DoubleLine Funds’ Jeff Gundlach just wrapped up a webcast titled “The Decline and Fall of the Roman Empire.”
Gundlach drew parallels between the U.S. and Ancient Rome. Like the U.S., he noted that Rome had a weak tax system and huge military budget. Government projections call for the military budget to shrink. But Gundlach warns those are just estimates.
Speaking more generally about the U.S. economy, Gundlach warned that the economy would obviously take a hit when stimulus ends.
Regarding the Federal Reserve’s new, more transparent communication policy, he notes that this has increased confusion. It was recently revealed that three FOMC participants expected monetary policy to firm this year. However, he believes it is “extraordinarily unlikely” that rates will be raised any time soon.
As with Rome, Gundlach noted that the U.S. faces “persistence of a destitute underclass,” as reflected by the excruciatingly slow job recovery.
On government deficits, Gundlach went straight to Federal government worker salaries. He noted that unionization rates are extraordinarily high, salaries are rich, and benefits are generous.
Gundlach spoke generally on the performance of the global financial markets as well as the performance of the DoubleLine funds.
Broadly, he acknowledged that the worst performing assets of 2011 have been some of the best performing assets of 2012 so far.
But he doesn’t think people should necessarily be rushing to buy these assets either.
“This is a bad time to be deploying money into risk assets,” warned Gundlach.
In the Q&A, he revisited this matter when someone asked about investing in banks, Bank of America in particular.
He warned that it’s not wise to be in banks. And he reiterated that it was just a reversal of last year’s weakness.
In fact, if you’re a holder of Bank of America shares, Gundlach recommended selling them tomorrow at the market open.