Jeff Gundlach Sees Downside Risk For U.S. Stocks, Likes Japanese Stocks Into 2013 (Bloomberg TV, 12/18/2012)

Jeff Gundlach, co-founder of DoubleLine Capital, was interviewed by Erik Schatzker and Stephanie Ruhle on Bloomberg TV on December 18, 2012. Watch the 22 minute video below. He gave his views on the S&P 500, Japanese stocks, U.S. economy, and fiscal policy. Here are a few quotes from the video.

"Investors should be looking for lower prices on most risk assets in these developed countries, with the exception of Japan, which I turned bullish on, the Japanese equity market, about a month ago under the logic that the only policy tool that remains in Japan is debasement of the currency. So it's quite likely that the weakness that has started to develop in the Japanese yen will continue. And on the other side of that, the exporters in Japan will start to do better. And so my most high conviction investment idea for the past month and now going into 2013 is that the Japanese yen will weaken and that the Japanese stock market should improve based upon debasement"

Wow, nice call there. Look at the chart of USD/JPY over the past month. The Tokyo Nikkei Average is up 11% since mid-November. He even called the bottom on the Shanghai Composite Index recently. Here are his views on the U.S. economy and fiscal policy.

"Ultimately as you address the fiscal situation you are going to run the risk of a recession. When the next recession comes it's going to be a real killer because what exactly is going to be the policy response? It will be policies in terms of raising taxes and cutting spending that help to bring on the next recession I think. So, I don't think it's very plausible that you're going to just turn around and go back to the old method of pumping up the economy with debt when the next recession comes. The next recession probably is going to be somewhat cleansing, which means that you're going to see things reprice lower"

More reading:

  • Jeff Gundlach Hosted An Awesome Webcast — Here's What He Said About The Markets And The Economy (Business Insider)
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