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Jeff Gundlach Complete Slideshow Presentation

Tyler Durden's picture




 

DoubleLine's Jeff Gundlach, who has managed to double the AUM of his new firm in a few short months following an admirable return in 2011, and at last check had over $22 billion, as usual has put together a rather impressive slidedeck of raw data for his just completed investor call, which the chart porn addicts will salivate over for hours courtesy of the plethora of items covered: from Europe, to the US economy, to all financial products. Of particular note is slide 26 which shows the complete breakdown of the US bond market - it is curious that recently Treasurys became the biggest asset class on a relative basis, greater than both MBS and Corporate. The implication here is that the Fed, courtesy of being the largest single holder of Treasurys, now in effect is the marginal price setter of the largest US security.

Full presentation.

1-5-12_JEG_Just_Markets - FINAL JEG

 

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Thu, 01/05/2012 - 19:01 | 2037361 bob_dabolina
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Haven't check out the slideshow yet but I always look forward to Jeff's content. From my perspective I think the best pair trade for 2012 is shorting Treasuries while going long gold. Interest rates are so low that when you factor in commodity based inflation they aren't yielding anything. So the thesis being countries like Japan that are swamped in debt and facing a crisis of their own will be selling Treausuries. Now, Ben can always buy them but that's gona' be another expansion of the Fed balance sheet and thus puts gold in position to outperform. I also don't see the appetite for Treasuries being as heavy overall as it was in 2011. I would say oil would be a good investment but with the global growth outlook stagnant and slowing for the larger countries like China, U.S, Europe, the price potential doesn't seem as explosive. That obviously could change with a blow up in the middle east.

Thu, 01/05/2012 - 19:19 | 2037407 SWRichmond
SWRichmond's picture

This is going to make some of you puke,  but I think the Fed will keep Treasury rates just about where they are now right up until the currency explodes, including during / through the tipping point event right up to the final moment of "no mas."  I wouldn't short T's with other people's money.  Getting paid on the other side will be a bitch.

Thu, 01/05/2012 - 20:09 | 2037521 NotApplicable
NotApplicable's picture

Nah, they'll never keep rates this "high" long-term, as it brings their game to a sudden end, removing them from power. They're gonna ZIRP the whole sovereign ball o debt, and give us Hell on Earth as they chain us to it. My guess is it will be the "backing" for the new global currency. They just have to baby-step us there a little at a time.

Then, once the problem of sovereign debt service costs are eliminated, they can implement Uncle Milton's 2% inflation target, slowly bleeding away the remainder of private wealth as we create it, leaving us with only enough for bare sustenance (if we're lucky, or smart enough to do that well).

There, now I feel like puking.

Thu, 01/05/2012 - 20:15 | 2037536 bob_dabolina
bob_dabolina's picture

But this is what you don't get (unless I'm missing something) why are people or countries buying USTs that aren't yielding anything when they can picking up some corporate paper @ 6% which at least matches food based inflation. If you look at the start of 2011 oil was trading @ 80...it's at 101 now and if the Fed prints that's obviously going to push the price up (through currency devaluation not supply/demand) I'm not even going to pull up the chart for 3 month bills but their yield what? .03% or around that. So the Fed buys more Treasuries (or MBS) and gold explodes higher. If the Fed buys only marginally I think the prices of US bonds would still drop albeit not as fast. 

That's why I was suggesting putting the trade on as a pair. Obviously I could be wrong and the bond side of the trade would be a little more complex than just outright shorting, but from the research I've done that looks like the trade from my perspective. 

On a side note you can't really listen to Bernanke. He's said so many things (publicly) that were just downright wrong. I think Bernanke could lose control over the Treasury curve, not saying he will, but the possibility is there. Oil @ 250 really serves no one and most likely would result in all out revolution across the county (which is what happens when you print ad infinitum to maintain low rates)

Thu, 01/05/2012 - 20:22 | 2037551 JPM Hater001
JPM Hater001's picture

"why are people or countries buying USTs that aren't yielding anything when they can picking up some corporate paper @ 6% which at least matches food based inflation."

In short, and Im guessing, is that even when uncle Sam lies about the reality of our situation they can still print any money invested and get it back...not how the durations have collapsed as well.  No one is piling into 10 year they are going into 2 and 3 year yeilds figuring they may lose to inflation in the short run but can get out and reinvest as the market becomes fluid.  And by fluid I mean funs out into the streets and turns to blood.

Thu, 01/05/2012 - 20:35 | 2037579 bob_dabolina
bob_dabolina's picture

But that's my point. People are buying US paper figuring they're going to lose (to inflation) What kind of sense does that make? 

Now if you're a country like Japan who is on the verge of exploding why are you buying losing investments to inflation? 

If you listened to Jeff's conf call he said Emerging markets were attractive. Many EM economies have low debt-to-GDP and have the propensity for growth + low labor costs. Why not sell UST and buy EM paper?

Bill Gross was right on his short UST play but wrong on the timing. In my opinion the timing is 75% of the trade.

Thu, 01/05/2012 - 21:42 | 2037720 Seer
Seer's picture

I tend to agree on the general premise that inflation will come only because it favors the rich more than the poor: deflation kills those with wealth/assets.

But, EMs?  How long will they continue to "emerge?"  They rely on the BIG markets, and these BIG markets are collapsing.

I think that US paper buying is happening because the US will ensure that everything else tanks: people don't really believe that Bernanke et al are really stupid do you? (think about how fucked the US really is, then look at how it's managing to be the last horse at the glue factory when it should have been one of the first.)  And, the US has the ability to totally fuck things up via its military.  There's just no way of playing it that one can be certain of (other than long PMs, but even here there's some interesting twists in the short-to-mid term).  Such that it is, risk is off: yeah UST could collapse, but that'll likely happen when EVERYTHING collapses anyway.

Thu, 01/05/2012 - 22:15 | 2037782 bob_dabolina
bob_dabolina's picture

The only thing you're missing is that the US has the world's reserve currency.

I see where you're coming from but it gets sticky and convoluted when you sit down and really think about it. 

USTs won't collapse yet...they will though. I could write 1,000 pages on this topic, it's very complex and it changes constantly. 

Thu, 01/05/2012 - 22:00 | 2037756 slewie the pi-rat
slewie the pi-rat's picture

no points for being a highly liquid dollar investment?

last time i looked, the $ index = 80.888

let's say, offhand, the $ index was @ 73-75 roughly six months ago

not too shabby, really...

 

Thu, 01/05/2012 - 19:30 | 2037433 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

I thought you were short gold?

When you factor in inflation USTs have a (real) negative return.

That trade takes balls, with the Fed ready to backstop US debt to infinity; more power to you.

Thu, 01/05/2012 - 20:21 | 2037540 bob_dabolina
bob_dabolina's picture

I was short gold @ 1900. 

Find my comments here from 12/26/2011

http://www.zerohedge.com/news/es-bounces-200dma-and-total-chaotic-disconnect-ensues

And for the record, I've never said I don't hold physical. When the price action moves 4, 5, 6 standard deviations away from the mean in a long-term trend and the price action goes parabolic I will short it again if it happens. 

Thu, 01/05/2012 - 20:48 | 2037617 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

I guess I have just never read that you have ever been long.

Thu, 01/05/2012 - 21:18 | 2037636 bob_dabolina
bob_dabolina's picture

Because I don't post like some of these idiots who describe how they are jerking off on their coins. 

You know what I'm talking about. The people who are all "I just rubbed my gold on my balls and it's still shiny" people. 

Short-term an option calendar spread on gold futures is gona' be killer IMO

Thu, 01/05/2012 - 19:01 | 2037366 Mr. Fix
Mr. Fix's picture

Too many charts!

Thu, 01/05/2012 - 20:02 | 2037505 nyse
nyse's picture

Thanks! 

Thu, 01/05/2012 - 20:05 | 2037512 Landrew
Landrew's picture

During lunch I bought the Feb. 6$ puts on BAC that is about as far as I can even hope to see. Bonds, would have killed me when I didn't think 30yr would ever go under 4% ha! We don't have free markets so only an insider can make any of those trades. I buy silver when it falls below the 200 day moving average and that has worked for me. I seldom see easy trades anymore. Lehman brothers puts easy. BAC has been my only no-brainer.

Thu, 01/05/2012 - 20:17 | 2037542 NotApplicable
NotApplicable's picture

If you think 4% is crazy, just wait until it hits 3% (or 2% eventually).

Remember, as stated above, The Bernank is the marginal buyer, and profit is not his motive.

Also remember, this is not a market prediction, but a political one, as the market is dead. All that remains are the zombies that refuse to die.

The only alternative I see? People refusing to accept fiat to settle any payment. However, given the lack of alternatives, monopoly money will rule.

Well, there are worse alternatives involving nukes and such, but there's little point of getting into those scenarios.

Thu, 01/05/2012 - 21:20 | 2037668 Landrew
Landrew's picture

The 30yr hit a string of six days under 3% to 2.96%

Thu, 01/05/2012 - 21:36 | 2037706 earleflorida
earleflorida's picture

bac will flatline til your out-o-z-$$$ - or the best you can hope for is a back-toback rumor de`jour... deja vu 

Thu, 01/05/2012 - 20:16 | 2037544 JPM Hater001
JPM Hater001's picture

I need to listen to the replay.  There has to be a midget in a green suite that jumps out and says, "Gotcha!"

Because otherwise this shit isnt funny...no sir not funny at all.

Cue bear in pink tutu.

Thu, 01/05/2012 - 20:27 | 2037561 Solarman
Solarman's picture

You are exactly right.  As much as I hate the FED and their cabal, to think they are out of bullets or Cjina et al not buying our paper will collapse the bond market is simplistic.  They will simply buy anything and any duration they desire at the price they desire.

 

My view is they will monetize in a way that supports real estate, and household cash flow.  This will start the velocity function they desire, and Obama's reelection chances.

But I do agree we are in for positive gold and commodities

 

Thu, 01/05/2012 - 22:23 | 2037797 slewie the pi-rat
slewie the pi-rat's picture

on p 49, we see a picture of jeff's Magic 8 BallTM with the green "Shake Me" arrow!

+ 888!

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