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I always like bold calls. So I couldn’t help but take notice when Jeffrey Gundlach, the outspoken chief executive of DoubleLine Capital said this a few days ago:
"The artist Christopher Wool has a word painting: ‘Sell the house, sell the car, sell the kids.’ That’s exactly how I feel — sell everything. Nothing here looks good" … "The stock markets should be down massively but investors seem to have been hypnotized that nothing can go wrong."
Powerful stuff for sure. That’s especially true when you consider Gundlach oversees a pool of more than $100 billion in capital at his firm. Just about the only thing he does like is gold and gold miners. He added that he thinks the Fed is "out to lunch" in its analysis of the economy, and that the Bank of Japan is out of bullets because, "You can’t save your economy by destroying your financial system."
Of course, Gundlach is far from alone. Janus Capital’s Bill Gross just released his latest Investment Outlook, and he rained on Wall Street’s parade, too. His take on today’s markets:
"I don’t like bonds; I don’t like most stocks; I don’t like private equity. Real assets such as land, gold, and tangible plant and equipment at a discount are favored asset categories. But those are hard for an individual to buy because wealth has been ‘financialized’."
You probably also remember my columns from this spring, the ones that noted how many of the nation’s billionaires were the most bearish on stocks they’ve been in years. The list includes everyone from Carl Icahn and Stanley Druckenmiller to Sam Zell and George Soros.
What accounts for the bearishness? I mean, didn’t the major averages just hit all-time highs? I think it all goes back to valuations and to where we are in the economic and credit cycles.
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Valuations on all kinds of assets are ridiculous. |
Valuations on all kinds of assets are completely ridiculous. They’ve been inflated to some of the highest levels ever by too much funny money from the world’s central banks. Almost nothing is cheap anymore, especially taking into account how far into the economic cycle we are.
Billionaires know this. Gross and Gundlach know this. And judging from the incipient tightening of lending standards I told you about earlier this week, an increasing number of bank executives are now seeing the writing on the wall.
On the flip side, you have a handful of government bureaucrats and Ivory Tower economists trying to hold back the tide. Their latest Hail Mary idea is fiscal spending, particularly in Japan. But it turns out that, just as I suspected, the "massive" stimulus over there is mostly smoke and mirrors.
So what should you do? My latest Safe Money Report issue just went to press. You can get my specific investment recommendations in it just by clicking here. But suffice it to say I agree with the billionaires and the mega-fund managers who have decades of experience.
We’re at the tail end of the biggest "Everything Bubble" in history. That means you have to stay cautious with your stocks, own gold, avoid taking too much credit or duration risk in bonds, and hold more cash now than you have at any time since the bull market began in 2009.
Until next time,
Mike Larson
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
{ 36 comments }
Love your take on things Mike you always seem to be way ahead of the economist crowd. I use the word economist lightly.
The BS part of your degree stands for Bachelor of Science not the other variety given out to most economists.
…”Valuations on all kinds of assets are completely ridiculous. They’ve been inflated to some of the highest levels ever…”
I know this is true in my corner of the world….I trade in the high-end vintage guitar market and the prices commanded for vintage guitars of all makes and models has gone through the roof in recent months (years really)….HOWEVER, in the last one or two months, I’ve seen a measurable softening of asking prices….possibly the buying market has had enough and there are “no greater fools” out there to be had.
I am wondering how other collectable markets are doing right now. Readers, please chime in.
I have a friend who antiques frequently in PA, NY and New England. He and his wife are seeing unbelievable deals, due mostly to what they perceive is tightened spending. But, they also talk to the owners of these stores who claim that the millennial’s and my generation (Gen X) are not buying these collectibles, and as such, the market is stagnating and in some cases declining. Moreover, I know two people who own small businesses in the retail services sector, selling software and the like, and both of them are seeing declines in orders and CAPEX, which they say is usually a harbinger for a slowdown in consumer spending. They say that their slowdown, which is now in its 3rd month, is usually an indicator of a larger slowdown 3-6 months away…
i just paid $50 for a m- copy of a 45 by richie valens. The next day i got an e mail selling another copy of the same record in lesser condition for $150.
sellers are very greedyin this field ,like in all things! sanders crowd are making out like bandits.
ragnar
True at vinyl shops around the country they have exclusive vinyl’s at record days and people who get there early snatch them all up and put them on Ebay for multiples of the oriiginal price !
Here in the UK very rare postage stamps are an attractive alternative. However, you must deal with a reputable firm such as Stanley Gibbons. With the right stamps you will generally make 4 – 6 % a year. I’ve been investing for more than ten years have not made a loss yet.
Good info. Many people think collectibles are a safe refuge when the ___ hits the fan. Not true. What we are facing in the very near future is going to remove much of the value of virtually all assets.
Why does Harry Dent think Gold is a dead duck?
Gold is probably headed down in the next couple years. But it’s probably going to continue rallying for another while now. Commodities generally are headed down as we’re now in the downside of the commodities supercycle. The Dent call is almost certainly too early. Same with their yen call. Too much yen repatriation short term for now. Longer term, yen is going to zero, and Dent is right.
Paul, I have asked the same thing many times without a response. Where I think Harry Dent could be wrong is that he doesn’t account for people who don’t have the US $ as their base currency. For example the other major currencies of the Canadians, Aussies, Europeans and Brits, I’m am ex-Brit with dual US citizenship now, have all lost 30% or more against the $ and Gold; and some other currencies have fallen a lot more so for them Gold would have been a great choice,
Yes , why does Harry talk against gold and says to hold greenbacks ? I’ve read one of his articles on it And he thinks gold will fall just like the economy . The only hole in his argument , that I can see, is that he forgot we where on the “gold standard ” during the depression and it upheld the US dollar . I’m no economist so could someone elaborate on this subject ?
Paul, look at Wikipedia who the real Harry Dent is, his back ground and you will rather notice that HE is the dead duck, NOT GOLD. Each unto himself, me and my household knows where safety lies, definatily not with untested Dent who WILL DENT your financial portfolio if you got out of gold completely
Dear Mike – i’m really quite confused now. You’re saying and agreeing with the big investors – e.g. Soros, that we should sell out as the market is over-stretched and then you are punting stocks in your Safe Money Report. What is a small investor like me supposed to do now? I have a very small holding in gold and silver ETFs and then in a gold mutual fund and also a few gold mining shares all of which i am reluctant to sell even if the market does tank, apart from other stocks like commodities and other sectors which i suppose are the ones i should sell if the markets are that nervous. Nevertheless I still enjoy reading your money and markets report every day.
You might look up the Jim Bell Money Report and load his weekly talk. He works off of the Elliott Waves and Fibonacci math projections which helps show how bad things are at the point at. His report comes out each week.
The thing that keeps things going is the Fed., pumping inflation so called money in to our system. At some point something will happen and trigger the bust. Most often in the past history, September or October is when the crashes have come in history. People are back from vacation, starting up the end run of the year, school, and it hits.
I would also look up The Trends Journal, Reading: The Great Wall Street Swindle. The New Confessions of an Economic Hit Man, The secret History of the American Empire, Ron Paul Pillars of Prosperity. Couple more, Everything you were taught about the Civil War is Wrong and two or three of his other books, The South Was Right, there is one other after that too0. From Pelican Press. Gets into the Political system of the power elite back then and you can compare history with what is going on in the u.S. today. The régime could out law paper money and try and place us on plastic, plus like in the last depression (government created), go back on the gold / Silver standard.
Ask why we should get off if in the first place. Right now should you be stocking food, water, enough cash for 6 months. weapon’s in your mountain cabin?
Can someone show the difference in the outcome of the November election and the effect on the markets in 2017?
What if you do go to All Cash and the Government decides to exercise a Bail-IN like was done in Greece… Your Cash could become greatly reduced , especially if it is in a
safety Deposit box, along with your Gold.
My suspicion is that the experts are hedging their bets by selling their Gold to those who are worried about a Democrat Win in the US. This is short Term Thinking.
The Big Players have already made their move and are waiting to see if some certainty is
expressed in the US Election direction. They have buy and sell orders just waiting to be
activated by a market reaction.
If the Repubs win, and (America becomes Great Again)… or at least stops the mounting Debt, then tell me what will happen to the price of Gold ….
.regards,
Ron
No market goes up indefinitely without corrections. Usually, there will be something like a 50% correction, even in a rising market. We have gone about 7 years since the last correction of note. This rising market is getting a bit long in the tooth, and is overdue for at least a sharp pause for consolidation. With central banks violating all rules of logic in the management of money, this coming correction could turn into a collapse like 1929 – at least.
So says the man on a day when stocks continue their upside breakout and precious metals make a sharp pullback. Funny how the market will do that to you. Long-term, I am in complete agreement with all of the above. Right now it looks like we may be initiating a blowout rally to the bubble to end all bubbles; this is where good hard earned money becomes irresponsible speculative money that will be destroyed in the carnage that ensues on the backside. The late Richard Russell, grandaddy of all financial newsletter writers, has been advocating the purchase of physical gold as a safe store of wealth for a very long time – he foresaw the day of reckoning that is just around the corner.
Dent believes we are headed to deflation and the value of everything will fall, including gold.
if the news was good and gundlach, soros, gross, icahn, druckenmiller, zell, etc., were all bullish, would you buy? just because they’re bearish, should we not buy? for six years now, bad news has been good news and good news has been bad news. is it possible all this bearishness is still the same signal to own stocks? you’re always asking for our thoughts, mike. whatta ya think?
btw, druckenmiller completely missed this entire bull market. he closed his fund in 2010 because he became a bear then and still is. he’s definitely been proven wrong.
thanks you for the articles but i want one day to give analysis for east Africa economy especially Tanzania i will be so greatful to understand from your article
Hi Mike
I’ve been in cash for some time now and not the least bit concerned about my lack of exposures. You see cash will not crash before this bubble unwinds and the clamor to be on board with stocks will have those with exposure licking their wounds.
Would prefer your monthly report to come out right after the jobs report versus right before …….to get your latest thoughts since prognosticators vary significantly what the data will be on a month-to-month basis. Thanks for your great insight.
Commodities were never cheap, there’s no such thing as bargain basements, it’s swings and roundabouts with the markets deciding the price levels of most goods and services. The markets decide the price levels in order to allocate scarce resources. Too much government intervention leads to a centrally planned economy with no booms or bust, the economy just flatlines like the film with Julia Roberts.
As I stated in a discourse a few months ago “The Stock Market IS NOT Logical”. It must be realized that a market is driven primarily by its participants. While most Americans, Economists, Fund Managers etc, are holding cash, this is the only game in town (in the world) so foreign money and shrewd investors and those desperate for yield are investing and making money. The short positions are getting called and stock buybacks slowly continue. By the time most catch on the sell offs will begin and some of these bubbles may burst and there will be a slight correction. But unscared money will come back to buy on drops and the market will be up again. There will be volatility but in a tight range.
This correlates with my thoughts to the letter….
And please comment on silver, too . Gold is out of reach to most of the working class so is silver truly an alternative ?
Ernie
Silver may rocket as demand will outstrip supply due to lack of investment because of silver prices being manipulated so low .
Ernie
I mean lack of investment by the Miners in New mines
If Hillary is elected how soon do you think it will be before she tries to tax savings accounts? I’ve started stashing cash in a lock box and other safe places.
I remember back in the 2006-2008 time frame, people sounding the alarm about the housing and financial bubbles. They were eventually proven correct with all the consequences to the world economy. But months or years went by before the reckoning occurred with Wall Street’s meltdown and the near collapse of the world economies.
We seem to be going through another series of bubbles triggered and supported from bursting by the central banks. Will a similar “reckoning” be triggered next week, next month, next year, or after 2017. The correct answer is clearly, “No one knows for certain.”
So what should the investor do? I say take part in the market upward moves while maintaining tight limits on any equity purchases to limit capital loss or assure gains are preserve if a sharp drop in the markets occur. By staying with an active but wary investing strategy seems better than going to a neutral investment strategy, a severe preservation of capital strategy, or “sell everything” cash only strategy. The longer the markets continue to make new records, the more we increase our possible capital gains. If the markets start to turn over and/or go sideways, we can always increase short protection and/or take profits to increase our cash position.
The Fed is doing everything in its power to keep the markets up so that Hilary will win. There is a near perfect corelation in the regard… The next President will see the largest destruction of wealth the world has ever seen. The elites will get richer, the middle class will rapidly disappear and most of us will belong to the welfare class. Another American revolution will take place to reset the global economy. And then the cycle will start again…
When we have our crash, likely it will be like Greece and Italy, lock boxes will not be safe, sense they were raided first!
Interesting–Where is the best place to keep my cash??Maybe in the mattress?? I love your response..Thanks WfW
Thanks–My thoughts as well–