Bond investor gundlach buys stocks sees kaboom ahead

Posted: larbik Date of post: 24.06.2017

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July 11, Boston Nov. Check out the latest webcasts available covering the most important topics in the industry. Many qualify for CE credits. October 17, l Boston. It's mid-October, and Jeffrey Gundlach is giving a stump speech to a luncheon crowd of about financial advisers and investors at Los Angeles's City Club.

Gundlach sees 'kaboom' ahead, touts hard assets

The renowned money manager's theme: The co-founder and chief executive officer of DoubleLine Capital LP explains that the first phase of the coming debacle consisted of a year buildup of corporate, personal and sovereign debt.

That lasted untilwhen unfettered lending finally toppled banks and pushed the global economy into a recession, spurring governments and central banks to spend trillions of dollars to stimulate growth, Bloomberg Markets reports in its January issue. In the ominous third phase, he predicts another crisis: Deeply indebted countries and companies, which Gundlach doesn't name, will default sometime after Central banks may forestall these defaults by pumping even more money into the economy -- at the risk of higher inflation in coming years.

Gundlach, 53, doesn't know when the third phase will get here, but he tells his audience they need to gradually get ready for it. Gemstones, art and commercial real estate are high on his list. And DoubleLine has been buying the stocks of Chinese companies, U. Gundlach himself has amassed a contemporary art collection of about pieces, with works by Jasper Johns and Franz Kline.

bond investor gundlach buys stocks sees kaboom ahead

The money manager drew on abstract painter Piet Mondrian's double-line style for the name of his firm and its geometrical, crosshatched logo. Gundlach, who correctly predicted the subprime mortgage disaster, has a proven record as a prognosticator -- and the performance numbers to go with it. At his former firm, TCW Group Inc. Topping Gross The co-chief investment officer at Newport Beach, California-based Pacific Investment Management Co.

PTTRX Gundlach's performance convinced Andreas Lehmann, chairman of Luxembourg-based Alma Capital Investment Funds, to hire him to manage a fund for European investors. If Gundlach's outlook for the possibility of higher inflation comes true, his bond funds could suffer like most fixed-income investments. Mortgage Holdings Most of DoubleLine's assets are in the Total Return Bond Fund, which has 78 percent of its holdings in residential mortgage-backed securities -- both those guaranteed by the U.

The mix should help the fund weather either inflation or deflation because the securities should move in opposite directions if interest rates go up or down. Because higher rates could mean the economy is improving and housing prices are recovering, there would be fewer defaults on the riskier nonguaranteed bonds, and prices would rise, says Philip Barach, DoubleLine's co-founder and president. And he says the fund's duration, a measure of how much bond prices will change when yields rise or fall, is low, making it less sensitive to shifts in interest rates.

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 to offer investors additional protection from inflation. Gundlach, who says he buys assets only on the cheap, is also sitting on cash in anticipation of scooping up securities at fire-sale prices.

Cash makes up 17 percent of his Total Return fund. Kaboom He says the amount of money investors can make in phase three will dwarf what they can earn now. The markets don't have lots of opportunity now.

At a conference in New York in April, he told a Bloomberg News reporter that he would abolish the year-old Federal Reservea position espoused by failed Republican presidential aspirant Ron Paul. He dropped out of a Yale University theoretical math Ph. He then moved to Los Angeles and performed as a drummer in two rock bands before landing a job as a quantitative analyst in at TCW. Gundlach soon became a star manager of mortgage-backed- securities funds and, inwas on the losing side of an internal struggle over the leadership of the Los Angeles firm.

TCW fired Gundlach and sued him a month later, accusing him of breach of fiduciary duty and theft of trade secrets. The suits were settled, though Gundlach hasn't left behind his combative ways. Sincehe's been complaining to Morningstar Inc. MORNclaiming the research firm's analysts are biased against him. He completes them in pen and often skips Sunday because it's too easy, like counting Cheerios in a box.

Alfred Prufrock Those who work for Gundlach are intensely loyal to him. As he was starting DoubleLine in Decembermore than 40 people from TCW -- including Barach, his right-hand man -- joined him at the new firm. Bonnie Baha, who followed Gundlach from TCW and now oversees DoubleLine's investments in corporate bonds, says her boss's eclectic mind is part of his charm. One time, Baha cited a line from T. He peppers his unscripted investor presentations with references to James Bond movies, William Shakespeare, Karl Marx and rock songs from Nirvana and The Who.

And in addition to rooting for his hometown Buffalo Bills football team, he likes to garden, pruning back his Betty Boop and Gemini tea roses. He is crazy about football. Then he recites a T. Citibank international atm rates winning bet produced a return of Now, after a global financial debacle, bank bailouts, the European stock exchange brokers bangalore crisis, a slowdown in China and a halting U.

While he doesn't expect any countries to default inhe points to Japan as an example of a government that may have to embark on more-aggressive asset buying that could lower the value of its currency. Its economy contracted at an annualized rate chocolate covered almonds recipe easy 3.

Japan's trade deficit rose to a half-year record 3. And the central bank increased its asset westfield north lakes australia day trading hours program on Oct.

He says inflation could jump by 2 percentage points if the Fed ramps up its purchases of government debt beyond what it has done so far. Pressure Cooker Led by Chairman Ben S. His pessimism sets him apart from other prominent money managers, notably Larry Fink, chairman of BlackRock Inc. BLK Fink says the U. The economy grew at a stronger-than-forecast annual pace of 2 percent in the third quarter. He says the tax hikes proposed by Obama on the wealthy wouldn't bring in enough revenue to have a significant impact and politicians probably won't make major pakistan forex market in entitlement programs because the public overwhelmingly supports them.

Rather, he expects politicians will find a way to push the deficit issues into and beyond. In making his case to abolish the Fed, Gundlach cites an argument made by former Texas Representative Ron Paul in Paul said the U. Constitution grants Congress the authority to coin money and regulate the value of currency and that it doesn't give Congress the right to delegate control over monetary policy to a central bank.

Emerging Markets Richard Pildes, a constitutional law professor at the New York University School of Law, says that line of thinking has been widely discredited. Gundlach's outlook isn't uniformly bleak. He sees some opportunities in emerging-markets equities, particularly in China, where the Shanghai Stock Exchange Composite Index SHCOMP fell 3.

Chinese stocks make up the majority of international equity holdings in the DoubleLine Multi-Asset Growth Fund DMLIXsays Jeffrey Sherman, a portfolio manager for the stock market ticker search. It increased its exposure to international equities to 6.

Beyond China, Gundlach says, the demographics in some emerging markets will support sustained growth. While developed nations will have fewer than three workers for every retiree byBrazil, India and Mexico will have almost six to seven workers, according to the U.

In line with Gundlach's gloomy outlook for America, the Multi-Asset fund recently dumped some of its U. Sherman says the stocks are too expensive and U.

Bond Investor Gundlach Sees "Kaboom" Ahead - Mutual Fund Observer Discussions

But the fund has added to its holdings of gold-mining companies and natural gas producers in because these stocks are beginners to the stock market, he says. Gundlach has made some prescient calls on stocks. He recommended in April that investors short Apple Inc.

AAPL and hedge that bet by going long on natural gas. After that call, Apple stock fell about 4. Even after the September release of the iPhone daily signal forex, which shattered Apple's pre-sale order records, the company will struggle to reach its earnings potential without an innovator like Steve Jobs at the helm, he says. Natural Gas Gundlach made his recommendation on natural gas stocks after they fell 59 percent from January to April The prices plunged as producers extracted gas trapped in shale and created a supply glut.

Gundlach says investing in natural gas now is similar to buying gold inwhen prices hit an year low before a surge in the precious metal's value. Even with timely calls like these, Gundlach has to overcome skepticism from investors that a bond guy can succeed in equities and other investments.

Lagging Returns Started in Decemberthe fund includes natural gas exchange-traded funds, gold futures and currency and agriculture options as well as U. The fund returned only 4.

We haven't done the work to give us confidence that they can successfully do it. Morningstar Fight Gundlach does care enough about what Morningstar opines that he's now fighting with the mutual-fund industry's preeminent rankings and research firm. In meetings, e-mails and phone calls, david jones easter trading hours adelaide has repeatedly complained to Chicago-based Morningstar's executives that their analysts are biased against DoubleLine.

DoubleLine co-founder Barach dismisses Bush's concern, saying the securities make up less than 3 percent of the fund's investments and have performed well over the past 20 years while also providing cash flow. She says DoubleLine later stock binary trading game programs to fill out a detailed questionnaire that would have helped explain the Total Return Bond Fund's performance.

Gundlach also accuses Morningstar senior analyst Eric Jacobson bond investor gundlach buys stocks sees kaboom ahead being a cheerleader for TCW, Gundlach's former employer. They wanted to form a management committee to lead the firm. A TCW spokesman declined to comment for this story. Both the TCW and Gundlach lawsuits were settled in a confidential agreement at the end of Art Passion One subject the money manager is happy to talk about is art.

His passion is on display throughout DoubleLine's offices, with many of the paintings from his personal collection hanging on the walls. In designing DoubleLine's logo, Gundlach borrowed from Mondrian, the abstract Dutch artist whose career spanned almost five decades until his death in His works are characterized by grids of black lines, white space and rectangles in primary colors.

Gundlach began buying valuable art in the s, favoring what he calls pretty pictures of landscapes. Inhe went to the Tate Modern in London and wandered into a room where he saw a Mondrian and had an aha moment.

It was the first abstract work that he truly appreciated. It features double black lines on a white background with a blue rectangle. In its early days, DoubleLine's existence was threatened, as the TCW lawsuit and its potential liabilities scared away institutional investors, she says.

Fighting Tears Fighting back tears, Gundlach stood before his staff of about 40 people and told them he felt responsible for their careers after they had left TCW to start DoubleLine, she says. DoubleLine got help from Howard Marks, another former TCW star, who left the firm 17 years ago with four other distressed- debt experts to start Oaktree Capital Management LP. They all debate the broad investment categories in which DoubleLine will place its bets during monthly asset allocation meetings in the Warhol conference room, named after the flamboyant pop artist.

Gundlach acts as the final judge, signing off on the percentages of investments of particular assets for the firm's funds. Once he settles on a strategy, Gundlach leaves it up to his managers to execute the trading, with oversight but little interference. The robbers also snatched two works by Gundlach's late grandmother, Helen Fuchs, who was an amateur painter. Santa Monica Police Department Sergeant Richard Lewis says the large sum of money was key to cracking the case, which the Federal Bureau of Investigation assisted on.

In late September, two suspects were arrested and all of the stolen art was recovered. The cerebral Gundlach also gave investigators a tip for solving the crime. He says that while he was at home in his family room, it dawned on him that thieves would do a Google search using his grandmother's name to find out more about the paintings and how much they might be worth.

Gundlach told the authorities that they should check the Internet to see who might have googled the name Helen Fuchs. He says exactly two such searches were executed: Gundlach says his Internet idea impressed investigators. View comments Please enable JavaScript to view the comments powered by Disqus. Join InvestmentNews at the 12th annual Retirement Income Summit - the industry's premier retirement planning conference.

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