May 6 Post
Hi Again,
Who is Jeffrey Gundlach?
Gundlach was formerly the head of the $9.3 billion TCW Total Return Bond Fund, where he
finished in the top 2% of all funds invested in intermediate-term bonds for the 10 years that
ended prior to his departure. He was fired by TCW in 2009. In the aftermath, Gundlach and
TCW sued each other and went to jury trial in California; TCW alleged that Gundlach stole
trade secrets (TCW prevailed, but was awarded $0 for the claim), Gundlach sued over
compensation claims (Gundlach prevailed, and was awarded $66.7 Million).
I have a lot of respect for Gundlach. After each Federal Reserve decision on interest rates,
Gundlach gets invited to give a talk on CNBC. On 5/1/24, here is a summary of what Gundlach
had to say:
Powell hopes that inflation will continue to go down without another rate hike.
We will get a rate cut (1) in 2024.
Corporate bonds have a rate over 7% at this time. (Tough competition for the equity
market).
This is a good environment for the moderate risk takers.
Long end treasuries are not that attractive. The 10 year is better than the 30 year treasury.
Gundlach agree with Powell that there is no indication or threat of stagflation. The
economy is not shrinking. Unemployment very low around 3%. During the stagflation
years under Jimmy Carter, unemployment rate was at about 10%.
Gundlach will follow commodity prices on a monthly basis. This is how we can see what
will happen to the rate of inflation in the future.
We will not have a recession in 2024.
Corporate layoffs have been increasing but new unemployment claims have not being
rising. This implies that the labor market is strong and those who lost their jobs have been
able to find new jobs.
Unemployment rate will go up.
Federal Reserve may end up raising rates in the future.
Gundlach is neutral on equities and he favors equities in Japan, Mexico and India.
Gundlach is bullish on gold.
If we go in to a recession, the dollar will weaken.
Oil is stable around $80. If oil goes over $90, the Federal Reserve will have a problem.
No chance of a 2% inflation rate.
The Fed confirmed that starting in June, it would slow the rate at which it's reducing the
size of its balance sheet. The Fed expects to lower the Treasury securities monthly
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redemption cap from $60 billion to $25 billion, a slower-than-expected change in pace. –
This is like a rate cut.
We have to keep an eye on the commodity markets. Dow Jones commodity market index made
a short term bottom on 2/23/24; and thereafter it rose steadily to a peak on 4/29/24. If oil goes
over $100, we might have a recession but as soon as we expect a global recession, oil prices
will drop like a lead balloon.
We had a lot of volatility in the stock market over the past 2 months. VIX is the COBOE
volatility index. On 2/4/24, the VIX was at 12.93. On 4/14/24, the VIX was at 18.71! This
rarely happens! I should have bought some call options on the VIX around 2/4/24.
Larry Williams has taught thousands to trade the markets, and has been the only futures trader
in the world to repeatedly trade $1 million of his own money. On 4/24/24, Larry stated that the
equity market will bottom around 5/20/24.
Carolyn Boroden (“Fibonacci Queen”) , who is renowned for her expertise in Fibonacci price
and timing analysis, joined our ElliottWaveTrader analyst team in December 2019. On 4/4/24,
Carolyn stated that Apple will bottom in the mid-160s. She has been quite accurate on
predicting future prices of Apple.
Thomas Lee is a Managing Partner and the Head of Research at Fundstrat Global Advisors.
Tom Lee is one of the most bullish analysts and he has been one of the best during the past 3
years. Tom Lee strongly believe that the Russell1000 (small stocks) will rise by 50% within the
next 12 months.
As I have stated many times in the past, all the best “pundits” of Wall Street speak with one
voice at all times. I have made money by betting against these “pundits’. That is how I found
good bargains on Disney, Meta, AMD etc. For years, they were negative on MMM but when
they got a new a CEO, I purchased a call option on MMM on 3/13/24. On 3/21/24, Josh Brown
(one of the best on Wall Street) stated that this is a good time to buy MMM. By then (3/13/24 to
3/21/24), my call option had gone up by 40% in 8 days!
Around January 2023, as Tesla was dropping like a lead balloon, all the Wall Street “pundits”
stated that Tesla is good as dead (due to competition). I disagreed; one and only reason for the
drop was that Musk sold a big portion of his Tesla stocks to buy Twitter. I was able to buy
Tesla (TSLA) at $106 on 1/3/23. Then on 7/9/23, Tesla peaked at $281! Once again, a few
months ago, all Wall Street “pundits” started ganging up against Tesla and they removed it from
the “magnificent 7”. As it was going down I kept buying it. Tesla is not a car company; it is a
technology company. On 3/14/24, CNBC stated that they only get 40% of their revenue from
cars. On 3/14/24, Wells Fargo analysts predicted that Tesla would fall to $125. That would have
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been great for me. This time I bought my last installment when Tesla was at $141.50 on
4/22/24. One day I got up too late to buy it when it fell to $139. On 4/29/24, Tesla rose to $194!
Why? Previous weekend Musk visited China and he was given an amazing reception by the
Premier of China and more freedom to test their “driverless” technology in China. Like Apple,
Tesla is in the process of developing a revenue stream through monthly subscriptions. Ford,
GM and others tried it but failed. Tesla could succeed.
In the Fall of 2022, all Wall Street “pundits” were extremely negative on Meta/Facebook and
Zuckerberg. They said that Zuckerberg is lost in his metaverse! From the day Facebook came
public, from time to time, this has been happening on Wall Street. On 10/31/22, Meta bottomed
at $90 and I managed to buy it at $98 on 10/27/22. Now all those “pundits” say that it should
not have gone that low in 2022. On 4/1/24, it peaked at $527! A few days ago, Mark
Zuckerberg told Wall Street that he is going to spend billions of dollars on AI research over the
next few years. Then these “pundits” stated that they will trust him and be patient with Meta. I
have my doubts. Quarter after quarter, year after year, when they report their financials, all
these “pundits” will gang up against Meta; and once again and run away from the stock. That is
good for us. That will provide another great buying opportunity! Just imagine it going down to
$100 and rising to $500 in another 2 years!