“Sell Everything,” Says DoubleLine’s Gundlach, According to Reuters

By Jennifer Ablan

NEW YORK (Reuters) – Jeffrey Gundlach, the CEO of DoubleLine Capital, expressed concerns on Friday regarding the current state of various asset classes, describing them as overly inflated. His firm maintains a strong position in gold, which is traditionally viewed as a safe-haven investment, as well as gold mining stocks.

Pointing out the recent surge in the S&P 500 index amid sluggish economic growth and stagnant corporate earnings, Gundlach remarked that investors in the stock market have entered a state of “uber complacency.” The index reached a record high of 2,177.09, while the U.S. government reported a modest 1.2 percent growth in gross domestic product for the second quarter.

Gundlach conveyed a sense of alarm, likening his sentiment to the provocative artwork of artist Christopher Wool, which includes the phrase, “Sell the house, sell the car, sell the kids.” He stated in a phone interview, “That’s exactly how I feel – sell everything. Nothing here looks good. The stock markets should be down massively, but investors seem to have been hypnotized that nothing can go wrong.”

As the head of a firm managing over $100 billion, Gundlach revealed that DoubleLine took a "maximum negative" stance on Treasuries on July 6, when the yield on the benchmark 10-year Treasury note fell to 1.32 percent. He emphasized that while his firm typically does not short in their primary strategies or reduce Treasury exposure to zero, they did adjust their duration and lowered their allocations.

Currently, the yield on the 10-year Treasury note is at 1.45 percent, leading to some profits for DoubleLine. “The yield may drop again, but I am not interested. The risk-reward is horrific,” Gundlach remarked, stating there is “no upside” in Treasury prices.

Gundlach asserted that gold and gold miners offer the best alternatives to Treasuries, forecasting that gold prices will reach $1,400. As of Friday, gold settled at $1,349 per ounce.

He also criticized Federal Reserve officials for their discussions about rate hikes this year, especially given the disappointing economic growth reflected in the latest GDP figures. “The Fed is out to lunch. Does the Fed look at what’s going on in the economy? It is unbelievable,” he stated.

Additionally, Gundlach commented on the Bank of Japan’s decision to maintain its benchmark rate at minus 0.1 percent, indicating the challenges of monetary policy. He concluded, “You can’t save your economy by destroying your financial system.”