Gross, Dalio, Gundlach...Minerd?

From aiCIO's December Issue: Is Guggenheim Partners' Scott Minerd set to enter the Pantheon of fixed-income investing greats?

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It’s 4:45 a.m. in Los Angeles, and the Scott Minerd Show has already started—15 minutes ago. As I’m led into the room where Minerd—the global CIO of Guggenheim Partners—is holding court, he finishes his sentence before turning to greet me with a grin. 

“Who’s gonna buy that freaking stuff?” 

And with that, he’s off—and few things can match Scott Minerd on a roll. 

Minerd holds this meeting every Monday, often from the firm’s Wilshire Boulevard offices. It’s his pre-game talk, of sorts, to his key troops. On this morning, he sat at his desk overlooking the Pacific—which is pitch black at this hour—surrounded by four computer screens, one television, a picture of a private jet, a large Charles Schulz-themed birthday card, various war-bond posters, and eight slightly tired looking men—and for nearly two hours discusses everything from fiscal policy to bond spreads to upcoming travel to the Los Angeles Dodgers. Throughout the meeting various people, ranging from his ex-military chief of staff to his marketing head, rotate to the seat in front of him. Whether the meeting is for his benefit or the others is unclear—but the amount of information streaming through the room is immense. 

“The US economy has had a good September,” he says at one point. “Nearly every piece of data is a positive. Part-time unemployment is up, and that’s one of the best leading ­indicators of future employment. Home prices have appreciated; Bernanke’s policy of ­propping up home prices is working.” 

A few minutes later: “I’m almost happy if we drive over the fiscal cliff. It’s not likely, but the economy is strong enough that it could power right through, and we could fix some things. We will get some policy compromises.” 

And then: “The number-one best predictor of Christmas sales, as we all know, is the stock market. Some indicators are more than tarot cards and tea leaves—and this might be one of them.” 

And: “Long-term rates are like a balloon being held underwater. They are there as long as you hold them there. When you let go, they shoot up, which the Fed will one day do.” 

Then: “From Europe to China to US retail—green shoots in the US are showing up.” Just then, on the muted television behind him—where fellow bond-house Californian Neel Kashkari of PIMCO is speaking on CNBC—the telltale red band comes onscreen, indicating breaking news. As it does, a robotic female voice from Minerd’s Bloomberg terminal chimes in: “September retail sales rise 1.1%.” 

“That’s an annualized rate of 13%,” Minerd says without pause. “Obviously positive news.” 

Minerd hasn’t always been so positive—and he reminds the men in the room of this. “I’m not one of those guys who is always saying the next crash is coming or that everything is always positive,” he says. The historical record supports such a claim: Before the crash, Minerd was one of the few voices predicting a global calamity “of biblical proportions. I only used that phrase once in public,” he says. “People labeled me a nut. But I continued to use it internally, because it was accurate. I said, ‘Imagine how bad it could be. It will be that bad.’” 

By now, nearly two hours later, the October sun has started to arc over 100 Wilshire Boulevard onto the Pacific. The discussion moves to Minerd’s upcoming travel schedule, which will bring him to Chile, Europe, and New York in the next 10 days. “I’m going all the way to Santiago to answer two questions?” he jokes with his chief of staff. The meeting winds down, but as we stream out of the room, he has one more idea.