, the Pal­adin Long Short Fund (PALFX). For a list of the afore­men­tioned fund's hold­ings at the end of the prior quar­ter, visit the Pal­adin Funds web­site at http://www.paladinfunds.com/holdings/blog

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