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tv   Wall Street Week  FOX Business  May 7, 2016 9:00am-9:31am EDT

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facebook is kennedy fbn. and email at good night from new york. >> announcer: this who has never been solely about investments. we talked about anything that affected people and their money. from fox business headquarter in new york city, the new "wall street week." >> welcome to wall street week, i'm anthony scaramucci. gary: i'm gary kaminsky. anthony: joining us is a giant
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in the world of if i nance. gunned * is the ceo of doubleline capital and when he speaks people listen. early february in los angeles right about the type the market bottomed. everybody was concerned about the outlook to for next year and the outlook for the equity market as a whole. what happened since february 11. >> mash ets rallied with incredible bear i -- bearishne. people were asking janet yellen about should we go to negative interest rates in the united states. it was black as night and when that happens the market is pretty sold out. what we have been seeing is
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incredible volatility in the stock market. huge decline that brought on a pessimistic attitude and a large rally in december. the february interest rates, i thought it would be a bad idea and we got off to the start in the history of the stock market. but now we back up on doveish talk. >> you were buying stocks in february, were you not? >> just when thing look that bleak, usually the market is sold out. i thought the talk of negative interest rate was shocking given that the fed was on record saying they were going to raise interest rates four times over the course of 2016, which i thought was never going to happen. by the many a strange world when you are talking about four increase and you are getting questioned about should we go to negative interest rates.
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the best trade i have done over my 30-plus career are the ones where your hand are almost shaking out of fear when you are writing the ticket. and that was almost the case february 11. but the problem we are facing is most stock markets around the world are way off their highs. the japanese stock market, it's been terrible since they went negative. the european markets are down 10%, 15%. negative interest rates in europe and japan were supposed to be sometime la tough to their markets and economies, and they are supposed to weaken their currencies and the opposite has been happening. gary: back on april 15 carl bass
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gave us this take on the stock market. maria: when it comes to the stock market is there anywhere you want to be putting stocks right now? >> no. if you are talking about china the gdp is going to slow. gary: he thick this move of doveishness by the fed is an opportunity for investors to sell. >> i agree with that. i think when you are within a percent or two of the highs and you have been going sideways and stock markets around the world are off their high, the u.s. is the last man standing. what is really unsettling is the demand people have for low volatility equity fund. there is no such thing. it's an oxymoron.
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class action litigators click and safe. utilities have been great over the last three years and great year to date. but they are not low volatility. they look like they have been. during the oos there was a drawdown of 57%. so i always get concerned when investors are buying something they think is safe that underneath isn't safe. that's when you get problems in markets. subprime there were triple rated ratings. and they dropped 80% in value. i would admonish investors not to get sucked into this flavor of the month market volatility. gary: market allocation, isn't that the best advice? >> you are better off buying
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things that are risky, because at least they are priced like they are risky. mortgage reits, that index and rem has been negative in return since three years ago. utilities are up 40%. i want the one that negative the last three years, not the run up 40%. the yield of rem is 11 and change. the yield of the utility index is 3.03. gary: that's like buying stocks on february 11 whenner was selling them. >> announcer: gunnethem.. >> announcer: coming up gundlach tells us his investment game plan.
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at ally bank, no branches equals great rates. it's a fact. kind of like grandkids equals free tech support. oh, look at you, so great to see you! none of this works. come on in.
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at ally bank, no branches equals great rates. it's a fact. kind of like vacations equal getting carried away. more proactive selling. what do you think michal? i agree. let's get out there. let's meet these people.
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anthony: welcome back. we are talk with bond king jeffrey gundlach. do you think there is a recession coming the next few months? >> there is basically two or three indicators that investors should look at that are all fail safe. one is the leading economic indicators which year over year are going below zero and tends to be incredibly consistent with recession. it's not strong, but it's not close to zero. one thing we started focusing on is the unemployment rate. if you take the unemployment rate and compare it to its 12-month moving average. you never get a rescission without the unemployment rate being above its average.
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there is false signals in that indicator. it sometimes falsely signals recession. but you never get a recession without it crossing over. the good news is it's below its average. but the bad news is it will cross over before august of this year. anthony: so talking august there is a high likelihood? >> i don't know if i would go high likelihood. there is one indicator that never gives a false signal. the dat crossover point being the front of a recession won't controls over for a year or maybe even two, because the unemployment rate fellow much. these indicators may not work all the time, but they give us confidence 2016 will not print
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probably a negative. gary: part of what happened early this year was the concern about recession weighing heavily on equities in january and february. >> you start to wonder with the bond market tanking you won determine. when it's down heavily with it was from the middle of december. rebound has take son of that pressure away. gary: i want to talk about asset class. the bond king, i think you are the greatest investor out there in terms of all asset classes. but you know -- >> the kirng of long island. you are one of the princes of it.
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gafer gary: we have asked for ol asset class. a year ago you came on "wall street week" and gave the initial warning on the high yield market. >> it dropped 20% to 25%. gary: that was on this program first time anybody warned. let's talk about various expected returns. the equity market in the united states what would you say the expected return would be? >> over what horizon. gary: the next three years. >> i think you are talking low single digits. gary: the side yield market? >> maybe 4-5%. gary: if i was in a go anywhere bond fund how would those returns compare to an equity return or high-yield return?
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>> i think slightly higher but it will be dependent on the strategy used. the unconstrained bond thing was a fad when sudden think there were big native returns in bond it turned out unconstrained bond funds has a category have been disappointing. a lot of them have been negative. some of them not only buy junk bonds but they try to get rid of the interest rate risk. buying risk and shorting safety. try selling that to your grand mother. buy something risky and hedge it by shorting safety. but some unconstrained funds don't short the safety. they take various means of credit risk. i think those can do 6% to 7% if they are managed correctly. particularly if interest rates rise.
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i'm stating the interest rate rights from the fed for a lot of years. if the fed wants to raise interest rates. people think when interest rates rise bond don't do well, but if you are owning shorter-term bond, rising interest rates are your friend. these returns are real returns. it's 6%, 7%, and it's a good return. >> we are in a world where there is very little inflation. there is finally some wage growth with minimum wage increases and the like. but broadly speaking there is very little inflation. you look at the cpi. cpi is the grandaddy of inflation. >> you take out energy. what is your view in energy, do you think the energy market is still distressed? one of the things you said a year ago is the energy component
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would lead to a swoon. >> a year ago the energy picture was incredibly depressing because the supply was enormous and the demand was well below supply. and it takes time to work this through. a year later time is passing so the demand and supply imbalance is not as bad because recounted is done and the like. i turned bullish in january. i said oil will bottom i think tomorrow. turned out i was wrong, it bottomed a week later. it was down to $28 a barrel. i don't think we'll see oil in the 20s again. yet oil isn't high enough, anywhere close enough to forestall defaults in the energy high yield markets. we are looking at a default cycle that is already apparent. you are getting filings pretty much every day.
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i have a hard time believing the high yield bond will rights sharply further. gary: we'll be right back with more. >> announcer: full battle mode. trump versus clinton. the stake of america's economy and wall street next. jeffrey gundlach tells us which candidate he thinks is the best
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i would switch to crest hd over what i was using before. shoshow me more like this.e. show me "previously watched." what's recommended for me. x1 makes it easy to find what you love.
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call or go online and switch to x1. only with xfinity. show show me more like this. s. show me "previously watched." what's recommended for me. x1 makes it easy to find what blows you away. call or go online and switch to x1. only with xfinity. anthony: welcome back, we are joined by double line ceo jeffrey gundlach. you mentioned donald trump being president and you said there would be a global growth scare.
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>> i have been predicting a trump presidency for months. i was on the baron's round table in january and they asked who would be the next president and i said donald trump. people gasped when i said that. gary: back in february when you made that prediction there wasn't a person in the room who thought trump would get to the nomination. >> they predict what they want to happen rather than what they want to happen. i have been quite convinced trump will win for a long time. there are possible tough d there positives and negatives to a trump presidency. make america great again is a conservative concept. in fact it's reactionary. he's talking about a rollback of regulation and make it more business friendly.
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do you know what ronald reagan's slogan was? it was let's make america great again. gary: you talked about his comport level. he's very comfortable with debt. he's based a lot of empires based upon debt. but like many thing that are long term urn healthy in the short d long term that are unhealthy, if you do a large forecast * build-out. for the short term it may look positive. i'm challenged on whether it would be net positive or negative. long term another $10 trillion debt is a disaster. but while it's happening it may have the illusion of success.
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but global trade is a disaster. what does that mean for china and mexico. carl bass says he's worried about china. they have abandoned their handoff to the consumer and gone back to a infrastructure based consumer. i'm a political. i don't really support candidate or have idea. people ask me what should policy makers or people do? i say that's not my job. i'm not a policymaker. or banker. when i say donald trump is going to win. it's just that i think it's going to happen. gary: on the debt scenario if he's elected. you said you try to figure out what are we going to do as a result. you have been in front so many thing.
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how do you position portfolios? >> the fir thing that happens when i talk about the global growth scare. people don't understand the debt buildup part yet. i think they understand the protectionism aspect. based upon the global growth scare there will be a rollover of assets. i do think a debt buildup, as unhealthy as it is, it will, i believe, show some result in term of unemployment and the like. i think you have to play it first as a fade, then as a buy opportunity. >> what about tax and regulatory reform assuming he can keep the house and senate, you get some of that stuff done, isn't that positive for g -- p? >> i think it is. i'm not sure what's going to
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happen to the senate and the congress. people think that trump is different from other politicians. he's not. he's just anotherrer. running for office. this season is so ugly. i showed a slide where bar barry goldwater was running a slogan in your heart you know he's right. lyndon johnson said in your gut you know he's nuts. anthony: my guess is when he wins the presidency he will assemble the right people. he's clearly a talented guy. when ronald reagan was running in 1980. everybody thought he was a joke, a stupid person, a b actor. i don't think anyone thinks trump is done. he's a smart guy and he managed
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a lot -- gary: much as you saw him getting the nomination when most people did not, you see him winning this election in november. >> sure. the rap was that trump has a ceiling of 0% with republicans. then 30, then 35. then he's winning in 50s and 60s. gary: there are a lot of people in gary's class that want to vote for him but are afraid to admit it. gary: your background in statistics and mathematics. you know what people say the numbers are and you just don't buy it. >> the polls until you get to the conventions don't mean anything. gary: our thanks to jeffrey gundlach for joining us. next week we'll be interviewing
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and that is why you invest. the best returns aren't just measured in dollars. good night from new york. >> announcer: this who has never been solely about investments. we talked about anything that affected people and their money. from fox business headquarter in new york city, the new "wall street week." >> welcome to wall street week, i'm anthony scaramucci. gary: i'm gary kaminsky. anthony: joining us is a giant


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