SLV, GLD 4:41 PM Gundlach: Worrying about how the Fed may unwind its policies is a waste of time, he says. The current Fed boss and the putative successor (Yellen) haven't indicated any interest in an exit. With precious metals bears patting themselves on the back of late, Gundlach thinks it's a good time to buy, preferring silver (SLV) to gold (GLD) thanks to the white metal's higher beta. [U.S. Economy, Commodities, Quick Ideas] Comment!
4:32 PM New Orleans was full of liquidity after Katrina, says Jeff Gundlach, beginning a presentation titled, "The Big Easy." The major global central banks are all engaged in circular financing schemes, funding gaping government deficits with money minted at the touch of a button. As a group, the central banks are expanding balance sheets by about 3.5%/year.
The Fed's QE isn't going anywhere for years, because the Fed can't exit. [U.S. Economy, Breaking News] Comment!
4:58 PM Gundlach: Japan is the "pace car" in the great global debasement race, he says, continuing to be bullish on Japanese stocks (EWJ, DWJ) and bearish on the yen (FXY). One interesting slide shows an explosion higher in consumer confidence there since Abe made his yen devaluation policy clear. He's not bearish on JGBs however, as the BOJ - like the Fed - has a big checkbook and can buy up all the debt the government can issue. [Global & FX] Comment!
http://seekingalpha.com/currents/allFull presentation probably available a bit later.
Comments
Yeah, "questions about exit strategy are misplaced...there is no exit...so, it's not relevant to today's investment horizon."
He basically believes there is no bond bubble. Currently, he's pro long-term Treasuries, again. He believes that while SP500 has benefited from QE, it has been a correlated event...the Fed would be more motivated to buy bonds directly to keep interest rates from raising.
He's also bullish Japan equities. And, bullish US housing market.
And, thinks Apple is now about fairly priced, if oversold. "Long time before it hits 700 again."
http://www.scribd.com/doc/128740069/Gundlach-the-Big-Easy-Slides-FINAL
"...raises more than a few 'doubts' about the new reality in which our markets live - Gundlach fears 'trade protectionism' is coming (and will hurt the global economy); sees monetary easing going on for years (not months); dismisses the 'money on the sidelines' myth by noting that retail involvement is about the same as in 2007; thinks a 2% 10Y is 'reasonable' value; says to avoid banks; likes Silver; thinks the Student Loan debt market is a bubble set to burst; sees the perceived strength in housing as 'overblown'; blows the 'great rotation' meme away - "there can be no net rotation, for every buyer there's a seller"; and is sticking to his long Nikkei, Short S&P 500 trade. "
http://www.zerohedge.com/news/2013-03-05/doublelines-gundlach-likes-silver-great-debasement-will-continue-years-not-months
http://www.zerohedge.com/news/2013-03-04/gundlach-says-stocks-obviously-overbought-buys-more-long-term-treasuries-last-month-?page=1
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Personally, I completely agree regarding the student loan situation. Housing is probably overhyped in the short term, but I could see it trickle higher with inflation over the next 5-10 years. It's not going to go straight up but it's probably bottomed. Hopefully more people will consider "what is it I need?" than "What is it I want?" when looking now. You watch HGTV shows from 2006/2007 with people who look like they just got out of college and they want some gigantic place. If they're still there not only has the price dropped but they're probably paying a fortune in heating/cooling/etc. Property taxes are absolutely going higher, but those who continue to rent will see that too, just indirectly.
I think you're going to see more people thinking about house as utility than luxury, and convenience. There will be areas that take many, many, many years to recover where there's just a glut of cookie-cutter houses and condo units and there will be places where there will be more noticeable signs of recovery in 5 years. I think the recovery in housing will take a long time, but it will be a very multi-speed recovery, and you may see two very different speeds in areas 30 minutes apart.
Those who want to play metals should consider CEF.
I remain long Japan, but not because of the fundamentals, which are (unfortunately) not very good, but because of money printing. As Gundlach said yesterday, "Can you imagine (the President) walking around the U.S. saying 'I'm going to inflate. I want to inflate. My policy is inflation," he asks. That's what the President wants, says Gundlach, but at least he doesn't say it. In Japan, the PM is actually saying it. He sees the yen (FXY) headed to 200 to the dollar (93.37 now).
I just asked you in another thread if it might not be true that student loan bubbles cannot burst. I just read the above and apparently they can. Could you explain to me where the bubble is in the market and/or how it bursts?
Look at JG's graphs - I think display # 32 shows since 1978 the inflation rate for college tuition has risen 1115%. When the music stops someone's going to get burnt on college tution loans.
Romick of FPA has noted the coming student debt crisis for some time. He's not alone. Seems to have backed off of his short positions in that sector, though..
On luxury homes -- sort of an aside -- I'm reminded of Frank Underwood's comment from the Netflix series House of Cards [sic]: "...Money is the McMansion in Sarasota that falls apart in ten years; Power is the old stone house that lasts forever...".
Be interesting to see what happens in the vacation home market.
DMLIX is only 6.5% up since its inception more than 2 years ago. It has 26% in cash, 33% in bonds, 3% in US stocks, 15% in international stocks (a significant part - in Japan and China), and 21% in what M* calls "Other".