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

Ugly day in DC after a beautiful week, but more good NCAA basketball on TV. Good luck to those whose brackets still have a chance of winning!

1. “The Current Models Have Nothing to Say”

Should we be surprised? Policy makers continue to employ models of an economy with no financial system.

2. Economics without a blind-spot on debt

The aggregate level of debt, especially private, matters in

forecasting economic growth.

3. Consumer Credit Growing at Highest Rate in Past Decade: Unhealthy and Unsustainable?

Stopping addictive habits is not easy, but extending those actions will only make the eventual adjustment more difficult and painful.

4. The Japan debt disaster and China’s (non)rebalancing

Chinese consumers continue to increase savings in lieu of domestic consumption. Japan is attempting to rebuild its trade surplus, but which countries will allow their surplus to decline or deficit to increase? Global (and domestic) imbalances not addressed remain significant risks to the global economic outlook.

5. A step in the right direction

Scientific exploration incorporating complex systems and networks continues to move our understanding of reality forward.

6. It's not structural unemployment, it's the corporate saving glut

Businesses save instead of investing in labor when consumer demand is weak. Until policy focuses on improving the consumer balance sheet (e.g. debt write-downs), unemployment will remain high.

7. Wrong vs Early – Contrarians Bet on Natural Gas

The best investors are often early and patient.

8. The Real Problem with Microfoundations

Microeconomics is not especially sound in predicting all outcomes

either.

9. Principal writedowns of the day, mortgage edition

Positive for households but will Bank of America (and others) really accept the associated losses?

10. Why Using P/E Ratios Can Be Misleading

In early 2009, at the market bottom, the P/E jumped to over 100 as profits plummeted. Using E/P corrects for this issue and shows the market is slightly overvalued currently.