Sunday, April 14, 2013

Gundlach on a Bond Haven

Track-records are the only way of knowing if people have actually proved themselves.

Jeff Gundlach here. Actually, posts by a person who attended his meeting or something.
Quotes are from that site.

"Jeff demonstrates why the Fed's policies literally cannot change any time soon and how investors can use this as an opportunity."
"There's no bubble in bonds. Gundlach is amused by those claiming that the bond market is on the verge of some kind of imminent collapse. "They're dead wrong.""

The below slide shows how just about every single country in the world is currently running a trade deficit at the same time - "How is this even possible?"  The answer is the circular scheme being perpetuated around the world (Bank of Japan, Bank of England, the ECB and the Fed are all expanding their balance sheets at the rate of 3.5% of GDP per annum). "This is what Krugman says is the answer to five millennias-worth of human struggle. Maybe he's right but it seems a little too easy."
See below, that's central bank balance sheets, January 1995 through January 2013:
balance sheets

He says that Japan is an important thing to watch out:
"Besides, he thinks that over time - not tomorrow but one day - the only way the Japanese can ever deal with their debt level is more debasement so a Yen at 200 over the USD is conceivable."
"Japan, most importantly, illustrates to investors that bond yields can stay low for as long as they want to."

This last line is absolutely brilliant. It's brilliant because it's true and because nobody can dictate the market's moves.

About Gold:
"Nobody asked Jeffrey about gold for the first time - he was very surprised by this so he brought it up himself. He thinks that as fear of systemic collapse rolls away in the short term, gold should continue to slide. He mentioned $1200 an ounce as a possible target but didn't seem emphatic one way or the other."

Absolutely brilliant link.

All in all. 

Systemic Collapse far away.
JPY 200 to the USD.
Bond yields can remain low for a long long time (as Japan has shown)
The Fed will continue with its policy for a long time.

These are my picks from the 2011 meet.

On Gold: Jeffrey bought gold personally in 1997 because he thought it looked cheap - "For five years it did nothing, I actually lost money, then I made five-fold on my investment."

Two Final Rules: 
- "The Bloodless Verdict of the Market" - In the end, he who gets it right wins, there are no points awarded for being smart but wrong - I love this.
- "Never, ever take counterparty risk."  - It is the one risk you are almost never rewarded for taking.  Unless you are running $800 billion dollars, there is no need to use swaps, synthetics or baskets - trade cash markets and avoid any trades that require a counterparty.

And these from the 2012 meet.

About Europe:
He's also got nothing but disdain for LTRO and the other rescue measures designed to prolong the inevitable in Europe: "The firewall they're putting up is just more debt!  How are you going to go on a diet by eating more food?!?" he asks rhetorically and incredulously.

On Portugal: "Portugal is at Defcon 5 levels already, 10%-plus yields on 10-year bonds usually leads to default."
On Spain: "Nothing is more dangerous than a bunch of 20 year olds with nothing to do.  Spain has 23% unemployment and 45% unemployment among young people."  He views it as a powder keg and sees civil unrest as highly possible.
2010 Military Expenses, US vs rest of World

About Apple - he said this:
Another money quote: "If I were one of these crazy hedge fund guys, with the slick haircuts and fancy shoes and racing stripe shirts, the trade I'd put on is 10-times-leveraged natural gas long versus 10-times short Apple."  I don't think he's joking.
And in 2012 he did so?


Fantastic posts - all 3 with great charts.

No comments:

Post a Comment