On CNBC just now, DoubleLine Capital bond manager Jeffrey Gundlach says this is a “bear-market rally” in stocks right now, and that everyone is missing the quiet story: The big crash in mortgage credit.
Actually he called it a “quiet crash,” something that’s persisted even as other forms of credit and assets have rallied in recent days.
Specifically, he referred to the PrimeX index, a synthetic index of mortgage bonds that are specifically NOT subprime, which has been been tanking lately.
For a good overview of what PrimeEx is, see FT Alphaville’s Tracy Alloway here, or click on the image
Generally, Gundlach remains bearish, and says to short risk amid this latest bout of euphoria.
The next 5 points in credit will be down, not up, and you know it’s a bear market rally, because the rally feels so good.