CNBC felt Gundlach’s commentary to be so valuable, so prescient that they ran this banner headline, “Jeffrey Gundlach says the S&P 500 is headed to new lows: ‘I’m pretty sure this is a bear market'”, two days in a row. BTW we are already very close to the S&P’s low of the year. A break to new lows is not a very big reach or outlier prediction to make.
Why should we care what Gundlach thinks?
Well, CNBC thinks we should care because Jeffrey, in their mind, has made a couple of good calls recently. For example:
“Gundlach predicted in March that the closely watched 10-year Treasury yield would hit 3 percent and send stocks tumbling. His call came true a few months ago, as October was one of the worst months for U.S. stocks since the financial crisis.” It came to pass September 18, nine days before the Fed bumped the target rate on Fed funds 25 basis points to a range of 2.00% to 2.25% (9/27/18). It did roil the market. Just about every pundit CNBC trotted out was predicting that if the Fed moved rates higher the market would go down. For most of the month of March, when Gundlach made this staggering (?) prediction, the 10-year was trading between 2.80% to 2.85% …not very far from his predicted target. The Fed was talking raising rates. You’d have to be pretty dim not to think the 10-year could trade above a 3% yield when that happened … pretty lame for CNBC to credit Gundlach any predictive chops on this call. Interestingly that 10-year closed back at a 2.81% yield today (12/18/18). Interestingly, based on the above reasoning the market should be rallying. Nobody seems to be making that case.
“Gundlach revealed in February that he was betting against Facebook shares. He said his short was due to falling public perceptions of the company. Facebook’s stock is down more than 13 percent since Gundlach’s call.” This was a good call, but not unique to Gundlach based on information available at the time.
“He also in 2017 envisioned bitcoin cratering, saying that “if you short bitcoin today, you’ll make money.” At the time, bitcoin traded at about $16,000. The cryptocurrency now trades at about $3,400, losing about 75 percent of its value this year.” Again, this is a call that was not rocket science as most credible investors (including Warren Buffett) thought the cybercurrency was a house of cards.
So, again, I ask, why the banner headlines on his prediction about new lows coming in the market ?
My answer is, this attention to Gundlach predictions is unwarranted
From my perspective in recent years Gundlach’s predictive talents have been pretty unimpressive and unprofitable. I give you a few examples from the Kort Sessions’ archives, circa 2015 and 2016, the last time the market experience a real sinking spell:
Excerpt from “Two major questions facing mankind” (March 15, 2015/S&P 500 2085)
“But, given the growing signs of weakness at home and abroad, hiking rates in the near term would make the folks at the Fed a “bunch of blockheads,” contends Jeffrey Gundlach, the head of the DoubleLine Asset Management complex. (If you are a Wall Street Journal subscriber, you may find link to Barron’s article here —“Global Markets vs. Reality: The Great Divide” )”
Excerpt from “Help! Plus more piling on”(October 5, 2015/S&P 500–2019)
Excerpt from ‘Pity the Fool” (September 5, 2016/S&P 500 2168)
- Jeff Gundlach (July 29 interview with Reuters): “Sell everything. Nothing here looks good.” (except gold, which has declined since then) Twenty-six months later (September 29, 2018)the S&P 500 peaked a 2940 … plus almost 50%. Even in the current correction we are still up over 400 points from the level most of these excerpts were taken from.
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