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HomeJeff Gundlach Had the Call
Posted by Larry Doyle on August 25th, 2010 7:40 AM |
What is it that distinguishes the greatest athletes in sports, such as Michael Jordan, Bobby Orr, Wayne Gretzky, Peyton Manning, Magic Johnson, Larry Bird? While these ‘best of the best’ have and had many extraordinary athletic skills, those who love the game know that these world class athletes were able to see exceptionally fast moving action in slow motion. (In Manning’s case, he still does!!) As such, they played the game three steps in front of their teammates and four steps in front of the competition. As a result, special things happened.
In the world of investing, there are a handful of investment managers who possess similar instincts. Jeff Gundlach of DoubleLine Capital is one of them. Two months ago, Jeff was the keynote speaker at a Morningstar conference. Let’s roll the tape, as I highlighted Jeff Gundlach Sees 10Yr Treasury Rallying to 2.5%:
3. What does Gundlach predict for government bonds?
He said there hasn’t been a single day when the U.S. government bond market has failed to be the beneficiary of risk concerns globally, especially over the euro. “And as long as that’s the case, the probability is the 10-year Treasury is going to go to the yield of two-and-a-half percent,” he said. “Which sounds very low, but it’s been there before. In Japan, when they were dealing with similar problems, the bond yield stayed below that level for 20 years. So the bond market outlook in government bonds, for the time being, is positive.”
Where was the 10Yr Treasury when Gundlach made this call? (more…)
Alternative Housing Finance: How Does “SwapRent” Work
Posted by Larry Doyle on August 24th, 2010 11:58 AM |
Our nation rests on a foundation of entrepreneurial risk taking. I am a strong proponent that our government should work to promote those who have the minds and spirit to take risk and drive our nation’s future economic growth ever higher. That spirit has brought us untold gains over the years. We need to continue to tap into that spirit whenever and wherever we can. On a day in which we just reported that existing home sales dropped 27% in the month of July, I believe it is timely that we tap into this ‘spirit’ and address another alternative housing finance solution.
I referenced the need for real entrepreneurial spirit the other day in writing, A Proposed Solution to the Foreclosure Crisis:
With the Conference on The Future of Housing Finance being held in Washington today, do we really expect the government to propose anything that may help support or fix our system of housing finance? (more…)
Invisible Taxes = Loan Sharking = Usury
Posted by Larry Doyle on August 24th, 2010 8:27 AM |
Why is it that the very people who saved and invested to finance a lot of the growth in our nation are now the very ones being penalized by the exceptionally low interest rate policy of the Federal Reserve? While Ben Bernanke and his Washington cronies maintain that our economy needs these artificially induced government driven interest rates, the very fact is these anemic rates are crushing those citizens in our country who live on fixed incomes and rolled their CDs. While savers are getting waxed on one side of the coin, the banks are sticking it to our brethren who rely on credit lines from their credit cards on the other side. That’s business, you say? No, that is not purely business. In the midst of an economy dominated by the government, our current interest rate and credit card policies are nothing more than invisible taxes on both savers and consumers alike.
There are two sides to this coin and on both sides banks are squeezing American citizens. Savings rates have plummeted while borrowing rates via credit cards move higher. Both these points are highlighted in recent commentaries. (more…)
The Price of Everything, The Value of Nothing
Posted by Larry Doyle on August 23rd, 2010 12:23 PM |
What is something worth? Very simply whatever somebody is willing to pay for it, correct? While regulations or the lack thereof have a big impact on overall levels of returns and compensation, all other things being equal, I do not begrudge those who take risk, work hard, and reap rewards. I applaud them. I view that process as the essence of capitalism.
Does this line of thinking still work in our Uncle Sam economy circa 2010? One of the overriding themes highlighted in Observations on My Afternoon in New York City addressed the topic of market valuations. I wrote:
4. Investors do not want to sell what they currently own because they do not know what they might purchase to replace it. Investors do not want to allocate more capital because they are concerned about market valuations in general.
I should have been even more pointedly specific in writing this statement. While I do believe many people in the market today are concerned about the overall level of the market, the point I was trying to get across is that people do not trust or believe the individual values of investments at current prices. Why is this the case and how does this happen? (more…)
Consumption Takes Another Leg Down
Posted by Larry Doyle on August 23rd, 2010 7:56 AM |
Do you increasingly feel that you are not receiving the full story in terms of our overall economy? Do you feel as if the ‘political class’ in Washington is speaking a different language than the ‘working class’ in the rest of the country? Do you scratch your head as to why economic releases are often immediately panned and quickly thereafter revised? (Case in point, the initial release of 2nd quarter GDP on July 30th was quickly thereafter projected to be halved.) For all of the above reasons, more and more Americans are relying on independent economic research and analysis. Two of my favorites in this camp (aside from Sense on Cents, of course!!) are John Williams of Shadow Government Statistics and Rick Davis of Consumer Metrics Institute.
I recently highlighted Williams’ work in writing, What Is the Real Rate of Unemployment in the United States? In that commentary, I referenced Williams as he had stated:
That began a lengthy process of exploring the history and nature of economic reporting and in interviewing key people involved in the process from the early days of government reporting through the present.
For a number of years I conducted surveys among business economists as to the quality of government statistics (the vast majority thought it was pretty bad), and my results led to front page stories in the New York Times and Investors Business Daily, considerable coverage in the broadcast media and a joint meeting with representatives of all the government’s statistical agencies. Despite minor changes to the system, government reporting has deteriorated sharply in the last decade or so. (LD’s emphasis) (more…)
Who Are the FINRA Board of Governors?
Posted by Larry Doyle on August 22nd, 2010 10:23 AM |
While the general financial media would seem not to understand nor care that Wall Street to a large extent is a self-regulated industry, many within the industry and around the country very much care. The Financial Industry Regulatory Authority (FINRA) is the financial industry’s self-regulatory organization.
At FINRA’s 2010 Annual Meeting held a week ago, FINRA’s member firms overwhelmingly voted for seven aggressive non-binding proxy proposals. These proposals were by and large targeted at bringing greater transparency and disclosure to FINRA’s operations. Will FINRA’s board of governors acquiesce and fully address these proposals? (more…)
Is FINRA’s Board Tone Deaf?
Posted by Larry Doyle on August 20th, 2010 3:15 PM |
When might a voting process with overwhelming returns be negated by the wishes and desires of the powers that be? Am I speaking of those who may occupy bully pulpits in third world nations? No, that guess would not be close.
Am I referring to political leaders who are protected by military and business minions? Nope, still quite cold.
How about a board that is more affiliated with an organization’s executives than with its members? We are getting warmer.
What about financial regulators and a board who have the reputation of being much more closely aligned with major players within the financial industry than their rank and file members and American investors at large? Bingo!!
Let’s get more specific. A week ago, FINRA’s member firms voted overwhelmingly in favor of seven non-binding proxy proposals put forth by Amerivet Securities. In light of the vote and the overwhelming results, one would have thought that FINRA’s board would have absolutely no choice but to fully address these proposals. To do otherwise, one would think that the FINRA board might run the risk of further alienating its membership while sending a message to the American public at large that transparency and disclosures are virtues this financial regulator speaks of but does not truly practice. (more…)
“Markets Don’t Go Up, They’re Put Up”
Posted by Larry Doyle on August 20th, 2010 6:57 AM |
I have to admit, while I personally view myself as an optimist by nature, I come from an immediate and extended family which could redefine what it means to be cynical. Often, I will initially chuckle when hearing my siblings (6 brothers, 1 sister) and uncles characterize an individual or situation in less than glowing terms. The busting on each other typically continues until somebody goes over the line. That happens fairly regularly.
Invariably, a number of my brothers, uncles, and I will not be able to restrain ourselves from laughing, while the individual targeted for the good-natured ridicule exits the conversation often cursing under his breath. Such is life in a close-knit, Boston Irish Catholic family.
That strong, competitive, acerbic cynicism does not end at Mom’s kitchen door but carries over into the workplace. My immediate and extended family largely pursued careers in the legal and investment fields. Both career paths have allowed our cynical wit to flourish. Why do I raise this topic? (more…)
Observations on My Afternoon in New York City
Posted by Larry Doyle on August 19th, 2010 12:14 PM |
I spent yesterday afternoon in New York City meeting with a variety of people. Without violating any confidences, there were a number of common themes that came from all my conversations. The themes included:
1. The financial system remains very fragile.
2. The economy remains in very tough shape.
3. Trading volumes in both equity and fixed income markets remain depressed. Equity volumes from just this past May are down by over 30%. I have heard of summer doldrums, but these figures are a lot more than that.
4. Investors do not want to sell what they currently own because they do not know what they might purchase to replace it. Investors do not want to allocate more capital because they are concerned about market valuations in general. (more…)
New Jersey’s State Pension? Fuhgeddaboutit!!
Posted by Larry Doyle on August 19th, 2010 7:35 AM |
In a state that has a reputation for putting the ‘organized’ in ‘organized activities,’ is anybody surprised that New Jersey has been charged with misrepresenting the health of its state pensions? (The state has already settled). How do you think politicians get elected? Line the pockets of the unions with lavish pensions and perks, then stick it to future generations. This scam has been played for years. What’s new now?
The Wall Street Journal provides further details on this story in reporting, SEC Sues New Jersey as States’ Finances Stir Fears:
The Securities and Exchange Commission, in its first securities-fraud case against a state, accused New Jersey of misleading investors about the health of its two largest state pensions while selling billions of dollars in bonds.
State authorities settled the case without admitting or denying wrongdoing.
While it singled out New Jersey, the SEC is conducting several investigations into what other states disclosed about their weakened finances. (more…)
