EDITOR NOTE: Like markets, the economy, too, is conditional. Lot’s of the conditions, if not the bulk of it, so it seems, appear to be driven by monetary and fiscal policy. Given the mess we’re in, as asset and debt bubbles abound, anyone can be forgiven for not having the brightest outlook on the near to intermediate-term future, or for not trusting the Fed or the government to find the way out of their own self-made labyrinthine dilemmas. Bond King billionaire Jeff Gundlach hits the nail on the head when delivering his first point below: "The dollar going down. That's the linchpin to everything, I believe. And so, that's the thing that is the most important." He also makes a crucial point when stating that the only way out of inflation is one that’ll likely lead to a tremendous cratering of equity assets. Bleak outlook but a simple counter move: if you don’t already own non-CUSIP gold and silver coins or bars, now’s the time to diversify your portfolio by allocating some real money into the mix.
Billionaire 'Bond King' Jeff Gundlach warned about rising levels of debt in the US, doubled down on his bearish dollar outlook, and said he's turned positive on European stocks for the first time in over a decade in his latest webcast.
Here the DoubleLine Capital founder's 10 best quotes.
1. In response to the question: "What would cause the market to regard the national debt, or the debt to GDP ratio, as a major threat to future returns?"
Gundlach: "The dollar going down. That's the linchpin to everything, I believe. And so, that's the thing that is the most important."
2. "We continue to run over 20% of GDP budget deficit. So as robust as a 10.4% nominal GDP forecast is, if we didn't have deficit spending, there would be no economic growth in the United States. If we suddenly took the deficit to zero, we would actually have a negative 10% GDP growth almost instantaneously. So we're living for sure on an unusually fueled economy. It of course has been aided and abetted by the Fed's balance sheet."
3. "Whenever I get interviewed, people ask me, is inflation going to be a transitory? And I say, how does anybody know whether it's going to be transitory or not?"
4. "One thing arguing for transitory is the base effects from a year ago. If we look at the month by month CPI and PPI numbers, though, the base effect narrative gets exploded a little bit because we continue to accelerate not just versus a year ago, but versus three and four months ago. So, there might be more to the inflation story than simply the base effects."
5. If extended unemployment benefits were rolled back, "we would suddenly see some very significant shocks to the disposable income that would quite noticeably reverse some of the trends we looked at with housing and automobiles. That's the best argument, I think for inflation being transitory, but it also has implications that the economy would go into a significant reversal mode."
6. On hearing about a McDonald's in Pennsylvania that was offering a $500 signing bonus: "You wonder what the terms of that might be. You'd think that maybe people pocket $500 and then go to the business down the street and pocket another $500. You wonder how long you have to work there, but there's clearly a shortage of workers because small and medium-sized businesses still have to compete with the US government stimulus checks."
7. "The strength of the retail investors has also been a distortion due to all of this disposable income from the government. We've never seen anything like this in terms of flows from global investors into both developed market and emerging market equity funds."
8. "I turned positive on European stocks, which felt really weird. I've been negative on European stocks relative to US stocks since the founding of DoubleLine 12 years ago. Now European stocks have begun outperforming US stocks."
9. "Ultimately, I think gold will go much higher as the dollar falls and commodities broadly have a further significant leg to the rally that began 15 months ago."
10. On whether he would short AMC: "I don't want to be involved in any of these, you know, mob running stocks, because as fundamentally overvalued as AMC became with the short squeeze last week, as fundamentally overvalued as it is, you're just playing with fire with that type of stuff,"
Original post from Markets Insider