This weekend’s Barrons has an excellent interview with Jeff Gundlach of DoubleLine.  I’ve spent quite a bit of time discussing Gundlach and his performance, because quite frankly, there is no one better in the bond space than Gundlach.  His performance over the entirety of his career is simply incredible.

As the article cites, Gundlach’s outlook for bonds is likely the most credible, however, I was floored by his comment that the S&P 500 is going to 500.  Gundlach may not be an equity guru, but he’s no lightweight when it comes to understanding the macroeconomy (via Barrons):

Gundlach rarely is shy about offering his opinion on markets. Like most bond honchos, including Gross, a member of the Barron’s Roundtable, he seldom likes stocks, which are, after all, bonds’ primary rival for investment dollars. “Though I rarely go public with specifics on stocks, I think the Standard & Poor’s 500, which is now over 1300, will hit 500 in the next couple of years,” he says. “I usually couch my belief by saying merely that 2011 will be a tough year for equities.”

Nor has he made a secret of his bearish views on the U.S. economy and the seemingly inexorable rise in government debt. But he sees little chance in the near term of a surge in inflation that would send Treasury-bond yields soaring. A jump in the yield on 10-year bonds to a range of 4% to 4.5% from a current 3.6% would cause economic growth to short-circuit, he says.

By the same token, a renewed slowdown in the economy would drive 10-year bond yields sharply lower, but not below 3%, unless a banking panic similar to last year’s euro-zone crisis ensues. As for the U.S. housing market, Gundlach expects home prices to fall by another 10% to 15%.

You can find Gundlach’s bond market outlook here.  The full Barron’s piece is here.


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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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  • FDP15

    This makes sense actually. If hy is in a bubble then so are stocks….

  • MG

    Gundlach 500 vs Birinyi 2800 for the S&P 500…
    What’s a layman to think?


  • LZ

    For record this guy has been remarkably wrong in last half year.

  • D

    This is not the first forcast I’ve come across that offers a dismal outcome for equities over the next few years. Quite an exciting time to be an investor I’d say.

  • billw

    What Gundlach is saying is basically the same as more and more of the big names in finance have been saying, only like he said he “usually couches his belief”. Isn’t that pretty much the same thing as saying this will not end well. Please tell me any of the serious big guns from Soros to Hussman who has not said “this will not end well” (TPC included).

  • jc

    Elliott Wave been predicting this for 2 years now. They do really offer a very interesting newsletter but one still difficult to believe. I think they are quite respectable though.

  • Tom Hickey

    “This will not end well.”

    Why? Because “it” is inherently dishonest, driven by extreme cognitive-emotional bias. Perception is not reality, Karl Rove notwithstanding (“Perception is reality.”)

  • Dimm

    nice one

  • Tom Hickey

    Couple of examples from at ZH today:

    Sure It’s Legal… But Is It RIGHT?

    Is Bernanke To Blame For The Rising Global Revolutionary Wave?

    Then there’s Bill Black, Randy Wray, Janet Tavakoli, Yves Smith….., the list goes on, and the stench rises higher.

  • B Ferro

    They’ll put a moratorium on trading activity before they let another bear market take place, much less a drop to 500. Can and never will happen.

  • Willy2

    S&P 500 to 500 ??? What an optimist !! I have an ultimate target of 50 for the S&P 500.

    Or when bond yields are equal to the dividend yield, that’s the bottom for the stockmarket. At about 50 on the S&P 500.

  • Willy2

    Real estate prices falling another 10 to 20% ?? what an optimist !! In Japan realestate prices have fallen at least a 60 to 70%. So, why is he thinking the US is different ?

  • DrRyan

    Just take the difference and divide by 2.

  • Gary_UK

    B Ferro, have you already forgotten 2008/09?

    It’ll happen, another big crash, and in the not too distant future.

  • JH

    But isn’t he the guy who was fired from TCW with loads of porn on his computer and some massive trove of sex toys in his office?

  • AWF

    He always makes money in bonds

    What else do you need to know

  • Brandon Ferro

    They weren’t aware of or prepared for the repercussions of what their past policies had created. They are fully cognizant now – the rules will be changed and/or altered to maintain the status quo and to keep the ball in the air. Let me repeat it – the SPX will never drop to 500.

  • Oroboros

    True, but this has no relevance to investing. Benjamin Franklin and Amadeus Mozart were fairly sex-crazed, too. Yet they still seemed to do alright, even so.

  • first

    Yea, a genius as long as rate trend is down. Now its not so easy is it ?

  • Reilly

    That article was a true f#cking waste of my time.
    Im really pissed off now

  • Reilly


  • first

    “Board member Juergen Stark said policy makers will act “quickly and decisively” if they see any signs of faster inflation becoming entrenched.Inflationary”

    Pressures are rising all over the global economies, raising interest rates on the agenda but King Bernanke says inflation is still benign and not a concern.

    The day he react with the same speed he did in 2008 this rally will end.

  • first
  • LZ

    Inflation will never be Bernanke’s concern. Look, everything and anything he and Tim have done in last a couple years is driving dollar down 20-30%. Because they are so persistent, despite so much resistance I firmly believe they will success. look, if GDP 5% and S&P 10% every year, who would care if interest rate is zero and inflation is 20%? I am not playing rigged game in treasury but I think this GUNDLACH guy’s career is over.

  • Joe Johnson

    Amadeus Mozart did OK.? Never have read any boooks on the subject but, in the movie version, Amadeus died alone, broke and was buried in a mass grave. Maybe that’s what passed for doing okay in those days.

  • first

    “if interest rate is zero and inflation is 20%”

    No way this is going to happen. Rates will move up before long. I sense it will unfortunately be a reaction instead of a calculation.

  • LZ

    No way? TPC taught us central bank and treasury are husband and wife. Would wife raise interest rate of husband’ debt, especially he doesn’t have enough income to cover his spending?

  • first

    “Central bank and treasury are husband and wife”.
    Remember Paul Volker. Was he a good husband?
    That was when the wife divorced from Arthur Burns low rates frivolous behavior.

    Inflation went out of the US – courtesy of BB but now, the foreigners are re-exporting inflation back to the US.

    “Almost every business in America uses imported energy. Other than BB every American eats, Even excluding Oil (up 60%) Inflation is ramping up worldwide and I don’t see that US will avoid it.– Prices are catching up all over.In case you are not sure ask your wife if she does the grocery.
    I think its a good time to borrow and lock a good rate for a long duration. Higher interest rates are inevitable.

  • LZ

    Interest rate is going up but will be far behind inflation forever.

    There are a couple of guys trying to take Paul Volcker ‘s line, but one is retiring the other quits. No more evidence needed to tell where we are going. Who cares how much people spend on grocery. Even consumer doesn’t care. I remember people protested in 2008 when gas reached $3, nobody says anything right now.

  • BK

    There is simply no chance the S&P 500 will be 500…EVER
    I’m certainly no bull, but its even worse being a mega-bear like this.
    unfortunately making a comment like that gives him no credibility

  • JNH

    Its a new day and age my friends, the players are both bulls and bears, as long as they can make long or short. The new “uptick” rule says it all that shorting is part of the game. 500 seems extreme but so was the Dow losing 8000 pt in 2008.
    The stock market can only go so far, can you imagine what would happen if the Dow went to 20000 with the wealth created, the demand for everything would be unprecedented, and inflation would go thru the roof, then the Feds steps in and start raising rates as fast as possible, then we all know what happens next. Who do you think will be holding the bag as usual, you.

  • Gerald P

    Franklin as diplomat in Paris was seen as charming by court ladies, and as a smart guy picked up secrets from the ladies for US and got French money for revolution. Very proper Adams was jealous and useless as a diplomat and claimed Franklin’s popularity was improperly sexual.

  • Gerald P

    Wonderful simile.

  • Oroboros

    Results in chosen field. Come on, seriously. You really think I’m talking about Mozart’s financial ability? Yeah, because that’s what he was known for.

  • Morgan Silver Dollars

    Even a dead clock is right twice a day.

  • David W. Young

    500 on the S&P is not shocking at all when you consider the garbage numbers coming out of Corporate America for earnings reports. Worked in Corporate Finance for 7 years and was a Registered Investment Advisor for 20 years and I must inform the uninformed: BASING INVESTMENT DECISIONS ON CORPORATE EARNINGS REPORTS IS LIKE PLAYING ON THE RAILROAD TRACKS. Printing of money by Bernanke with an endless sequence of Q.E.x’s will be inflationary no matter what the U.S. economy is doing; history is replete with examples of fiscal and monetary largess stoking hyper-inflation. Stock investors have yet to own up to the fact that the S&P 500 has gone absolutely nowhere since its 2001 peak at 1550. And dividend yields have been meager at best over the last 20 years when they have contributed almost 70% to total returns over decades and decades. Never say never when the Fed has assumed for the taxypayers’ liability $Trillions of garbage assets from the banks and insurance companies. LOOK AT REVENUE GROWTH, or more accurately the lack of it in this so-called Recovery!!! Just isn’t there for the majority of stocks in the S&P 500. WE ARE IN A COST-REDUCTION EARNINGS RECOVERY, NOT A TRUE ECONOMIC RECOVERY, just ask the unemployed, under-employed and discouraged Americans. Have been an investor since 1975, have tripled my money since 2000 while stock investors sucked eggs, and see 500 on the 500 as a distinct possibility with the Debt Collapse we are currently in. We are also in a Depression, Phase I only. Loan demand is just not there to propel an economy forward. Housing still stinking up many a balance sheet and going to get worse. Most of you didn’t see 2007/2008 coming, so why would you see the next collapse coming??!! Happy trails ahead for those who stay out of financial assets.

  • Daniel Victor

    I have heard the same prediction from another respected source.However,if the US budget deficit continues to expand,and the absolute debt total continues to increase,inflation must result.If that were not the case,it would be possible for the Federal Reserve to actually create real wealth by creating more dollars.Since the prediction appears to be based on low inflation,I do not trust it.

  • Trading Options

    I’ll go way out on a limb and predict volatility… LOTS of volatility in the coming months (probably years). Which will be good for savvy traders but will kill buy-n-holders.

    But with Uncle Ben’s Instant Money pouring out of the Fed, the Central Bank of Ireland financing itself with 51bn hot-of-the-press Euros, and who knows what else going on undisclosed, there are gargantuan distortions in the markets that are more reactive to political events than freemarket forces.

    How do you predict what distortional – possibly irrational – forces desperate politicians will apply next? Since a rising Dow or S&P is political “proof” that economic recovery is underway it’s in their best, most self serving, short term interests to work it like a giant pump n dump.