“Explosive” Gold & No Fed to Rescue

Those were the 2 big takeaways from DoubleLine’s CEO  Jeffrey Gundlach at the 2018 Sohn Investment Conference in New York yesterday.

Gundlach reaffirmed his call in his December investor presentation (which we reported here and here) that we are on the verge of a strong commodities boom.

Readers of Monday’s article here, will recall the Investment Return Quilt (last figure) showing indeed, Commodities and then Gold have been the two best performers year to date, since that prediction.  This is part of the reason Gundlach manages $119b of people’s investments…

Gundlach is calling a late cycle inflationary boom, and sees that inflation going higher than most predict.  On the day that 10 year Treasuries topped 3% (and hence bond price lower) he was still not a buyer, believing there was more to go.  Otherwise known as the Bond King, people listen when Gundlach speaks.  

He is also not buying into talk of an inversion of the yield curve coming before any recession.  He believes there won’t be a safety flight to bonds on the next crash which in itself will exacerbate the crash.  He is also convinced the new Fed chair Jerome Powell will not be there to bail out the market as Yellen always was.  From Reuters:

““The Fed is not going to bail out the market - unless there is a big problem,” he said. “The stock market peaked the last day of Janet Yellen’s tenure, as Federal Reserve chairperson, literally,” Gundlach said.

“I’ve nicknamed her Lucky. Lucky Yellen. I mean, can you imagine? Leaving on the top day of the stock market? And the very next day, here comes Jay Powell. I don’t think that’s a coincidence. I think that’s when people realized that Powell has been vocal about not having this desire to have this 2017-type of stock market where we are going to come in and ‘help me out every time it drops 2 percent’.””

But our readers will probably be most buoyed by his views on gold.  Again from Reuters:

“Gundlach said gold prices, which have broken their downtrend line, were on the verge of breaking out to the upside. “It’s getting almost exciting ... something big is happening,” he said.

“Gold is maintaining an upward pattern above its rising 200-day moving average, which is extremely good,” he added.

Based on classic chart reading, Gundlach said an “explosive, potential energy” of a huge “head-and-shoulders bottom” base was signalling a move of $1,000 in gold prices.”