Jeff Gundlach’s Macro Market Moves

Bloomberg had a good profile of Jeff Gundlach on Friday that highlighted some of the positioning from the new bond guru.  It’s interesting to note how many of these fixed income managers are being forced into other asset classes due to the limited options in the fixed income space as a result of the collapse of the yield curve (thanks to the Fed and the credit bubble).  We’re all becoming macro thinkers now….

“He recommends buying hard assets: Gemstones, art and commercial real estate are high on his list. And DoubleLine has been buying the stocks of Chinese companies, U.S. natural gas producers and gold-mining firms because it considers them to be bargains.

Gundlach himself has amassed a contemporary art collection of about 100 pieces, with works by Jasper Johns and Franz Kline. The money manager drew on abstract painter Piet Mondrian’s double-line style for the name of his firm and its geometrical, crosshatched logo.

Of course, this positioning doesn’t mean he’s veering too far away from his primary area of expertise.  Gundlach is still holding huge fixed income positions primarily in MBS:

Most of DoubleLine’s assets are in the Total Return Bond Fund (TGLMX), which has 78 percent of its holdings in residential mortgage-backed securities — both those guaranteed by the U.S. government and those that are not and have discounted prices.

The mix should help the fund weather either inflation or deflation because the securities should move in opposite directions if interest rates go up or down. Because higher rates could mean the economy is improving and housing prices are recovering, there would be fewer defaults on the riskier nonguaranteed bonds, and prices would rise, says Philip Barach, DoubleLine’s co-founder and president.


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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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  1. I can’t help being struck the thought that if people who are trying to invest all this money stopped trying to invest it and actually started spending more of it then in time this desperate search for assets priced at fair value would stop.
    I begin to wonder where this is all going.I preceive that the money looking for a home is far greater than the options that should be invested in.In which case please let us consider what we mean by misallocation.

  2. >Most of DoubleLine’s assets are in the Total Return Bond Fund (TGLMX)

    But that’s not a Double Line Fund is it?

  3. Money in secondary markets isn’t idle and unproductive. It has already been “put to work”. When a company issues stock through an IPO they raise capital and invest it in their company (which helps the economy in various ways). Their shares remain in the market and trade on exchanges. But it’s a mistake to say this money has not been put to work or “spent”.

  4. Have to disagree SS

    Most IPO money just goes to pay off the initial investors and most secondary market activity is like a casino. Its not building any capital goods and increasing investment in the ways economists mean investment. When a money manager says investment he doesnt mean the same thing as Krugman (or Hayek & Keynes).

    It does add to money manager income AND it can actually add to the employment of additional money managers but we certainly cant build an economy around money managers. They are extractors not producers.

  5. I cant help but think about why this guy wants people to buy all this artwork or gemstones. The people actually holding those now are probably very wealthy already. Why should I buy their art or gem stone? It wont be bought back from me till the price craters and then they will come and start the process again. Commercial real estate maybe but art and gemstones? No thanks.

  6. Hey Cullen,

    What do you think of his inflation views? Seems to be different from MR. I’d also be curious to know what you think about his views on sovereign default and the “third phase” that the article mentions.

  7. this guy should stick to bonds. he sounds like a fool when he starts talking about other asset classes and “kabooms”.

  8. Gundlach’s DoubleLine Total Return bond fund has ticker symbol DBLTX. I own it and it has performed quite well.

  9. You’re trying to have it both ways. The top 10% of all income earners in the USA do 50% of all consumer spending. The top 20% spend about 75%.

    You claim this is all just money going to the top, but it’s actually the bulk of all spending. The rich aren’t that different than the poor. They like to spend also. They just happen to also invest (which again, isn’t money trapped in savings accounts, but has already been put to work). So the rich are actually carrying the country on their backs.

  10. You’re making a common mistake. Cash is never “on the sidelines”. When a company sells shares through an IPO they obtain cash and either pay out former owners or put it to productive uses for the corporation. These shares then trade on the stock exchanges in the secondary market. But the money used to purcahse these stocks does not represent money that is “on the sidelines”. That money has already been used. It represents the other side of the ledger of the securities that were originally issued.

    It’s a common fallacy to blame the size of financial markets for a lack of aggregate demand. Keynesians and primarily post-keynesians make this mistake because they don’t fully understand financial market dynamics.

    See John Hussman’s explanation for more.

  11. “Forced into other asset groups” and “Gemstones, art and commercial real estate “. My comments were made in respect of the above extracted from the article.
    I really don’t see the trickle down effect being substantial from same when compared shall we say to someone choosing to go out and buy a new car etc etc. In one case,the car depletes inventory and causes Ihopefull) immediate replenishment in production. In the other someone buys transfers a tangible non-depreciating asset (gems/art) fromone stock of inventory to another persons inventory. In such a case of we are lucky the inventory may need replacing,but not necessarily so as it’s just as likely to be an asset swap which causes no transmission into the economy.Which I might add may well be the argument re QE …am I any clearer as to meaning?

  12. What is Monetary Realism?

    “Monetary Realism (MR) is a description of the monetary system applicable to nations with floating exchange rates and non-convertible fiat currencies (see here for our full primer). Monetary Realism describes how a modern monetary system is a tool formed by the people of a nation that is intended to be utilized to optimize living standards. This relationship is deep, complex and often misunderstood. We hope to bring balance and objective insights to the discussion in order to clarify many of the misconceptions about money, economics and the monetary system. Our goal with MR is to focus on the core operational realities of the economy while any policy ideas are entirely peripheral to MR.”

  13. Hi Scott,

    I am not quite sure. He’s very vague in some of these comments. I presume he’s referring to Japan in his “kaboom” comments about sovereign debt, but he’s not specific so it’s impossible to know. I find some of his understandings on macro to be lacking, but he’s not necessarily a macro guy. At the end of the day, he’s a micro bond picker and he’s damn good at it.


  14. It strikes me that advocating holding them is simply one more way of saying I believe the powers that be intend to keep going until they inflate us out of the hole we are still in therefore I want to hold anything that promises to retain a real value based upon the fact that it isn’t replaced/replenished with the speed of most others assets.
    As I said though I can see that this line of thought is simply enouraging the lack of transmission we have been seeing for quite some time.Frankly ,it’s hoarding.