Jeff Gundlach: "Things Are Going To Get Pretty Scary"

Tyler Durden's picture

One day before the Fed's June statement, Jeff Gundlach once again accurately predicted the somber mood that would ensue as a result of Yellen's Wednesday decision and press conference when he correctly said that "Central Banks Are Losing Control." Today, in the aftermath of James Bullard stunning U-turn where he cast aside years of fake hawkishness and emerged as the market manipulating dove he had been all along, Gundlach appeared on CNBC, to discuss many things, among which his latest take on central banks.

Specifically, he said that central banks are "out of control" because they don't understand the consequences of their own policies. On CNBC's "Halftime Report", the DoubleLine bond guru projected that markets are likely to see another round of negative interest rates before central bankers realize they aren't working and that fiscal stimulus may be the better option. "The policies that they're implementing don't have the consequences that they're looking for," he said.

Gundlach pointed out the chart which we said back in 2010 is the only one that matters: the S&P's liquidity "flow" manifested by the Fed's balance sheet overlaid on top of the Fed's balance sheet:


He said that "it's really uncanny how the S&P500 rallied when they were doing QE and expanding their balance sheet, and how the S&P never goes anywhere when they stopped expanding their balance sheet. They stopped QE3 back in December of 2014 and the S&P500, the DJIA, the Nasdaq are all exactly the same when they stopped expanding their balance sheet. The S&P has been dead money for 18 months."

That - once again - resolves the whole "flow vs stock" debate.

So what went wrong? According to Gundlach, chief among central bank mistakes was negative rates.  

"When you go to negative interest rates, you do not stimulate consumption, you necessitate saving," Gundlach said. "You cannot fight deflation with deflation. Negative interest rates are the definition of deflation. You cannot put out a fire by pouring gasoline on it," he added.

He then referred to something we first showed in October, namely that
negative rates actually encourage saving, something we showed in "BofA Looks At Europe's Record €2.6 Trillion In Negative-Yielding Debt, Is Shocked At What It Finds"

Too bad not more people, or central bankers for that matter, noticed it at that time.

He also said that central bankers will probably still believe in negative interest rates for some time, but will come to the conclusion that "they just haven't done enough of it." Luckily this is increasingly a position that only discredicted Keynesian hacks like Paul Krugman now endorse. Eventually, he added, those bankers will figure out the actual consequences of their policies, and call for fiscal stimulus: "When that comes, that's when the game will change," Gundlach said.

That will be when the helicopter money, which we first predicted in March 2009 is inevitable, will arrive.

By observing the dramatic change in the Fed's demeanor this week, Gundlach also said that the Federal Reserve has actually gained "a little bit" of credibility this week by "at least acknowledging reality" about tepid U.S. economic growth, he said. It was unclear if fringe "tinfoil" site who have said that all along will be elevated in status (we certainly hope not).


Unfortunately for the Fed, it's too little too late, as it means normalization is and never was an option, something else we have claimed all along. It also means that a return to ZIRP, NIRP and more QE, if not helicopter money, is now officially back on.

Gundlach then redirected the conversation to the topic of markets and specifically Donald Trump.

As we first reported two months ago, Gundlach believed and still believes that Trump is going to be the next president of the United States, and the immediate aftermath will be "pretty scary." While Gundlach emphasized that he does not support political candidates, his analysis leads him to believe Trump will win the White House. "People aren't getting along, they're not happy because of technology taking jobs, and sort of this long, slow grind of a new economy. And so they're looking for change, and I think Trump is going to win on the basis of that. And he will be quite a bit like Ronald Reagan."

From a trading perspective, Gundlach said Trump is "bonds negative and stocks positive" as Trump would promote fiscal spending and facilitate direct monetization of the US debt, aka "chopper money." If Clinton were to win, she would mean the opposite for the markets, he added.

So what happens after November 8? "Things are going to get pretty scary, and I think it's going to present quite a good buying opportunity because I think when Donald Trump is inaugurated, I think that he's going to initiate a very large deficit spending program."

Well, they always said buy when there is blood on the streets. Only in this case it looks like it will be literal...

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Boris Alatovkrap's picture

Get scary!? Skittle color flying unicorn is already crash land.

Looney's picture

... That will be when the helicopter money, which we first predicted in March 2009 is inevitable, will arrive.


Awww… The “Helicopter Money”!

What a concept - waiting for money falling from the sky and instead… getting’ a Hellfire missile  ;-)


Escrava Isaura's picture

Jeff Gundlach: Central banks don't understand


The problem with capitalism are the renters take via usury, such as you and Trump. The GAP will only exacerbate in your favor as labor income decline.


As Falak Pema described, we live in a Oligarchy universe. One man’s easy money (inflation) becomes the other man’s/nation deflation as lack of wage growth and depletion kicks in.


Yes, Central Banks understand it very well. The general public are the ones that don’t understand what’s about to hit them.


Son we’ll be facing social Darwinism as capitalism fails due to its built-ins contradictions. Jeff Gundlach “Hedge Fund” is a great example of what‘s wrong with this capitalism.


Anyway, enjoy. Next decade it’s over.


O C Sure's picture

"The policies that they're implementing don't have the consequences that they're looking for," he said.


The presumption then is that what TPTB are doing is not a means to an end, and that the end they are achieving and have been successfully achieving for themselves and their sychophants for generations at the expense of everyone else is not the consequences they are looking for?


Come on! Enough already! This is balderdash. As usual, sensationalism for the draw...


Who produces values? Who steals values?
Is there any other question to define what is just with respect to money and counterfeiting?




The scariest thing is that presumed antagonists to the dishonesty are so deep into it they can't find their balls.

santafe's picture
santafe (not verified) O C Sure Jun 17, 2016 7:47 PM

Things are NOT ONLY gonna get scary, they're NEVER gonna get better. This is why:

adanata's picture



escrava...  this ain't "capitalism".  Get your headma outta your dogma.

Squid-puppets a-go-go's picture

escrava has a point, and you have a point, too. No, this isnt capitalism, in the small 'c' organic main street variety ZHers love to espouse. But while free markets discovering price is essential to the formation and preservation of capital - there is NOTHING INHERENT in that philosophy that prevents the emergence of cartels and olicarchic behaviour that seeks to  pervert 'price discovery' in its own favor

Socialism is not the only ism that has inherent flaws or excesses if not mitigated by some alternative force. Socialism in exclusion of any mitigating force will lead to tyranny. CAPITALISM in exclusion of any mitigating force will lead to tyranny

both systems have their flaws, both have their benefits, and they are a good temperence for each other

Scandanavia showed us for the last 50 years the way to balance them both and take the benefits from both

America, trapped in the false dilemma of an either/or socialism/capitalism has now emerged to having the WORST of both systems.

tarsubil's picture

The outside force is a just law system.

Socialism by definition, where wealth from some is taken under the threat of force and given to others, is not just.

Socialism is not just like capitalism. Capitalism can respect property rights under a just law system; socialism cannot. Mixing the two gives the fatal flaw of socialism to capitalism. This is what has happened in the US with zero respect for property rights including highway men dressed up as cops stealing cash on the highways.

Sweden has not found a balance. Sweden is doomed by demographics and the lunacy of the socialists.

O C Sure's picture

(Just read your comment. You know, after posting on the next indent to be high without any concern to replying to you. Typical non-sequitor stuff that the moderators cannot un-indent...)

Anywaze, after reading your comment, I must respond and point our that your premise is wrong. Of course, then your conclusion too.


Capitalism is not the failure.

Lack of reason is the failure. Specifically, what you call "easy money" is not money at all. Therefore it has nothing to do with capitalism since capitalism comes from good ethics, not bad ethics.


This is no surprise since ZH has 578ish GLOSSARY entries regarding "Free Money" (like your easy money) and absolutely ZERO entries for the word Counterfeit.


Zero Hedge, your beloved stomping ground, may be the source for your lack of reason with respect to the very definitions on which capitalism depends. That is, money being equivalent to good ethics and counterfeit being equivalent to bad ethics. I really do not enjoy deriding ZH since I so, so, so much agree with their manifesto. In this respect they and you contradict it... More than a damn shame, since at once I thought of ZH as a cyberdelphia. Meh, but Franklin was correct...



Escrava Isaura's picture

O C Sure:


1) Capitalism is not the failure.


Again, capitalism is a suitcase word. Like the word sport. What does bowling have in coma with basketball, beside breathing? Not much.


So, in that case, let’s label our capitalism America Capitalism, after all America is the king of capitalism. But, before continuing, let’s go to your second point:


2) That is, money being equivalent to good ethics and counterfeit being equivalent to bad ethics.


My answer, summarized: So, if we have good ethics in capitalism, capitalism would flourish. It would be a good thing. Capitalism sounds pretty reasonable, if you don’t look behind its curtain, right?  


Because, if you look behind the curtain, you’ll realize that capitalism is a human creation, prone to all kinds of problems and major failures. Also, which will make capitalism failure even more severe is that capitalism was built by some human species that developed their high mental faculties. On the other hand, the ones that didn’t developed high mental faculties, these people gravitated towards religion. Religion function with less complexity so it make religion more sustainable.


Anyway, the topic is capitalism so let me give you two examples why capitalism will fail:


1) The core of capitalism is to sell and make a profit. To maximize personal gains at the expenses of others. Now try to run a family under these value. In the end the family will self-destruct.  


2) The main foundation of capitalism is energy. Take the energy away, and we’re back at the feudal system. Now, by the way, this statement is for most Hedgers, not sure your view about it: Which part of oil being a nonrenewable commodity that you don’t understand?


piceridu's picture

Let's put it this way for EI to understand: If Crony Capitalism was in a police line-up and victims and witnesses were there to identify Capitalism, Crony Capitalism would be let free because it does not resemble real Capitalism one iota....We live in Crony Capitalist construct. Where elites, politicians and corporations have eliminated creative destruction and all other identifying characteristics.

Escrava Isaura's picture

All industrialized nations are STATE CAPITALISM, period. They wouldn’t be where they are if wasn’t for the state.


Crony capitalism examples are GM and AIG. When they get in trouble (2008) they come to the STATE for a shot in the arm.


America had —still has, but not as much— a huge advantage “Exorbitant Privilege” by having the global reserve currency. Reserve currency conquered by state power. Then, came the Petrodollar, again, conquered by state power.


Laissez fare capitalism —open markets— is for the third world. That’s why they’re the third world.


If, or when the global reserve collapses, our lifestyle is over. Most Americans won’t be able to drive anymore.

spdrdr's picture

Isn't "STATE CAPITALISM" a textbook definition of "FASCISM"?

Jus' sayin'

Escrava Isaura's picture

YES, because State Capitalism is a top-down managerial system.


Any form of capitalism will lead, eventually, to Fascism. Capitalism main weapon is propaganda. Once propaganda fails, capitalism new weapon will be to bludgeon its population into submission. Once that also fails, you looking into civil war.


REAL Socialism CAN NOT exist in a capitalist system. Of course socialism won’t be all gone, because power won’t allow it, because they’re the biggest beneficiary.


Please understand,  I am not advocating socialism, because socialism will also fail. Real socialism wouldn’t fail  as miserably as capitalism, but it would fail. And most that have being blogging for the last few years in the internet not only can see and understand better than the general population, we can even articulate how it will fail.


Now, in State Capitalism the people have a say on it, because there is this thing call election. In Private Power the people have NO say at all. Private Power can do as they please. Some good examples are by Private Power moving its logistics overseas; or by pressuring states to support them through taxes incentives or they will move to another state.


zeropain's picture

it all cycles.   success to failure, failure to success    their is no permanent solution.   it's the law of diminishing return.   nature has a built in resistance in order to bring balance.  cus in reality all things are equal.  notice all science laws are proven through equations.  and for the law to the valid both side of the equal sign must balance.  everything can work or fail in given time.   

John_Coltrane's picture

I get so tired of hearing people apply fatuous ideas to define capitialism. 

There's only one important characteristic of capitalism (and evolution):  COMPETITION.

The implication of competition is winners (a few) and losers (many).  And competition brings out the very best in humans-whether they are atheletes or scientists.  But there cannot be bailouts.  And the reason a central bank is anathema to capitalism is bailouts.  This leads to reckless behavior because Other People's Money (OTM) is now a stake.  (Socialism and the welfare state are based totally on OTM and thus are doomed to fail)  And, no one, particularly politicians, care about OTM.  So, when people talk about crony capitialism they should not be using the word capitalism.  Corporations protected by .gov and the FED are all about cartels and monopoly-the opposite of competition.  Its the reason Citibank, GM, AIG should not exist anymore-they failed and should have gone extinct in 2008.  They were unfit and deserved to be weeded out of the economic gene pool.  But the govenment and the central bank it created in 1913 prevented this.  And so we get more and more defective economic "alleles" which a competitive environment would eliminate by fitness (i.e. profit, supply and demand and luck) forces.  Why else "companies" like Tesla, Solindra, Solar City etc.  Government subsidies/loans allow the existence of weak players and industries which could never progagate without .gov protecton.

So, I've diagnosed the problem.  Lack of true competiton.  How to rectify:  Eliminate the FED and its monopoly on interest rates.  Follow it up with an elimination of the illegal income tax.  Some "downsizing" of .gov would be required, of course (haha)!  Those with real skills and work ethic will be fine but parasites may become less common (extinction is too much to hope for). 

Escrava Isaura's picture

Rain check. Have doctor's appointment. 

Squid-puppets a-go-go's picture

there is more than one important characteristic of capitalism. You know, communists thought of their creed as darwinian end-gaming, too. Competition is secondary to the formation and preservation of capital. Competition is just one element to analyse in the strategy to form and preserve capital.

One flaw with capitalism as we currently view it is that it only seeks to preserve the capital that has already been made. It does not have the wisdom or foresight to compromise this current quarters formation of capital to ensure the ongoing formation of capital in a sustainabe way for our descendants (or even next years balance of payments for that matter)

we think of sustainability (of the environment) as immaterial to capitalism, but what IS sustainability but preservation of FUTURE capital?

11b40's picture

Corporate Capitalism breeds the short-term syndrome that bleeds out the companies with "professional management".
Entrepreneurial Capitalism is the pure form, and strikingly different. Once the BOD takes control, all too often, the looting begins.

DocBerg's picture

People actually don't like to compete, because they might lose.  People tend to much prefer winning, so the various ideologies like capitalism and socialism reward different sorts of rent seeking.  The result generally winds up being fascism, because that is the most secure system for the rent seekers.  So-called "crony capitalism" is fascism, and most socialist regimes wind up there too.  Why have the government own the means of production, when it is much easier to control it via a regulatory state.  This is the brilliant realization of the former socialist, Mussolini.  He has been copied world wide ever since.

neutrino3's picture

Downvotes? Just mail healthy jealouzee on female brains. Solid threads ... and beautiful name. 

Kickaha's picture

Your definition of capitalism as an economic system requiring good ethics is a waste of brain cells.  


Putting aside for the moment what sort of economic system, if any, must necessarily result from private ownership of the means of production, a more basic problem is that theortetical constructs based upon pure logic will never comport with reality when human beings are involved.  The stimulus gets imposed on the organism and elicits a response.  You cannot define the response by utterly ignoring the nature of the organism. To the degree that you can argue in favor of capitalism, you must rely not on ethical behavior by the organisms, but, instead, if you must assume anything, assume unethical behavior ("greed is good").  It might be best to assume no behavior whatsoever, and instead take humans as you find them without imposing a particular pattern of behavior upon them as part of your economic theory.  The problem with that approach is, of course, that different tribes of humans have different basic systems of ethics, and your monolithic theory splits into dozens of sub-theories due to variations in the organisms upon which you seek to impose the stimuli, and you end up with such a myriad of responses that you cannot say the data confirms the theory.


Communists are also fond of defending their very logical theoretical construct by saying "It would work, but nobody has ever actually tried it", noting that those pesky human organisms keep fucking up any attempts by not behaving within the parameters required for success of the logical construct.


Private ownership of the means of production, as near as I can tell from my life's observations, results in serial monopolies and political oligarchy.  Advances in technology have proven effective in bringing down some monopolies over time, heralding limited periods of real competition, which slide into oligopoly and then back into monopoly again until the next sea-change in technology arrives.


Mankind, overall, despises economic competition, and each individual seeks with all of his life's energy to remove himself from the crushing predicament of true competition, while at the same time disingenously trying to impose free enterprise on everybody but himself.  "Monopoly for me, competition for you" is the mantra of every businessman.  Unfortunately for our society, as the influence of religion declines in the West, fewer and fewer men in positions of power will allow ethics to govern their commercial decisions, and we have been left with a version of capitalism where fewer and fewer men control the means of production, and those same men use the government to obtain insulation from real competition and preservation of that privileged position forever.  It is a downward spiral, with men having the protection of the government and being unconstrained by ethics destroying those who refuse to subvert the government or use unethical means against their competitors.  Over time, there are few, if any, ethical men left in power.


I have come to conclude that humans are genetically predisposed to a tribal model of social interaction, and that they are square pegs that do not really fit into the round holes of the theoretical dimension out there somewhere where a pure capitalism or pure communism might exist.  But given the wide variation in human personality and the many different ethical systems presently found worldwide, it is a waste of time to posit that captialism is a system that requires its participants to have ethics.  Obviously, it does not, because we have a system in place that, the most part, includes private ownership of the means of production, and, at the same time, we are overrun with men and women in positions of power who are shockingly devoid of ethics. Ergo, capitalism does not require any ethics at all, although I would agree that the predicted results of the basic theory would be more likely to be confirmed by the real world data if all of the actors were ethical, but that is not the real world, and creating elegant theories about some imaginary world is pointless.

11b40's picture

Excellent post, IMHO.
Over a long business career, I have jokingly used the phrase "all I ever ask for is an unfair competitive advantage" many times.
Another of my favorites is "I trust everybody". This usually gets a curious reaction, until I add "to act in their own self interest".
Once you figure out what someone thinks is in their best interest, you can usually tell a lot about their course of action.
We are genetically tribal, and cannot change that. All efforts to cover it up are futile, and it is why too much immigration over short periods of time is disruptive. We need to acknowledge our prejudices are inherent and exist in every one of us. They can be overcome and dealt with, but only if acknowledged and accepted as natural. Companies, governments, and civic organizations all have a tendency to write rules & regulations that try to change intractable human instincts.

Mad Cow's picture

Great post!

Man, being corruptible, can never achieve "Utopia" no matter the system. The knowledge of good and evil can only be handled by a perfect being.

NidStyles's picture

Okay sure, next instead we will simply enslave all of you and take what we want instead. The alternative to Capitalism is the strong rule.


Brazil and your people certainly are not very strong.

Arnold's picture

Yeah, his bio used to say he was a DC wonk.

NidStyles's picture

Which makes it even funnier.

Escrava Isaura's picture

Not sure what you mean by strong. If Brazil would go to war with the US or Russia yes, Brazil would be the weaker nation. But most Brazilians live with very little. Those Brazilians are strong.


Now, I am worried about those Brazilians that embraced capitalism and are living large. Coming collapse and those Brazilians won’t be able to cope. Those Brazilians will become the real danger. The ones in the shantytowns will be dying of laughing how worthless most, if not all, are.     

hxc's picture

Yet another illiterate commie fuck that can't tell between capitalism and corporatism.

UnpatrioticHoarder's picture

The chart showing increased savings rates for 3 European nations would be due to people in each of Switzerland, Denmark and Sweden saving in their domestic currency which was perceived to be headed higher vs the Euro? So negative interest rates are only correlated with increased savings rates when the neighbouring dominant economy's currency is falling and the local central bank is fighting currency appreciation with negative rates, but losing?

JRobby's picture

Escrava, you frightened all of the folks here that think they are going to "get their market back" some day (Laugh Track Deafening) Or perhaps they got a quick glimpse of their own motivations?

Allowing anihilation over a disgusting obscene obsession with power and wealth is all the human race is capable of. The promoters of peace and charity don't have the stomach to violently destroy the oligarchs. Anyone that thinks change will happen soon? Yea, I give them ten years tops.

Al Gophilia's picture

Please, could you define that  "Capitalism" thing which you refer too as the systemic problem with inbuilt contradictions?

Escrava Isaura's picture

Rain check. Next time because I have doctor's appointment. 

quadraspleen's picture

"as bankism fails due to its built-ins contradictions."


FTFY. We have not had true capitalism for a long time.

Pickleton's picture

"great example of what‘s wrong with this capitalism."


You keep on yammering about what people don't understand and about capitalism.  The problem is, YOU don't understand a goddamn thing and this system is what YOU advocate for.  Anyway, enjoy your slavery.  Unfortunately, you stupid fucks are enslaving the rest of us too.

MalteseFalcon's picture

Helicopter money isn't coming, because it solves nothing.

If they won't raise rates, then what's left?

Three letter word starts with 'w' and ends with 'r'.

O C Sure's picture

But when War goes ballistic, then guns and butter will solve everything!

quadraspleen's picture

I'm not so sure anymore about all out war. Times have changed. I think there are forces for good who will just about hold off the forces for evil. I'm not going all DC comics or anything; I just think we are at a turning point for humanity, and we will see real change for the better in the next few years if we can just hold on to what matters..There are very hard choices to be made very soon for all of us, but I think the cabal's days are now numbered and they know it.

Hold the line.

Maybe I've smoked too much Hopium

max2205's picture

Relax, it'll crash overnight and bottom before your 1st cup of coffee 

Sockeye's picture

Precision drops based on iPhone location.

Arnold's picture



"It was unclear if fringe "tinfoil" site who have said that all along will be elevated in status (we certainly hope not)."


Youse guys have not been below the radar for quite some time.ald

WTFRLY's picture

A long, drawn out transition to the Hunger Games

N0TaREALmerican's picture
N0TaREALmerican (not verified) Jun 17, 2016 3:51 PM


How can such highly qualified people with so many PhD's not know what's going on?  That's inconceivable. 

xrxs's picture

Things look different from up at the top of the Ivory Tower.

AU bitchez.

TuPhat's picture

The same way you don't know what's going on.

Arnold's picture



I drink to that.

The day I know it all, the only thing I will be able to tell it to will be the cover of my urn.

MasterControl's picture

".... they're not happy because of technology taking jobs..."


N0TaREALmerican's picture
N0TaREALmerican (not verified) MasterControl Jun 17, 2016 5:41 PM

Re:  huh?


tyler's picture

Because a PHd not only comes in the form as a piece of paper but also comes with ability to defy the reality of ever being wrong.