The rallying markets aren’t as good as they seem, says Guggenheim Partners chief Scott Minerd. He likened inflation of asset prices caused by loose money policies of central banks to a Ponzi-scheme that eventually must collapse.
The Federal Reserve’s efforts to pump liquidity into markets has created “Zombie Companies” that may see an outflow of capital as the utility of that money continues to diminish. The longer that this market runs, the harder the fall will be when it ends.
For now, 15% of the US economy is already in recession. We will reach a tipping point when investors will awake to the rising tide of defaults and downgrades.
“The timing is hard to predict, but this reminds me a lot of the lead-up to the 2001 and 2002 recession.”
Defaults despite a rally in riskier assets, reiterated a warning that BBB-rated bonds risk further downgrades.
RT. com / ABC Flash Point News 2020.