Scott Minerd ‘Gazes Into Crystal Ball,’ Says Fed May Buy Stocks, Hoard Gold In Severe Crisis
"As I gaze into my crystal ball...", Guggenheim's Scott Minerd begins, in a note dated Monday.
To be sure, Scott's "crystal ball" isn't always a happy place.
Back on February 27, he "gazed" into it live on national television alongside Joe Weisenthal and Scarlet Fu, who, along with Bloomberg's audience, were subjected to Minerd's dark vision for the future of humanity.
Read more: Scott Minerd Woke Up On The Armageddon Side Of The Bed This Morning
"This is possibly the worst thing I’ve eve
Depressing. This is a really great post.
Not sure I get the rationale for why they would buy gold on the speculation on the demise of the greenback…except that gold would one of the assets, paper and otherwise, in a basket. Where this basket ends up being the replacement for the greenback.
On re-reading this post (and, this really is a great post), amazing is that “The minimum period of time for keeping rates at the zero bound would be something like five years, but a longer time period may be necessary”. One more downleg for Treasuries (who knows when, I don’t) then that’s it. Over as an asset class. Maybe the Fed takes most of the Treasury market on their balance sheet. Whatever they don’t take on, maybe they print the money for the interest payments to the bagholders. Bang or whimper.
There’s a reset coming. The current system is ending.
I see a rather dark road being started on here. This mythical toolbox the Fed and other CBs refer to appears to contain whatever they want it to contain. They are rapidly becoming a fourth tier of government and like the SC and other courts will tempt the senate majority party to pack it with ideological and partisan board members. We’ve already seen Trump toy with the idea.
Gold is about a $9T market depending on the day. I don’t get it. They could buy all the gold today with their digital printing press. So what. People don’t sell gold to the Fed and price doubles. So what. I don’t get the motivation for the potential for th Fed to consider it unless it’s part of the system reset.
Except they couldn’t. If they bought even a few billion with forward guidance to buy more the price would raise. Then the next few billion would drive it up more. If they tried to buy it all it could hit $20k or more per ounce easily. I mean how much would you have to pay to pry the sums held by China and Russia from their reserves? Especially in a scenario where we obviously want it all. But that’s just Econ 101.
The way this article went from market reality to what I see as false structures allowing manipulators to guide the natural course of events into predescribed theoretical channels like flood control devices which sound good but aren’t’ because the movements should be a function of natural market flows not some theoreticians conception of what they should be. What is happening now is the result of too much control not too little. I follow cycles and no one wants to let them follow their course when the natural diretiion is something that some don’t want – that direction is down. New Orleans is a disaster because of over-control and so are the markets ever since Greenspan cut off the 1987 reactions.
Seems that many EM central banks have been ramping gold positions.
Thank you for that post and especially the last chart. I would have preferred to see it begin in 1980 which I’m guessing was the apex. Being a “reserve currency” is not a magical property that is immutable. Let’s start thinking about the conditions that led the USD to become one (trade surplus from issuing country, banking system to clear international Market settlement, biggest orderly securities market, growth of multilateral trade, etc.). What is the trend on those?
That are of course part of the “reserve currency” puzzle but the big one… the real elephant in the room is America’s military power. The power to keep global shipping lanes safe and to take action against threats in practically any world area. You want USD because you know if they don’t do that job there is not a second option. Neither China nor Russia is up to any challenge beyond maybe their immediate vicinity. That is not about to change anytime soon. The USD will likely enjoy reserve currency status for a good long while, especially while the rest of the world needs QE and negative rates even worse.
You are right… Nobody to challenge that. So on with MMT as long as US keep military hedge… Hang on, does that mean that the rest of the world has to support US population wealth concentration otherwise… Happy times!
1971 was likely much closer to the apex of dollar dominance than 1980 due to the abandonment of the US dollar’s gold convertability in 1971. The subsequent 1973 oil crisis further exacerbated the rise in inflation. Inflation remained a significant drag on the US economy until it was finally brought under control by the Fed in the early 1980s.
And another thing. Last financial crisis, I thought the big bagholders had been sovereign funds, are they back this time? I read that retail is the buyer in this market (?) What happens when the first move back to real markets is when the Fed turns off the promise of corporate credit support and other new tools? I get that the USD yc is here at zero to stay but what about the rest: Does QE infinity mean corporate credit support infinity? Now that big corps filled their coffer with cash, why continue? but if it doesn’t continue, then what happens?