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Bond Investor Gundlach Sees "Kaboom" Ahead

edited November 2012 in Fund Discussions
http://www.businessweek.com/news/2012-11-30/bond-investor-gundlach-buys-stocks-sees-kaboom-ahead

"He recommends buying hard assets: Gemstones, art and commercial real estate are high on his list. "

"Gundlach is so confident that phase three is coming that he’s planning to start an equities fund and a long-short hedge fund in early 2013 to offer investors additional protection from inflation"

Comments

  • Ah, scott; you just did a "front run" on me with this.
    Whether folks like him or not; he should be read and an attempt to understand his point of view.
    ......"he only does the Saturday NY Times crossword; as the Sunday version is too easy and not unlike counting Cheerios in the box....it can be done, but what is the point?":)
  • edited November 2012
    I've listened and read uncle Jeffrey. He sounds clear, logical and concise to me, with his head on straight. I am always leery of doomsday talk: "Phase 3." I'm in his DLFNX, and got in just a few months ago, after wanting to do it for quite a while, but I was unable. Anyhow, I realize I got in near a "top." The fund holds a ton of Treasuries. Is THAT going to blow up, do you think, anyone? As for holding hard assets--- well, if you run in HIS crowd, I suppose that makes sense, unless your house gets robbed and your car and Artwork get TAKEN??? (That's what happened to HIM.) What do people here in MFO think about the future for DLFNX? Thanks....
  • P.S. I hold it as a basic, ordinary, taxable account, not a retirement thing.
  • Howdy Max,

    Oct. 31 indicates only about 16% Treasury related, 30% corp. and about 50% mortgage related.....data here.

    If DLFNX blows up, there will already be a lot of other bond blood upon the wall, first.

    At this point in time, Mr. Gundlach is able to run a bond fund as well as anyone else, eh?

    Don't lose any sleep on this today, Max.

    Take care,
    Catch
  • I was wondering about his equity fund, DMLIX. Does anyone have any comments ?!

    Have a good weekend, Derf
  • Reply to @Derf: the best response would be the link Scott attached. JG is positioning the fund for the ultimate inflation but only invests in assets that are currently cheap -- hence a lot of cash. Just like with any active fund, you need to trust the manager.
  • edited November 2012
    Reply to @MaxBialystock: Hey Max,

    Both his intermediate bond funds are set up on a barbell; the T's in Core FI and the gov't mortgages in Total Return are the risk-off counterweights to the riskier assets in the funds ... mainly EM bonds in the former and non-agency mortgages in the latter. If the T's in Core FI head into a rough patch, for example, the EMs will appreciate, ~ offsetting the capital loss in the former.

    Both have very low durations for a core bond fund. The way they're positioned, there isn't much interest rate risk in either fund. Check out the durations on the DBL web site, or on M*. JG and team are good at this.

    You probably already know this, but in case not, there's another web cast coming up on Core and TR on Dec.11.

    Edit:in the article Scott linked, the counterweight strategy I mentioned is explained for DBLTX under the heading "Mortgage Holdings."
  • Reply to @MaxBialystock: I think holding high income throwing funds in taxable account is not tax efficient. If you have the capability hold these in IRA etc.
  • Reply to @AndyJ:
    If the T's in Core FI head into a rough patch, for example, the EMs will appreciate
    I have interest in DBLEX and TGEIX. How do you folks see these funds performing in the next year?
  • Reply to @MaxBialystock: It's not entirely doomsday talk - in some regards it's very equity positive, just not for positive or "organic" reasons.

    I don't think it's difficult to invest in hard assets via various stocks, etfs and otherwise. There is, however, no easy/quick way to invest in art.

    I'm rather concerned about how well fixed income will do over the next five years (and Gundlach is opening equity funds now too), but I think if one has to be in fixed income, as noted by those below, Gundlach is great at navigating the market.
  • Reply to @Mona: Hi Mona, quick reply here, maybe others can chip in too.

    There has probably never been a more risk-averse EM debt fund than DBLEX. If the lower-IG EM bonds Luz P. has $ in continue to make their way up the credit scale, it's likely to do pretty well next year ... but if not, the meager yield may not be adequate reward, depending on your perception. It's almost all investment grade, and all U.S. dollar-denominated ... no currency risk (or reward).

    TGEIX invests in lower-quality bonds, some foreign currency-denominated, not sure how much now; so it's got higher yield, but is subject to credit and some currency risk.

    Fidelity's FNMIX is kind of in-between the two in terms of yield and credit/currency risk. It'd be a middle-of-the-road choice in the space, imho.
  • Reply to @Derf:

    DMLIX has had underwhelming performance since inception, and there are other far more attractive WA funds out there.

    Granted, JG is smart, eccentric, gives inspiring speeches and made the right call on AAPL/natural gas, but that doesn't make him an expert at managing equities within an allocation fund. I remember all the enthusiasm prior to the launch of Mohamed El-Erian's WA fund, PGAIX. Well, that fund has been mediocre at best since inception. Once JG develops an attractive track record managing equities, then I will be a believer, but not until then.

    Kevin
  • Reply to @AndyJ:

    Thanks much for your thoughts!
  • I thank you all for the various responses. I won't panic. ..... Investor, I'm already holding the lion's share of all my total stuff in a tax-deferred retirement vehicle. (Trad. or Rollover IRA.) When I bought-into DLFNX, I wanted to deliberately keep that money available without penalty for any early withdrawal. You're right, of course. And yet, I'm glad I own shares in that fund. I think I shall not play with it now... Just watch the divs. grow.
  • Reply to @MaxBialystock: You can do a swap. Sell equity in your tax advantaged account and buy in taxable account. In reverse sell your bond fund in taxable and buy in tax advantaged. After the swap you will have same ownership but in the right account.
  • Reply to @Investor: i think Max is dealing directly with the fund companies... this way if his IRA is with Matthewss Asia, it would make it impossible to do what you suggest (and what all of us are doing in our brokerage accounts).
  • edited December 2012
    Thank you! But fundalarm is right....
  • Reply to @fundalarm: Can't he open a taxable account at Matthews Asia funds? If this is possible he can open an account and buy the same fund he has in IRA in taxable. Next transfer his Ira to the place where he can buy the taxable bond in IRA. Otherwise, if taxable account at Matthews is not possible, he can easily open brokerage account at fidelity and buy the equity in taxable.

    However, his funds at Matthews is also throwing a lot of distributions so they are not necessarily the best choice to move to taxable account.

    In other words, the only reason why you are not placing the funds in the right account is that you are avoiding paperwork. IRS does not care. They are happy to take their cut if you do not plan.
  • Reply to @Investor: i am with you, Investor, but we had a long discussion a few months back, and some people are just not comfortable with brokerages.. unfortunately, the price is high, especially in tax inefficiencies.
  • Just doesn't seem to make sense to me. Stocks and bonds have been tightly coupled and are only getting more so. The art and collectibles markets are dependent on the highly variable incomes of rich people. Even assuming gov'ts and central banks try hard to bail out everyone, they can only do so much. Austerity will nuke all markets long before any mass bond defaults.
  • Given the concern expressed by Gundlach about bonds, can anyone suggest a closed-end fund/ETF that can go short and long bonds?

    Thanks in advance

    BWG
  • edited December 2012
    Howdy BWG,

    MFO's fundalarm is invested with this cef .

    Ron noted this in the recent PIMCO thread here.

    For practical purposes, although not etf's or cef's; what ron has listed for a Pimco fund is the longs and shorts; which are in place within many Pimco bond funds. One already is partially in a long/short bond fund, for a given sector.

    I list our holdings of PONDX as the "steroid version", versus some of our very mellow bond allocations that don't use many or as many tools to adjust.

    If you are interested in more wide open bond funds with a short/long aspect; the type of positions indicated with ron's post will give the clues. Viewing funds named, unconstrainded, absolute, will give some clues; but many of the short/long positions must be checked with a deeper look into the fund.

    Regards,
    Catch
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