Gundlach: "I'm Waiting For Something To Go Kaboom"

Tyler Durden's picture

Following some well-timed 'suggestions' in Natural Gas and Apple this year, the new bond guru has some rather more concerning views about the future of America. Reflecting on a dismal outlook progressing due to the fact that "Retirees take resources from a society, and workers produce resources", Gundlach has cut his exposure to US equities (apart from gold-miners and NatGas producers) noting their expensive valuation and low potential for growth. In a forthcoming Bloomberg Markets interview, the DoubleLine CEO warns we are about to enter the ominous third phase of the current debacle (Phase 1: a 27-year buildup of corporate, personal and sovereign debt. That lasted until 2008, when Phase 2 started, unfettered lending finally toppled banks and pushed the global economy into a recession, spurring governments and central banks to spend trillions of dollars to stimulate growth) as deeply indebted countries and companies, which Gundlach doesn’t name, will default sometime after 2013. "I don’t believe you’re going to get some sort of an early warning," Gundlach warns "You should be moving now."

 

Excerpts (via Bloomberg):

On Hard Assets:

He recommends buying hard assets: Gemstones, art and commercial real estate are high on his list. And DoubleLine has been buying the stocks of Chinese companies, U.S. natural gas producers and gold-mining firms because it considers them to be bargains.

On Bonds:

Most of DoubleLine’s assets are in the Total Return Bond Fund, which has 78 percent of its holdings in residential mortgage-backed securities -- both those guaranteed by the U.S. government and those that are not and have discounted prices.

 

The mix should help the fund weather either inflation or deflation because the securities should move in opposite directions if interest rates go up or down. Because higher rates could mean the economy is improving and housing prices are recovering, there would be fewer defaults on the riskier non-guaranteed bonds, and prices would rise, says Philip Barach, DoubleLine’s co-founder and president.

On Kaboom:

He says the amount of money investors can make in phase three will dwarf what they can earn now.

 

“I’m waiting for something to go kaboom,” Gundlach says in his office a week before the L.A. speech. “If phase three takes two years, it’s worth waiting for. The markets don’t have lots of opportunity now.”

 

Gundlach is so confident that phase three is coming that he’s planning to start an equities fund and a long-short hedge fund in early 2013 to offer investors additional protection from inflation.

On Japan:

“Japan is running out of policy tools,”

On Europe:

Following actions by the European Central Bank that pumped $355.4 billion into the region starting in 2010, DoubleLine managers see several possible events that could hammer markets, from Finland exiting the euro zone to another near default of a Spanish bank.

 

“The only reason asset prices are up is because of all the liquidity in the system,” says Luz Padilla, manager of the $707 million DoubleLine Emerging Markets Fixed Income Fund. (DBLEX) “Our concern is that it can turn very quickly.”

On USA:

Gundlach sees a post-election, pre-fiscal cliff economy that’s growing anemically and only because of consumer loans, government stimulus and the Fed. He says inflation could jump by 2 percentage points if the Fed ramps up its purchases of government debt beyond what it has done so far.

On US Equities:

Retirees take resources from a society, and workers produce resources,” he says.

 

In line with Gundlach’s gloomy outlook for America, the Multi-Asset fund recently dumped some of its U.S. equities. Sherman says the stocks are too expensive and U.S. companies don’t have much potential for growth. But the fund has added to its holdings of gold-mining companies and natural gas producers in 2012 because these stocks are cheap, he says.

On Bernanke and The Fed:

You’re just going to build up pressure in the pressure cooker, and when it blows, the lid will blow sky-high, and that’s when you get to phase three,” Gundlach says.

On Obama and The Fiscal Cliff:

Gundlach says he has no faith that President Barack Obama in his second term will reach an accord with Congress to make significant cuts in the $1.09 trillion deficit. He says the tax hikes proposed by Obama on the wealthy wouldn’t bring in enough revenue to have a significant impact and politicians probably won’t make major cuts in entitlement programs because the public overwhelmingly supports them.

 

Gundlach dismisses the chances of a grand compromise on the so-called fiscal cliff of automatic spending cuts and tax increases totaling $607 billion if an agreement isn’t reached by January. Rather, he expects politicians will find a way to push the deficit issues into 2013 and beyond.

 

I don’t think Obama is likely to give on anything, and I doubt the Republicans are going to roll over because they failed to regain the White House,” Gundlach says.

On Gundlach:

He’s a much more complex human being than an egotistical blowhard,” Baha, 53, says. “The guy is a paradox. He is crazy about football. Then he recites a T.S. Eliot poem.”

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Gimp's picture

LOL - Buy and hold darlings , that's the ticket.

My Enron, Worldcom, MF Global and other gems are doing fine.

 

Savyindallas's picture

Do you think my Worldcom could still be worth something someday? How about my Global Crossing? I still -can't figure out why Bernie Ebbers is in jail forever, Ken Lay died rather than go to jail forever, and that sleaze Gary Winnick walked off with a cool billion and continues to hobnob with his Zionist Likudnik Buddies in israel. There's something wrong with that picture -seems like Ken and Bernie may have been victims of religious discrimination.

Cursive's picture

If stocks don't have much potential, why's Gundlach starting an equity fund next year?  When this thing goes KABOOM, don't expect to start picking pieces up for 2 or 3 years.  Maybe more.

kito's picture

Eggggactly.....his version of phase three implosion is a 2 percent rise in inflation and a 25 percent drop in u.s. equities......whoopdeefuckingdoo.....another clueless cog in the mainstream "professional" investment machine........

Urban Redneck's picture

Cross currents (deflating business environment vs inflating money supply being unleashed) make exact ideal entry points difficult to predict, and the relative ease of raising capital to deploy into equities at that point is unknown.  It's the Wall Street version of prepping...

Yen Cross's picture

 I finally talked some sense into a family member about buying some "gold coinage"... They find it hard to justify $1720 an ounce (aprox) for something so small. I replied with, "welcome to inflation"...

Silver Garbage Man's picture

Hey Yen, you need to reply with this( this is how I finally got through to a friend) a good farm in my neck of the woods has went from $24 000 to 1.39 million in 45 years. But if you price it in gold it has not changed that much. Once he really thought about that then the lightbulb went on. He is now less stressed and more secure.

slaughterer's picture

Let's all go 300% short and see where we end up.  

buzzsaw99's picture

Gundlach is so confident that phase three is coming that he’s planning to start an equities fund and a long-short hedge fund in early 2013 to offer investors additional protection from inflation.

Yeah, for a fee. What a guy! Kaboom my ass.

This is the way the world ends
 Not with a bang but a whimper.

Yen Cross's picture

2 and 20 BITCHEZ...  Otherwise "beat it"...

buzzsaw99's picture

Hello Yen,

He admits he doesn't have any idea what interest rates are going to do but either way he wants to be ready. His thesis for stocks is that he expects a big move and even though he is vague about the direction he wants people to invest long-short with him just in case. ;)

 

Ha! I will tell him the future right now. Interest rates will be doing the limbo for the rest of his natural life. Stocks will continue rising within the channel pre-designated by the bankstas. Save your 2 and 20 for the bread lines and enjoy some free reading of the tea leaves by yours truly.

Best

Yen Cross's picture

 Hey Buzz, you're making sense as usual. Keep up the good work :-)

vast-dom's picture

That whimper sounds like gas escaping the hopium filled shit bag called the markets.

chrisd's picture

The only reason to go long art and jewels going into an apocalypse (and not food and farmland with water) is if you are taking a bath on your art and jewel investments. I remember when John Paulson was featured in lapdog BBG pieces as well - good times.

Oldballplayer's picture

My wife loves TS Eliot. And doesn't know shit about the market.

Zymurguy's picture

Have the elected mis-representatives volunteered to have a cut in pay and pension yet to coincide with the increase in taxes they want us to have?

Being Free's picture

"Retirees live of their accumulated resources, workers produce resources and Banksters and Government take the resources from both."

fixed it for ya.

Yellowhoard's picture

"Retirees take resources from a society, and workers produce resources"

Which is why ObamaCare is so super awesome.

Old people are expensive. ObamaCare just tells them to go fuck themselves! So, workers get care until they are no longer useful to society.

Everybody wins!

Except old people.

JR's picture

Exactly! The greed of the majority – the voting “democracy” – leads to “The Terrible Tyranny of the Majority.”

Or, as Bionic Mosquito put it today on Lew Rockwell: “Envy is the root, the seed that gives life to the tyranny of the majority. Democracy satisfies this covetous nature while sanitizing the evil – creating a false legitimacy to the end result of envy, that being theft and destruction.”

Thus: according to a new poll by The Washington Post and ABC News:

Sixty percent of poll respondents said they supported higher taxes on annual incomes above $250,000, with 37 percent opposed.

Sixty percent of poll respondents said they supported disallowing medical care on people over 68 years old, with 37 percent opposed. “

And so, Congress currently is busy catering to the mob's coveting and envy in order to get their share of the mob vote, justice and morality and the nation all taking a back seat to their immoral personal fortunes.  Bionic Mosquito reports that:

“Policymakers in Washington are locked in a debate over whether to increase the top marginal tax rate on incomes above $250,000, with President Barack Obama and congressional Democrats insisting the rate return to 39 percent and Republicans saying it should stay at 35 percent.”

And:

“Policymakers in Washington are locked in a debate over whether to increase the age where health care will be disallowed, with President Barack Obama and congressional Democrats insisting on the age of 69 and Republicans saying it should be at 65 years of age.

“Or 58, maybe?”

http://lewrockwell.com/rep3/tyranny-of-the-majority.html

JR's picture

When Bloomberg begins identifying the targets, i.e., the scapegoats the Fed-connected bankers will select, and suggests there may not be an early warning for “kaboom,” then that’s the only warning anyone needs.

Translation: Cover up of the banker crimes begins in anticipation of the economic explosion.

As the year closes and Christmas approaches, America is awash in the tax cliff menagerie and who has the cards to play: “We won, it’s time for you to pay more (Obama”,  and “You can’t have it all yet so just select one or two things from our side (Boehner)”.

Nowhere is there a representative for the class that built America. And the message is clear: this class is to pay and “they” are to get.

For demonization purposes, of course, “this class” erroneously has been called “the rich,” and for the producers to allow the term to be used is a rookie mistake, i.e., following in your enemy’s language.

The Obama Administration successfully has defined the terms as no tax increase for the ”middle class,” only for “the rich” –i.e., individuals making more than $150,000 or couples $250,000 -- and the Republican leadership, only worried about re-election, is happy to play the game as long as it can be settled and they can get out of town before the New Year.

Never mind that the banker-controlled Congress is using rape of the culture to pay Wall Street's shareholders – the Blankfeins, the Dimons, the Romneys, the Rockefellers, the Rubins – who will not, of course, share in the tax increase.

As the Christmas season gets underway, the financial and industrial monopolists bent on destroying their small business competition with Congress' help, only are interested in getting their slick catalogues in the mail, putting up some lights and taking advantage of the sentiment of the people for their year's profits while they purposely take out the religious part of the holiday, one of the vital foundations of the country.

Wall to wall retail from Halloween through New Year’s Day - from Thanksgiving afternoons to Black Fridays to Cyber Mondays - the incessant greed is in the air and everywhere – extinguishing the Merry Christmases, the nativity scenes, the church services and replacing them with contradictory “holy days,” party dresses, liquor, plastic toys, an excessive cornucopia of food, and mockery for the disappearing voices of the religious event that once was a lode star for America’s moral conscience: it’s city on the hill.

klockwerks's picture

Well said JR, hard to add anything to that.

boogerbently's picture

More ZH'ers are against retirees than WallSt/Washington/corporate pirates.

That makes THEM sheep/shills.

Things that go bump's picture

So sorry, even though it is diminished in recent years, I like my winter solstice celebration without bogus religious trappings. The tree goes up, Santa still comes, and then we have a feast.  We don't drag the children from their toys to go and sit in a cold and drafty institute of religous indoctrination.  The charming The Night Before Christmas is read for young children, as a belief in Santa is eventually outgrown and doesn't do much harm.  Unfortunately many don't outgrow fairy tales of vigin-born gods (that was borrowed from the Mithras cult by the way).   

JLee2027's picture

I'm waiting for the Kaboom too. Popcorn all ready.

Bastiat's picture

How can you say they "take money from society" what about their contributions to their retirement and their savings?

Retirees spend money--I thought that was good where 70% of the GDP is consumption. 

The older and more decrepit people get they more stimulative they are, too.  Krugman has to love that -- like a window that keeps breaking itself!  Even with Medicare they are not taking from society but performing a Keynesian service!

JR's picture

When the debate finally begins to identify who shall keep their property and their livelihood and who shall lose it…to benefit others…then the process of demonizing the potential losers begins.

The next steps: savagery and ruthless plunder.

This is the end of a nation, where Mr. Jefferson’s description applies: “Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.”

ShrNfr's picture

"shall seem most likely to effect their Safety and Happiness" = Food Stamps + Birth Control Pills. It will be ugly.

Everybodys All American's picture

I find it hard to believe that kaboom has not happened to more than a few jackasses. Bankers, politicians, and many other notables leading this country to a quick demise.

xamax's picture

WHATEVER IT TAKES, BELIEEEEEEEEEEEEEEEEEEEEEEEEVE ME

Ned Zeppelin's picture

So his theory is that inflation is coming - in a depression.  OK.  Somehow residential real estate will blossom and become valuable.  Mmmmm-uh.

Run, Forrest, run. 

boogerbently's picture

There is nothing to force another city/county to take them.

And, certainly, not the liberal politicians who spent them into bankrupcy.

They would have to move and become productive citizens, or shot down like dogs performing their only other "skillset."

topspinslicer's picture

paper pusher say what? PAPER PUSHER SAY WHAT?? shares of this company, debt of that company -- strangely absent from his recs are the physical beauty of gold and silver

Yen Cross's picture

J.R. you are a great read!  A true Thespian/ Master of History!  Look in the mirror J.R. and tell me about devine intervention/ reflection on ones life?

  Your comments were very well thought out. Excellent in content and referrences. I can't argue against you J.R. You are a truthful person/

Mediocritas's picture

Not sure there's much point investing in gold miners and natgas producers. The more interest there is in gold miners, the more management is tempted to issue more shares and dilute existing holders. That's the primary reason gold miners haven't tracked gold spot particularly well. So buying gold mining shares as a leverage play on gold spot ends up hammering you with the very inflation you're trying to protect against.

Staying away from the miners and taking delivery of physical bullion makes far more sense.

As for natgas. The world is drowning in natty now thanks to fracking (which is popping up overseas now, so watch the foreign price collapse start to match the US). The industry is going to cannibalize due to oversupply so you're playing with fire to invest in producers. Stay away.

Best bet is to be out of equities entirely. Best bet is to be out of paper, all forms, entirely.

toomanyfakeconservatives's picture

The KABOOM can and will be minimized by placing Obama, Brenanke, Geither, Corzine, and the majority of Congress in chains and orange jumpsuits... http://tinyurl.com/czrlm2n

JamesBond's picture

if you scrap away the useless and tasteless crust of this article you are left with -

buy metals and energy.

nothing wrong with that advice.  the writer should have just said that and left dodge.

 

-jb

Aurora Ex Machina's picture

My current theory is that GS really is doing "God's work", and have set themselves up as the masters of the Universe as the ultimate fall guys, to drive an enlightened response, much like the story arc of the current Batman films. They appointed 70 new members this year, "a Number corresponding to the totality of an evolution, an evolutionary cycle being completely completed, according to Saint Augustin" (or rather, according to this site).

They are the heroes that the world deserves, not the one it needs, so we will hunt them, because they can take it.

 

Snark level: you decide.

polo007's picture

A Senate Republican aide tells Breitbart News, “It’s clear that the White House is becoming increasingly comfortable with the cliff dive. They’re just not engaged. They’re less engaged than they were two weeks ago.”

http://www.breitbart.com/Big-Government/2012/11/29/Exclusive-Source-Obama-ready-fiscal-cliff?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+BreitbartFeed+%28Breitbart+Feed%29

polo007's picture

Sen. John Cornyn (R-Texas), who will soon be the second-ranking Republican in the Senate, on Friday panned a proposal by the White House that would allow President Obama to raise the debt ceiling without congressional approval.

Cornyn was referring to a plan Treasury Secretary Tim Geithner presented to Speaker John Boehner (R-Ohio) on Thursday that was meant to avoid the "fiscal cliff" of tax increases and spending cuts.

The plan, which sparked strong Republican criticism, included a provision allowing the White House to raise the debt ceiling without the consent of Congress.

"Well, it's outrageous," Cornyn said on Fox News.

"It's like saying we maxed out our credit card so I'm going to get a new credit card with no limit so I can keep spending. There needs to be some accountability here and, so far, we're spending 42 cents out of every dollar in Washington and that's borrowed money. And that's money that our kids and grandkids are gonna have to pay back."

http://thehill.com/blogs/blog-briefing-room/news/270373-cornyn-obama-crazy-to-claim-unilateral-debt-ceiling-power