Guggenheim Says Market a ‘Ponzi Scheme’ That Must Collapse

A Must Watch Video of Guggenheim’s Interview,

Click To Watch



Ross Larsen, Sonali Basak and Sridhar Natarajan

Bloomberg January 21, 2020

Article From

(Bloomberg) -- Sign up here to receive the Davos Diary, a special daily newsletter that will run from Jan. 20-24.

Scott Minerd has a message for his fellows at Davos who are applauding rallying markets: Things aren’t as good as they seem.

The Guggenheim Partners investment chief likened the inflation of asset prices caused by the loose money policies of central banks to a “ponzi scheme” that eventually must collapse.

“We will reach a tipping point when investors will awake to the rising tide of defaults and downgrades,” he wrote in a letter from the World Economic Forum meeting. “The timing is hard to predict, but this reminds me a lot of the lead-up to the 2001 and 2002 recession.”

Minerd’s warning to clients came before U.S. President Donald Trump spoke to a delegation in Davos, where he faulted the U.S. Federal Reserve for trying to raise interest rates and said the central bank took too long to lower them. The European Central Bank will on Thursday decide about the direction of interest rates as officials weigh the extent of an economic slowdown.

Minerd cited rising defaults despite a rally in riskier assets and reiterated a warning that BBB-rated bonds risk further downgrades. He said that type of debt is at a greater risk of deterioration than it was in 2007.

Anne Walsh, Guggenheim’s fixed-income chief, said in an interview that 15% of the U.S. economy is already in recession. She said 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, she said.

The longer that this market runs, the harder the fall will be when it ends, she said.

“Patience will lead to bigger opportunities for disciplined investors who don’t wander off into exotic asset classes or chase current returns,” Minerd wrote in the letter.

(Updates with quotes in the final paragraph and context in paragraph four.)

To contact the reporters on this story: Ross Larsen in Rome at;Sonali Basak in New York at;Sridhar Natarajan in New York at

To contact the editors responsible for this story: Sree Vidya Bhaktavatsalam at, Ross Larsen, Stefania Bianchi

For more articles like this, please visit us at

Subscribe now to stay ahead with the most trusted business news source.

©2020 Bloomberg L.P.




Ross Larsen, Sonali Basak and Sridhar Natarajan (January 21, 2020). Guggenheim Says Market a ‘Ponzi Scheme’ That Must Collapse [Web Page]. Retrieved from

Scott Minerd, Guggenheim Partners co-founder and Guggenheim Global chief investment officer (Jan.22) Why Guggenheim’s Minerd Sees the Market as a ‘Ponzi Scheme’ [YouTube Link to Video] Retrieved from

Rate this article:

Please login or register to post comments.


Get Your Free Investment Kit

Free Investment Kit
To receive your free kit please fill out the following form.
All form fields are required