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."

More:

"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.

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Black Markets's picture

For fuck sake it doesn't matter what you buy so long as you are OUT of cash.

It's cash that is crashing here as the central banks pursue a policy of monetary drag, raising rates far too slowly, easing too much and generally bankrolling their various respective governments by transferring the spending power of currency deposits to the public finances.

Everybody is at it. Holding money is a dumb fucking play.

All assets will rise.

What is basically happening is the banks are buying everything up in an environment of low monetary velocity.

Once the banks own everything the central banks will start printing money and distributing it to the wider economy and the general public.

When this happens monetary velocity will accelerate and the economy will take off again and who will benefit? The banks who bought everything because they were first receivers during the period of slow monetary velocity.

The whole system is vulnerable to influence from the men who control finance and monetary issuance. Their power is so esoteric that it survives unquestioned.

It is not necessarily a bad thing. It is better to have plutocrats than barbarian chieftains. These megalomaniac psychopaths need to be occupied in order to keep the peace.

It's good that the Icahn's of this world spend 20hours a day plotting market mischief rather than laying siege to suburbia and invading Poland.

MrPalladium's picture

"It is better to have plutocrats than barbarian chieftains"

Depends upon which barbarians you are talking about.

Uncle Zuzu's picture

"Stocks are obviously overbought in the short-term and I am obviously overpaid in all terms, long, middle and short."

lolmao500's picture

Big rumors coming out of Europe that a lot of SWAPs are gonna be called... and it won't be pretty.

rubearish10's picture

Apparently those "big" rumors are not big enough!

electricgorilla's picture

Looks like alot of people are going to be wrong here. BTFD? Good luck with that.

fuu's picture

Look at that orderly afternoon ramp, stairway to heaven.

thismarketisrigged's picture

every single stock is fucking overbought and will fucking crash like a bitch once this crash happens, which shouldbe realtivley soon, since this has been going on for 5 years already.

 

look for goog to fucking drop to 500 when this happens. talk about a stock being overbought. same with amzn, company has not fucking made a profit in god knows how long, yet the stock continues to shoot up on nothing.

rhinoblitzing's picture

Current Depository Trust  seems 2 b GOOG and PCLN -

Cthonic's picture

According to Forbes, PCLN is #20 Most Shorted Nasdaq 100 Component according to latest data

Kirk2NCC1701's picture

Funny... when I flipped my 401k into an IRA, I opted for cash the Treasuries for the same reason.  And I don't make what he does, so... either I need to be paid more, or he needs to be paid less.

But I forget: you only get paid way more if you risk OPM, not your own money.  Silly me.

spekulatn's picture

Working on Wall Street 101:

Here is a guaranteed way to get paid well if you work on Wall Street. Find a best friend at a competing bank or hedge fund and take opposite sides of the same large bet. In one year’s time one of you will have a huge profit and get paid well. The other person will have lost and perhaps be fired. The sum of both your profits will be zero, but the sum of what you get paid will be positive. Split the pay.

 

http://blogs.scientificamerican.com/guest-blog/2013/02/27/why-its-smart-...

SAT 800's picture

Of course the Stocks are overbought; and I thnk one thing on his mind, is the flight capital from Europe that will soon be flowng faster into Dollar items; such as Ten Years; He and Kyle Bass are the people I listen to very carefully; because they're as smart as I am, and they do this full time. They don't make mistakes over any one year period.

Bingfa's picture

Buys "more long term treasuries"

That's hilarious, that has to be a typo....... maybe he said "more long term farmland"

 

WhiteNight123129's picture

The only reason the Treasuries rallied is because of the Italian election and knee-jerk treasuries. There could be more turmoil, but the South of EUrope owns the vote at the ECB, meaning in the next 2 years ECB prints and then what goes with the safe heaven rally on treasuries? Over.

The long the Treasuries yield stay above the all time low, the long the FEd prints the more you move into bear market for bonds. Another 2 years of uncertainty and then rates rise aggressively.

 

 

Lord Of Finance's picture

Go into treasuries for quite some time. Interests rates should stay low for a while. It takes about 7-10 years for massive spending/printing to start making economic impact. That is where I am for short term, and emphasize short.

 

    I want to see this nonsense come to a reset as much as anyone, but the money binge will not impact for a few more years. I want it to occur most especially against this corrupt and dispicable administration, but I am afraid it will not occur until after the 2016 election. And that adninistraation will get the blame. It is what has occured throughout history. Bernanke's, Geithners and Obuma's treacherous policies will be a distant memory to the sheep when all this printing leads to near catastrophic to outright catestrophic inflation in a few more years.

syntaxterror's picture

Motherfucking bullish!!!

Börjesson's picture

"The dumbest investment, in my view, is a long-term government bond."

- Warren Buffett on CNBC this morning

goldenbuddha454's picture

Gundlach called AAPL falling through 425, when all the other analysts were piling into the stock.  I'd rather be with Gundlach than against him.

Richard Whitney's picture

TBT closed at 65.47 today. Let's watch,and review in a month or two.

Hongcha's picture

Silver may be putting in a tradeable bottom here.  Long since late Friday.

magne13's picture

Guys, Gundlach is right and he should be loading up on 3% bonds and 2% notes as well as some long equity exposure, obviously not Apple, cuz thats going to 213, but as much as I love ZH and all the contributing commentaries, it is much easier if you look at the big picture and the timeline for what will transpire:

PROBLEM = zero growth, higher exponentially increasing debt, unfunded liabilities and decreasing collateral values

SOLUTION:

1. FED KEEPS ZERO RATES INDEFINITELY AT LEAST TILL 2016

2. FED CONTINUES PUMPING 85BLN A MONTH INTO INVESTMENT BANKS

3.  INVESTMENT BANKS CONTINUE TO PUMP 85 BLN SPLIT BETWEEN NEW SIV'S AND EQUITY MARKETS

4.  SP500 AND ALL INDICES CONTINUE LINEAR PUMP WITH MINOR PULLBACKS

5. LONG TERM RATES ANCHORED VIA RMB/$ PEG, FED INTERVENTION, LONG TERM LIABILITY MISMATCHS

RESULTS:

1. 2013-2016 EQUITY MARKETS 15% ANNUALIZED RETURNS

2. LONG TERM RATES 3.25% TO 2.50% RANGE

3. BANK RESERVES NEAR 3TRN, ASSET PRICES HIGHER, INPUT PRICES HIGHER, FOOD HIGHER, GAS HIGHER

Then the FED can raise rates which will be a boon for unfunded pension liabilities as the risk free rate rises and discount rates normalize.  FED is the bad bank and will hold assets to maturity, they do not need to worry about the losses on their balance sheet, nor do they need to pay anything to the Treasury.  That is just a luxury for the treasury, that is not the intention of the FED, it is the by product of an over spending government.  So as much as I do not agree with the bankster mentality, it is much a part of a very corrupt system that we are stuck with.  If you choose to fight and resist and be a naysayer and doomsdayer, this market will destroy you and you we be left to vent your miseries on this board.  The market will never go down as it did in 2008, it will never crash as it did in 87 nor 29, because it is no longer a zero sum game.  It is a rigged game by which the FED who controls all the money can simply print and print and force every other CBank around the globe to do the same.  Thats it, that simple, we have everyone backed into the corner and they will just have to take it.  So I suggest you just BTFD and get into the matrix.

 

goldenbuddha454's picture

"it will never crash as it did in 87 nor 29"           That is one interesting call. 

Lord Of Finance's picture

Good post. He can load up long treasuries and sell them to some sucker if the winds change direction after 2015 or so. He can easily sell and get out if the shit does hit the fan, and if we continue to have a Japan scenario here over the next couple lost decades, then going long would be a safe/good call, but I do believe that even the fed will have to recognize real inflation come 2016 or thereafter. Food and energy inflation(especially food) will be soooo devastating that it will start to affect the CPI(in the LONG term). Maybe by 2016 at the earliest. It will be undeniable at some point. The fed will be forced to raise rates,(by the same way they always have been forced), by then and that will be devastating to this sand castle economy THEY have been artificially proping up with grossly inflated asset prices.

 

  Gundlach knows this is a possibility. Both scenarios are highly possible, but I am putting my money out of the long term bond/Japan scenario for now. Once again, Maybe Gundlach knows there will be undeniable inflation in 3-5 years and he is just setting up the suckers to sell them his bonds in the future. Or he is playing it by ear and eye as we all are. We do not have crystal balls in this game. There is no telling for sure what will happen and exactly when. We just stay on look out, and this site is a great lookout post!!!!!!!!!!!!

Grand Supercycle's picture

DXY daily chart retracement & DOW  daily megaphone wedge confirmed thus more equity upside while DXY retraces from current overextended level.

Bullish warning for DXY monthly long term chart continues and this will not change.

trader618

Nu Yawks hottest club is's picture

I can't fault this guy's logic and, truth be told, he usually seems to be 'on the money' whenever I've seen him interviewed.