Over breakfast at an outdoor cafe in Santa Monica, Minerd recalls panicky clients phoning him during the 2008 financial crisis. Sell everything, they’d say. It was classic fear-driven decision-making, he says. To calm the investors, he’d retrieve their Riskometry assessments and ask two questions: Had performance met or exceeded expectations in the event of a market downturn? And had the investments stayed within risk guidelines? In every case, Minerd says, the answers were “yes.” “We’re really only left with one conclusion,” he would tell his jittery customers. “We should increase your risk.”
Minerd pauses to let the thought sink in. His pointy-eared rescue dog, Grace, stretches at his feet under the cafe table. “Virtually every client agreed to increase risk,” he continues. “The financial crisis was the best thing that ever happened to us.”
Minerd, the son of an insurance salesman, grew up in southwestern Pennsylvania on land his family settled before the Revolutionary War. He quit high school a year early to follow a girlfriend to Philadelphia, where he persuaded the University of Pennsylvania to allow him to take courses at the Wharton School. After earning a degree in economics from Penn in 1980, he took classes at the University of Chicago’s Booth School of Business and then worked as an accountant for Price Waterhouse. He switched to investing, which paid better, and started climbing Wall Street’s ranks for the better part of a decade. “He’s a hard-charging guy, and he doesn’t suffer fools,” says Mack, who supervised Minerd at Morgan Stanley. “That’s what you need in this business.”
In 1992, Minerd generated a big win for Morgan Stanley by trading Swedish bonds after the country raised its interest rate to 500 percent to defend its currency. The next year he orchestrated a debt restructuring for Italy that helped stave off a bailout by the International Monetary Fund. He left Morgan Stanley for CSFB in 1994, running the fixed-income credit trading group under Diamond, who two years later jumped to Barclays Plc. Minerd was shuttling between New York, London, and European capitals, facing second-guessers and corporate intrigue. He followed Diamond out the door, only in a different direction—west to California for the sun, the food, and the fitness.
“People thought I was crazy when I moved out here,” Minerd later says over lunch at the Firehouse, a Venice Beach restaurant frequented by bodybuilders. He bought a waterfront home and devoted himself to lifting weights at Gold’s Gym in Venice, an institution for bodybuilders such as Arnold Schwarzenegger, but eventually changed venues because people were constantly interrupting to ask about money management. “I couldn’t get in a good workout,” he says.
At his peak, the 300-pound Minerd could bench-press 495 pounds 20 times and even competed in the Super Heavyweight and over-40 divisions at Los Angeles bodybuilding championships. “I don’t like to do things halfway,” he says, tucking into a Bob Bowl, a 12-ounce steak with sautéed red peppers and onions over rice. “Bodybuilding is 24/7,” he says. “It’s everything that goes into your mouth. It’s if you get enough sleep. It’s how you manage your stress.” Minerd remains disciplined in the gym—hence his Popeye arms. He tries to clock a two-hour workout five days a week in the window between the time markets close in New York and open in Asia.
“If I was ever going to say ‘no’ to him, it would be by phone,” jokes Guggenheim Executive Chairman Alan Schwartz about Minerd looking so physically intimidating. “But I can tell you that his heart and brain are bigger than his body.”
Minerd presided over a December meeting of his macro team in Guggenheim’s Manhattan office in a glass-walled conference room overlooking Grand Central Terminal. Maria Giraldo, a research analyst, explained how his demands for data spurred her to reexamine her biases about the risks of credit investing. “I have this instinctively bearish view based on the length of the business cycle,” she says.
At Minerd’s urging, Giraldo read reports written before the 2008 financial crisis in search of early trouble signs, such as deals being pulled and credit spreads widening. The red flags that showed up a decade ago weren’t happening in late 2016. By contrast, recent company earnings were better than expected, leading Giraldo to revise her forecasts for the current credit cycle to continue at least until 2019. “It could push it out even further,” she says.
Minerd concedes that his investing process can test his clients’ patience. “I tend to be early to sell, and I tend to be early to buy,” he says. “If you’re going to be early, you tend to have periods of underperformance.” In late 2014 he began selling most of Guggenheim’s energy-related debt after his economists predicted a long-term plunge in oil prices. Then, in late 2015, he began buying collateralized loan obligations, months before oil prices hit bottom. “Going into January and February, we were having a tough time,” he says. “But those investments turned out to be a home run.”