Gundlach: Delusional Fed Could Trigger 40% EM Equity Correction

January 25, 2016 • Page 2 of 2

Nominal GDP, a favorite indicator, is falling and the Fed had never raised interest rates in this environment. In 1982, they tried and immediately reversed themselves.

The only major expense rising in America today is housing, a significant cost for most people. "I thought everyone wanted the economy to grow," Gundlach said. "Put [all the Fed governors'] forecasts together and you get a hall of mirrors."

As for the U.S. stock market, it is "whistling past the graveyard."

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2 Comments

Comments

AMV911 8 years ago

Well.... OK. "The Fed could trigger a 40% drop in the emerging markets." That's funny. Looking at the EEM, it peaked at over $50 in May of 2011. The price hit a low last week of $27.61. That is a loss of 45%. A move that most likely happened in anticipation of the fed raising rates, which we have talked about for years. But the wonderful Bernanke and the lovely Yellen have not till December obliged. Isn't Mr. Double Line Capital a little late at this point? Looked at a monthly chart on EEM and from 2003 to present the trend line meets with the 2008 low and current price. The funds price return for the 13 years is 148%. A 10.53% return thru the 12/31/15 year end since inception. A reasonable return. I don't buy the emerging markets much. We get our international exposure from MMM & CL, etc. I might actually buy some EEM. Thanks Jefferey.
DTS53 8 years ago

Gundlach's rhetoric makes it sound like he's running for office. His overly dramatic comments, like "big mouth policy", "nothing but air", etc. don't add any credibility to his arguments. One particular comment which is way off base is that "the only major expense rising in America today is housing." Has he totally overlooked the ever-increasing cost of health care alone? The percentage of consumer spending on health care rose from 15% in 1990, to over 20% for the first time in 2009, and over 20% again in 2014. Those seeking decent rates from fixed income can no longer rely on interest paid on CDs or Treasuries, so Gundlach's comments about the increase in the number of investors in junk bonds might very well be because they are chasing returns, particularly through mutual funds. Aside from stagnant wages (and low interest rates have not helped there), has he considered the fact that retirees are being hurt the most by the ongoing zero rate environment? As baby boomers move into retirement, more will be looking for decent returns on a fixed income portfolio. We can't ignore the largest segment of the population and continue to provide banks and lenders with favorable rates at the expense of the growing retiree market.

Gundlach: Delusional Fed Could Trigger 40% EM Equity Correction

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