Taps Coogan – June 11th, 2020

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Scott Minerd, Guggenheim Partners co-founder and Global Chief Investment Officer, recently spoke with Bloomberg about his concerns that the Fed’s policies will lead to a ‘day of reckoning’ whenever they choose to taper their stimulus and that monetary and fiscal stimulus, as well as the widening wealth divide, may be “fundamentally altering capitalism in the United States.”

 

Some excerpts from Scott Minerd:

“…The Federal Reserve has basically eliminated the downside in corporate debt. They’ve sent the world a buy signal and we’re now putting on record amounts of corporate debt… I think ultimately, the Fed is going to find itself in a position where when it tries to phase out these programs of support for corporate debt, it will be a lot like what happened back in 2013 when Ben Bernanke first talked about ending quantitative easing. There was a tantrum. It is very likely that the Fed will face that day of reckoning when it tries to slow down asset purchases of corporate debt and the market will challenge the Fed to find out where the put is and I think this is now a permanent feature of the market… Corporate America is going to become addicted to the Fed providing support…”

“The amount of space dedicated to retail in the United States is approximately three times that of the next country, which is the United Kingdom. So, the fact that we’ve had such a glut in some categories like retailing, a lot of that is never coming back and the jobs attached to it will never return and we are going to have to retool workers and that is going to be a major policy issue…”

“I think the question is ‘How far can we push this?” …The American people need to have more confidence in the willingness and ability of its government to print money. The dirty little secret of central banking is that, ultimately, the role of the central bank is to finance the government. This open ended financing from the Federal Reserve, I think, will continue and is going to give a lot of flexibility to Congress to pass additional support programs… Some of them may be very constructive and positive, but some of them might turn out to be highly disruptive to the capitalist system. I believe that we are fundamentally in the process of altering capitalism in the United States and the free enterprise system has a number of threats on a number of fronts.”

There is much more to the interview, so enjoy it above.

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