‘Big Equity Losses’ Expected on Monday (or Wednesday): Sri-Kumar

The U.S. and Europe can expect big equity losses on Monday, Komal Sri-Kumar, chief global strategist at TCW Group, told Bloomberg TV.

If not Monday, the losses will come on Wednesday or whenever Eurozone leaders hold their follow up meeting, he said.

For the past three weeks, global equities had largely rallied on hopes of a satisfactory Eurozone bailout.

On Friday afternoon, the S&P 500 Index is up about 12 percent and the Dow Jones Industrial Average is up about 10 percent from the Oct. 3 closing level.

Sri-Kumar, however, thinks the meetings will be fruitless for one major reason: German Chancellor Angela Merkel needs approval from the German legislative body Bundestag before she can agree on anything.

He thinks Sunday's Eurozone summit will be an empty meeting because the Bundestag has not approved anything yet.

Come Wednesday, he thinks Eurozone authorities may announce a guarantee for the first 10 or 20 percent of losses on peripheral Eurozone debt.

However, he is skeptical of where the funding will come from because once again, it would have to go through the Bundestag.

He thinks the German political reality is that the Bundestag will not approve such bailout measures.

Even if the 10 or 20 percent is guarantee is approved, he still thinks it will not be good enough to investors, who generally are not willing to accept the risk of any losses on senior credit.

On these disappointments, he expects big losses in the equities market by Wednesday at the latest.