Guggenheim CIO Warns "Everything Is Liquid Until You 'Need' To Sell"

The holidays came early to the world's investor class, as instead of 12 Days of Christmas, Scott Minerd, Global CIO of Multi-billion-dollar Guggenheim Partners, dropped his 12 lessons for today's meltup-market participants.

In a series of tweets, Minerd offers some clear-cut advice for the complacent many...

He begins by noting "The rally in risk assets is probably not over, but strength is an opportunity for investors to move towards the exits."

Then explains...

Merkel's failure to effect a coalition increases the risks of longer QE from #ECB.

 

The myth of higher long term rates in the US ignores the risk that the business cycle's terminal rate may be lower than many think.

 

With the neutral rate stuck at zero, a December rate hike will move the #Fed into restrictive territory.

 

The Senate plan to delay a corporate tax cut into 2019 is likely to create a massive drag on the US economy. Bad policy!

 

The shape of the yield curve is telling us that we are on track for a recession and that monetary policy is becoming restrictive. The #tax bill is not a reason to rethink this signal.

 

Market phase has moved from recovery to fundamental and now to speculative. There's little price appreciation now, just clipping coupons. It is time to become more conservative and book gains.

 

To paraphrase Hemingway, credit downturns happen slowly and then all at once. Don't let yourselves be surprised by a sudden increase in spreads and defaults.

 

We are at a moment in time where complacency in the markets will be badly punished in accounts, bonds, and careers.

 

People who snooze will get run over by the bear market in risk assets.

 

The markets have had a great run, and it is easy to get complacent after such a long period of returns.

Ending with some crucial advice for everyone..."Everything is liquid until you NEED to sell. Plan accordingly."

As Minerd concluded recently, based on the historical relationship between market cap to GDP ratios and subsequent 10-year returns, today’s market valuation suggests that the annual return on a broad U.S. equity portfolio over the next 10 years is likely to be very disappointing.

As such, investors may want to seek better opportunities elsewhere.