El-Erian
Mohamed El-Erian, discusses how investors can prepare their portfolio for the European election effect, and what to expect from the Fed’s policy, with Mario Gabelli, GAMCO Investors chairman & CEO.

Transcript:
we should — do you do match making before the show is over always. here’s a squawk master. mohamed el-erian is the ceo and co-investment officer at pimco, world’s largest bond fund manager. trillion in assets. i have no room to talk. you started out what five straight? i know you had high hopes. you grasping to one game above .500 with the mets. it’s april 25th and still above .500. that’s an achievement. i know a team in cincinnati that’s a game below .500. we can talk about that team. better than for our five which was a couple of days ago that beat san francisco. let’s not forget the red sox. how long was and you know i love you and i’m not mocking you but how long was the new normal. how long was that going to be? we said originally back in 2009 that we are on this bumpy journey to this unusual destination which is a three to five years. now the length depends on policymakers and policymakers have been postponing the deleveraging which makes this journey even more uncertain. that’s why you’re getting this tug-of-war between the uncertain macros and the policy sector. i got so many thing i want to ask you your opinion on and some of the recent things written, something in the journal today about this whole viewpoint in europe about the latest is that it’s austerity’s fault, that it’s not the rigid labor laws and the structural problems, that it’s austerity and that somehow if the government, if the governments of southern europe were allowed to start spending freely again that in some keynesian way it would solve all the problems. should we learn that austerity doesn’t work from what’s happening over there? what’s happening, and i was over there last week, is people are trying to simplify four different narratives in jump. depending where you look you get very different conclusions. if you look at greece, unfortunately there is no alternative to austerity but it has to be combined with structure reforms to promote growth. if you look to germany they are doing great so there’s very different narratives in europe and people are trying to simplify too much. the reality in europe and the is this is a day and a time to be very differentiated. don’t go for the simple headliners because that will mislead you. you think germany can maintain its stance and merkel has the support of at least the german people who knows what happens in france. tgermany is a good house in a challenged neighborhood. in the next few months something has to change. the neighborhood has to get better or the house will come under pressure. what does the new normal mean for the employment rate. the biggest, easiest gains in this country have already been had or will we have a nice steady move down month after month where we get down to hopefully the old normal at least below 7% eventually some day. unfortunately, and i can’t stress enough the word unfortunately, but unfortunately, joe, the easy gains are behind us. now we’re dealing with longer term unemployment. remember we had over 5 million americans that are long term unemployed. that’s a real problem. in toward get to the next stage we have to teal with really this year because our politics are so polarizing in washington right now. i had lunch yesterday with a ceo of a french company who argued that sarkozy is going to lose and ultimately the euro is going to break up as a result. i know it may sound far fetched but i’m curious what your view is of the politics that’s going on and what the result may ultimately be? so he’s pointing to something important which is that the core has uncertainty now. franetherlands and the perry fercy of the eurozone has more uncertainty. he’s right in pointing frampbs is an issue. i wouldn’t go as far as went. i wouldn’t think that it would turn france upside down. he’s going to have to cost adjust as he sees the reality. it changes the dynamic with germany. they have been fast friends or at least partners in this and that may change potentially in a big way. absolutely. merkel is campaigning for sarkozy. she wants a partner in france and if he doesn’t win she has to have a new relationship with the new person. jeremy siegel says 3-1 odds that the dow will be at 15,000 at the end of next year, he said 50-50 shot it gets to 17,000. what do you think of those odd? becky he speaks to this tug-of-war. we have strong corp operates that are telling you they are resilient and well run. we that have three major uncertainty on macro. we have europe, fiscal cliff that hasn’t been priced in and the geopolitics. those who say dow 17,000 are saying that the corporate strength is going prevail. those who say it’s much more uncertain say wait a minute that’s a tug-of-war. that’s why it’s really important to look at individual companies and sovereigns that have high margins, that have low leverage and that are exposed to growth and that’s what the results are telling you. that’s what apple is telling you. and it’s really important to be differentiated today. all right. i echo your comments, mohamed. you’re amaing. how do you big payable teams? let’s not go baseball. both of you guys. come on. you’re a yankees fan. next thing you’ll tell me i’m a yankees, i’m a rangers, i’m a nets. it’s cablevision thing. it’s france, it’s new york. i grew up before these teams were around. i don’t know, mohamed. i don’t like the new normal. i readon’t.i guess you were kind of right. it’s not good for any of us. whandicap and odds the euro breaks up. i don’t think that’s a likely outcome. it’s a possible outcome but not likely. in terms of not liking the new normal, remember it’s not what should happen, it’s what’s likely to happen. et cetera navigate to what’s likely to happen. i know. that’s the key issue. have you changed the tails on percentage probability? no, it’s a very bi-normal world. we have risk on/risk off because people romance either mode and in reality it’s a bimode. and we have to get used to that. when do the reds and mets play? won’t be in contact with you then? we can’t talk then because it gets too nasty. we’ll see. there’s always hope. focus on the hockey. watch it every night on cnbc. our thanks to pimco’s mohamed el-erian. we’re very pleased to have him as an advisory board member for