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Wednesday, June 15, 2016

Gundlach: "Central Banks Are Losing Control" - His Latest Presentation

In his monthly call with DoubleLine investors, Jeff Gundlach ratcheted up the gloomy rhetoric - and considering the rising voices claiming central banks are rapidly losing both credibility and control, he has been spot on - and said on Tuesday investors are dropping risky assets and turning to safer securities including Treasuries and gold because they are losing faith in central banks.
As Reuters puts it Gundlach, who oversees more than $100 billion at DoubleLine, is one of the first heavyweight investors to publicly raise red flags, and to keep hammering it at every possible opportunity, about the credibility of major central banks, including the U.S. Federal Reserve, as countries struggle to manage economic growth. Last year, Gundlach correctly predicted that oil prices would plunge, junk bonds would live up to their name and China's slowing economy would pressure emerging markets. In 2014, he forecast U.S. Treasury yields would fall, not rise as many others had expected.
"Central banks are losing control and they don't know what to do ... just like the Republican establishment and Donald Trump," Gundlach told Reuters in a telephone interview, speaking one day before the Fed is widely expected to again announce it will do nothing as it continues its one-and-done "strategy."
"The Fed is confused and their confusion spills into investor psychology," said Gundlach, who oversees more than $100 billion at Los Angeles-based DoubleLine. "The Fed changes its tone so frequently, it seems every other week the message is different. They’ve turned into the 'Zombie Fed.' They say the meeting this week is 'live,' but investors all know it isn't at all."
In terms of investments, Gundlach said it is a "dangerous price appreciation game" to purchase German Bunds at current levels and that gold and gold miners are still an attractive place to put money to work. He also said that negative interest rates, notably in Japan, were backfiring. "Negative interest rates don't do what they're theoretically supposed to do," he said, noting the appreciation in the Japanese yen.

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