15%-20% Losses Ahead for Munis

Jeff Gundlach, Chief Investment Officer of DoubeLine Capital, is looking for losses of another 15%-20% in muni-bonds. Barron’s ran a cover story on Gundlach a few weeks back. The title of the piece was “The New Bond King.” Gundlach made a name for himself investing in mortgage-backed securities at TCW. After a falling out with TCW management, he started DoubleLine Capital. In the Barron’s piece, Gundlach comes off as arrogant and egotistical. Check out this introduction from Barron’s.

In the course of several interviews at the Los Angeles headquarters of his new investment firm, DoubleLine Capital, Gundlach drops any number of boasts. He can do the Sunday New York Times crossword puzzle in a half-hour. On a good day, make it 20 minutes. Gundlach, 51 years old, was a top student at Dartmouth, where he majored in mathematics and philosophy before entering a high-powered Ph.D. program in mathematics at Yale. He left, claiming boredom, to become a rock drummer in L.A., before drifting into money management.

“Look, I have a gift, or some would say a curse, of being able to have stunning insight into the reality of markets and the economy,” Gundlach says, dressed resplendently at this particular moment in a well-tailored Italian suit with matching green tie and pocket square. “I don’t often know where my ideas come from. Maybe it’s the fact that I’m obsessively regimented in my analysis, borderline autistic. But whether it’s bond selection or asset allocation, we can do it better than just about anybody around.”

One might wonder if J.G. has a connection to Goldman Sachs. Notwithstanding the hubris, Gundlach makes some good points about the muni market in this video. We continue to avoid munis for some of the exact reasons J.G. mentions and advise the same for our subscribers.

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Jeremy Jones, CFA

Jeremy Jones, CFA is the Director of Research at Young Research & Publishing Inc., and the Chief Investment Officer at Richard C. Young & Co., Ltd. Jeremy is the editor of Young Research’s Global Investment Strategy and he is a contributing editor of youngresearch.com.

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