'Sell everything,' DoubleLine's Gundlach says

[openfire]

By Jennifer Ablan

NEW YORK (Reuters) - Jeffrey Gundlach, the chief executive of DoubleLine Capital, said on Friday that many asset classes look frothy and his firm continues to hold gold, a traditional safe-haven, along with gold miner stocks.

Noting the recent run-up in the benchmark Standard & Poor's 500 index while economic growth remains weak and corporate earnings are stagnant, Gundlach said stock investors have entered a “world of uber complacency.”

The S&P 500 on Friday touched an all-time high of 2,177.09, while the government reported that U.S. gross domestic product in the second quarter grew at a meager 1.2 percent rate.

“The artist Christopher Wool has a word painting, 'Sell the house, sell the car, sell the kids.' That’s exactly how I feel – sell everything. Nothing here looks good,” Gundlach said in a telephone interview. "The stock markets should be down massively but investors seem to have been hypnotized that nothing can go wrong."

Gundlach, who oversees more than $100 billion at Los Angeles-based DoubleLine, said the firm went "maximum negative" on Treasuries on July 6 when the yield on the benchmark 10-year Treasury note hit 1.32 percent.

"We never short in our mainline strategies. We also never go to zero Treasuries. We went to lower weightings and change the duration," Gundlach said.

Currently, the yield on the 10-year Treasury note is 1.45 percent, which has translated into some profits so far for DoubleLine.

"The yield on the 10-year yield may reverse and go lower again but I am not interested. You don't make any money. The risk-reward is horrific," Gundlach said. "There is no upside" in Treasury prices.

Gundlach reiterated that gold and gold miners are the best alternative to Treasuries and predicted gold prices will reach $1,400. U.S. gold on Friday settled up at $1,349 per ounce.

Gundlach lambasted Federal Reserve officials yet again for talking up rate hikes for this year while the latest GDP data showed disappointing economic growth. "The Fed is out to lunch. Does the Fed look at what's going on in the economy? It is unbelievable," he said.

Overall, Gundlach said the Bank of Japan's decision on Friday to stick with its minus 0.1 percent benchmark rate - and refrain from deeper cuts - reflects the limitations of monetary policy. "You can't save your economy by destroying your financial system," he said.

http://finance.yahoo.com/news/sell-e...202955293.html

[Zippyjuan]

He isn't "selling everything" either.

"We never short in our mainline strategies. We also never go to zero Treasuries. We went to lower weightings and change the duration," Gundlach said.

A previous prediction he made: https://en.wikipedia.org/wiki/Jeffrey_Gundlach

On March 9, 2011, Gundlach was quoted on CNBC that “Munis Are The New Subprime.” “You’ve got a history of low defaults, which is comforting. But that kind of sounds like what subprime sounded like back in 2006,” Gundlach said. Gundlach pointed out that even if defaults do not ultimately climb as high as critics like Meredith Whitney have warned, muni bonds will likely trade much lower. “Between here and the end game, lies the valley. And the valley is full of fear. I think the muni market is going to go down by at least, on the long end, something like 15 and 20 percent,” he said.[6]

Gundlach reportedly liquidated 55 percent of his personal holdings in municipal bonds on March 10, 2011.[7]

However, the decline he predicted did not occur: on March 10, 2011, the Bond Buyer Index closed at 106.151904, with this index closing at 119.886063 12/30/2011 the last day of 2011 or an improvement of +12.9%. The index closed at 129.99416 on 12/31/2012.[8]

At the time, Gundlach also stated: "Nobody owns California general obligation bonds because they think it's an improving credit story," he said, drawing chuckles from the audience.[9]

However, since March 2011, the ratings of California General Obligation bonds improved from A- to AA- by Standard and Poors and from A1 to Aa3 by Moody's.