Bob Brinker, founder and publisher of the Marketimer Investment Letter, comes on The Sherman Show to discuss “Quantitative Easing Infinity” under Federal Reserve Chairman Jerome Powell, the consequences of a Biden versus Trump election victory for the federal deficit, “free money” in times of negative interest rates, his investing concept of “critical mass” and other topics with podcast hosts Jeffrey Sherman and Samuel Lau. The podcast was recorded July 8, 2020.
Now in its 35th year and listed on the Hulbert Financial Digest Investment Letter Honor Roll, Marketimer covers the economy, Federal Reserve Policy, technical analysis of the markets and market timing. Among Mr. Brinker’s outlooks is the idea that as long as real interest rates remain negative, the Federal Reserve will continue to buy the U.S. government’s debt. “The question here is going to be whether interest rates are going to stay near zero forever, which would, by the way, accommodate Modern Monetary Theory because, what the heck – if you don’t have to pay for the money, who cares?” Mr. Brinker tells Messrs. Sherman and Lau. “That’s where we are right now in my opinion…. The reason Modern Monetary Theorists are getting away with this right now is because we’re not paying for the money. The real interest rate on the 10-year Treasury is negative. So we’re getting paid to borrow in real terms, which is a good way to borrow if you can figure it out.”
Of course, how long rates can stay negative in inflation-adjusted terms is the open question. “Where does this all come to, one way or the other? Interest rates,” he notes. “If we ever get into a situation where interest rates go up, you do the math, the interest on the national debt is going to be a really big number. That is going to drive whether Modern Monetary Theory has legs or not.”
Asked for a few of the most valuable lessons from his long career investing in securities markets, Mr. Brinker replied, “The most important thing is to keep emotion out of your investment decisions. That’s what we did this year – well, we always practice this, but we showed that this year when we maintained our fully invested position even though there was that very brief panic in March. We maintained our fully invested position; we told our subscribers to dollar-cost average additional money into the market as they wished. And look what’s happened in the market. The market is back near all-time record highs.”
