Jeffrey Gundlach on bonds, risky assets and gold

Jeffrey Gundlach, bond-fund manager and CEO of DoubleLine Capital LP, held a conference call late Tuesday, October 11, discussing whether the risky assets are cheap enough. Not yet. “It’s a dangerous market at the present level, and if anything we’d be inclined to short risk assets.”

DoubleLIne Multi-Asset Growth Fund DMLIX is positioned to benefit from further declines in the price of copper ,  which Gundlach called a “wonderful indicator” of global economic health. DMLIX is “significantly underweight” commodities in general. Copper’s weakness “shows that the global recession story has some teeth.”

The global-growth slowdown also has driven Gundlach into U.S. dollar-based assets, with no exposure of any kind to non-U.S. stocks. Gundlach' funds are in a low-risk mode . There will be a better entry point into the emerging market equity, energy and commodity complex and equities in general.

Gundlach is bullish on gold, especially shares of gold miners, which under performed  metal itself. “Gold could come down to $1,500 or so on a sell-off of commodities and inflation-risk generally.” And at that level he would be a buyer .

Gundlach has owned Treasury bonds for some time and his investors have benefited from the rally, but nowadays he sees long-term bonds as hedges, not investments. In fact, if and when the 10-year Treasury yield  touches 1.7% again, Gundlach would be inclined to lighten up on Treasurys. It’s not that he believes inflation is imminent and threatens bond values. It’s more that bonds have rallied tremendously and may have had their best days for capital appreciation.  “I don’t think buying Treasurys at 1.7% on the 10-year can be classified as investments.”