Jeffrey Gundlach is quote worried about the longer-term risks coming from the worldwide monetary policy. That was the message of his latest presentation.
“Central banks around the world have put together a lot of intricate policies,” he shared. “Ultimately, the tower will not be able to stand.”
Jeff Gundlach noted that interest rates are negative for so many countries from up to 5 years. In the US, he stated it’s more likely the 10-year yield goes below 2% and then it heads toward 3%. So he is still US gov bullish bonds. He is bearish investment-grade corporate bonds as he thinks the yields are too low for the risks.
Supply and demand is what drives the bond market. On the chart below you can see that the net issuance of some sovereign bonds is now negative This means that central banks are buying bonds faster than issuing them and that is why interest rates are so low worldwide.
“I do think inflation is not a problem,” Gundlach shared. He is not worried near-term, but it will be a problem in 4-5 years.
Citing various alternative measures of inflation, Gundlach stated that inflation in the US may be lower than conventional CPI and PCE measure might suggest. Its normal as commodity prices are low. Once they stabilize, as they can’t go down forever, inflation will return or stabilize.
Regarding the hot topic of the USD strong uptrend, Gundlach warned against shorting the dollar, saying that the consensus is right to be long.
“Speculative positioning is really, really one-sided,” he said. “The dollar is 60% long.”
Gundlach warned that shifting demographics, specifically the aging population, will become an increasingly big deal.
On various investment classes, Gundlach said emerging market bonds denominated in local currencies looked like a disaster in 2015. He said he liked gold, especially due to the strong demand coming from emerging market central banks; he sees gold going to $1,400 this year.
Gundlach likes Indian stocks, but only as a long-term play. He recommended investors by Indian stocks and lock them up in a vault for twenty years.
He noted investment-grade bonds are overvalued, while high-yield-grade bonds are fairly valued. He likes Puerto Rican municipal bonds, and he has 15% of his own money in California municipal bonds.
During the Q&A, he reiterated his negativity toward “old-school” automakers. He noted the the average car sits parked more than 23 hours a day. He also said the space used by garages could be better used for something else.
Near the end of the webcast, Gundlach said 2014 was the best year of his career. And despite the rapid growth of the firm and the increasingly numerous offering of DoubleLine investment products, he reassured listeners that he was not spreading himself too thin.
Receive News & Ratings Via Email - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings with MarketBeat.com's FREE daily email newsletter.