Mohamed El-Erian Sizes Up 2012
Mohamed El-Erian, the CEO of bond giant Pimco, has written many fine, insightful articles on today’s vexing capital markets.
His piece in today’s Wall Street Journal isn’t one of them.
See if you can figure out what the following means:
Navigating [today’s unpredictable markets] requires investors to rely less on historical short cuts and, instead, spend more time decomposing asset classes into their constituent risk factors. Moreover, they need to internalize a much broader set of correlations, pursue a more global opportunity set, and mitigate risk not only by diversifying but also by using active tail hedging aimed at protecting against the bad extremes of possible outcomes.
–Mohamed El-Erian, “Investing in a Fat Tail World“; The Wall Street Journal (1/9/2012)
Me, too . . .
P.S.: and I’d avoid putting “decomposing” and “asset class” in the same sentence. 🙂