The NEW Jeff Gundlach Trade Is Going Wild, And It's Been Less Than A Week

Last Tuesday, Jeff Gundlach unveiled his latest trade: Go short the Japanese yen and long the Japanese stock market.

One week in, it’s already in the money.

Here’s a one week look at the Japanese yen against the dollar (the short) via Bloomberg:


Photo: Bloomberg

And here’s the Nikkei (the long) via Bloomberg:


Photo: Bloomberg

Tonight, the yen is getting smashed and the Nikkei is surging in the wake of a landslide election win for Shinzo Abe, who ran on the platform that he would push more easy monetary policy in an effort to stimulate the economy.

During last week’s webcast to DoubleLine Funds clients, Gundlach argued that Japan would pursue aggressive currency debasement, which would mean inflation.

He provided 9 charts that supported his view on this trade.

Japan has an incredibly heavy debt load

The budget balance is around -7.6% of 2012 GDP

Meanwhile, the birthrate has been falling and the population is ageing

Since last year's tsunami, interest in nuclear energy has collapsed and energy imports have spiked

Surging imports have caused Japan to fall into a trade deficit

Japan's stock market has underperformed the US stock market for years

Japan has a positive real interest rate (unlike the US) which gives them room to pursue more easy monetary policy

Japan's dividend yield is higher than the interest income offered by Japanese bonds

All things considered, Gundlach believes there's a big opportunity if you go short the yen and long the Nikkei

That was just an excerpt from Gundlach's presentation...

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