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Jeff Gundlach: Very Cautious 2013 Outlook

Posted by Larry Doyle on December 19, 2012 6:05 AM |

Last week I shared with readers a written “playbook” provided by Jeff Gundlach and his team at Doubleline in my commentary, What Is Really Going On in the Economy/Markets?.

Today we get to invite Mr. Gundlach “into” our office so to speak and hear his piercing insights. If you have an even passing interest in the markets and economy, get yourself a second cup of coffee and some pain medication as you absorb this 20-minutes worth of wisdom that will surely help you navigate the economic and market landscape in 2013 if not beyond. What does Gundlach address? 

1. We should be more concerned with the fiscal crisis than the fiscal cliff.

2. Economic headwinds are prevailing and likely to worsen given developments in Washington.

3. Government bonds likely to remain strongly supported . . . for now.

4. Bullish on Japanese equities but learn why….a debasing of their currency.

5. Calls for increasing inflation are WAY too early.

6. The United States may not be in as bad shape as Japan but there are some similarities.

7. Market fundamentals have been trumped by Federal Reserve policy but each successive round of quantitative easing is having a lessened impact.

8. Investors should be hoarding cash and waiting for better price points on many risk assets.

9. Investors need to develop and maintain a longer time frame and outlook in managing assets.

10. The world will be a very different place 3 years from today!!

11. The economy left to its own devices would like to go into a “cleansing” recession.

12. Likely to see substantially lower prices in many risk sectors that have benefited and been propped up by the Fed’s QE programs. He specifically referenced the S&P 500 as likely to experience a serious decline at some point perhaps later in 2013 into 2014.

13. We are not currently in a credit bubble.

14. The next recession —and we would be in a global recession right now if not for central bank policies — will be a ‘killer’ and bring real cracks into the market. He questions what the Fed and Uncle Sam can do to slow that recession at that juncture.

15. We will not experience a repeat of 2008 in the markets because there is not the same degree of leverage in the markets currently, although that could change somewhat if hedge funds try to play catch up with the market and increase their leverage.

16. There is a lot of naivete involved with many investing currently in the market.

17. Homebuilder stocks look overpriced. Financials look cheap.

This clip runs for 20-minutes. You may not necessarily like all that he says BUT you should listen as he charts the path for our 2013 landscape and beyond.

Gundlach Interview on Bloomberg

Navigate accordingly.

Props to our friends at eWallStreeter for initially highlighting this.

Larry Doyle

Isn’t it time or overtime to subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook.

I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • Randee

    American investors should be hoarding cash? Really? These perma-bears have been around for the past few years and if you followed their advice – and I’m sure Larry and most of his disciples did – you missed out on stock gins in excess of 100 percent.

    It is very dangerous to publish comments by these types of fools, Mr. Doyle. When interest rates are basically zero the thought of investors following his advice and hoarding nothing but cash sends a chill down my spine. It’s reckless, irresponsible and inexcusable advice and for you to publish it makes me sick. You perma-bears and ultra conservative preppers with your cash and your canned guns and your assault weapons disgust me.

    • LD

      Then why do you bother to come around these parts?

      Gundlach is a perennial Morningstar All-Star manager.

    • Bud

      “canned guns?” I’d guess Randee likes it in the can!

  • Eddie

    Randee,
    Why bother with your assault I would figure you would would be counting your own hoards of cash from your bullish investments but out of curiosity where were you positioned in the spring of 2008…..please do tell, otherwise go pour yourself a nice big cup of STFU and go back into hibernation.

    • Randee

      In 2008 I was in the market and got hurt when it fell. But I was under-invested in terms of the percentage of my money I had in the market. Those were the good old days when you could get six percent from a bank CD, so it made a certain amount of sense to keep money in cash. Today, that is not the case.

      When the market plummeted and so many media types and people on blogs like this one were comparing it to another Depression I did a lot of research on the Depression. I realized that the situation in 2008, as bad as it was with Lehman, etc, was relatively benign compared to the Great Depression. I recognized that it was no Depression, only a bad recession, and that the market had overreacted to the downside, thanks in large part to our hyperbolic media and blogs like the one you’re reading. So I invested a lot of money and in four years that’s worked out pretty well.

      I’m just sick of the fanatics who say ANYTHING to get their names in the paper and on blogs. Dr. Doom is a moron and I’d be happy to compare my track record to his any day. Do I think one should be 100 percent invested in the market? Heck no. But the gloom and doomers who, for four years have been talking about how dire the situation is have hurt a lot of people and ruined a lot of lives, and that disgusts me.

      • fred

        Randee,

        I checked in with Bankrate.com to verify historic CD rates; as I suspected, ST (<1 yr)CD rates haven't been at 6% since the early 1990's, LT (<5 yr) CD rates haven't been near 6% since FY2000.

        So Randee, according to Bankrate.com, even if you had been able to lock in 6% CD rates in FY2000 they probably would have renewed prior to FY 2008 at a max closer to 4%.

        Bankrate.com DOES reports a national average so I won't go so far as to call you a liar; but certainly without further proof, there is enough doubt to question both your track record and investment acumen.

        Futhermore, I would not label either LD or JG as "perma-bears". LD did call a bottom in US real estate (bullish) awhile back, but has promoted nothing more than cautious optimism for both the US debt and equity markets, "don't fight the fed". JG currently has a large position in Japanese equities, hardly the actions of a perma-bear.

        Randee, stop trying to slap labels on everyone, it does not become you. You can offer a refreshingly divergent opinion, BUT, 1) get your facts straight, 2)try to disagree without being disagreeable.

  • Hawk

    Randee, you are what your record says you are. Those investors that stumbled blindly ultra long into the corrections of 1987, 1994, 1998, 2002, 2008 are the same ones that got flushed out at the bottoms in each of those bear moves. Randee, were you one of those cowering maggots too flustered to open your 401K statement when it arrived in the mail? Come now….be truthful. Or instead, were you one of the intrepid souls that braved the markets at its depths to buy the lows and reap the REAL bull move on the long side. Investing, Randee, is not about the last year rather it is about the long term. Buying highs and selling lows and flailing mindlessly back and forth is unfortunately the reason that dolts like you will be scorched yet again from being “All in” at precisely the wrong time. A very wealthy and sage Partner of mine once reminded me when I was much younger, “Young Man, you make a lot of money over time by not losing any.”
    Beware the Black Swan and don’t forget to sell.

    • Randee

      Hawk,

      What in the world are you talking about? I’m a long term mostly buy & hold investor who was invested in the market when it fell in 2008 and then invested a lot more money when the market was at its nadir. (That means bottom.) I’m a Warren Buffett fan, my family originally invested with him circa 1966 and we’ve done fairly well, up approximately 45,000 percent. What about you? Can you match that return?

      I do not have a 401k, I have a traditional pension. But I won’t need to use it, since I’ve done so well with my investments, both pre-2008 and then again in ’08 and early ’09 when I ignored the perma-bears like Gundlach and Doyle and everyone on CNN and CNBC and threw several million more into a diversified array of stocks and funds that are now up about 106 percent in four years.

  • Crusader82

    Well said Hawk and Eddie. I admire your and Larry’s ability to suffer fools like Randee with an even tempered perspective. Randee keep drinking the Kool Aid as for me, I’m taking a pass on your Jim Jones Punch.

  • fred

    LD,

    Nice interview with JG on CNBC today. What I was particulary drawn to was his discussion of what causes a bubble, his response “leveraging up positions”, the obvious cause, ZIRP as it pressures down both yields(bonds)and VIX(stocks).

    Stay thirsty my friend!






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