(September 20th, 2012) There was a great interview on CNBC with bond guru Jeffery Gundlach yesterday. Here are some of the points which we found interesting. Videos of the interview are at the bottom of this post.
Jeffery Gundlach on the 10 Year Treasury
- The 10 year treasury could rise 100 basis points by year end.
- The bottom is in for yields and price has peaked as of July.
- At DoubleLine they have gone to their lowest interest rate exposure in history back in the summer of this year.
- The reason 10 year treasuries can go up a lot is that it is so unattractive even at 1.8
On QE3 and the Fed
- QE3 its not going to be very effective because its not very big.
- Quantitative Easing is not going to bring interest rates down.
- We are living in a hall of mirrors because we don’t know what investors are thinking because price discovery is being destroyed by government intervention.
- There is no exit by the fed. Its more likely the fed buys all the us treasury bonds that exist that they are going to work the other way and start selling bonds. There is no reason to even have a concept of what a Fed exit would like like because its not going to happen.
On the Stock Market
- We are not going to have another lost decade in equities but things are high right now.
- The obsession with Apple (AAPL) is a truly remarkable social phenomenon, the obsession with apple means the stock is over believed and overbought.
- He would not buy or short bank stocks. They are reasonably valued where they are today but they are so challenged how are they going to grow and make money?
- They will likely close the DoubleLine Total Return Fund around the $50 or $60 Billion in assets under management level.
- Europe is not solved because the one question that needs to be answered has not been answered. Will Germany pay the debts of the periphery or not? Many of us suspect that the answer will be no and if thats the case then the banking system would potentially have a big shock.