Jeff Gundlach

Jeffrey Gundlach, DoubleLine Capital CEO, does not believe there is a bond bubble, but thinks that double digit returns going forward are unlikely. Gundlach was on CNBC yesterday, and also discussed his views on the country’s biggest company (by market cap). Gundlach who is considered a bond guru, has been bearish on Apple for a while.  He stated “I deeply believe Apple is headed to $425 a share.” He discussed the fiscal cliff and other economic and investing topics. The video and a computer generated transcript are embedded below:

if you took our next guest’s advice early last year you’d have been handsomely rewarded in
return. now to give you his 2013 outlook, double line capital’s co-founder and ceo jeffrey
gundlach joins gary kaminsky for an exclusive interview. hi, gary. simon, happy new year
and thanks very much. jeffrey, our viewers know who you are. they want to hear what you
have to say. when we visited with you in los angeles in september, you sort of telegraphed
what you expected with the fiscal cliff and not surprisingly, you were dead-on. so tell us now
what are your expectations in terms of what’s happening with the debt ceiling, how it will
impact capital markets and how the portfolio’s positioned as a result of that. gary, happy
new year. it feels like ground hog day, that movie, doesn’t it? where the fiscal cliff was the
big deal and ace have been saying for the last few months that’s not really the big deal. the
big deal is the fiscal crisis that’s ongoing in the united states and we’re just moving on to
chapter 2. chapter 2 is the coming fight over the debt ceiling and will there be any spending
cuts. it is amazing how politicians on both sides of the aisle were talking about how the bill to
address the fiscal cliff needed to be balanced and what came out couldn’t have been more
imbalanced sort of by definition with nothing but tax increases. so now comes the harder
work as we move forward and we’re stuck with the same issues. i really think the
environment hasn’t changed much since you visited double line back in september. when it
comes to the bond market, the yield on the 10-year treasury i think almost exactly the same
today as it was in the middle part of later september when you visited our offices. so we’re
in a range bound market for bond. we have these two competing forces. on the positive
side if you want to call it a positive, you have rate repression by the federal reserve, buying
bonds which obviously keeps interest rates lower than they would otherwise be. but on the
other side, in the treasury market, you have no value to speak of from an investor’s
perspective. however, when you’re at the higher end of the range in yields, which you are
right now, the higher end of the range for the last few months, it is actually a reasonable
time to be putting cash to work in the bond market because the prospect for higher yields
just isn’t that great with the fed’s policies. i want to get to expected returns in various asset
classes. when we came out there last time you made a comment about price discovery and
how the manipulation by central banks around the world were making it very hard for bond
markets to have true price discovery. do you get a sense that there is better price discovery
now than there was back in the early part of the fall? no. i think it’s just getting
systematically worse. people keep talking about a bond bubble. i keep hearing that all the
time. i done think there is a bond bubble but i think the year 2013 may be building a credit
risk bubble as we move forward because what’s happening is that investors starved for
yield now that yields are lower on competing assets versus treasuries, thanks to yield
compression, due to yield starvation, the next move i believe that will start happening in the
financial industry is funds will start leveraging credit risk to a greeter extent which will build
up an overexposure potentially should the market ultimately turn against bonds later on. so
i think that’s really an issue that investors should be thinking about. in the near term, it is
actually a positive for risk assets in the bond market because the leveraging up of those
sectors will bring even higher prices and lower yields on things like junk bonds, corate
bonds, emerging market debt and things like credit risk in the mortgage-backed securities
market. those things are likely to add higher in price — jeffrey, since we did this a year ago
and bill gross sat down in california giving out his outlook in terms of expected returns in