Jeffrey Gundlach, CEO of the investment firm DoubleLine, is bullish on the Dollar and worried that a rise in interest rates could cause an economic downturn in the United States.HT: ZeroHedge (buy gold)
In the worlds’ financial markets things are coming thick and fast. Oil prices are spinning down, the Rubel is collapsing, and the Swiss National (NATN 80.7 -0.43%) Bank is introducing negative interest rates. At the same time, the Federal Reserve is getting ready for the first interest rate hike in over half a decade. Jeffrey Gundlach worries that this could be a severe mistake. The outspoken and highly influential CEO of the investment boutique DoubleLine was one of just a few contrarians who, at the end of last year, were correctly predicting that long term U.S. interest rates would decrease in 2014. Now, he spots warning lights in the bond market signaling the growing risk of a severe setback for the American economy that even could turn into a recession.
Mr. Gundlach, on Wall Street you are well known as an influential bond investor. But you are also a connoisseur of art and even tried to start a career as a drummer in a rock band. What tune comes to your mind when you look at the financial markets these days?
I have kind of lost track of music. I do not know any songs that have been written since about 1997. People around here, they all hear Radiohead and that stuff – I do not know a single song. But there is an old record by Led Zeppelin called «The Song Remains the Same» – and that is kind of what is going on: Basically all over the world, we have continued accommodative policies, to put it mildly.
Sounds almost a little bit monotonously.
What has changed in the financial markets is the strength of the Dollar. When the Dollar started strengthening, a lot of things started to change. The Japanese stock market started to go up again. Also, the Chinese stock market started to go up finally. In the United States, the junk bond market started to weaken. Now, junk bonds are at the low of the year whereas treasury bond prices are close to the high of the year. In the equity market, for two years, weak balance sheet companies were doing better or outperforming. Starting in this year, strong balance sheet companies were beginning to outperform. This is exactly consistent with the weakness in junk bonds.
And what does this mean?
It is interesting how you have been beginning to see signs of investor concern around the edges about the health of the economy and about the financial system. Historically, when junk bonds give up the ghost and treasuries remain firm, it is a signal that something is not right....MORE
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Just to be clear: we are not Jeff Gundlach fanbois.
In fact if the allegations in "Latest Twist in the Jeffrey Gundlach Bonds, Drugs and Porn Litigation" are true you might not even want to have a beer with him
