Government Shutdown Old Hat to Americans: Minerd

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Oct. 1 (Bloomberg) -- Scot Minerd, global chief investment officer at Guggenheim Partners, talks with Francine Lacqua about market reaction to the U.S. government shutdown and why the situation does not scare investors. He speaks on Bloomberg Television’s “The Pulse.”

We are facing a debt ceiling in three weeks.

What is going on?

We have been through this exercise in the u.s. so many times, something like 17 times in the last 30 years.

The effect on balance has always been that equities tend to rise during the crisis by about 1% and bond yields fall after the event -- i don't want to call it a crisis, but i guess it is a crisis.

This is old hat to americans.

They understand how the political process works.

There's going to be a lot of brinksmanship.

I think this will go on for much longer than we currently expect.

You expected to go on until we have to renegotiate the debt ceiling.

That's right.

I think that date is receiving.

In a government shutdown, we are spending less money so does the treasury even more time.

I can see this going on for another two to four weeks, which does have some pretty profound implications for the fourth quarter gdp.

How concerned are you that this is a glimpse of what is to come?

That we will be up to reach agreement on the debt ceiling?

This concept that is getting tossed around the u.s. treasury will default, it is just nonsense.

Even if we don't get a debt ceiling, the treasury still has enough receipts to meet all of its interest needs.

The debt ceiling does not preclude us from rolling the debt over that is already there.

I don't think this noise really amounts to much at all for the capital markets in the near term.

Last year it was risk are in/risk off.

We at a political crisis in europe in every two days the markets would widely gyrate.

It seems this year they are pushing off any political uncertainty.

Are we not too complacent?

I think we are getting complacent, especially in the west the reality is, full markets typically go through three phases.

The relief at the beginning which is when a crisis ends, like in 2009, and we realize the world is not coming to an end.

Markets repriced to something that is fair.

Then there is the wave of fundamental improvement where we see earnings growth and we see markets move up in line with earnings growth.

The way we have just entered in the last 12 months is the one where we get multiple expansion.

Earnings are growing, but equity prices are continuing to rise.

U.s. equities are not the value they were just a year or so ago.

I think it is time for prudent investors to tart taken some cash off the table and look where else they could allocated around the world.

And the huge unknown, when will the fed start tapering and will replace ben bernanke?

You met with larry summers a couple of days ago.

Unfortunately, in united states, the federal reserve chairman appointment has become highly politicized.

We are going to be in for an interesting season here in the fourth quarter because dr.

Bernanke, if he ever does announce his resignation, will be leaving the first quarter of 2014. janet yellen i think is the odds on favorite.

I think her federal look a lot like renee keep us fed, which will be highly accommodative and that will be generally supportive for asset rices both in u.s. and around the world.

You like european equities.

A lot more than u.s. equities we have started to turn the corner in europe.

We look at the competitiveness of the periphery, unemployment seems to be stabilizing.

Unit labor costs are coming into line.

And things are not getting worse.

The market is a discounting mechanism for the future.

I think european equities have a lot of headroom, for instance, spain.

Equities could be up 40% or 50% in the next 12 months.

It is an interesting place to look.

There is a confidence vote tomorrow.

That is the nature of politics, we have these crises.

As an investor, is it too soon to put money in their?

It depends on your perspective.

If you're concerned about a 5% drawdown in italian equities, yes, you might want to wait.

If you look at the next 12 to 24 months or you might expect italian equities to be 20% to 40% higher, why take the risk is today isn't the day?

I think getting involved or averaging your way in italy is a good trade.

Thank you for that, scott minor, guggenheim chief investment officer.

This is something we also heard from the provincial ceo, he was saying, look, things are not getting worse, so where's a little bit of light at the end of the tunnel here in europe.

A lot of investors saying, it looks cheaper in europe, why not invest in this region?

Signs of stabilization.

Thank you very much, indeed.

And just 20 minutes time, "surveillance" with tom keene and he joins us with a preview.

The lights are on, but no one is home in washington.

You saw our coverage out of hong kong and washington as we hit the shutdown at your 5:00 a.m. time.

We have a host of perspective on the political economics of washington, david stockman will join us.

Always controversial, the former reagan budget director.

I won't quit some on the future

This text has been automatically generated. It may not be 100% accurate.


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