Keynote Address: Jeff Gundlach Presenter Chief Executive Officer & Chief Investment Officer DoubleLine Capital

Transcription

1 Keynote Address: Jeff Gundlach Presenter Chief Executive Officer & Chief Investment Officer DoubleLine Capital

2 This Time It s Different 2

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4 Past Fed Tightening Cycles Source: ValueWalk, Taking a Lesson From Two Decades of Fed Rate Hikes by Clayton Brown, July 1,

5 Fed Funds Target Rate and US Recessions 1/1/1982-9/30/2014 5

6 Fed Hiking Cycles and Economic Cycles As of 10/21/14 First Rate Hike Preceding Recession Hiking Cycle Months Number to 1st of Rate Size Fed Hike Hikes (bps) Starting Funds Rate Target (%) Date Size (bps) Trough Date Length (months) 5.88 Oct Nov Feb No Recession Feb Mar Mar No Recession Jun No Recession Jun Nov Current Cycle 0.25 Jun-15* Jun-09 72* *Note: June 2015 rate hike based on Bloomberg analyst surveys. Recessions according to NBER. Source: Bloomberg; DoubleLine; Credit Suisse 6

7 Number of Months Current Economic Cycle vs. Previous Cycles As of 10/21/ Conraction Expansion Length of Economic Cycles Expansions and Contractions months and counting (33 cycles) (16 cycles) (6 cycles) (11 cycles) Current Cycle Note: Economic expansions and contractions are according to NBER. Source: Bloomberg; DoubleLine 7

8 Market Implied Rates vs. FED Source: Bloomberg 8

9 U.S. Rates: Fed Funds Forward Curve Anticipating a Fed rate hike is like waiting for a friend who never shows up Dan Loeb Source: StateStreet Fed Fund projections annually. Each colored line represents the consensus opinion projections given each Fed meeting. 9

10 Probability of Fed Rate Hike by Dec 2015 Source: Bloomberg; StateStreet 10

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12 US, UK and Euro Seem Far From Hiking Notes: As of 9/10/14 Source: Goldman Sachs, Global Economics Weekly 12

13 GDP Forecasts January 1, 2004 through 2016 Estimates Source: DoubleLine, Bloomberg GDP = Gross Domestic Product. The monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. GDP CYOY = GDP Year-Over-Year. EHGDUSY Index =US Real GDP. ECFC = Economic Forecasts 13

14 Median Economist Forecast for Real GDP at Year End Median Economist Forecasts of U.S. Real GDP Annually through September 30, Days Leading Up to Forecast (Trading Days) Source: DoubleLine, Bloomberg GDP = Gross Domestic Product. The monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. ECGDUS 14 index = US GDP Economic Forecasts quarter-over-quarter and year-over-year. 14

15 Median Real GDP Forecast (%) Revisions to China Growth Expectations January 1, 2010 through October 15, The last 3 years have been a story of downward revisions to growth in China. Median Forecast of China Real GDP (by year ) Days Leading Up to Forecast (Trading Days) Source: Bloomberg GDP = The gross domestic product is The monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. 15

16 Global GDP Forecasts 16

17 10-year U.S. Treasury Yield Forecast for Year End 2014 July 11, 2013 through October 14, Bloomberg Median Economist Forecast for Year End 2014 and Actual 10y UST Yields 3.3 Median Economist Forecast % y UST Yield % % Notes: Median economist forecasts are based on Bloomberg survey data as of 8/13/14. Survey produced 9/2/14. Source: Bloomberg; DoubleLine 17

18 Global Bond Yield Change Year-To-Date (YTD) 2014 through 10/14/14 US Canada Mexico Australia Japan Switzerland United Kingdom France Germany Ireland Italy Spain Denmark Norway Sweden Poland Turkey Malaysia Singapore South Africa India Indonesia Change in Global 10y Bond YTD (BPS) Notes: As of 10/14/14 Source: Bloomberg; Doubleline Bps = Basis points 18

19 Yield (%) German Bunds vs. U.S. Treasuries December 31, 1999 through October 15, % 6% 5% 10 Year US Treasury Yield 10 Year German Bund Yield 4% 3% 2% 1% 0% Source: Bloomberg USGG10Y Index = Generic 10-year U.S. Treasury. GDBR10 Index = German Bund 10-year generic 10-yr treasury rates. 19

20 30 Year U.S. Treasury Total Returns January 1, 1974 through October 14, 2014 Source: Bianco Research 20

21 Global Bond Yield Forecast As of October 21, 2014 Source: Bloomberg Financial Services G7 = Group of Seven and includes the economic alliance of Canada, France, Germany, Great Britain, Italy, Japan and the US. 21

22 What Happened to 10-year U.S. Treasury Rates During the Rate Hike Cycle? August 1, 2003 through September 30, 2007 Source: Bloomberg; DoubleLine USGG10YR Index = Generic 10 year US Treasury yields. Federal Funds Target Rates = federal funds rate is "the interest rate" [1] at which depository institutions actively trade balances held at the Federal Reserve, called federal funds, with each other, usually overnight, on an uncollateralized basis. You cannot invest directly in an index. 22

23 U.S. Interest Rates: U.S. Treasury 2-year vs. 10-year Spread August 8, 2004 through October 14, 2014 Source: Bloomberg; DoubleLine USGG10YR Index = Generic 10 year US Treasury yields. You cannot invest directly in an index. 23

24 04/01/1 04/01/1 04/01/1 04/01/1 04/01/1 04/01/1 04/01/1 04/01/1 04/01/1 04/01/1 04/01/1 04/01/1 04/01/1 04/01/1 04/01/1 04/01/2 04/01/2 04/01/2 04/01/2 04/01/2 04/01/2 04/01/2 04/01/2 04/01/2 04/01/2 04/01/2 04/01/2 04/01/2 04/01/2 04/01/2 Barclays HY Spread to 10Y UST % High Yield Spreads and Fed Hiking Cycles As of 10/10/ Hiking Cycles HY Spread to 10Y UST Source: Bloomberg; DoubleLine 24

25 U.S. Core PCE Core PCE = Personal Consumption Expenditures measures prices paid by consumers for goods and services without the volatility caused by movements in food and energy. 25

26 PriceStats vs. CPI for U.S. CPI = Consumer Price Index produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. 26

27 U.S. CPI Inflation Source: Minack Advisors, Globall Outllok Back to normal? : October 2014 CPI = Consumer Price Index produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. 27

28 Nominal Wages 28

29 FED Economic Slack Indicators January 1, 1985 through June 30, 2014 Source: Wall Street Journal 29

30 Inflation Adjusted Average Hourly Earnings January 1, 2007 through June 30, 2014 Source: Economic Policy Institute, Wall Street Journal, Bianco Research Inflation = A general increase in prices and fall in the purchasing value of money. 30

31 Minimum Wage Has Declined in Real Terms 31

32 Importing Deflation 32

33 Eurozone 2 year Yields October 1, 2013 through October 14, 2014 Source: DoubleLine, Bloomberg 33

34 U.S. Dollar Index Spot December 31, 2007 through October 21, 2014 Source: Bloomberg Financial Services, DoubleLine Capital LP DXY = DXY is the US Dollar Index (USDX) indicates the general value of the US dollar. Average exchange rates between the US dollar and six major world currencies. An investment cannot be made directly in an index. 34

35 Percent (%) 4/26/ /10/2014 Inflation Expectations April 26, 2007 through October 10, Federal Reserve 5 Year Inflation Expectation Five Year Five Years Forward 5 Year Breakevens 10 Year Breakevens -1.5 Source: Bloomberg, DoubleLine 35

36 U.S. Breakeven Treasury Rates September 1, 2011 through October 14, 2014 Source: DoubleLine, Bloomberg 36

37 QE and Inflation Expectations January 1, 2008 through October 20,2014 Source: DoubleLine, Bloomberg 37

38 U.S. Commodities Last 5 Years October 14, 2009 through October 20, 2014 Source: Bloomberg CRY Index = CRB excess return index is an arithmetic average of commodity futures prices with monthly rebalancing. You cannot invest directly in an index. 38

39 Commodities: YTD Performance Year-To-Date through October 14, 2014 Source: Bloomberg DJUBS = Dow Jones Indices representing grain sector, energy, commodities as a general basket, and metals. 39

40 CPI YoY % WTI YoY % U.S. CPI and WTI October 14, 2004 through October 14, US CPI WTI YOY % (RHS) Source: DoubleLine, Bloomberg CPI = Core Price Index produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. WTI = West Texas Intermediate is a grade of crude oil described as light due to low density. RHS = Right Hand Side of the chart axis. 40

41 CPI YoY % Brent Crude YoY % Eurozone CPI and Brent Crude October 14, 2004 through October 14, EZ CPI Brent Crude YoY % (RHS) Source: DoubleLine, Bloomberg CPI = Core Price Index produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. WTI = West Texas Intermediate is a grade of crude oil described as light due to low density. RHS = Righ hand side of the chart.axis. 41

42 U.S. Breakevens and Oil October 8, 2011 through October 7,

43 Breakeven Oil Prices 43

44 Primary Oil Importers Source: Hellenic Shipping News, EIA: China Market Overview 44

45 Federal Reserve is the Largest Holder of US Debt Source: Barry Ritholtz, The Big Picture, All Holders of US Debt, October 11,

46 Who Owns US Government Debt Source: FactCheck.org 46

47 Mandatory vs. Discretionary Spending 2013 (Numbers in Billions of Dollars) Source: Congressional Budget Office 47

48 Drivers of US Debt Source: Congressional Budget Office 48

49 U.S. Government Revenue vs. Expenditures Source: Congressional Budget Office 49

50 Debt Storm and Global Rates Source: Deutsche Bank, GFD, Haver 50

51 Fixed Income Liquidity 51

52 BKLN Shares Outstanding BKLN = Powershares Senior Loan Portfolio Shares Outstanding Index represents the current index shares outstanding. 52

53 Major U.S. Financial Institutions Leverage Ratios Source: Grant Williams; Things That Make you Go Hmmm 53

54 U.S. Single Adults Rising 6/1/1975 through 9/30/

55 An Aging Population 55

56 Where the Wealthiest Live Source: Credit Suisse, Global Wealth Report 2014, October

57 Where the Wealthiest Live 57

58 Keynote Address: Jeff Gundlach Presenter Chief Executive Officer & Chief Investment Officer DoubleLine Capital