Meanwhile, “Call Me Ken” 🫣
☑️ #3 Sep 21, 2023
What kind of a man watches Barbie?
williamhgross.com: A majority of vocal professional investors seem to expect a peak in short term rates in the next few weeks and for the Fed to lower yields several times in 2024, perhaps initiating a mini-bond bull market in the process.
☑️ #2 Sep 20, 2023
Gundlach: “One of the best decisions we’ve had in a while”
@DLineCap: DoubleLine CEO Jeffrey Gundlach shares his outlook with @ScottWapnerCNBC following the FOMC release and Fed Chair Powell's press conference.
#rates #bonds #inflation #QT #higherforlonger
Related content:
☑️ #1 Dec 7, 2022
Recession Signals: Gundlach, U.S. Will Face Recession by Mid-2023
DoubleLine Total Return Webcast » 1:15 PM PT ⤵️
Jeffrey Gundlach, Chief Executive Officer and CIO. DoubleLine Capital
Andrew Hsu, PMs of the Total Return Bond Fund. DoubleLine Capital
⚡️
Transcript: “Expect a recession by the middle of next year,” Jeffrey Gundlach warned investors. The Fed’s monetary tightening will not be as aggressive as expected, he said, but high rates will dampen housing, consumer spending and other sectors, and will force the economy to contract.
Updated ✅
Complete thread (for non-Twitter users) ⤵️
Gundlach: There have been four QE’s, going back to 2008-2010. 201 billion of quantitative easing. A short while later, QE2 started November 2010, $565 billlion. QE 2012-2014, nearly $1.7 trillion. And then 2020-22 QE4 $4.6 trillion Jeffrey Gundlach: Now we see the stock market has rolled over, consistent with the balance sheet shrinking. Mr. Gundlach: The budget deficit as a percentage of GDP. The blue dotted line is the U-3 unemployment. In the past, low levels coincide with low deficits. Not this time. Very precarious. This might mean that historical comparisons won’t bear out. Jeffrey Gundlach: I personally don’t think the Fed will make it to 5% on the Federal Funds rate. There’s too much weakening.Gundlach: The market has priced in a terminal Federal Funds rate at around 5%. I don’t think we’re going to make it to 5%. Jeffrey Gundlach: Inflation is coming down, and it’s going to continue to come down into the middle of next year.Gundlach likes export and import prices because they’re not adjusted like the CPI. These prices have been moderating. Export prices are up 6.8% year over year. Import prices to 4.2%. DoubleLine CEO Jeffrey Gundlach: Headline expectations for YoY CPI – that inflation will come down to 3% and then flatline at that level for three years – are strange and implausible. If the Fed succeeds to get inflation down to 2%, Gundlach believes it will overshoot on the downside and perhaps go negative. If that conditional statement comes true, he expects a massive bond rally.Jeffrey Gundlach: Bloomberg Commodity Index has been below its 200-day moving average for a few months now. It makes sense to wait for the commodities market to prove itself by moving up the 200-day. Right now, that’s not happening. Jeffrey Gundlach: Golds appears to be stabilizing around its 200-day moving average. Maybe it’s predictive of a weakening U.S. dollar. DoubleLine CEO Jeffrey Gundlach: Look at the reversal in the DXY dollar index. With this reversal, we’ve seen some improvement in risk assets. Jeffrey Gundlach: M2 growth is basically the lowest in my lifetime. M2 growth is negative on the 6-month annualized. That’s not supportive of an accelerated inflation narrative. Gundlach: The savings rate is very low as compared to disposal income. The savings rate has collapsed. That is suggestive of a weak consumer. DoubleLine CEO Jeffrey Gundlach: Consumers borrowing money to buy food and gas indicates desperate consumers.Jeffrey Gundlach: Leading indicators are very suggestive of recession. Gundlach is on full-on recession watch. Gundlach: Consumer pessimism for the present is getting closer to consumer pessimism for the future. Recessionary. Jeffrey Gundlach: If you look at the depth of the 2s10s Treasury curve inversion, maybe we’re only several months away from recession. Jeffrey Gundlach: ISM manufacturing delays are very low. Suggestive of low demand. That’s non-inflationary. Gundlach: Employment data is the last thing to give up the ghost. In the last 3 recessions, it’s right at the front edge of the recession that the unemployment rate crosses above its 12-month moving average. Gundlach: Housing affordability has gone from very good pre-pandemic and now it’s at the lowest level in 30 years. Housing is not going to help the economy. Jeffrey Gundlach: Monthly mortgage payment based on existing home sale price has gone from 17% of disposable income pre-pandemic to 33%. So affordability has fallen dramatically. Gundlach: New home inventories are robust. Homes sitting on the market usually coincides with recession. Jeffrey Gundlach: Versus history, the mortgage-backed securities market in terms of risk-reward is as favorable as at any time in at least 25 years.Jeffrey Gundlach: The combination of positive upside versus downside, or neutral upside versus downside, and historically very ample excess yield versus Treasuries makes the mortgage sector very attractive.Gundlach: Amid all this Fed hawkishness, the 10-year Treasury yield has started to fall. I think rates are peaking out here in the fourth quarter of 2022. Jeffrey Gundlach: Real yields have gone up a lot. This was very bad for risk assets. The good news is the real yields have stopped going back and back to where they were in 2019. Gundlach: With all the tax loss selling, I would not be surprised by strength in risker assets in early 2023.Jeffrey Gundlach: The end of most megatrends predicted in the June 9, 2020 “Superman” webcast has come true, including the end of growth’s outperformance over value and the Nasdaq 100’s outperformance over the S&P 500. Gundlach: The next might be U.S. equity price outperformance vs. the rest of the world. The dollar’s decline would be the catalyst for the rest of the world to outperform. Gundlach: Now that the dollar has peaked out, spreads on emerging market debt, while still pretty wide, have come in about 150 basis points from their wides of the summer. Jeffrey Gundlach: Stocks were cheap to bonds entering 2022. Not anymore. As of September, bonds were screamingly cheap versus stocks.Gundlach: Bonds are still cheap to stocks because the yields that you can get per unit of risk are so much higher now than the dividend yield or the earnings yield if you will on the S&P 500.Gundlach: In the last couple weeks, IG corporate spreads have been decompressing, HY corporate spreads have been very compressing. The junk bond market had very large inflows. DoubleLine CEO Jeffrey Gundlach: Lending standards have tightened a lot. There’s a very good fit between default rates nine months forward and lending standards tightening. Could pose a problem for bank loans. Gundlach: It’s pretty obvious that that the crypto market was heavily dependent on government money spraying.Jeffrey Gundlach: Crypto goes on faith and speculation. And when you have rampant speculation, you have fraud.