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Minerd: We Can't Avoid a Tax Increase, Fiscal Drag

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    Guggenheim partners CIO Scott Minerd gives his outlook for economic growth.

  • Duration 5:21
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-- called.

To this country's economy is drawing but not so fast this morning second reading on third quarter growth shows an increase of annualized increase of two point 7%.

Is up in the first reading of just 2%.

But -- -- -- go up at the end of the year even produce some Americans.

Then watch Scott -- -- chief investment officer Guggenheim partners he -- 10060.

Million dollars in assets.

Scott than what.

Then like well you know -- I -- everybody talks about the fiscal cliff I've I've referred to as the fiscal speed bump right and that is that.

No matter what happens we are not going to -- worked.

A tax increase some kind of drag on economic activity next year so even if if there's the grand bargain -- were -- talking about.

The shrinking of the federal deficit whether -- despite spending cuts or tax increases -- -- both.

Is going to be a drag on economic growth for the next few years is that why you have what one point 63% roughly on the tenure at this point of the -- I think the reason of one point 63 up.

On the ten years because.

Particularly on the federal have a Federal Reserve -- The -- they.

The Fed is distorting and -- bond market and a essentially.

All of our long term debt that we term borrowing -- nation is being bought by the central by.

Does it make sense I'm a front page of the Wall Street Journal about all of that beheaded likely to continue the bond buying mortgage.

Security buying program -- said that into the next year does that make any sense on the planet.

Well.

I in look.

I thought QE1 was absolutely -- central.

QE2 I understood why we do that in the QE3 I don't object.

I.

Think that the Fed is is making a mistake here -- -- kept perpetuating the growth and its balance sheet and behind all of this debt on their balance sheet.

And they could have achieved the same or even -- better objective by following a different policy.

But -- this is the path that -- on.

Doctor Bernanke is obviously completely preoccupied with the risks of of having -- and -- depression.

And he is just throwing this much monetary stimulus this this thing as he -- And and it looks like even if doctor Bernanke doesn't stay on for another term.

That be the leading candidate to take its place is Janet Yellen and Janet Yellen is actually even more.

-- money printer than than Ben Bernanke.

What is the president that you need to be highlight that if -- Because you need somebody in there who -- help you.

Continue to spend borrowed money and it.

And essentially not -- seriously worried about the level of debt that this nation and as children.

-- -- -- you're you're actually right -- And you know what.

Is happening in substances that.

Because we've driven long term rates down so low artificially low -- -- -- our work shows that they should be about two percentage points higher than they are today.

That's causing the recovery in housing boom I mean we saw today is that.

House and pending home sales surged this month we're we're -- amount and the annual year over your number of eighteen person -- growth.

And and if you live in certain pockets.

You know you're seeing home prices appreciating it.

Over 15% a year well it is that dangerous are these bubbles I asked her talk show -- maybe he said that it in a.

Could be a very weak very well could very well I think the real risk is when -- when -- from the Fed comes to the point where they realize they -- After reversed the policy.

Interest rates are likely to search fairly dramatically.

Com that's going to cause mortgage rates to -- -- you know all kinds of expenses to -- us.

And that's gonna be a drag on economic and -- and we do it and it's going to be nasty.

We it would be nasty form a broad.

We could potentially for up broad range of asset classes -- you have to buy today what looks better do you.

Buying a house or high and stocks well I get a tape given home where you can borrow money on -- -- these cheap rates homes are.

Very very attractive and I know I've I've actually bought three pieces of property personally in the last year and it's if the government's willing market all residential residential.

I'm not asking for help markets copper yeah and I'm not I'll never get -- not living out all of them did you can look at it but Tom.

The F the issue but the point I'm making is that.

You know -- if the government's willing to hand me money.

It was three and a half percent to go buy up on panels and -- and we have mortgage interest deductibility.

Where -- -- that our tax rates in California.

You're talking about an after tax cost of of interest on these homes at less than to -- don't think they'll take that away for.

Wealthier Americans I think that that is a third rail.

And I think they're very likely to -- but I think removing the mortgage interest deduction.

Is like taking -- -- Social Security benefit.

From your mouth -- well.

Let's hope -- senators say hello this act that was great to see if they get -- -- -- minor thank David compartments below where.

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