Jeff Gundlach is currently speaking at the Ira Sohn conference, where he has reiterated the one trade that he has been pitching since the start of the year, namely go long commodities, which as a reminder was presented in December 2017 as his "favorite trade of 2018"...
... and which so far is indeed the best performing trade of the year, with commodities surging double digits YTD in the latest late-cycle vindication of the controversial bond king.
Gundlach said that while commodity inflation is common before recessions (i.e. late cycle), more notably he also picked up on a topic we covered earlier this month, namely BofA's thesis that regulation can - and will - kill bull markets, and will hurt tech stocks, in this case a very specific one: Facebook.
Which brings us to Gundlach's Ira Sohn trade reco: go long oil, and short Facebook.
Here are some more details from the BofA piece which Gundlach clearly was referencing:
The economic & social disruption of technology is unlikely to stop. It has many beneficial economic & social impacts. But the sector’s growth, power & visibility make it extremely vulnerable to increased regulation & taxation, most especially if recession wrecks government finances.
- Politics: privacy becoming policy issue as equivalent to entire global population searches Google every 2 days; last year 1579 “data breaches” exposed 179 million records of personal names plus financial or medical data; pending US & EU regulation threaten 4% of tech revenue.
- Tech most lightly regulated sector: just 27K regulations (Chart 7) for tech; by comparison manufacturing regulated by 215K rules, financial sector by 128K.
- Occupy Silicon Valley: tobacco (1992), financial (2010), biotech (2015) industries illustrate how waves of regulation can lead to investment underperformance.
Following Gundlach's reco, the Nasdaq promptly slumped back to session lows...
... while FB stock slid lower from session highs.