Tag Archives: Jeff Gundlach

Gundlach Warns Stay Away From Gold ETFs: “What Happens If Everyone Wants Delivery”, by Tyler Durden

People who buy gold often distrust pieces of paper called currencies. If you buy gold, by the actual yellow shiny stuff, not pieces of paper called ETFs. From Tyler Durden at zerohedge.com:

The internal mechanics of the gold market are again showing strains under this rally. The gap between New York futures and spot prices in London is still elevated, a sign of lingering concern over future supply of the physical form of the metal.

While investors continue to seek gold as a haven, it’s still difficult to ship bullion around the world due to coronavirus-related restrictions, sending futures prices even higher.

As Bloomberg reports, until recently, that was unheard of in a metal that’s so utterly fungible, so easy to transport and where trade channels are so deeply established. But with planes grounded and refining capacity severely restricted, don’t expect the arbitrage to break down immediately.

“People are paying the premiums over in the physical market and I think it’s rolling into the futures,” said Peter Thomas, a senior vice president at Chicago-based broker Zaner Group.

“It’s safe-haven buying. People are scared.”

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Gundlach: “Intense” Downturn Means “Helicopter Money” Is Coming, by Martin Luscher

Jeffrey Gundlach is one of the world’s most astute bond fund managers and economic prognosticators. From Martin Luscher at Finanz und Wirtscaft via zerohedge.com:

Central banks are easing, and stocks have reached a record high. But that doesn’t mean that everything is okay. Jeffrey Gundlach sees big trouble ahead. The CEO of the investment firm DoubleLine is worried about the development of corporate debt. But also the levels of government debt and the US equity markets are not sustainable. According to Gundlach, investors have to brace for significant disruptions.

Mr. Gundlach, what would you recommend to investors?

They need to position themselves for the next global downturn because it will lead to substantial changes in the markets.

When will the downturn come?

It doesn’t matter whether it comes in one year or four. If you don’t start preparing now, you will maybe do better while the economy continues to do okay, but whatever gain you get from that will be overwhelmed by problems with your investments in the downturn.

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Gundlach Lashes Out At “Crackpot” MMT Used To Justify “Massive Socialist System”, by Tyler Durden

The solution to the US government’s debt woes is to simply print money. From Tyler Durden at zerohedge.com:

If US debt is at $22 trillion and interest rates can barely rise above 2.60%, why can’t the US have $222 trillion in debt? Or 2 quadrillion.

That, in a nutshell, is the generic MMT argument which is gradually being spoon-fed to the general public as the financial basis behind such policy proposals as the “Green New Deal”, and which claims that the US government should dispense with a central bank altogether and resort to helicopter money to reflate the economy, a strategy that is especially popular among socialist politicians as it affords them a carte blanche to spend virtually unlimited funds obtained from the sale of debt.

Of course, this only works until it doesn’t – and it usually stops once faith in the reserve currency starts buckling. But while that has yet to happen, as the TBAC pointed out two months ago, it has not prevented a cohort of financial icons and pundits from opining on the intellectual inconsistencies of MMT. And the latest to do so, just hours after we presented the scathing criticism of Convoy Investments’ Howard Wang, was none other than Jeff Gundlach, who during his Tuesday webcast “Highway to Hell“, slammed MMT as a “crackpot” theory, and slammed the “people who have PhDs in economics” and are “actually buying the complete nonsense of MMT which is used to justify a massive socialist program.”

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Will The Real Bond King Stand Up? by The Global Macro Monitor

Jeff Gundlach, the best bond fund manager in America, is short-term bullish, long-term bearish on bonds. From The Global Macro monitor at macromon.wordpress.com:

We get it.

Jeff Gundlach (we are some of his biggest fans) is a trader at heart, as are we, and is very cognizant of short-term market technicals.

He recently tweeted,

However, it was only June he stated

So it’s eye-catching, then, that Gundlach reiterated in a webcast on Tuesday his call that the 10-year Treasury yield would rise to 6 percent by 2020 or 2021. “We’re right on track” for that, he said. As a reminder, that would be the highest yield since 2000.

His reasoning is fairly straightforward. The combination of rising U.S. interest rates and fiscal deficits is like a “suicide mission,” he said in the webcast, escalating the intensity from last month when he referred to the trend as a “pretty dangerous cocktail.” Ultimately, the debt burden will rise to such a level that borrowing costs will surge, in his estimation. That hasn’t happened yet because ultra-low German yields are capping how much Treasuries can sell off.   Bloomberg

Wow,  6 frickin’ percent!

Two Views Are Consistent

We are with Jeff.

In the near term, the bond shorts may be scorched (or may not) with their record off-side position but given time long-term interest rates are going much higher than the markets believe.  Deteriorating flow technicals will bring term premia back with a vengeance.

European Bond Bubble

The trigger will most likely be the bursting of the European bond bubble.

The Portuguese 10-year trading at half the yield of the 10-year U.S. Treasury?   Come on, man,   Are you serious?

When Super Mario takes his foot off the pedal, turn out the lights on those holding the Spanish 2-year at -0.327 percent, or the 10-year bund at 0.34 percent.

To continue reading: Will The Real Bond King Stand Up?

Gundlach’s Bond-Market Inflection Point, by Lisa Abramowicz

The long bull market in bonds (since 1982) may be over. From Lisa Abramowicz at blomberg.com:

DoubleLine’s Jeffrey Gundlach indicated in a webcast on Thursday that financial markets are on the brink of turmoil, saying “this is a big, big moment.” He’s right. It is.

The mood has shifted suddenly. Investors are losing faith in the efficacy of monetary stimulus, and it appears that perhaps central bankers may be, too. The Bank of Japan and European Central Bank have refrained from committing to additional rounds of stimulus and are quickly running out of bonds to buy under their existing programs. The BOJ may run out of bonds within the next 18 months, while the ECB may run into a wall sooner than that, according to analysts cited by the Wall Street Journal and the Financial Times.

The Federal Reserve, meanwhile, is still planning to raise benchmark interest rates despite underwhelming economic data. This is in large part because policy makers are increasingly concerned about the threats to longer-term financial stability by keeping rates so low. Meanwhile, inflation expectations are rising on bets that government officials will embark on spending plans to stimulate growth.

This multifaceted dynamic is a game changer, and markets have taken note. Traders have started dumping government bonds, leading to the biggest rout in Japanese debt in 13 years.

On the Rise

Japanese bond yields have risen in the past few months as the BOJ studied its stimulus effort.

[For interactive graph, see original story, link below.]

Yields on 10-year German bonds just turned positive for the first time since July.


German 10-year bond yields turned positive for the first time since July

[For interactive graph, see original story, link below]

U.S. government bonds are poised for a second consecutive month of losses for the first time this year.

Going Down

U.S. government bonds are set for their second consecutive month of losses for the first time this year

[For interactive graph, see original story, link below.]

Futures traders are predicting a greater chance of the Fed raising rates this month than they were just a day ago, with every new speech or piece of data moving the needle. It’s clear that many are struggling to understand what the Fed members’ main considerations will be when deciding whether to take action.“Interest rates have bottomed,” Gundlach said in the webcast. “They may not rise in the near term as I’ve talked about for years. But I think it’s the beginning of something, and you’re supposed to be defensive.”

The big question now is, how far will this selloff go? If it stops here, it will be another blip soon forgotten. So far, the moves have not been drastic. Japanese government debt, for example, has been losing value steadily, but the losses since June amount to 2.3 percent, which isn’t the end of the world.

But this does feel like part of a bigger trend. Jitters are spreading.

If European and Japanese central bankers are approaching the end of their bond-buying programs, then investors will have little reason to buy debt at a premium that pays no interest. Developed-market sovereign bonds would certainly suffer some significant losses, sending ripple effects through stocks, currencies and riskier bonds.

No one really knows how damaging a bond-market tantrum would be for the worldwide economy. Indeed, it seems as though it would be healthy for bond yields to rise and some equity valuations to fall a bit. But it’s worrisome that global markets are moving together as much as they have been, leaving investors with few hiding spots.

The next few months will most likely be more turbulent than what traders have become accustomed to. And it probably won’t be much fun for many bond investors.


“Stock Markets Should be Down Massively,” but Investors “Hypnotized that Nothing Can Go Wrong” by Wolf Richter

Jeff Gundlach, perhaps the best bond fund manager in the world, has turned negative on stocks and bonds. From Wolf Richter at wolfstreet.com:

Bond bull Gundlach U-turns, goes “maximum negative” on Treasuries

Stock investors have entered a “world of uber complacency,” Jeffrey Gundlach, CEO of DoubleLine Capital in Los Angeles, explained – we assume with some bafflement.

On Friday, the S&P 500 hit another all-time high, after it was reported that the US economy grew at a painfully slow rate of 1.2% annualized in the second quarter, after a first quarter of 0.8% growth, which produced a first-half growth of 0.9% annualized, the worst in four years.

Even “adjusted” ex-bad-items earnings of S&P 500 companies have declined on a year-over-year basis for four quarters in a row. Total business sales in the US have declined since mid-2014. Defaults of companies rated by Standard & Poor’s have jumped to the highest level since the Financial Crisis. Overall business bankruptcies are soaring. Yet, stocks march higher.

So Gundlach told Reuters in a telephone interview: “The artist Christopher Wool has a word painting, ‘Sell the house, sell the car, sell the kids.’ That’s exactly how I feel – sell everything. Nothing here looks good.”

“The stock markets should be down massively, but investors seem to have been hypnotized that nothing can go wrong,” he said.

And his firm went “maximum negative” on Treasuries on July 6, he said. That day, the 10-year Treasury yield fell to 1.32%, taking out the low of 2012. “We never short in our mainline strategies,” he added. “We also never go to zero Treasuries. We went to lower weightings and change the duration.”

On Friday, the 10-year yield was at 1.45%. So at the moment, his timing was right. Money was being lost in Treasuries; prices fall as yields rise.

Grundlach’s “maximum negative” on Treasuries is a U-turn. For years, he’d been out there telling astonished listeners that yields would fall further from their already ludicrously low levels.

For example, on January 14, 2014, he shocked Wall Street and the media when he predicted that the 10-year Treasury yield would fall as low as 2.5% in the near-term. It was a ridiculous prediction. At the time, the 10-year yield was at around 3.0%, and Wall Street predicted that it would climb to 3.4%.

By mid-May, 2014, the yield hit 2.5%.

Then on December 9, 2014, he went way out on a limb and predicted that 10-year Treasuries would gain even more in 2015, and that the 10-year yield could plunge as low as 1%.

“Why not?” he told Reuters at the time. “The European rates are at 1%. France is below 1% right now,” he said. People laughed at him. QE Infinity had ended. The Fed had begun flip-flopping about rate increases. At the time, the 10-year yield was around 2.2% and couldn’t possibly go lower.

“If oil goes to $40, something is very wrong with the world,” he said in the same interview. Nonsense, people said. Oil will never drop this far.

In January 2016, WTI fell below $30 a barrel! The 10-year Treasury yield hasn’t quite made it to 1%, but got close: On July 6, 2016, it fell to 1.36%.

That was the day he turned “maximum negative” on Treasuries, which should give Treasury bulls the chills.

To continue reading: “Stock Markets Should be Down Massively,” but Investors “Hypnotized that Nothing Can Go Wrong”