DoubleLine's Jeffrey Gundlach on "Getting There"

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.

Read it at The Reformed Broker
Notes from the DoubleLine Lunch with Jeffrey Gundlach, Spring 2012
By Joshua Brown


Gundlach is the new “Bond King” after handily beating PIMCO and 98 percent of other peer funds last year (on top of his previously superb record). Although his area of expertise is housing and mortgages, Gundlach’s macro views have been spot on the past few years. Brown’s writing style makes for an amusing read throughout the presentation.

(Disclosure: A portion of my personal funds are invested in Gundlach’s DoubleLine Total Return Bond Fund.)

Points of Public Interest

This week’s best and most intriguing for your weekend reading:

1. Krugman on (or maybe off) Keen

A Nobel Laureate is taught the limit of his own assumptions. Others pile on: Philip Pilkington: Krugman Makes Accusations of Fundamentalism to Defend His Own Dogma and Debt, Income and Aggregate Demand: Scoring Krugman vs Keen

2. Why Some Multinationals Pay Such Low Taxes

Insight into Google’s use of a “Double Irish Dutch Sandwich” and many other clever practices being used by GE, Microsoft, Apple, etc.

3. WHY MINSKY MATTERS: Part One

A former student of Minsky’s elegantly outlines the important aspects for understanding the reality of our financial and economic system. More on Minsky: Was 'Post-Keynesian' Hyman Minsky an Austrian in Disguise?

4. The worst anti-regulatory travesties in the financial sphere have had broad, bipartisan support

Without much fanfare, the “fraud-friendly JOBS Act” passed Congress this week with overwhelming support. William Black, a professor of law and economics, offers a history of anti-regulatory bills over the past several decades. If history is any guide, the JOBS Act will be front and center as having aided and abetted massive frauds during a financial crisis in the not too distant future. More on the JOBS Act: Bill Black: “The only winning move is not to play”—the insanity of the regulatory race to the bottom

5. Liberating The Hunger Games and What Happened to Liberty in the The Hunger Games Movie?

What can I say...talk of The Hunger Games is everywhere these days!

6. The Real Leadership Lessons of Steve Jobs

The bottom 99% fall further behind:

Source: NYT

Quote of the Week

...is from p.96 of Vitaliy Katsenelson’s The Little Book of Sideways Markets: How to Make Money in Markets that Go Nowhere:

“Stock buybacks can create shareholder value if the stock is purchased cheaply, but they often destroy value when management overpays for the stock.”

This past week Apple announced plans to buy back up to $10 billion in stock as the company’s shares continue their meteoric rise past $600 from only $80 three years ago. Apple, however, is not alone in ramping up funds to buy back stock at markets repeatedly move higher. The graph below displays total buybacks for US companies over the past 20+ years (from Musings on Markets):
There are two distinct, significant run ups in buybacks: during the late 1990’s and in the middle of the 2000’s. The first peak, in 2000, coincided with the top of the dot-com bubble and the beginning of a lost decade in stock returns. The second peak, in 2007, is also apparent in this next chart depicting the past ten years of stock repurchases with the broad S&P 500 index overlaid on top (from ALPHA NOW):
Once again the peak in stock buybacks (and all-time high) occurred just as the stock market was reaching its all time high. Interestingly, stock buybacks were at their lowest levels in 2002 and 2009, precisely the same time stocks were bottoming.

Since the market’s lows in March 2009, buybacks and the stock market have largely been rising together once again. Analysts and investors frequently celebrate new announcements for buying back stock, seemingly unaware of companies poor historical record of timing the market. Will Apple, among others, choose their timing right this time around? Or will current purchases at new all-time highs destroy value and mark another peak in stocks? History is not on their side.