Jeff Gundlach, the founder of DoubleLine just wrapped up a superb conference call with investors. Below are the cliffs notes:
On the inflation/deflation risk: deflation remains the much bigger risk.
On equities: “I firmly believe that stocks bought today will show a double digit loss sometime in 2011”
On interest rates: short-term rates are bottoming while long-term rates are likely capped. He says this steep curve is “unsustainable”.
On high yield bonds & corporate bonds: He says high yields are unattractive from a risk/return perspective. Corporates are also unattractive though not to the extent of high yield.
On higher oil prices: he says they are deflationary because higher oil prices will cause reduced consumer spending on other goods and put downward pressure on overall consumer spending and prices. Higher oil is NOT inflationary.
On Gold prices: Looks “toppy”
On the state budget woes: This will put continuing pressure on states to raise taxes and slash budgets.
The “no-brainer” of 2011: the Euro will decline because the crisis in the region in flare up again.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.