of housing is going to exchange extraordinarily substantially to the downside. and so a lot of things that people don’t understand is quantitative easing is responsible for these market disportions. it’s likely to keep them in place. it’s created a set up that isn’t just bond investors or bond owns picking up nickels in front of steamrollers. we have to be very careful about what that means in our portfolios. all right. i just would like to add one point, and i understand — statistician, practical guy. but from 1960 to date, the s&p multiple averaged 15 times. in that same period when the s&p multiple averaged 15 times, the 10-year u.s. government averaged 6.67. here we are, 10-year government i think i’m seeing on your screen 1.8 and the mutiple in line with historical. so either pricing in some increase in interest rates or slower long-term economic growth. the bullish element to that is it’s pricing it in. so i’d rather take a chance in an equity than i would in — and so i understand jeff’s point. i also make the point that over time inflation has been a pose tim for stocks negative for bonds. because inflation company’s costs gets incorporated into selling prices. works its way into higher level of earnings. inflation becomes a problem for the market when the central bank is moving to curb the inflation. it is tantamount to curving growth. right now, we have a central bank that tells you every day, i want more growth, i want more inflation. i want to keep interest rates low till i get it. so i think equities pay better than fixed income. that last point is a good point, lee.
QE’s Effects in 8th Inning: Jeff Gundlach
Everything begins and ends with quantitative easing, DoubleLine Capital’s Jeff Gundlach says.
Transcript:
give us your thought on where we are right now in the markets. i think everything kind of begins and ends with quantitative easing. it’s really at the centerpiece of everything. it creates a demand for obviously treasury bonds. it creates a low basis of comparison that is keeping the trend towards anything with a yield on it as being successful investment that will continue to i think appreciate in value and lead to even more of a conen drum for investors in terms of what they’re su povd to do going forward. people have been fighting it. at some point, it’s going to end probably badly. but it’s still going on. the fed is not going to stop. probably about the eighth inning. and it’s going to continue to trend in the same direction i think. yeah, we obviously spend a lot of time talking about equities on the network, on this program. we know where the markets are at these record highs. leapt’s switch the conversation to your wheelhouse, that being bonds, treasuries. warren buffett on cnbc exclusively last week called them a terrible investment. i want your reaction to that. depends what your time-frame is. if you want to talk about 10 or 15 years, i think we should all home bonds represent an underperforming investment for the next 10 or 15 years. because if they don’t, it means that no one is going to have any investment return of any significant at all. over the short term, though, let’s say that’s six months to a year, maybe 18 months, bonds are notng to be a terrible investment. treasury bonds will be an okay to okay minus investment probably for that time period. just as they’ve been an okay investment or okay minus investment since we went into qe nonstop, which was the early part of october 2011. since then, the investment that everybody loves to hate, including i guess warren buffett, the tlt is a proxy, the etf of long-term treasuries, has actually returned about 3.5% annualized.
