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Gundlach On Mortgages, Models, And "AAPL-To-NatGas" Monster Legs
Jeff Gundlach discussed mortgages, models, math, and moronic delusion with Tom Keene on Bloomberg TV this morning. Starting with why Europe matters to US Treasury and mortgage markets, the DoubleLine boss goes to address whether banks/hedge-funds have become too math-centric. "I don't believe in models" is how Gundlach begins his diatribe on the over-confidence in math and empirical relationships, adding that they use 'scenarios' or 'space-relations' and build portfolios as one would stack a dishwasher - piece by piece. He discusses the model-implications of JPM (and other hedge funds) as they seemed to ignorantly utilize and rely on correlations - which, unlike certain talking-heads who in a know-nothing manner discuss JPM's 'spread' trade incorrectly - leading to models-behaving-badly which are generally at the heart of most unexpected blow-ups.
Shifting gears to practical matters, Jeff believes there is no reason to hold any investment grade bonds that are inside of 3 years (and perhaps even 5 years) because they "just basically have no yield" and further, it is non-sensical to think that short-term interest rates are going up in the US. Even if you are worried about inflation - the Fed will still not allow interest rates to rise to implicitly suppress nominal GDP.
The new king of bonds also goes on to note that price action in bonds is almost everything nowadays as the old-school coupon-reinvestment-growth models no longer work since coupons are implicitly lower and lower in this new ZIRP world. This in our view means that prices will become more volatile as the coupon reinvestment flow becomes less of a smoothing effect - especially when the Fed tightens its liquidity spigot a little as it is now. As Socrates said, Gundlach echoes the fact that 'one should not try to know everything; but respect the things that one cannot know' - don't delude yourself - which seems like good advice for all those with such high convictions of sustained reality.
Towards the end he discusses his already-infamous short-AAPL, Long-Nattie trade - adding that the trade has 'monster legs' and the biggest mistake investors make is exiting winners too early.
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The 10 year is starting to scare me.
Short it if you have some guts then. I mean 1.69% for ten years. You re-invest and watch if your purchasing power is intact in 10 years by re-invested... Good bloody luck. Financial repression can last very very long...
Turning Japanese
I think we're turing Japanese
I really think so
"Even if you are worried about inflation - the Fed will still not allow interest rates to rise to implicitly suppress nominal GDP."
Amen. They cannot, and thus they will not, allow interest rates to rise. Period! End of sentence. Even if it means marching people off to jail. Because to allow rates to go up is an instant death sentence for the Ponzi.
They would rather kill you and me than allow themselves to die a "natural' death. Desperate men WILL do desperate things. Count on it.
Ponzi > You, me, everyone.
There is a game plan. I know something about it, but do not know the objective.
There is a compelling reason that TPTB keeps things going at all costs until an objective is attained.
What? Resource grabs? Preempt threat to USD as Reserve Currency? Restructure global money system? Make permanent the elite's privileged status?
I do not have to know the what. It is enough to know the trend and avoid the game-makers' poisonous bait.
I think the saying is desperate WOMEN WILL do desperate things/
does this video also work for non americains?
Works in Canada
Monster legs? How does Kim Kardashian fit into all this?
She tried to buy a Porsche Boxter and did not fit in it
Gundlach is right in saying that short term bonds have no return but he needs to realise that long term bonds will have no value.
He is the bright spark who once said that he prefers precious gems over gold because you can fit a million dollars of gems in your shoe and not even realise they are there.
What left of the "market" already knows it .
That why the Fred is having to buy all the long dated junk
UST's.
The game would already be over if the Euro was'nt falling apart.
JPM is taking HUGE Euro naked shorts(July),right now.
By August,it will be the US's turn.
This show aint going to last till November.
Charlie Munger said I can sew gold in my clothes. One ZH wag said I can sew gold coins into my kimono.
this is why they make you take off your shoes at the airport.
ot
jamie can loose 4 billion dollars but he wont refi my mortguage. fuck jd and jpmc
At this point, I can't see the USD going that much higher. You would think by now, European financial destruction would already be priced in.
If you didn't ride the wave up, I wouldn't try to catch it now.
Remember how the central Bank of Israel decided to invest their reserves in stocks and especially in Apple just at the top few weeks ago......mmmmmmm...........
Got my natural gas as well...finger crossed on that one, but at least Gold got another rise...kep on stacking
Is Tom Keene related to Barney Frank?
"The genius at Apple isn't there anymore."
SFTRUE
Nothing lasts forever, not even stars.
He is da man
It's Gundlach and Einhorn's year on Wall Street
And once again Paulson is in the pooper...along with Falcone who's Liqhtsquared has gone dark....
Gundlach has bought NG equities. He will have his head handed to him there. Price will be down for longer than he can stand it and he will be vomiting it up. Almost all of the NG stocks are still overpriced. Oils are cheap. He should stick to bonds.
The fact that he derived the equations from that book and figured out that the reinvestment of bond money at low interest rates is just worthless is worthy of an applause and perhaps sending him some money to invest.