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DoubleLine Funds’ Jeff Gundlach just gave a massive presentation on the global economy, focusing on the ways in which deficits and debts play into the current economic outlook.While he refuted a statement made by Dick Cheney in 2002, alleging “deficits don’t matter,” his prognosis for the eurozone and for the U.S. economy is not simply “fixing the problem” by enacting harsh austerity measures.
Instead he told investors that in countries burdened by excessive debts, “the economy will only turn around if you make the debt problem worse,” suggesting that slow fiscal reforms amid continued spending were a better alternative than the harsh austerity Germany appears to be imposing on the rest of Europe.
That said, he said he doesn’t believe Greek’s membership card to the euro area will be valid come January 1 of next year.
Gundlach also forecast several bumpy years ahead for housing, which admittedly is “nowhere near under the stress it was a few years ago.” He talked about cautious investments his funds are making, particularly in agency mortgage-backed securities which offer higher risk-adjusted returns than similar non-agency securities.
Last but not least, he told investors to prepare for the week of June 18, in which the Federal Reserve, eurozone finance ministers, and the European Central Bank will each convene and Greece is likely to see a new round of elections.
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