Reuters: DoubleLine’s Gundlach Says ‘Central Banks Are Losing Control’

The following is an excellent article written by Jennifer Ablan on the Reuters website on June 14, 2016 titled “DoubleLine’s Gundlach Says ‘Central Banks Are Losing Control'” and I quote:

“DoubleLine’s Gundlach says ‘central banks are losing control'”

Jeffrey Gundlach, the chief executive of DoubleLine Capital, said on Tuesday investors are dropping risky assets and turning to safer securities including Treasuries and gold because they are losing faith in central banks.

The man known on Wall Street as the ‘Bond King’ is one of the first heavyweight investors to publicly raise red flags about the credibility of major central banks, including the U.S. Federal Reserve, as countries struggle to manage economic growth.

Last year, Gundlach correctly predicted that oil prices would plunge, junk bonds would live up to their name and China’s slowing economy would pressure emerging markets. In 2014, he forecast U.S. Treasury yields would fall, not rise as many others had expected.

“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, referring to the Republic Party’s unpredictable presumptive nominee for U.S. President.

Safe-haven German Bund yields fell below zero on Tuesday for the first time and global equity markets slid for a fourth day in a row on intensifying worries about a potential British exit from the European Union next week.

Gundlach’s remarks come the day before U.S. Federal Reserve officials are widely expected to leave short-term interest rates unchanged following a dismal May jobs report.

“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.”

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.

On a webcast for investors later on Tuesday he said negative interest rates implemented by some major central banks, notably in Japan, were backfiring. “Negative interest rates don’t do what they’re theoretically supposed to do,” he said, noting the appreciation in the Japanese yen.

He added that negative interest rates “aren’t leading to higher economic growth.” He said world gross domestic product could be averaging around just 1 percent against the backdrop of aggressive global monetary policies.

Gundlach also noted the dramatic “drawdowns” from the highs in several stock markets. Germany is down 22 percent, Japan is down 23 percent, China is down 45 percent, the United Kingdom market is down 15 percent and France is down 20 percent.

“Negative rates do not prop up stock markets,” Gundlach said on the webcast.

Gundlach’s prescient investment calls have accelerated DoubleLine’s rise and earned him a reputation as a savvy investor. DoubleLine’s flagship DoubleLine Total Return Bond Fund (DBLTX.O), which invests mainly in mortgage-backed securities, has assets of $60.3 billion, making it one of the world’s largest bond mutual funds.

“This summer is going to be a rocky ride,” Gundlach said, summarizing his outlook.

(Reporting By Jennifer Ablan; Editing by Nick Zieminski, Andrew Hay and Bill Rigby)

[As you know, the big investment banks don’t have any REAL REGULATIONS to keep them under control, particularly in the unregulated derivative market which makes it impossible to keep any sort of books as to what the condition the big banks are in. Even companies like Moody’s, Standard & Poors. It’s time Hillary Clinton and Donald Trump talks about these problems. I hope Hillary Clinton instates a NEW, STRONGER Glass-Steagall Act. And see if Donald Trump can beat that. Up to now, all the Republicans I hear are calling for more DEREGULATION which would really bankrupt this country, as well as the world.
LaVern Isely, Progressive, Overtaxed, Independent Middle Class Taxpayer and Public Citizen Member and USAF Veteran
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About tim074

I'm a retired dairy farmer that was a member of the National Farmer's Organization (NFO). Before going farming, I spent 4 years in the United States Air Force where I saved up enough money to get my down payment to go farming. I also enjoy writing and reading biographies and I write about myself as well as articles and excerpts I find interesting. I'm specifically interested in finances, particularly in the banking industry because if it wasn't for help from my local Community Bank, I never could have started farming which I was successful at. So, I'm real interested in the Small Business Administration and I know they are the ones creating jobs. I have been a member of Common Cause and am now a member of Public Citizen as well as AARP. I have, in the past, written over 150 articles on the Obama Blog (my.barackobama.com) and I'd like to tie these two sites together. I'm also on Twitter, MySpace and Facebook and find these outlets terrifically interesting particularly what many of these people did concerning the uprising in the Arab world. I believe this is a smaller world than we think it is and my goal is to try to bring people together to live in peace because management needs labor like labor needs management. Up to now, that hasn't been so easy to find.
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