Gundlach Says Stocks "Obviously Overbought", Buys "More Long-Term Treasuries In Last Month Than In Four Years"

Tyler Durden's picture

Doubleline's Jeff Gundlach must not be a GETCO algo because unlike the algorithmic programs who are all that's left of traders in this policy farce of a manipulated market and who are programmed to BTFD especially when there is a massive stop hunt program about to be unleashed on 10-20 ES contracts, he is not buying stocks. Instead the bond manager has closed his July 2012 call when he called the top in Treasurys, and told Reuters that he has bought "more long-term Treasuries in the last month" than in the last four years." And this coming form the so-called new "bond king." Gundlach said he started buying benchmark 10-year U.S. Treasury notes in the last month after yields popped above 2 percent, because he sees value there relative to other asset classes, including stocks, which he said are "overbought."

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"I bought more long-term Treasuries in the last month than I've bought in four years. I am a fan of Treasuries now. I wasn't a fan of Treasuries in July," said Gundlach, chief investment officer and chief executive officer of DoubleLine Capital. 

 

"They looked cheap at a yield above 2 percent, compared to certain riskier assets, which had gone up in price over the last six months while Treasury prices fell," he said. "Also, owning 10-year Treasuries at yields above 2 percent provides an offset to credit risk we are taking elsewhere in the portfolio."

 

So far, Gundlach's call is proving correct as 10-year Treasury bond yields dropped below 2 percent to yield 1.87 percent on Monday.

As for stocks...

The investor, who was dubbed by Barron's as the new "King of Bonds" two years ago, said he thinks the recent rally in stocks, which last week drove the Dow Jones industrial average within 75 points of its record close of 14,164.53, has gone too far.

"They are obviously overbought in the short term," he said.

Gundlach, known for his contrarian investment views and opinions, also shorted Apple at $610 last year and predicted that the tech giant's stock would fall to $425. On Monday, Apple's stock was trading at around $423.

Finally, as all our readers know quite well, ex the Fed, the economy, not to mention the market, would be a complete disaster:

He also said the U.S. economy would have no growth without central bank action.

 

"It's pretty clear that the Bank of Japan, Bank of England, the ECB and the Federal Reserve have expanded their balance sheets by approximately 3.5 percent of GDP per year for the last four years - and if it weren't for that, you'd have negative GDP."

The problem, of course, is that as long as the Chairman believes unprecedented US central-planning will have a happier result than it did in the USSR, those who believe there is any trace of fundemantal or technical reflection of what is truly going on, will be in for a surprise, or suffer unprecedented losses, or most both, whichever comes first.

And on this bearish news, buy stocks. It's call New Normal logic.