Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
FYI: Jeff Gundlach upped the rhetoric on DoubleLine’s webcast last night. The famed bond manager is now talking about a spike in 10-year yields to as high as 6% (from 3% currently) and the potential for a recession in 2020 Regards, Ted http://thereformedbroker.com/2018/06/14/gundlachs-bond-call/
I and almost every analyst think Gundlach’s wrong, but if he’s right there’d be no point owning either stocks or bonds in 2020. Both markets would tank. Meanwhile Japan despite all the austerity shills has survived with large deficits and ultra low rates for decades. In fact it was priming the pump even more that got that country’s equity market moving again in recent years. It’s true the tea party nuts may push back as Gundlach says, but how fast would they roll over if markets and their beloved portfolios started to tank as rates went higher? I think Gundlach is increasingly sounding more like one of them than viewing the situation with the appropriate level of detachment.
It seems like it would be hard for rates to get that high, in a situation when the Fed can always print money to bring rates back down, unless inflation takes off. That doesn't seem likely right now, but with a massive tax cut near what may be the peak of a recovery, plus rising commodity prices and (so it seems right now) rising prices everywhere due to tariffs, maybe high inflation is no longer impossible.
Right now we seem to be in an era of permanent low inflation. I'm old enough to remember when we seemed to be in an era of permanent high inflation. These things can change and even if in retrospect the warning signs appear clear, at the time it feels very sudden.
I'm not smart enough to predict this stuff, but I don't think Gundlach's scenario is impossible.
@expatsp - I disagree. I can say one of 2 things. You ARE smart enough. OR you don't need to be smart enough. The problem is your last name is not Gundlach or Gross or Miller or Blockchain so no one will listen to you.
I would ignore his calls. Recessions come and goes and that is market cycle.
I would pay more attention if he would articulate how the impending traiffs would impact the global market, the future earning, and the possible catalyst to trigger the next recession.
@Sven- for stuff like that you need to go to The Economist or another similar high-quality source. And I'm afraid that even they don't get it right much of the time. As either Rono or Catch 22 (I can't remember which) liked to say: "My crystal ball is in the shop for recalibration".
JG has said repeatedly, as have others, that the corporate debt explosion is looking like it could be the trigger for the next crisis + recession ... although the recession indicators he talks about are not signalling anything dramatic on the near horizon. (That of course doesn't rule out an intracyclical slowdown like, for example, in 2015, the kind of slowdown ECRI is projecting.)
The 6% T comment is the one comment he's made in quite a while that sounds more like an assertion without any real support rather than the usual well-documented insights in his webcasts. Really, to get an idea of what he's up to, someone would need to tune in to at least a couple of full webcasts.
His ego's pretty puffed up, yes, but the economic, financial, and investment insights are mostly close to the mark and overall useful. The 6% thing is a real outlier, IMHO.
Comments
And hindsight is always 2020. Pun very much intended.
https://bloomberg.com/view/articles/2018-06-13/gundlach-sees-6-yield-in-3-years-anyone-else
I and almost every analyst think Gundlach’s wrong, but if he’s right there’d be no point owning either stocks or bonds in 2020. Both markets would tank. Meanwhile Japan despite all the austerity shills has survived with large deficits and ultra low rates for decades. In fact it was priming the pump even more that got that country’s equity market moving again in recent years. It’s true the tea party nuts may push back as Gundlach says, but how fast would they roll over if markets and their beloved portfolios started to tank as rates went higher? I think Gundlach is increasingly sounding more like one of them than viewing the situation with the appropriate level of detachment.
Right now we seem to be in an era of permanent low inflation. I'm old enough to remember when we seemed to be in an era of permanent high inflation. These things can change and even if in retrospect the warning signs appear clear, at the time it feels very sudden.
I'm not smart enough to predict this stuff, but I don't think Gundlach's scenario is impossible.
I would pay more attention if he would articulate how the impending traiffs would impact the global market, the future earning, and the possible catalyst to trigger the next recession.
The 6% T comment is the one comment he's made in quite a while that sounds more like an assertion without any real support rather than the usual well-documented insights in his webcasts. Really, to get an idea of what he's up to, someone would need to tune in to at least a couple of full webcasts.
His ego's pretty puffed up, yes, but the economic, financial, and investment insights are mostly close to the mark and overall useful. The 6% thing is a real outlier, IMHO.