Jeff Gundlach: "The Situation Is Set To Explode In 2019"

At the Strategic Investment Conference 2018, Jeff Gundlach said that we’re at a "moment of truth" that could break either way. So, now is not the time to have high conviction about the economy or markets. Showing a chart of the US budget deficit as percent of GDP, Gundlach warned investors about rising deficit without a recession.

Jeff Gundlach at Strategic Investment Conference

The deficit combined with with the Fed’s balance sheet roll-off, will mean $2–$3 trillion in new Treasury issuance. Gundlach thinks this "situation is set to explode in 2019" and also sees net tightening starting next year, adding that the market is starting to realize it. As such, sentiment is shifting. On housing, Gundlach says the fundamentals look “pretty darn bad” as mortgage rates start to rise.

All Indicators Point to Higher Inflation

Later Gundlach moved on to inflation. He said there are two key parts of inflation: core services and core good. And there’s a big disparity between the two in the US. However, the core CPI in the US is trending up. We’re also seeing rising inflation in Germany and Japan Further, Gundlach pointed out that there is a high correlation between core CPI and future GDP. A very high correlation between core CPI and ISM PMI also suggests a higher CPI ahead.

Bottom line: All of Gundlach’s indicators point to higher inflation.

Also, just like David Rosenberg the day before, he finds it comical that the Fed has been trying to get to 2% inflation, yet we are already there. So, if inflation does go higher, the question is not how it affects the economy, it’s how the markets will react to it.

Emerging Markets Look Promising

Gundlach then turned to emerging markets. In comparison to emerging markets, he noted, the PE ratio of the S&P 500 is at sky-high levels. Which means that either sales must take off or stock prices must come down (once the buybacks end of course).

He showed that the CAPE ratio for emerging markets (EM) is about half that of the S&P 500. It’s very likely that the ratios will eventually converge. That means EMs will go up, and the US will come down.

Over the past year, EMs have outperformed the US while Europe has underperformed. Gundlach thinks Europe and world markets are cheap now.

The Dollar Is Likely to Go Down

Gundlach also touched on the US dollar. He showed that dollar bull and bear cycles last about seven years. By this measure, he thinks the dollar is headed lower. If we look at a longer-term chart, the dollar sits right on a major support level. Will it hold?

The opposite is seen in gold price charts. Gold has been building a base for years, and is bumping up against a critical level. If it breaks out, it could begin a new gold rally.

As he has shown recently during his DoubleLine webcasts, Gundlach brought a series of charts showing that various asset classes have broken through crucial trend lines. In particular, he made a hard call on the long bond market, and gave us a line in the sand above which he says the bond bull market is over.

Readers can get live updates from the Strategic Investment Conference 2018 at the following link.


Endgame Napoleon BullyBearish Fri, 03/09/2018 - 16:34 Permalink

Is this THE Cohn? If so, I hope he is not capitalizing on poverty trends, reminding me of several Clinton Administration officials who invested heavily in the burgeoning, $multi-billion poverty industry, knowing that Clinton’s policies, like NAFTA, the mass offshoring of breadwinner to China and propping up the service sector economy with bigger child tax credits and more government-paid rent and groceries for 1) single moms and 2) male breadwinners in illegal alien households, working part time to stay below the earned-income limit for the programs, would undercut underemployed, non-welfare-eligible citizens in the job market, resulting in lots of customers for the poverty industry, with its massive interest rates.   

In reply to by BullyBearish

bobsmith5 Stan522 Fri, 03/09/2018 - 15:12 Permalink

The hot air is is not the fact, that according to the laws of logic and reason, the system has to eventually explode, fall apart, break irreparably, crash and burn, go bust.  Take your pick.  The hot air is picking a year, a date, a timetable.  Nobody can do that, not even the crooks who invented the greatest lie ever foisted upon the human race, i.e the fake phony fraudulent global fiat monetary system. Every attempt to create a fiat monetary system in the last 1000 years (over 400 of them) have failed.   Next year some lame prognosticator is going to say it is 2020 when it could be tomorrow, next week, next month, next year, etc.  Who the hell really knows?

In reply to by Stan522

GreatUncle bobsmith5 Fri, 03/09/2018 - 15:52 Permalink

And all those fake phony fraudulent global fiat monetary systems failed?

The real neat trick is not the fail it is ensuring that like the Rothschilds you are still number 1 in the world after it happens. Now I see a rabid deep state trying to create war or revolution on an epic scale so maybe this is the part that is needed to reset the system provided you have protected your wealth.

Then it becomes a planned system over and over and each and every time the elites will be the wealthiest and the poor just economic slaves and cannon fodder.

The system created is designed to collapse, then through turmoil to repeat then repeat the cycle.

Surviving that is the trick with enough wealth and power to start the next cycle.

In reply to by bobsmith5

bshirley1968 resistedliving Fri, 03/09/2018 - 14:51 Permalink

Shut the hell up, Grundalatch!

Next year, you'll be saying, "2020 is the year it will all come crashing down." It will crash when the Jewish bankers that you pay your dues to say it is time. Until then, putzes like you will be kissing their asses and being the money manager whore you are.

If he thought that for sure, he'd get out now. If he knew that for sure, then he's one of them and just another propaganda tool.

In reply to by resistedliving

bobsmith5 bshirley1968 Fri, 03/09/2018 - 15:22 Permalink

Those  Jewish bankers you accuse are not Jews.   They don't practice the Old Testament (Torah) religion, nor do they have a drop of blood from the Tribe of Judah.  They don't have dark skin, curly hair, and big noses typical of any real Arab or Middle Eastern Semite.   Most of those bankers you hate so much are atheist or Satanist, and hide behind that word so you will be an irrational racial hater.  I think most of them are descendants from ancient Khazaria, Eastern Europe, the Huns, and Turks. 

Just as most Democrats do not believe in a government of, by, and for the people, or a government where the people rule over it and are mostly socialist of varying degrees all the way up to hard core socialist communist.  All forms of socialism are extremely anti-democratic. Oh how they have robbed you of your reason by stealing the language and it's meaning.

In reply to by bshirley1968

Endgame Napoleon bobsmith5 Fri, 03/09/2018 - 16:47 Permalink

How does your theory expand to include the bank-bashing Jews, like Bernie Never-Met-A-Single-Mom-Who-Did-Not-Deserve-More-Welfare Sanders? To Bernie, all of the welfare eligible — regardless of race or creed — are angelic and far more deserving of more money than any banker, whether that is a Jewish banker, a Christain banker or a Muslim banker. Bernie definitely would not care. He would tax and regulate all of the bankers and all of Wall Street, in general, even day traders, taking as much out of their goody bag as he could remove, while handing out the biggest, shiniest spoils from this Wall Street pillaging to the non-rainbow-like non diversity of citizen / noncitizen welfare recipients with high womb productivity and often low work productivity. 

In reply to by bobsmith5

107cicero bobsmith5 Fri, 03/09/2018 - 17:26 Permalink

You are right most of them are Ashkenazis originally from around the Caspian Sea basin.

In Roman times they were called Scythians.  They were ground level pirates as they made their money  pillaging, stealing from caravans  on the Old Silk Road.

In the ninth century the rich Scythians/Ashkenazis felt it was good to pick a religion to give them more unity.  They rejected both the Christian and Muslim religions because there religious laws did not permit interest on money, usury.  Jewish religion, that is their religion.


The Scythians became Jews yet they do not have one drop of legitimate Jewish  blood.  Very, very few modern 'Jews' do; maybe 4%.


So now, you know the rest of the story.


In reply to by bobsmith5

Agent44 Fri, 03/09/2018 - 14:39 Permalink

S&P 3200 eoy 2018...after that, wtf really knows? Maybe S&P 4000 by 2020, or S&P 1000 by 2020. Make HAY $$$ while the sun shinin' people.

Snaffew Agent44 Fri, 03/09/2018 - 14:56 Permalink

I find it difficult to chase momentum at nosebleed valuations when most real indicators are showing a declining global economy carried by massive debt printing.  i won't turn a blind eye and jump in...that is fucking stupid. "Hey everyone!  The showers are over here....follow the crowd!"  said the Jew in the Auschwitz camp.

In reply to by Agent44

wmbz Fri, 03/09/2018 - 14:41 Permalink

2019? It was supposed to be 2017, 2018.

When that doesn't happen it will be 2020,2021,etc...

The fed is expert at can kicking! All CB's are.

Snaffew Fri, 03/09/2018 - 14:45 Permalink

it's not retail driving up the stock's corporate buybacks...more empty pump into their company stock instead of their companies.  Taking corporate debt, tax breaks and whatever else you can throw at your company stock at all time highs is utterly stupid...but let em keep bidding these pigs up.

Endgame Napoleon Snaffew Fri, 03/09/2018 - 16:56 Permalink

If they cared about America, they would invest that tax cut money in training adult citizens and high school kids to work in their businesses, and they would invest in new, productivity-enhancing equipment to be used by underemployed American citizens in those jobs. 

They say there is a shortage of welders and pipe fitters. Go into the high schools and train some young welders, convincing them of the liberating option to learn this skill, whereby they can bypass the degradation of mom’s basement in adulthood. They send military recruiters in there. They could send people from industries where there is an alleged shortage of citizen workers.

In reply to by Snaffew

jughead Fri, 03/09/2018 - 14:46 Permalink

same old broken record.  We know the fucker is going to blow at some point, but trying to predict when and why is a fool's game. If you are not already prepared, you're a fucking moron.  If you are prepared, relax, enjoy life, the shit will come when it comes. 

Soph Fri, 03/09/2018 - 15:13 Permalink

2019!! Wait! What! ZH'rs have been telling me the world is coming to an end right now! er, and 2017, and 2016, er 2015 too, and 2014, 2013 was doomsday, er and 2012, 2011, 2010 and 2009 too!


Hrmph, ok. I've waited 9 years already for the world to end and markets to implode. What's one more year.

Endgame Napoleon Soph Fri, 03/09/2018 - 17:03 Permalink
  • Wages for the bottom 80% have been falling / stagnant for a lot longer than 9 years. Where was ZH during the previous 31-year free fall? Wages only inched up a little recently, mostly for managerial employees, while hours fell accordingly.
  • Markets have been going up, up, up for the top 20% for decades, with few interruptions, and ZHedgers know that nothing goes up forever except a giant Ponzi.

In reply to by Soph