Gundlach Gets More Bearish, Says "Big Money" To Be Made On The "Short Side"

Tyler Durden's picture

As we noted yesterday, in his latest webcast to DoubleLine investors, Jeff Gundlach confirmed the key points from his weekend Barrons which summarized his outlook that "things will get worse in the future, not better." But while Gundlach's skeptical bent has been well-known, we also learned that Gundlach has been actively adding to shorts as the market breaks out to new record highs. Cited by Reuters, the new bond king said that there is "big money" to be made on the "short side."

Gundlach added that he has been selectively betting against shares in the Standard & Poor's 500 index and continues to favor emerging market bonds over high-yield "junk" debt. Comparing the price action in the S&P to recent moves in treasuries, Gundlach said that “a minor new high in the S&P might be rejected, which is what happened with U.S. Treasuries." On Tuesday, the S&P 500 closed at a new record high for the second day in a row, closing at 2152.14.

As much as he dislikes equities, Gundlach is just as skeptical about bonds, warning investors that the yield on the 10-year Treasury note at around 1.38% to 1.39% "is a terrible trade location. It is the worst trade location in the history of the 10-year Treasury."

This warning was followed by the biggest two-day spike in 10Y yields in 5 years.  Gundlach said on Tuesday's webcast that he sees the yield on the 10-year Treasury settling around 1.7 percent as a near-term base case.

The new bond king has repeatedly said gold is the better alternative to Treasuries and equities against the backdrop of "a banking system in Europe, which is in a state of heading toward insolvency." Gundlach said on Tuesday's webcast that investors become fearful and nervous when banking shares begin to trade in the single digits, as could happen with Deutsche Bank AG, whose value has nearly halved since the beginning of the year.

"They know single digits is like a fire alarm," Gundlach said in an interview. Deutsche closed on Tuesday at $12.79 per share.

Confirming a point we first made here in March, Gundlach also discussed junk bonds, which came under severe selling pressure earlier this year before recovering, saying these are "dangerous because of their declining recovery rates," Gundlach said. He added it was the "right" decision to purchase emerging market debt over junk bonds. Emerging market debt has posted returns of roughly 11% so far this year, compared with 11.21 percent for junk bonds.

For those who missed it, his full presentation is below.

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Fogey's picture

It will get worse for Big money making a living when people see that it is a bad deal to trade real goods for nominal prices.

JamesBond's picture

Short the FED before a presidential election?  With Hillary running and Obama at the helm?


Fucking Idiot.




malek's picture

You mean like September 2008, where the FED also prevented markets from falling before a presedential election?

TheDonJuan's picture

The market does not go up in a straight line. Gundlach is simply suggesting to trade the ranges created by the extreme volatility (further compounded by TINA). If Trump is elected, he will become the Herbert Hoover of our generation and cause the "Great Reset" ( which is greatly needed to purge our corrupt system).

Here2Go's picture
Here2Go (not verified) Jul 13, 2016 6:22 AM

Gartman he is NOT (so he that going 4 him).

Stu Elsample's picture

Smart investors have ammo in their portfolio

SallySnyd's picture

As shown in this article, one key measure of global economic strength is showing significant signs of weakness:


This is the next dilemma that central bankers will face.

meghaljani's picture

This man has started to trade using his ego. He is going to lose money. 

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) meghaljani Jul 13, 2016 7:22 AM

New Gartman

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) meghaljani Jul 13, 2016 7:22 AM

New Gartman

brushhog's picture

Emerging market bonds? No way. All the emerging markets rode the wave in developed markets, there's no demand for emerging market's commodities.

Calculus99's picture

In a world of so many dross money managers Gundlach seems to stand out like a shing beacon.

NoDebt's picture

"warning investors that the yield on the 10-year Treasury note at around 1.38% to 1.39% "is a terrible trade location"

Yeah, just wait till they're trading at 0.38% to 0.39%.  You'll hate that even more.


OutaTime43's picture

Won't happen.  Who the fuck would put money in a place that basically lets the government have it for free? Negative rates even?  No chance.

RSDallas's picture

This guy always talks his book. I bet you a nickel that he is longer than ever right now.

Professorlocknload's picture

They all do. If it's in print on main stream media, this site included, it's somebody's book.

OutaTime43's picture

More like BIG PAIN! With everyone and their cousins piled into treasuries right now, does he really think there's much room to the downside? You'd think these guys would recognize a bullish indicator when they see one. When everyone is negative, stocks go higher. Dumb asses.

Panic Mode's picture

It's obvious the central banks will start printing very soon. This time they have to buy even more bonds and equities. So I'll expect the stock market will move higher. Profit this short term rally.

The losers are the sheep who believe saving in pensions and hold for long term.

Ghordius's picture

it would be easier to understand comments about central banks, worldwide, if some among us would stop using the phrase "central banks", plural when writing about the FED, actually. it's correct, the the FED is a dozen central banks. but it's very confusing

de facto everybody is printing except the FED. quantitiatively, the FED printed, then stopped, while the others are kind of "catching up" on the previous FED action

just a small rant on the widespread use of confusing wording, carry on

buzzsaw99's picture

it's only big money for him if he can lure in a bunch of suckers to pay his fees.

CarpetShag's picture

Is that a rare fungal disease on the lower half of his face?

DeadFred's picture

The Sapience Control gene in Reptilians has three common alleles. The two most common alleles cause an orange coloration of the host skin (SC1 examples, John Boehner, Christine Lagarde) or tautness of the skin (SC2 examples, Nancy Pelosi, Barrack Obama). On Gundlach you are seeing the effects of the least common allele, SC3, which makes patches of the host skin look moldy. It's not actual mold, up close you would just just see very small patches of skin sloughing off. I don't recommend getting close though, the skin in all of these cases emits a characteristic sulfur smell. They may look human but the nose knows.

CarpetShag's picture

How about the vertical slits for pupils?

"Vertical pupils weren’t just made for night vision. It turns out they may also help snakes stalk prey without being seen."

DeadFred's picture

Never trust a Wall Street guy with vertical slits in his eyes.

Grandad Grumps's picture

What we have seen:

A. Valuations have increasingly made less sense. Some never made sense (such as LinkedIn ... until theu were bought in a sweetheart deal ... the only think the cabal could do in face of deteriorting fundamentals ... now they can hide the fraud)
B. The markets have been moved/manipulated on nonsense, such as Brexit, which has no fundamental effect on company performance.
C. The banks have been buying out the sellers (as shown by the Zerohedge articles)
D. The banks have been controlling price through their market makers, specialists, HFT proxies and direct derivative (futures) price control
E. In recent years, every time that the banks or their propaganda proxies have predicted doom and gloom, they follow it with a short drop to trap people and then a manipulated rise in price.

As long as there is no fundamental connection to price and banks have the ability and desire to control price, one can assume that the markets are nothing more than a mechanism for theft and fraud. It is unlikely that Gundlach is ignorant of this and it is more likely that he is working (intentionally or innocently) on behalf of the banking interests. Under these circumstances, a negative picture will continue to be painted, pundits will claim shorting is good, there will be headfakes and rape. This will only change when the theft and fraud strategy is exhausted and the banks benefit from actually dropping the market ... and then they will.

Do not have any illusion that things are honest and fair. The evidence does not support that contention. Unlike in they past, where the banks could convince ignorant savers that the banks and markets were honest and fair and that markets moved on fundamentals, today people have few illusions. Now, as a result of the exposure in 2008, every time the banks crash the market and turn 401Ks to 201Ks, they will be blamed ... and rightly so. Seemingly, they will not only do this when they are ready to take further aggresive actions against the people. Until then, everything is B/S.

Mick Shrimpton's picture

Don't fight the Fed (and every other Central Bank on earth).  Only a black swan event can change the course now.

brada1013567's picture

It's the Daily Gundlach show, plug, plug, plug or talk your book!

Toonces Feline's picture

Jeff Gundlach is just as wrong about this call as he was about his call that the Brexit vote would go the other way.  I hope he is not running his clients' money with the same stupidity with which he is running his mouth.

Shorting any asset that central bankers have the ability to purchase is a fool's game.  Central bankers love globalist politiicans and they exist for the purpose of promoting the globalists' agenda.

So long as Hillary Clinton has a chance to win - and then, if she does win, the sky's the limit for all financial assets.  Central bankers love globalist politiicans and they exist for the purpose of promoting the globalists agenda.

However, if Donald Trump is elected, the central bankers will retaliate and pull the plug on all forms of asset price support.  If Trump is elected, you should short everything.

This cat is voting for Trump.  It's time to end the damned globalist agenda.  




tarsubil's picture

The market will collapse before the election if Hillary is selected. It will collapse after the election if Trump is selected. 

Or I'm wrong and since the stock market hasn't collapsed with a dem in the White House for the last 35 years, perhaps if Hillary is selected, the stock market will not collapse. Just as it didn't with Bill in office.

TheDonJuan's picture

The market does not go up in a straight line. Gundlach is simply suggesting to trade the ranges created by the extreme volatility (further compounded by TINA). If Trump is elected, he will become the Herbert Hoover of our generation and cause the "Great Reset" ( which is greatly needed to purge our corrupt system).

NoWayJose's picture

Shorts have been the sacrificial 'fuel' for the markets. Even though I agree that markets are way too high, it looks like it will take quite a flock of black swans to sink them. And central banks have effectively removed 'risk' - pumping up the assets of big banks - who would otherwise be the 800 pound black swan.

Cash and PMs for now.

overmedicatedundersexed's picture

invest with the reptiles..that is message #1. the role of investors in the west was to provide capital for new business, not invest in mega international monopoly co's like - amazon and goog..

yet here we are. what is painfully evident is if you are already TBTF you get moar, everybody else is Not in the Club. Main street is bleeding dry while the .gov owned and financed grow.

Where are the small community bankers..calling this out?  much like the lawyers and judges silent about corruption at the top..TBTF indeed..invest with the vampires that bleed you dry, they are a sure thing after all. right mr chis cox? right mr turbo tax tim? right mr yellen??

CarpetShag's picture

"Add to short positions when the S&P hits 920"

Bud Conrad, The Casey Report, April 2009


"The Crash of 2014 is imminent according to our proprietary technical analysis: sell all stocks"

email from Oliver Garrert, Casey Research, Oct 2014

Herodotus's picture

Didn't the stock market go up about 500,000% during the Weimar inflation?

The only trouble was that the general price level went up 1,000,000%

So, you ended up losing half of your money.

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) Herodotus Jul 13, 2016 7:23 AM

Better than being out of the market and losing it all, no?

CarpetShag's picture

I think you will be correct in the hyperinflationary endgame scenario. However, in the time frame 2008-16  it looks like the USD (measured either as DXY or against gold) still hasn't lost as much value as the S&P 500 has gained. I admit that Ihaven't done the analysis, though.


The Real Tony's picture

As I predicted years ago tariffs will be brought in amass by the biggest countries on Earth. This will be the sign of the very end. As global growth turns further negative we should see tariffs brought in next year.

kanselier's picture

BUY BUY BUY! Gundlach says so

herkomilchen's picture

His vague advice to go short is dangerous.  So Gundlach can make money is a rising market by picking select stocks and shorting them.  Congratulations Gundlach, your stock picking skills are so excellent you can go against the market and win.

What's this have to do with ordinary mortals who lack those stock picking skills?  People short the S&P are getting crushed now.  People shorting Amazon or FB or AT&T right now are being slaughtered.

If Gundlach wants laud being short he has to explain what he's shorting and why otherwise he should stay quiet so as not to lead people to their doom.

inosent's picture

Futures had tepidly broken all time highs (after 1 year 'seasoning'). The Brexit roller coaster plunge was a classic, one of the ultimate head fakes ever. I would imagine there were a boatload, zillions, of (in SP terms) stop loss orders at 2k. What % of the market got cleaned out there is hard to say, my guess is 60-70%. Then the buyers gun it back to the highs, so fast, that the losers taken out not only are psychologically incapacitated to 'get back in', but just too slow to react. They are all in now - at 2140 (SEP SP 2016). There is money to be made on the short side, but in this context, you have to be willing to stand aside and 'let the leash out'. Trend/Momentum players are all in here. They get long with nearby stops. That is a force to be reckoned with. Never underestimate that. The people who get rich are the masters of trend and momentum. They don't play value. They are greedy and take no prisoners. So if you cant handle that kind of trade (few can), and you want to play the value side (shorts), I say give them some room. I dont think this is the week. Next week for sure, take a look, 19/20/21 July.

Vlad the Inhaler's picture

It's hard for the bears to win this tug of war when they have totally let go of the rope and are just standing around watching.  There's no pain trade here.  Look at the rydex and the vix.  We are going up until the bulls get a good scare.  Looking overbought here though so I expect lots of churn.