Skip to main content

"Europe is a "train wreck" and on the "brink of a major financial crisis," Scott Minerd, CIO of the fixed-income firm Guggenheim Partners, told CNBC Tuesday.

 

The way Europe is operating right now, it's what I called recently 'cognitive dissonance,'" Minerd said, or "basically doing the same thing thinking they're going to get a different outcome."

 

"They keep throwing more and more liquidity at it thinking it's going to get better and it's not," he added. Europe fails to recognize that it has a "structural problem, not a liquidity problem."

 

People will "flee the euro" unless they find a way to bifurcate the euro in some way where strong countries are in the euro only and the weak countries are out, Minerd explained, adding, "To be honest with you, I don't see the mechanism to do that."

"As the capital is flooding out of Europe, which we're starting to see now, the first place it's going to go is to the safe havens—[U.S.] Treasurys, which [the market] perceives to be safe, and it'll chase gold," he added.

 

Compared to a 2 percent return on Treasury notes, investors will eventually say that "stocks with price-earnings multiples of 12 or 13 or 14 look relatively cheap, and the growth for corporate earnings in the United States is very good, and this is likely to help us," said Minerd.

 

The United States is "the least dirty shirt in the bag," Minerd concluded. "We have a very good chance of seeing equities up maybe another 10 percent [over the next six months] from where we are.' "

 

The great socialist paradise of the EU is breaking apart, investors are panicking and fleeing the oncoming deluge.  And, there's not a lot of havens of refuge.

 

Think of Europe as the good ship, Titanic.  Its beautiful, has grand lines, an ornate interior, and grand cuisine.  Unfortunately, the bulkheads aren't sealed, the rivets are brittle, its missing half the required life boats, and the lookouts have no binoculars.

 

The grand ship has sprung a leak and is going down by the bow.  There are only two rescue vessels in sight.  A sturdy small freighter designed by the Swiss.  Its in top shape and crewed by an experienced crew.  Unfortunately, they can only take on a few passengers and is slow to take those on.  The other ship is a large freighter designed and built in the US.  She's of good design and was well built.  Unfortunately, she's seen better days.  She's got barnacles and rust and leaks.  The engines still work and as does the bilge pump.  The crew is sturdy and trained.  Unfortunately, the captain is incompetent (there's a rumor he got his masters papers in Liberia).  The first mate is a blithering idiot  regularly sprouting inanities.  The second and third mate can't do math,or their taxes. Wonder how they navigate.

 

Still the old tramp steamer is better than swimming in the North Atlantic.

 

 

 

 



Original Post

Replies sorted oldest to newest

For now, the US remains the only refuge, raggedy though she is, for other people's money.  For now, Japan, our second largest foreign creditor, holds on to US Treasuries because Japanese treasuries pay about 1.1 percent.  The Japanese population is aging quicker than the US population.  They will cash in their Japanese bonds first.  However, at some point they will cash in their US treasuries.  True, the US doesn't have to pay out until the treasuries mature. However, as the Japanese dump their US bonds on the international market, it will crowd out new US Treasuries issues -- translated, it will cost more to sell new debt.

 

The Chinese economy will tank in time as demand for their products drop and their own stimulus plans come due (they overspent and corrupt officials diverted billions).  Chinese are aging faster than the Japanese. For results, see above/.

There are satellite views of over 20 large mostly uninhabited cities in China. Talk about infrastructure overbuilding.

 

Historically, every time China opens to the world, the coastal cities get rich, peasant flood in from the interior, resentment builds and civil war ensues.  So far, they've bled off the resentment partially by bribes and by a heavy handed internal security force. 

Add Reply

Post

Untitled Document
×
×
×
×
Link copied to your clipboard.
×