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Minerd: Ready for Fiscal Speed Bump, Not Cliff

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  • Description

    Guggenheim Partners CIO Scott Minerd on the impact of the fiscal cliff on the market.

  • Duration 3:36
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Says the economic impact of going -- that -- Is greatly overstated.

He is chief investment officer at Guggenheim partners overseeing more than a 125 billion dollars and assets.

Held -- overstated.

Well I think it.

This stage of the game.

The market already assumes that it's not likely were gonna get a deal.

And because the market -- were not getting a deal -- pricing for what I think is one of the worst case scenarios.

And to be honest with -- -- and I think that if you just went off a cliff.

At this stage of the game.

That removing that uncertainty from the market would result in -- in a rally in equities so.

On balance I think this is a good entry point to over the next few weeks before and even before we get a deal.

You've seen a bit like the -- we're looking at.

Their treasury and then meals come back up to one point 7% about our people say that they -- yield should be at one point 2%.

If we end up going over that -- -- you don't buy that you don't think there'll be a rally and in treasury is and and money come out of stock market and in addition to what we've already saying.

Right well I think people look I think that it is likely -- we get some kind of rally in treasuries.

But of course that brings -- yields down on treasury securities and fixed income assets to levels that make equities look even more compelling.

So while you know look we're gonna have some -- in here and you know me of I look at things over kind of a two to five horizon.

-- you know on balance you're being rewarded take the risk right now and equities are not where they should be.

Mean for instance take a stock like ConocoPhillips.

It yields four point 9% on a dividend basis and it's its debt yields less than 3%.

Or Johnson & Johnson which yields three and a half percent on -- dividend yield but yet its debt yields something like you know one and a half.

These comparisons are are just too compelling for so many income oriented investors and I think that they will put money.

And to talk about fixing common where interest rates are right now given what the Federal Reserve did this past week and -- really said.

About how it's targeting the unemployment rate at six and a half percent how it now views inflation.

Do you think that we're may be even closer to.

A serious serious pop up and long term interest rates well.

I think the Fed by virtue of doing what it did introduced a lot more ambiguity.

In the policy and when they're gonna -- for instance.

The forward looking expectation on inflation of two and a half percent.

As being a policy god so does that mean if inflation gets to 4% the Fed doesn't do any thing if the expectation is it's gonna come back down to two and half.

All these questions are completely.

Out there to be answered as the events occur.

And yet at the same time they took the certainty.

Of some short term rates staying behind that.

At these low levels until 2015.

Off the table.

So the market now doesn't realize what if unemployment at six and half percent sometime in the coming here and not.

-- to -- not 2014.

-- -- hit and bright and does that mean now we're gonna raise rates when you told us before you were gonna keep them.

At low levels -- until 2015.

I didn't like what the Fed did in the statement and I think it raises a lot more uncertainty.

And when you increase uncertainty you increase the risk of having an -- fixed income.

Like stacks.

Indices -- -- to say well Scott -- of Guggenheim partners take your take care hospital.

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