GBA Presents: THE GREEN MARKET


Bond king Jeffrey Gundlach: The yield curve may be sending a recessionary signal


Tue, January 4, 2022, 11:11 AM·


Bond king Jeffrey Gundlach has a lot on his mind as it pertains to markets when Yahoo Finance sits down with the DoubleLine founder at length inside his California estate on the first trading day of 2022.

China isn't a great market to be investing in, contends Gundlach. Stock valuations as measured by the DoubleLine favorite the CAPE ratio appear too rich, says Gundlach.


But it's Gundlach's warning on the path of the U.S. economy — in part caused by looming interest rate hikes by the Federal Reserve — that perhaps warrants the most attention by investors large and small after a strong run-up in equity prices last year.

"We have the highest two-year yield of the past year. We have the highest three-year yield. We have basically a high on the five-year yield. And so what's happening is the yield curve is sending a bonafide recessionary signal. You have interest rates going up at the short end and going down at the long end," explains Gundlach ahead of his third annual 'Roundtable Prime' investing panel at DoubleLine's headquarters.

The basic mechanics of a flattening yield (which could then lead to an inverted curve) as a recession predictor goes a little something like this: markets start to worry the Fed will slowdown an overheated economy by increasing interest rates which in turn triggers an economic slowdown. That then leads to a period of renewed lower interest rates from the Fed as they attempt to stave off a recession.

To wit, a yield curve inversion has preceded every recession of the past 50 years.

Indeed this junction may be where markets are at present as the Fed seeks to turn into an inflation fighter inside of a global health pandemic by 1) winding down its quantitative easing (QE) campaign; and 2) signaling a path of higher interest rates in 2022 and beyond.
 
Gundlach believes the bond market is suggesting an economic slowdown is in the cards this year. And as such, the yield curve is a must watch for investors right out of the gate.

Adds Gundlach, "I think the bond market is already showing enough of a recession indicator that by 2023 it's seems pretty likely. And I, like I said earlier, I don't think a lot of Fed officials, economists and investors appreciate the fact the economy keeps buckling at lower and lower interest rates. So I think the Fed only has to raise rates four times and you're going to start seeing really a plethora of recessionary signals. I think it's certainly a non-zero probability that you get a recession in the latter part of 2022. That's going to be dependent again on how aggressive the Fed is. One thing that we did notice in 2018 is the Fed stopped QE, they started quantitative tightening — letting the bonds roll off. And then they started raising interest rates and we got an instantaneous bear market.
 
stonedinvestor said:
I think the market wants to believe that great growth is ahead and Omicrom is whipped.

The facts on the ground do not support that.

I think economic growth will slow alot due to Omicrom a slow down made worse when Biden's 2nd plan fails to get through..

So the rush to by cyclical stocks I don't get.
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Ya know yesterday I was gonna say to buy some CAT. That joker is leading the Dow today. Up 4.6%, which is huge for an elephant like that.

You are right Stoney, the market does think we have it whipped. The airlines have all been going up since after Xmas despite the nightmare of all these cancelled flights. I doubt its just an industry-wide short squeeze, although I bet there were/are a ton of shorts piling on in anticipation of earnings adjustments (down).

But Stoney, what if this Omnicron is mother nature's way of vaccinating the world. I know at least a dozen people who have tested positive in the last week or so. Hell I might even have it, by all rights I should, but I feel fine so... I dunno. The people I know that tested positive, they are all saying its no big deal.

Regarding tech---- today's one of those tricky days. The Naz could easily drop another 2% tomorrow, and everyone who bought the dip today will take a hit or be stopped out. That would be my guess. But if we get a bounce later or tomorrow and the bounce holds, we're going back up.

The VZ top technically fell yesterday since the Q's closed above $401.

What's this lol:

stonedinvestor said:
GBA SHORT SNAP AT $46
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3 hours later?
Did you mean $43?
 
stonedinvestor said:
Gundlach believes the bond market is suggesting an economic slowdown is in the cards this year. And as such, the yield curve is a must watch for investors right out of the gate.

Adds Gundlach, "I think the bond market is already showing enough of a recession indicator that by 2023 it's seems pretty likely.

And then they started raising interest rates and we got an instantaneous bear market.
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I wrote this a week before Xmas Stoney:

vanzandt said:
I think 2022, despite what every expert and their brother is out there is saying.... I think 2022 just might be a bear market buddy. Recession? Beats me... but I watched a $15M bet yesterday that implicated the Nasdaq is gonna get 20% plus haircut in 2022. I also saw tons of "smaller" bets (> $1M) implicating the exact same thing.

I saw zero bullish bets.
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But Stoney, what if this Omnicron is mother nature's way of vaccinating the world.

That's what my brother thinks.

One must take a very complex view of all of this. Before any herd immunity a lot of dammge can be done. Many schools are closing NOW because they cannot staff. Already very shaky bus systems for the schools is in place that could go next.
It feels to me very much more of a battle.

All of this Biden testing will fail.

When you got Covid once you can get it again. Correct?
-It never was one of these hey I got it once I'll never get it again.

Everyone knows someone who's sick it seams. // The fact that we have to mask now again... something is not right.

So what is Omicrom? The virus wants to live and the first time it went to hard at us with a broadside of killing people and getting into our lungs so we quickly developed a defense and created the vaccines..the virus knows this and wants to get back in our bodies so it can live so it attacks again but in a lesser way, might we just ignore it?

And what then

Afraid of the punch line here... they know so little now... What if this Omicrom leaves a scar somewhere hard to get at. The next variant then targets that scar.

Seeing my bank suddenl closed. It's jarring. Wearing amask again at the gym... It's getting cold... This idea that the wave subsides next month... I dunno... How many times can people get it over and over-- That immune part<-- it's in question. You would think the human body could would work out... That each time we get sick it would be in a lessor form. But it's a dangerous game... when babies are involved and you don't know what the next one targets...

Could Covid burn itself out... I think so.. but there's a problem.

Man has defeated himself- Poor nations that are not served by rich nations will ensure a constant stream of plagues set upon us... Our lives are forever changed. Cue the mass depression... I have a Japanese forest feeling. I think something has stared here that we are not prepared for.
The income in-equality of the great nations has come home to roost.
 
Very Bad Look-


Tesla showroom in China's Xinjiang region blasted by rights groups
Tue, January 4, 2022, 3:03 AM





SHANGHAI (Reuters) - U.S. human rights and trade groups on Tuesday blasted Tesla's New Year's Eve announcement that it opened a showroom in Xinjiang, the latest foreign firm caught up in tensions related to the far-western Chinese region where detention camps have drawn heavy criticism.

The Council on American-Islamic Relations, the largest U.S. Muslim advocacy organization, said Tesla was "supporting genocide".
 
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