Bond god Jeff Gundlach is holding a call for investors in his fund.
The name of this call is “What’s Next?”
We’re listening, and will update if there’s news.
- On the debt ceiling: Doesn’t think it will be a disaster if it’s not hiked. Will just mean instant austerity (cuts to everyone except coupon payments.
- Fed is considering QE3 again, per today’s minutes.
- Solutions to debt problem: Defaulting on some entitlements, print & pay, raising taxes, cutting spending.
- Where are you going to cut spending? “I believe there is a groundwell of support for cutting defence.”
- Says GDP is an inflated number, since it doesn’t take into account debt. Also, identifies a “societal problem” that so much of the wealth is concentrated by the rich. Hopefully this will be resolved at the ballot box, because if not, it will be solved on the streets. Expect a lot of support for the Taxes Are Too Down Low-party.
- More on inequality: Shows chart of huge food stamp usage. “What the politicians seem to want is for society to consume more while borrowing less.”
- Going over market YTD returns. Strong returns on stocks, government bonds, and anything risky in the credit space.
- Europe: These are crashes that we’re seeing in Portuguese bonds. Talking about how everyone keeps saying various countries “aren’t Greece.” Says: “I’m almost ready to hear someone say Greece is not Greece.”
- On Treasuries: 10-year needs “fear” to stay below 3% (which is what’s happening right now).
- 30-year Treasury yields are a lot harder to push down: We’re in a long-term bottoming process of yields. He emphasises long-term yields will go higher, but in the meantime it’s hard. Debt ceiling is bullish for Treasuries. Says dollar likely to go higher too.
- Gold will probably do well. Silver WON’T do well. Even antiques are a better non-financial solution.
- Likes following Shanghai composite as a leader of the S&P.
- High yield bonds will underperform government bonds.
- Gundlach’s working assumption is that nothing good will ever come in housing market again. That’s not to say that’s likely, but it just means that Gundlach is not going to lose any money if housing keeps following.
- Going over his own fund’s performance. Talking about how well it’s done, while also taking a swipe at other funds that have no Treasuries.
- Answering question: Gundlach not buying any subprime. Not buying PIIGS. Reiterating opposition to derivatives, and the attendant counterparty risk. He says: If your bond manager uses derivatives and has counterparty risk, then come home to DoubleLine.
- Rate outlook: 10-year yield can’t get above 4%, but it can’t stay in the 2% range very long without fear. Kind of stunned and flummoxed by obsession and concern with higher rates. It’s just not happening.