Several months after his last live address to investors in his fund, Double Line CEO Jeffrey Gundlach is holding his latest periodic live webcast with investors, titled "Miracle Grow."
Readers can listen to the webcast live by clicking on the slide below or the click on this link (registration required).
Some of the key highlights from the presentation, courtesy of Bloomberg:
- Speculative positioning “is way long the dollar and now they’re wrong,”
- "I don’t think we’ll have new highs in the dollar without first seeing new moves to the downside"
- "it seems that U.S. president wants a weaker dollar"
- A stronger dollar “could be negative for the U.S.”
- If EM worsens, could be a global market problem, according to Gundlach
- Lower dollar would be relief for non-U.S. stocks; better to buy international stocks than S&P 500 now
- Short squeeze in Treasuries could get curve to invert
- Says while he doesn’t see U.S. 10-year yield heading as low as 2.25%, “what could get you there is a monumental short squeeze, because the speculative short positioning in the 10-year is off the charts”
- "Amazingly no-one’s feeling any pain because it’s not moving"
- Not necessarily the case that rates have to fall because there’s a short position, “but if something’s a catalyst to get a rally, you can just imagine the stampede to cover those shorts”
- Says he can imagine the short end would be higher at that point and that’s the way you’d get an inverted yield curve
We will publish the accompanying slides shortly, but until then, here is what Gundlach believes is the "Miracle Grow" pushing the US economy higher: debt, which according to Gundlach shows a remarkable correlation to the S&P.
And while the soaring debt is for now providing a sugar high to the economy, the question is what happens after the next downturn when the deficit - which is already exploding higher - will be off the charts.
Meanwhile, while the economy is humming, the housing market is rolling over as shown in the below chart which shows the responses to the UMich survey whether "it's good time to buy a house."
Gundlach is also not very optimistic on the future of the US labor market, where he sees universal basic income as the solution.