My posts today seem to have a Negative Nelly tone - I am looking very hard for some positive stories to offset what I'm posting. ;)
WSJ's Dealbook has an interview with one of the smartest men in the room - Doubeline's Jeffrey Gundlach. Many would consider this guy the best bond investor on planet Earth, alough PIMCO's Bill Gross gets all the press. His Total Return Fund is once again smacking its index year to date.
Gundlach believes the U.S. is in recession right now - I'll wait for the ECRI to confirm, but the bigger picture is, no matter if 'official' GDP is -1% or +1%, that does not matter much for economic prospects. This economy needs to be moving at 3%+ for quarters on end to truly have any serious impact on the lives of most Americans. At best we're at muddle through speed, despite massive stimuli. More from Gundlach:
- The country is already in a recession, according to bond manager Jeffrey Gundlach, who predicted “there’s going to be a big loss in Europe.” The much-watched head of Los Angeles-based DoubleLine Capital addressed a crowd of roughly 100 financiers and reporters at the New York Yacht Club this afternoon.
- Gundlach reinforced his often dark views about the status of the U.S. economy and future for Europe. “We’re in a recession right now,” Gundlach said, as he reviewed a hefty deck of slides with dreary data. Statistics on the polarization of wealth in the U.S., dim headlines about sentiment in locales abroad and the European bond market were among the reasons Gundlach cited for his dour forecasts.
- Echoing the sentiments of many money-managers, Gundlach said that the Eurozone is bound for problems. “I don’t know what is going to happen,” he said. “But I think there is going to be a big loss in Europe.” DoubleLine has no investments in Europe, he said.
- He then flashed a chart of 10-year sovereign debt spreads for the so-called “PIIGS” (Portugal, Italy, Ireland, Greece, Spain) and circled their recent spike in red. Next to the spike he wrote “These are crashes, why no understanding of that?” in red ink. Greece’s spreads showed signs of woe as far back as February 2010, he said.
- As for what’s ahead in the United States, Gundlach pointed out that the rally in the municipal bond market was helped by many states not having a choice but to balance their budgets. However, that may mean that “the man on the street thinks it’s a depression,” he says, as many local governments have slashed jobs, cut down hours for public resources and stalled projects. He pointed to the closing of bathrooms near his home in Southern California as an example. “You can’t go to the beach and drink your lemonade because there’s no bathroom,” he says.
- DoubleLine’s strategy has no exposure to Europe, Gundlach says, and is entirely denominated in dollars.
- The bets have paid off so far. The DoubleLine Total Return Fund is up 8.76% year to date, according to Morningstar Inc., compared to a 2.52% increase in the Barclays Aggregate index.
By Trader Mark
Mark is a self taught private investor who operates the website Fund My Mutual Fund (http://www.fundmymutualfund.com); a daily mix of market, economic, and stock specific commentary.
See our story as told in Barron's Magazine [A New Kind of Fund Manager] (July 28, 2008)
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