The Federal Reserve has become “the largest hedge fund in the world," Anthony Scaramucci, former White House Director of Communications and founder of the investment firm SkyBridge Capital, told Newsmax TV on Monday.
When asked about the Fed’s decision to slash interest rates and buy $700 billion worth of Treasury securities and a possible Congressional stimulus package in response to the coronavirus outbreak, Scaramucci told “Newsmax Now” that Wall Street has “lost our specific security analytics and we're now more concerned about things that are coming out of Washington, because these big macro moves, you know, we turned the Federal Reserve, ironically, into the largest hedge fund in the world. You know, they had a six-and-a-half trillion-dollar balance sheet at the peak of the crisis, they're likely taking this balance sheet up right now to one-and-a-half to two trillion dollars, so that makes very, very big macro adjustments to stock prices, bond prices, etc.”
He said earlier that “unfortunately, since the 2008 crisis we were a data-dependent Wall Street society, where we analyze stocks and there's a term in our markets called price discovery where you’re looking for the true value in the individual security. But, when you do these massive macro monetary easing’s those interest rate policies lift all assets. So, what we know in our industry is that interest rates are the financial gravity of financial assets, so the lower they go the higher the asset prices.”
Scaramucci later added, “we are actually short-term bearing, we do believe a recession is in place and starting to happen, our second quarter estimate is about -5%, we think you’ll get -3% in the third quarter, that defines a recession. But I do believe that you will see an economic recovery coming in the back half of the year because consumers are pretty well-positioned, they have pretty strong balance sheets, they’re slowing down their consumption right now, so you could be spring-loading consumption into the fourth quarter.”
Theodore Bunker ✉
Theodore Bunker, a Newsmax writer, has more than a decade covering news, media, and politics.
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