Jeffrey Gundlach – “Timing & Strategy” [Slides]

Jeffrey Gundlach – “Timing & Strategy” [Slides]

Jeffrey Gundlach’s DoubleLine Total Return Bond Fund webcast recap titled, “Timing & Strategy.”

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About this Webcast Recap

On June 14, 2016, Chief Executive Office Jeffrey Gundlach held a webcast discussing the DoubleLine Total Return Bond Fund (DBLTX/DLTNX) titled “Timing & Strategy.”

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This recap is not intended to represent a complete transcript of the webcast. It is not intended as solicitation to buy or sell securities. If you are interested in hearing more of Mr. Gundlach’s views, please listen to the full version of this webcast on on the “Webcasts” tab under “Latest Webcast”. You can use the “Jump To” feature to navigate to each slide.

Jeffrey Gundlach – Negative Interest Rate Policy

  • Amount outstanding
  • There are over $13 trillion of bonds worldwide trading with negative yield. A significant increase from $7.8 trillion 19 days ago.
    – German 10-year bund yields have gone negative, joining Switzerland and Japan.
    – Japan accounts for 58% of all negative-yielding G10 debt.
    >> Japanese yields on the 10-year are approaching -20 basis points (bps).
  • Consequences on Economic Growth
    • Negative interest rate policy has not led to the additional economic growth that Central Banks hoped for.
      – Gross domestic product (GDP) growth and world earnings expectation estimates continue to be revised lower.
      – Stock markets in Europe, Japan and China, as measured by the Eurostoxx 50 Index, Nikkei 225 Index and Shanghai Composite, respectively, are down substantially from the highs of recent years.
  • Consequences on Currencies
    • Negative interest rate policy has had the opposite result then what was the intended purpose, instead leading to strength in the Euro and Yen relative to the U.S. Dollar (USD).
  • Consequence on Banking Systems
    • Mr. Gundlach believes negative rates are fatal to the banking system.
      – As of today, Deutsche Bank and Credit Suisse are trading at all-time lows.
  • Central Banks
    • Mr. Gundlach believes Central Banks may engineer rates further negative. Also, he thinks this will continue to weaken GDP growth, strengthen local currencies and fail to boost equity markets.

United States

  • U.S. Treasuries (UST)
    • The 10-year UST is at 1.62%, which is the lower end of our current range.
    • The UST market accounts for 60% of all positive-yielding G10 debt.
  • Federal Reserve (Fed) Rate Hike
    • The Fed has failed to continue to raise interest rates.
    • Mr. Gundlach believes they have painted themselves into a corner by oversimplifying their communications into a two-parameter mode inflation and unemployment.
  • U.S. Economy
    • As a base case scenario Mr. Gundlach believes a recession is not likely.
  • Commodities
    • Up 20% from the low tick as measured by the Thomson Reuters Core Commodity CRB Index
  • Oil
    • Mr. Gundlach believes oil will be challenged to make future gains for the rest of the year.
    • U.S. Equities
  • Mr. Gundlach believes stocks have been dead money for 18 months.

DoubleLine Total Return Bond Fund (DBLTX/DLTNX) As of May 31, 2016

  • Statistics
    • Duration of DBLTX is 2.8 years vs. 5.5 years of the Barclays Aggregate Bond Index.
    • DBLTX is primarily mortgages.
    • No corporate credit exposure
  • Performance
  • Mr. Gundlach believes DBLTX has performed well this year on a risk-adjusted basis.

Question and Answer

  • Is Gold going to $1,400 this year?
    • Yes, Mr. Gundlach believes gold is inversely correlated to Central Bank creditability.
  • What are your thoughts on Puerto Rico GOs?
    • Mr. Gundlach still likes the Puerto Rico General Obligation (GO) bonds for DoubleLine’s higher risk funds. There are no GOs in the Total Return Fund.
  • Do you still like mortgage REITs?
    • Mr. Gundlach believes mortgage REITs are a hold.

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