Thursday, June 16, 2016

News Note - CNBC - Jeffrey Gundlach (Doubleline Capital) - Investors "Losing Faith in Central Banks"

While we only update our Crisis Watch here once a month, when I do see a news item that I think readers should be aware of I will try to post it. In this case we have an article on CNBC quoting the CEO of a major investment fund (Mr. Gundlach oversees $100 billion) saying he thinks investors are "losing faith in central banks." Below are some quotes and then some added comments.


"Jeffrey Gundlach, the chief executive officer at DoubleLine Capital, said on Tuesday that investors are dropping risky assets and turning to safer securities including Treasuries and gold because they are losing faith in central banks.
"Central banks are losing control and they don't know what to do ... just like the Republican establishment and Donald Trump," Gundlach told Reuters in a telephone interview."
. . . . . 
"The Fed is confused and their confusion spills into investor psychology," said Gundlach, who oversees more than $100 billion at Los Angeles-based DoubleLine.
"The Fed changes its tone so frequently, it seems every other week the message is different. They've turned into the 'Zombie Fed.' They say the meeting this week is 'live,' but investors all know it isn't at all. (note: Fed stated no interest rate rise in June on Wednesday after this CNBC article was published on Tuesday confirming what Mr. Gundlach said here)
Gundlach said it is a "dangerous price appreciation game" to purchase German Bunds at current levels and that gold and gold miners are still an attractive place to put money to work."
My added comments: This is a situation that we need to keep an eye on. It's one thing for one or two fund managers to make statements like this. However, if one or two begins to turn into several we need to watch for that. Already Bill Gross is making similar kinds of statements to what Mr. Gundlach says here. George Soros has been making investments that imply he has a very bearish outlook and has also moved back into gold. There have been some other well known names making similar statements and investment decisions.
If too many of these kinds of people decide things are heading in the wrong direction all at once, a trickle of capital exiting into safe haven hedges might turn into something much bigger than just a trickle.
It's always impossible to predict anything like this (market herd mentality). All we can do is continue to monitor events and see if capital keeps moving into things like gold (look at this chart) or other assets viewed as safe havens. But clearly these statements and investment moves by these kinds of people should not be ignored and need to be reported to readers here.

Added note: Mohamed El-Erian tells CNBC - US Fed sending "conflicting signals over time" and that Fed policymakers "don't have a vision" for where the US economy is going.

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