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“I Feel Young Again” – Jeff Gundlach Annual Just Markets Webcast Live

"I Feel Young Again" – Jeff Gundlach Annual Just Markets Webcast Live

It’s that time of the year when Jeffrey Gundlach, the billionaire money manager and chief investment officer at DoubleLine Capital, gives his outlook for 2021 in his annual

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"I Feel Young Again" - Jeff Gundlach Annual Just Markets Webcast Live

It's that time of the year when Jeffrey Gundlach, the billionaire money manager and chief investment officer at DoubleLine Capital, gives his outlook for 2021 in his annual “Just Markets” webcast today at 4:15 p.m., this time titled "I feel young again. Readers can register for the free webcast which will only discuss markets here (or by clicking on the image below).

As Bloomberg reminds us, we last heard from Gundlach at the start of December when he focused heavily on inflation, saying that it was likely we could see a 7% print for the CPI reading (it will tomorrow). He also told us that he thought markets could be facing rougher, choppier waters after the Federal Reserve signaled that it was willing to quicken its tapering program.

Since then, we’ve learned -- through the release of meeting minutes -- that central bank officials might favor earlier and faster rate hikes as well as a balance-sheet runoff. Indeed, that’s caused a lot of choppiness in the stock market, with richly valued equities taking a big beating so far this year.

Gundlach’s talking points may overlap with the prominent themes we’ve been seeing discussed in 2022 outlooks. Listeners will want to know his take on the Federal Reserve’s path toward tightening and how it’ll play out in markets, as well as his outlook on inflation and what lingering impact the variants of the coronavirus may have.

We will highlight the key presentation notes in this post, which starts off with a bang, and a comparison between Biden and Carter...

... as part of his contrast of today’s negative real rates with the 1970s. Back then interest rates were high, and inflation even higher. Now, rates are low and inflation high. Gundlach says Powell today further acknowledged the inflationary problem. He’s referring to the Fed chairman’s appearance in front of Congress for his re-confirmation hearing.

Gundlach then goes straight to the big guns, showing the surge in the market via the famous JPM chart which goes back to 1996, and where Gundlach says “we had this huge run” that was largely uninterrupted from 1998-2018"....

... comparing it to pre- and post-covid goods spending, saying that we’ve had similar goods spending in the past two years as we did in the previous decade...

... and ultimately the Fed's balance sheet change.

Gundlach says Powell is dusting off the 2018 “playbook” in terms of shrinking the balance sheet, noting that autopilot-QT led to a selloff in the stock market in 2018 which ultimately caused the Fed to pivot. He says that it looks like Powell is talking about repeating the quantitative tightening formula, which of course will lead to the same policy error.

Remarkably, Gundlach says something we have been warning about for the past month, namely that the Fed is hiking into a slowdown, only he goes one step further saying that “I do think recessionary pressure is building.”

The Doubleline strategist then shows various cross-asset returns in 2021, pointing out that bank loans were his top bet from last year’s webcast and that those securities outperformed...

... as well as the return of the S&P vs commodities, with Gundlach suggesting that commodities are set for a massive melt up.

Oil was the big winner last year and oil and commodities have rebounded again. Commodities are coming “roaring back,” he says and indeed, Exxon just had its best day since Feb 2021.

Going back to his recessionary point, Gundlach says consumer sentiment has “given up the ghost,” and looks like a recessionary level when scouring the chart. “This bears watching,” he says, noting to the “freefalling” sentiment which Gundlach says looks “somewhat recessionary”

He attributes this to the collapsing affordability (i.e. surging prices) of autos, which has led to the lowest ever reading in the series whether this is a good time to buy a car (he notes that people can make money by buying cars and turning around and flipping them, which is “interesting” and “unbelievable")...

... or house.

One reason for this: mortgage rates are now well below wage growth rates. Gundlach says there are some signs that “mortgage financing looks pretty cheap” given high inflation and low rates. So far there hasn’t been much of an increase in mortgage rates.

“Home prices are still going up a lot,” Gundlach says, pointing out the obvious.

Gundlach then spends some time discussing soaring inflation, including still clogged-up west coast ports, and focuses on export and import prices. "They’re really high", he says, adding that a lot of people don’t think export prices matter but the things we export, we also consume domestically. He also says that with export prices at all time highs, nearly 20%, all those conspiracy theorists who claim that inflation is artificially suppressed are likely correct.

Gundlach also notes that the ISM manufacturing PMI series shows some positive signs on inflation, noting that prices paid are “rolling over." But not yet, noting that CPI will be around 7% in tomorrow's report.

The DoubleLine founder also looks at surging wage growth, pointing to the record quits rate and the high appetites among Americans to switch jobs before citing JPMorgan CEO Jamie Dimon who sees the biggest wage inflation in his lifetime. Gundlach predicts that gains in entry-level wages will push up costs.

Gundlach then shows the Citi Inflation Surprise index, noting that every region tracked by Citi has surprised to the upside on inflation. That according to Gundlach, is one of the impetuses for Powell to change his tone from “transitory” to where he is now.

Gundlach shifts topics, and is now discussing the US dollar, where he remains bearish over the long-term and neutral currently. He claims that the dollar is broadly correlated with the “twin deficits” - the current account and federal budget gaps.

He also shows a chart comparing the (inverted) dollar to the yield curve (via the 2s10s), which he says suggests more weakness is coming, and more USD weakness..

... and also shows the historical correlation of the USD vs commodities.

Addressing the yield curve chart, Gundlach says the yield curve is now starting to flash “weaker economy ahead,” adding that when it gets to 50 basis points, that will be a signal to watch. The 2/10s spread is currently 85 basis points, so not too far away from the 50 mark that Gundlach mentions. It’s up from 73 basis points late last month.

Moving away from the yield curve and the dollar, Gundlach says that he is "quite bullish" on gold over the long-term for the same reason he is bearish on the dollar. However, currently he is neutral.

Gundlach next shows a chart of the “shadow” Fed policy rate target which is far lower than it hit back in the Carter era, he says, at -8.7% (thanks to soaring inflation). This takes the near-zero nominal federal funds rate target and adds in an estimate of the impact of quantitative easing. “The most aggressive stimulus in the history of this data series,” he says, while noting this is “academic.”

In an interesting detour, Gundlach notes that the economy has “broken” at a lower and lower level of two-year yields over time, echoing the famous chart from BofA which shows that every tightening cycle ends in a crisis at a lower and lower rate.

Here Gundlach says the Fed will follow the two-year yield until the short end reads the “riot act” to policy makers. Two-year yields tend to lead both tightening and easing moves by the Fed, he says and make the key observation that the Fed may be able to get to 1.5% for the federal funds rate before it needs to stop, about a percent below where it ended its rate hike cycle in 2018.

His conclusion: “We’re going to be more on recession watch than we have been,” which leads straight to our observations that the Fed will never be able to do 4 or even 3 rate hikes this year as the economy will contract long before that.

There is much more in the full DoubleLine presentation below.

Tyler Durden Tue, 01/11/2022 - 16:20

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International

Angry Shouting Aside, Here’s What Biden Is Running On

Angry Shouting Aside, Here’s What Biden Is Running On

Last night, Joe Biden gave an extremely dark, threatening, angry State of the Union…

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March 8, 2024

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Angry Shouting Aside, Here's What Biden Is Running On

Last night, Joe Biden gave an extremely dark, threatening, angry State of the Union address - in which he insisted that the American economy is doing better than ever, blamed inflation on 'corporate greed,' and warned that Donald Trump poses an existential threat to the republic.

But in between the angry rhetoric, he also laid out his 2024 election platform - for which additional details will be released on March 11, when the White House sends its proposed budget to Congress.

To that end, Goldman Sachs' Alec Phillips and Tim Krupa have summarized the key points:

Taxes

While railing against billionaires (nothing new there), Biden repeated the claim that anyone making under $400,000 per year won't see an increase in their taxes.  He also proposed a 21% corporate minimum tax, up from 15% on book income outlined in the Inflation Reduction Act (IRA), as well as raising the corporate tax rate from 21% to 28% (which would promptly be passed along to consumers in the form of more inflation). Goldman notes that "Congress is unlikely to consider any of these proposals this year, they would only come into play in a second Biden term, if Democrats also won House and Senate majorities."

Biden also called on Congress to restore the pandemic-era child tax credit.

Immigration

Instead of simply passing a slew of border security Executive Orders like the Trump ones he shredded on day one, Biden repeated the lie that Congress 'needs to act' before he can (translation: send money to Ukraine or the US border will continue to be a sieve).

As immigration comes into even greater focus heading into the election, we continue to expect the Administration to tighten policy (e.g., immigration has surged 20pp the last 7 months to first place with 28% in Gallup’s “most important problem” survey). As such, we estimate the foreign-born contribution to monthly labor force growth will moderate from 110k/month in 2023 to around 70-90k/month in 2024. -GS

Ukraine

Biden, with House Speaker Mike Johnson doing his best impression of a bobble-head, urged Congress to pass additional assistance for Ukraine based entirely on the premise that Russia 'won't stop' there (and would what, trigger article 5 and WW3 no matter what?), despite the fact that Putin explicitly told Tucker Carlson he has no further ambitions, and in fact seeks a settlement.

As Goldman estimates, "While there is still a clear chance that such a deal could come together, for now there is no clear path forward for Ukraine aid in Congress."

China

Biden, forgetting about all the aggressive tariffs, suggested that Trump had been soft on China, and that he will stand up "against China's unfair economic practices" and "for peace and stability across the Taiwan Strait."

Healthcare

Lastly, Biden proposed to expand drug price negotiations to 50 additional drugs each year (an increase from 20 outlined in the IRA), which Goldman said would likely require bipartisan support "even if Democrats controlled Congress and the White House," as such policies would likely be ineligible for the budget "reconciliation" process which has been used in previous years to pass the IRA and other major fiscal party when Congressional margins are just too thin.

So there you have it. With no actual accomplishments to speak of, Biden can only attack Trump, lie, and make empty promises.

Tyler Durden Fri, 03/08/2024 - 18:00

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Government

Jack Smith Says Trump Retention Of Documents “Starkly Different” From Biden

Jack Smith Says Trump Retention Of Documents "Starkly Different" From Biden

Authored by Catherine Yang via The Epoch Times (emphasis ours),

Special…

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March 8, 2024

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Jack Smith Says Trump Retention Of Documents "Starkly Different" From Biden

Authored by Catherine Yang via The Epoch Times (emphasis ours),

Special counsel Jack Smith has argued the case he is prosecuting against former President Donald Trump for allegedly mishandling classified information is “starkly different” from the case the Department of Justice declined to bring against President Joe Biden over retention of classified documents.

(Left) Special counsel Jack Smith in Washington on Aug. 1, 2023. (Drew Angerer/Getty Images); (Right) Former President Donald Trump. (David Dee Delgado/Getty Images)

Prosecutors, in responding to a motion President Trump filed to dismiss the case based on selective and vindictive prosecution, said on Thursday this is not the case of “two men ‘commit[ting] the same basic crime in substantially the same manner.”

They argue the similarities are only “superficial,” and that there are two main differences: that President Trump allegedly “engaged in extensive and repeated efforts to obstruct justice and thwart the return of documents” and the “evidence concerning the two men’s intent.”

Special counsel Robert Hur’s report found that there was evidence that President Biden “willfully” retained classified Afghanistan documents, but that evidence “fell short” of concluding guilt of willful retention beyond reasonable doubt.

Prosecutors argue the “strength of the evidence” is a crucial element showing these cases are not “similarly situated.”

“Trump may dispute the Hur Report’s conclusions but he should not be allowed to misrepresent them,” prosecutors wrote, arguing that the defense’s argument to dismiss the case fell short of legal standards.

They point to volume as another distinction: President Biden had 88 classified documents and President Trump had 337. Prosecutors also argued that while President Biden’s Delaware garage “was plainly an unsecured location ... whatever risks are posed by storing documents in a private garage” were “dwarfed” by President Trump storing documents at an “active social club” with 150 staff members and hundreds of visitors.

Defense attorneys had also cited a New York Times report where President Biden was reported to have held the view that President Trump should be prosecuted, expressing concern about his retention of documents at Mar-a-lago.

Prosecutors argued that this case was not “foisted” upon the special counsel, who had not been appointed at the time of these comments.

“Trump appears to contend that it was President Biden who actually made the decision to seek the charges in this case; that Biden did so solely for unconstitutional reasons,” the filing reads. “He presents no evidence whatsoever to show that Biden’s comments about him had any bearing on the Special Counsel’s decision to seek charges, much less that the Special Counsel is a ’stalking horse.'”

8 Other Cases

President Trump has argued he is being subjected to selective and vindictive prosecution, warranting dismissal of the case, but prosecutors argue that the defense has not “identified anyone who has engaged in a remotely similar battery of criminal conduct and not been prosecuted as a result.”

In addition to President Biden, defense attorneys offered eight other examples.

Former Vice President Mike Pence had, after 2023 reports about President Biden retaining classified documents surfaced, retained legal counsel to search his home for classified documents. Some documents were found, and he sent them to the National Archives and Records Administration (NARA).

Prosecutors say this was different from President Trump’s situation, as Vice President Pence returned the documents out of his own initiative and had fewer than 15 classified documents.

Former President Bill Clinton had retained a historian to put together “The Clinton Tapes” project, and it was later reported that NARA did not have those tapes years after his presidency. A court had ruled it could not compel NARA to try to recover the records, and NARA had defined the tapes as personal records.

Prosecutors argue those were tape diaries and the situation was “far different” from President Trump’s.

Former Secretary of State Hillary Clinton had “used private email servers ... to conduct official State Department business,” the DOJ found, and the FBI opened a criminal investigation.

Prosecutors argued this was a different situation where the secretary’s emails showed no “classified” markings and the deletion of more than 31,000 emails was done by an employee and not the secretary.

Former FBI Director James Comey had retained four memos “believing that they contained no classified information.” These memos were part of seven he authored addressing interactions he had with President Trump.

Prosecutors argued there was no obstructive behavior here.

Former CIA Director David Petraeus kept bound notebooks that contained classified and unclassified notes, which he allowed a biographer to review. The FBI later seized the notebooks and Mr. Petraeus took a guilty plea.

Prosecutors argued there was prosecution in Mr. Petraeus’s case, and so President Trump’s case is not selective.

Former national security adviser Sandy Berger removed five copies of a classified document and kept them at his personal office, later shredding three of the copies. When confronted by NARA, he returned the remaining two copies and took a guilty plea.

Former CIA director John Deutch kept a journal with classified information on an unclassified computer, and also took a guilty plea.

Prosecutors argued both Mr. Berger and Mr. Deutch’s behavior was “vastly less egregious than Trump’s” and they had been prosecuted.

Former White House coronavirus response coordinator Deborah Birx had possession of classified materials according to documents retrieved by NARA.

Prosecutors argued that there was no indication she knew she had classified information or “attempted to obstruct justice.”

Tyler Durden Fri, 03/08/2024 - 17:40

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International

United Airlines adds new flights to faraway destinations

The airline said that it has been working hard to "find hidden gem destinations."

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March 8, 2024

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Since countries started opening up after the pandemic in 2021 and 2022, airlines have been seeing demand soar not just for major global cities and popular routes but also for farther-away destinations.

Numerous reports, including a recent TripAdvisor survey of trending destinations, showed that there has been a rise in U.S. traveler interest in Asian countries such as Japan, South Korea and Vietnam as well as growing tourism traction in off-the-beaten-path European countries such as Slovenia, Estonia and Montenegro.

Related: 'No more flying for you': Travel agency sounds alarm over risk of 'carbon passports'

As a result, airlines have been looking at their networks to include more faraway destinations as well as smaller cities that are growing increasingly popular with tourists and may not be served by their competitors.

The Philippines has been popular among tourists in recent years.

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United brings back more routes, says it is committed to 'finding hidden gems'

This week, United Airlines  (UAL)  announced that it will be launching a new route from Newark Liberty International Airport (EWR) to Morocco's Marrakesh. While it is only the country's fourth-largest city, Marrakesh is a particularly popular place for tourists to seek out the sights and experiences that many associate with the country — colorful souks, gardens with ornate architecture and mosques from the Moorish period.

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"We have consistently been ahead of the curve in finding hidden gem destinations for our customers to explore and remain committed to providing the most unique slate of travel options for their adventures abroad," United's SVP of Global Network Planning Patrick Quayle, said in a press statement.

The new route will launch on Oct. 24 and take place three times a week on a Boeing 767-300ER  (BA)  plane that is equipped with 46 Polaris business class and 22 Premium Plus seats. The plane choice was a way to reach a luxury customer customer looking to start their holiday in Marrakesh in the plane.

Along with the new Morocco route, United is also launching a flight between Houston (IAH) and Colombia's Medellín on Oct. 27 as well as a route between Tokyo and Cebu in the Philippines on July 31 — the latter is known as a "fifth freedom" flight in which the airline flies to the larger hub from the mainland U.S. and then goes on to smaller Asian city popular with tourists after some travelers get off (and others get on) in Tokyo.

United's network expansion includes new 'fifth freedom' flight

In the fall of 2023, United became the first U.S. airline to fly to the Philippines with a new Manila-San Francisco flight. It has expanded its service to Asia from different U.S. cities earlier last year. Cebu has been on its radar amid growing tourist interest in the region known for marine parks, rainforests and Spanish-style architecture.

With the summer coming up, United also announced that it plans to run its current flights to Hong Kong, Seoul, and Portugal's Porto more frequently at different points of the week and reach four weekly flights between Los Angeles and Shanghai by August 29.

"This is your normal, exciting network planning team back in action," Quayle told travel website The Points Guy of the airline's plans for the new routes.

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