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Pimco’s El-Erian: More To Come in Financial Crisis

The financial crisis could be about three-quarters of the way through with more turmoil still to come, Mohamed El-Erian, co-chief executive of Newport Beach-based bond manager Pacific Investment Management Co., told CNBC on Wednesday.

The next stage of the crisis is “the policy response,” El-Erian said.

“What investors have to keep an eye on is how it morphs and (they should) make sure they stay ahead of how it’s morphing,” he said.

Stocks will be the last to recover from the turmoil, according to El-Erian.

“First (in the recovery) is unclogging the pipes of the system, healing the commercial paper market, healing money markets, getting people to lend, and that’s going to happen over the next few months,” he said. “Then slow sequential healing.”

Pimco, which invests in government and corporate bonds and is working on the Federal Reserve’s program to shore up corporate debt, is focusing on what El-Erian called “high-quality investments.”

“At Pimco the simple image is we are in a storm and not only want to be under the umbrella, but at the handle of the umbrella, in high-quality investments,” he said.

El-Erian’s comments are part of his expanding role at Pimco.

At the end of the year, he’ll become Pimco’s sole chief executive as longtime boss Bill Thompson retires.

El-Erian, who was at Pimco for seven years as a managing director and senior portfolio manager until 2005, returned in January.

He had run Harvard University’s $35 billion endowment fund before coming back.

El-Erian also shares the chief investment officer title with Bill Gross, Pimco’s star bond fund manager and public face.

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