Renowned portfolio manager Jeffrey Gundlach of DoubleLine Funds gave his latest presentation on the state of the market this afternoon. Here are the key takeaways:

  • Economist forecasts are always too optimistic with regard to growth and inflation

Treasury_Forecast

  • Oil could continue falling in yet another sign that global economic growth is weak
  • Bond yields have more risk of falling farther than rising
  • If oil falls to $40 the yield on the US 10-year note could fall to 1%
  • China is the 2nd largest importer of oil behind the US, the decline in oil could portend more weakness in China than the consensus is forecasting
  • US dollar strength is a risk to growth in 2015, a strong dollar adds to the global deflationary pressures

The main theme of this presentation is weak global growth and persistent deflationary pressures. Gundlach is bullish on the US dollar, however, interestingly enough he also seems to be positive on gold. In fact, he pointed out that gold is actually up quite a lot on the year in many foreign currency terms.

Gundlach’s bullish gold view is a bit nuanced. Falling yields and weak global growth are quite positive for the yellow metal as central bankers scramble to generate inflation at all costs including debasing their currencies and implementing negative interest rates (as the ECB recently did). Negative real yields may be just around the corner again in the US.

Some of the gem Gundlach quotes from this presentation:

Every year we get a 3% GDP forecast, but we haven’t had a 3% growth year since 2005.”

“If oil goes to $40, then the 10-year could be going to 1%.”

“Gold has been stealthily strengthening this year.” 

“Oil will find a bottom when it starts going up.”

“Lots of strange things happening in China.”

Zero Hedge: Gundlach “This Time It’s Different” presentation