Jeff Gundlach: Where to Invest in 2013

Jeff Gundlach was on CNBC this morning offering his 2013 outlook.  Here are some snippets:

  • We’re in a range bound market in bonds.  He says:

“On the positive side, we have rate repression by the Federal Reserve buying bonds which obviously keeps interest rates lower than they would otherwise would be, but on the other side in the treasury market, you have no value to speak of from an investor’s perspective.”

  • There is no bond bubble.  The year 2013 may be “building a credit risk bubble”.    He says:

“The next move that I believe will start happening in the financial industry is that funds will start leveraging credit risk to a greater extent, which will build up an overexposure potentially should the market turn against bonds later on….in the near-term it’s a positive for the bond market.”

He provided 1 year total returns on various assets:

  • 10 year t-bond: 3%
  • S&P 500: 5%
  • Laddered MBS: 6%
  • High yield bonds: 6%
  • Nikkei: 20%+
He offered some thoughts on Apple as well:

“Apple is in a consolidation period…I deeply believe though that Apple is headed to $425 a share.  Not because I’m a bond guy or stock guy but because I’m a market guy. I’ve been around for a long time and I know that when something goes vertical like Apple did from $425 once the bubble pops it goes back down to the point at which it lifted off.  And that’s about $425.”

See the full interview here:

Source: CNBC

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • Cowpoke

    App;e being a lion share of the NASDAQ falling like this can’t bode well for the NADAQ can it?

  • Andrea Malagoli

    Gundlach predicted the top of Apple last springat the Ira Sohn conference in NYC and was proven right. Other predictions he made back then came true. You have to give it to the man for making unconventional predictions, but worth paying attention to.

  • http://www.conventionalwisdumb.com Conventional Wisdumb

    I have been a holder of DBLTX/DBLFX for quite a while. Performance has been excellent.

    I listen to all his webinars. He made some interesting and very public calls last year:

    Buy Spain (IBEX) when it was cheap
    Buy natgas when it hit $2
    Sell AAPL short at the same time
    Buy Nikkei in Nov
    Buy Shanghai A shares late last year

    That was a pretty good list of broad macro calls.

  • Andrea Malagoli

    Exactly, those were the predictions I heard as well, and at the time many people were scratching their heads.

  • Boston Larry

    I bought EWJ on Gundlach’s advice and it is doing well so far. Also have held DBLTX for two years and pleased with it. It will be interesting to see if he can achieve 6% this year in DBLTX in what is starting out to be a weak fixed income market.

  • http://www.conventionalwisdumb.com Conventional Wisdumb

    Boston,

    If I recall correctly at the beginning of last year he was forecasting about a 7% return for DBLTX so I think he tends to be a tad conservative on his forecasts.

    Most of the return I expect to see this year is going to be from the distributions which looked like they averaged around 5.5 cents/mth last year – approx 6%. Given the high cash position, the duration risk seems minimal unless we get a big move in rates. I don’t expect that.

    I am more concerned about DBLFX from this point of view.

    Definitely going to be another very interesting year.

  • Boston Larry

    DBLTX has only returned 0.6% over the last 3 months. It may not be fair, but to annualize the last quarter gets you an annual return of only 2.4%. I think Gundlach will do better than that, but I would not be surprised to see a 2013 return in the range of 3% to 5% for this fund. Bond market volatility may boost his returns, as JG is an adept trader. Bill Gross is predicting returns of under 5% for the bond market this year. Thanks.

  • http://www.conventionalwisdumb.com Conventional Wisdumb

    Boston,

    Where did you get your numbers on the quarterly perforance?

    Here’s the link from their website:

    http://www.doublelinefunds.com/funds/total_return/performance.html

    Last year the fund returned just over 9% on a calendar yr basis. Most of the performance comes from the distribution rather than capital appreciation.

    The website says the quarterly performance ending Nov 30 was 1.56% which means December would have had to have a have had to have a significant decline to get to your number. The distribution was 5.5 cents/share for December and the price was pretty much in the range of $11.33-11.40.

    Thank you.

  • Ripper

    I agree. That’s why I’m in one of his mutual funds and very pleased.

  • Gary_UK

    What on earth is positive about rate repression by the Fed then?

    Madness.

  • Mr. Market

    When portfolio managers are leveraging up on bonds then that’s for me a clear sign of a bond bubble. It reminds me of the commodity, real estate and the tech bubble.

  • Geoff

    PM’s aren’t leveraging up on bonds. Most of them hate bonds. Yields are barely enough to cover MER’s. What bond PM’s may be guilty of is reaching for yield, i.e. moving down the credit spectrum from Treasuries into Corporate bonds and Hight Yield bonds. I wouldn’t call that a bond bubble, but possibly a credit bubble.

  • Boston Larry

    @Conventional, I got my quarterly performance figures from Google Finance on DBLTX.

  • Boston Larry

    @Geoff, there are many Closed End Funds that do leverage bonds, including at least 3 of these from PIMCO. Also some hedge funds leverage bonds and MBS.

  • http://www.conventionalwisdumb.com Conventional Wisdumb

    Boston,

    Google Finance is another example of their perpetual beta strategy. I wouldn’t be relying upon that as your source of performance data in the future. They apparently only look at price change not total return.

    With a distribution of about 0.5%/mth and no price appreciation or depreciation you get the 6%/yr that Gundlach mentioned.

    Good luck this year!

  • Geoff

    Larry, I’m sure there are many leveraged bond products in the marketplace, but that is different than saying “portfolio managers are leveraging up on bonds”.