2/28 Kelly Letter Topics
Weekly market review
Manufacturing rise
Euro zone risks
State fiscal disaster
China pulling back
Consumer conf.
FDIC bank closures
Bernanke on rates
Greek protests
Falling home sales
Dying bank reform
Oil price trends
Toyota saga
Natural gas trends
Gov killing economy
US rescue bot
Dividend ideas
Japanese women
2010 EDITION
Much has changed; good investing has not
The Neatest Little Guide to Stock Market Investing, 2010 Edition
TCW Group Chief Investment Officer Jeffrey Gundlach said at a June 2007 Morningstar conference, "The subprime market is a total unmitigated disaster and it's going to get worse. The delinquency rate is still climbing. At the same time, the ability of people to refinance is also going down. It's just not a very attractive situation." The S&P 500 traded at 1,500 back then.
On Wednesday, in a conference call titled Too Good to Be True, Gundlach said of the current market that it was about to lose momentum, and advised selling on strength when the S&P 500 is over 1,000.
"You've made 90% of the money you're gonna make in this rally," he said. He thinks much of the economic data that people are calling green shoots is just the temporary result of unsustainable government spending. "We're basically borrowing money and calling it economic growth. It's not real economic activity."
About the much-praised Cash-for-Clunkers program, he said, "Deflation is so strong that you can't even sell cars unless you slash prices 20% through government subsidies." He also thinks commodity deflation lies dead ahead, saying that "a turning point is close at hand in these markets."
He's also worried about debt defaults: "We're standing on the edge of a major default wave. Defaults are the elimination of dollars. You could eliminate so much actual wealth that this could be the source of a strong dollar rally."
To see the slides of his presentation in PDF format, click here.
