Research (Investicniweb.cz)
Macroeconomics  |  January 03, 2013 07:39:52

Warning man who is right: Another recession would be the overwhelming, and she comes!



Bond guru Jeff Gundlach has fears of another recession, which according to him, in the U.S. occurs due to spending cuts and tax increases. The last recession economy drew further government borrowing. But this time, according to Gundlach had this type of fiscal policy will not be tolerated. Great interview with Bloomberg TV is from mid-December, yet does not lose its topicality.

Jeff Gundlach

Addressing fiscal problems is at best weak growth

Politicians have made much more difficult journey. If the fiscal situation will actually try to address the risk of undergoing the economy recession. Old proven method of pumping money into the economy already out of the question, or will not work.

Whether it is a combination of spending cuts and tax increases may be, it always means the economy brake. Not only in the U.S. but also in Europe and Japan's economy is now dependent on the support of central banks. Their quantitative easing but allows governments to manage the massive budget deficits.

How to invest in the current environment?

The recession will have a cleansing effect on the economy, namely the asset will be revalued below.Will be those whose performance is linked to economic growth and where investors seek yield is difficult, but on the other hand, other types of investments, which will thrive quite well (such as bonds). Investors should focus on attractively valued risky assets in developed countries except Japan.

It is necessary to take note of the potential inflationary consequences of printing money. A shining example is Japan. 20 years ago, the Japanese began to look for a recipe for problems in the banking sector and the economy in the stand legs (unsuccessfully) trying day. Newly elected Japanese government faces a major challenge. U.S. is in such a bad position as Japan has not.

Play a role in the market today fundamentals?

Fundamentals are always important in recent years, but radical political decisions are pushed to the sidelines. Income disappearing with each round of quantitative easing. It's like half-life: The first QE offered a 50% yield, another about a half and a third less. Pavlov's reflex ("When you see Bernanke announcing quantitative easing, go and buy risky assets") worked four times, but such gold was not showing anything of substance. It seems that the fundamentals begin to take increasingly against Fed intervention, which means one thing - market support has its limits.

Gundlach advised to keep cash and buy at low price risky assets, once they start to promote the fundamentals.

Inflated credit bubble in the U.S.?

Gundlach does not think so. The most important foundation in the bond markets, which is distorted due to central banks, interest rates are zero on the huge market government guaranteed mortgage assets and high-quality bonds. This forces investors seeking yield elsewhere.

Where the money unless you are a short-term trader? Opinions Jeff Gundlach found on the web Investment

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