openpolitics.com

DoubleLine Capital CEO Jeffrey Gundlach joins Yahoo Finance’s Julia La Roche for an exclusive, wide-ranging interview discussing everything from his outlook on the economy amid COVID-19, the 2020 election, and more.

Transcript

00:03
I just want to get your views Jeffrey on
00:06
what’s transpired in the markets in the
00:08
last few months and as it relates to the
00:11
economy as well in the Fed dependency
00:14
here how do you think about the feds
00:16
role in the overall economy and the
00:18
markets well the Fed has decided that
00:21
they want to pull out all the stops to
00:25
reduce market and economic volatility I
00:28
think that was what really got them
00:29
going in the later part of March in
00:32
early part of April was that markets not
00:35
just the stock market but commodity
00:37
markets jump bond markets interest rate
00:41
Marcus we’re experiencing really
00:43
persistent and elevated volatility and
00:45
it just kept throwing things at it to
00:48
make the volatility stop and of course
00:50
when investors use the word volatility
00:52
what they really mean is down prices
00:54
going down a lot and the Fed came in
00:57
because there was a total seized up in
01:00
really the credit market system around
01:02
the world but of course relative to the
01:04
Fed in the United States I was I’ve been
01:07
in the market for thirty five years and
01:09
I’ve seen all kinds of crises including
01:11
I was right at the front lines during
01:14
2008-2009 during the global financial
01:17
crisis which really hit the securitized
01:20
assets sector and what we experienced
01:22
it’s been the last part of March was far
01:25
worse in terms of market conditions in
01:28
the investment grade corporate bond
01:30
market in emerging markets certainly in
01:33
the junk bond markets far worse than the
01:36
very worst date in March of 2009
01:39
literally in 2009 you could get a bid he
01:43
didn’t like it the prices were in a
01:45
freefall from the day before on the
01:47
really ugly days of maybe 10 or 15
01:50
percent price moves to the downside in a
01:52
single day but in March of 2020 here
01:55
there was no bid there were actually
01:58
situations in large swaths of the fixed
02:01
income market where you simply could not
02:03
sell assets and that led to well what
02:07
looked like was going to be some very
02:08
substantial bankruptcies in some of the
02:11
leveraged pools like like mortgage
02:13
related REITs
02:15
other leverage types of investments and
02:17
the Fed just figured that it desperate
02:20
times
02:21
you know they required desk for measures
02:23
and they went all the way into buying
02:25
corporate bonds which as I’ve said in my
02:28
webcasts is not allowed under the
02:30
Federal Reserve Act of 1913 and they did
02:34
not buy corporate bonds during the
02:36
global financial crisis even though I
02:37
know for a fact they talked a lot about
02:39
it because I know people that were
02:41
inside the Fed at at those discussions
02:44
but what they’re doing is really a
02:46
bridge further than they’ve ever gone
02:48
before where they’re not even following
02:50
the room Charter which means that the
02:52
Fed could go even further in violation
02:56
of the photos of Act of 1913 if they
02:59
really feel like you know we go into
03:01
another economic move down so the Fed
03:04
has propped up the economy with just the
03:08
most incredible fiscal lending that
03:12
they’ve ever contemplated and of course
03:14
I think the listeners know that the
03:17
quantitative easing that the Fed has
03:19
done since March is greater than all of
03:22
the quantitative easing that they did
03:24
that they started back you know in the
03:26
little financial crisis it’s it was more
03:28
in just three or four weeks than an
03:30
entire program that was laid out over a
03:33
multi-year framework so that shows the
03:35
level and extent of their commitment
03:37
yeah certainly the word that gets tossed
03:39
around is unprecedented and you were
03:41
just referencing your 35 plus years and
03:43
the markets never seen anything quite
03:45
like this we’ve talked a bit in the past
03:48
Jeffrey about corporate credit and you
03:51
know the issues that were already there
03:52
to begin with how do you begin to assess
03:56
those issues with the latest Fed moves
03:59
and are we just delaying the inevitable
04:01
here well in a certain sense I think
04:04
we’re delaying the inevitable because
04:06
under my analysis many bond prices that
04:09
have been pushed up by the feds buying
04:11
of ETFs and then individual corporate
04:13
bonds
04:14
more recently the prices they’ve pushed
04:17
many of these assets up to I think is a
04:20
higher price that they’re actually
04:21
paying for them then you’ll receive
04:23
through a bankruptcy workout when a lot
04:26
of these companies are
04:27
have to go through a filing also as I
04:30
talked about in the past before I talked
04:32
about this in our last interview the
04:35
fraction of the corporate bond market
04:37
that’s investment-grade and is the
04:39
lowest tier of investment grade which is
04:41
triple B is really enormous it’s
04:44
basically half from now even more than
04:45
1/2 of the entire you know it’s like a
04:48
12 trillion dollar market now there’s
04:50
been so much issuance of corporate bonds
04:51
and the prices have been propped up to
04:54
levels where I think the owners that
04:56
owned them at these levels will end up
04:58
losing principal on a basket of these
05:01
assets so to that extent they’re
05:03
delaying the inevitable in the meantime
05:04
they have a lot of wherewithal to
05:06
continue to layer because they are
05:09
spraying money all over the place and
05:12
buying all of these all these assets the
05:14
one thing that’s happened that a lot of
05:16
investors aren’t aware of relative their
05:18
corporate bond activities is at first it
05:20
really pops the prices of D which is the
05:24
investment grade ETF and J and K which
05:26
is the jump on ETF that I followed and
05:28
since then the the price of hyg
05:33
is not really even up since April 9th
05:36
when they really went fully and I think
05:38
they announced corporate bond purchases
05:40
as a strategy around March 23rd they
05:43
really upped the ante in a meaningful
05:45
very meaningful way on April 9th and 6th
05:47
since then those prices haven’t really
05:49
gone up they fluctuated but they’re
05:51
pretty much unchanged meanwhile that has
05:53
led investors that understand that the
05:56
price of corporate bonds today isn’t
05:58
really real there’s no price discovery
06:00
mechanism that’s being Ted hey there’s
06:02
no there’s a message there’s just a
06:04
target price that the Fed has been doing
06:07
and that led to a pump a pop-up and
06:10
corporate bonds but since April 9 which
06:12
is now we’re moving on to about three
06:14
months the sector’s that were left
06:15
behind to fight further themselves like
06:18
the lower tiers commercial
06:20
mortgage-backed securities or asset
06:22
backed securities and some emerging
06:24
market bonds they’ve really outperformed
06:26
corporate bonds because they’re catching
06:28
up as investors realize that the that
06:31
the interest rate profile of investment
06:33
created like the lqd is very long I mean
06:36
it’s about an eight-year duration so
06:37
it’s about the interest rate risk of
06:39
almost 10-year Treasury and yet the
06:41
yield to no losses is about two and a
06:44
quarter so there’s not a lot of reward
06:46
there and there’s a lot of risk if those
06:48
bonds get downgraded because the the
06:51
yields on junk bonds are far higher
06:53
today than the yields on trip will be
06:56
corporate so if they get downgraded we
06:58
know that the pricing is going to suffer
07:00
very significantly so in that way the
07:03
rating agencies might be might have an
07:06
influence that the Fed can’t really
07:08
offset that easily because those down
07:10
raids leads who probably about a 200
07:13
basis point spread widening which means
07:15
about a 15 point price drop if the
07:17
market starts to factor in the potential
07:19
for the credit quality reevaluated to
07:22
the downside all right Jeffrey I want to
07:24
bring in Brian chunk to give the latest
07:26
on the FOMC meeting minutes Brian why
07:29
don’t you break it down for us well
07:30
Julia the big headlines from that June
07:32
FOMC meeting which took place June 10th
07:34
where the Fed did hold rates steady the
07:36
Federal Reserve did commit to what they
07:38
call highly accommodative monetary
07:40
policy they said that was needed to
07:41
support a recovery for a second quarter
07:44
that the minute said would likely show
07:46
the largest decline in economic activity
07:48
in post-world War two history on the
07:51
other side of the coin the FOMC did see
07:53
financial conditions improve between the
07:55
period between its previous FOMC meeting
07:58
in April and that June 10 meeting they
08:00
also pointed to that may job support
08:02
which as you recall had the surprise of
08:04
job gains during that month the FOMC
08:07
said that the proportion of laid off
08:09
workers who expected to recall to be
08:11
recalled was much larger than they had
08:13
expected but even though they said it
08:15
could indeed be the case that April
08:17
showed to be quote rough of the
08:19
recession participants dead based on the
08:21
minutes that it was too early to draw
08:23
any conclusions a number of participants
08:25
on the FOMC did Express worry about the
08:28
epidemiological a path of the virus a
08:30
number of them saying that there is a
08:32
substantial likelihood was the quote of
08:34
additional waves of outbreaks which in
08:36
some scenarios could result in further
08:38
economic disruptions shifting gears to
08:40
quantitative easing again their asset
08:42
purchases of mortgage-backed securities
08:44
and also US Treasuries the FOMC minutes
08:47
did note that they wanted to increase
08:49
the current pace to quote sustain smooth
08:51
market functioning unquote that was
08:53
something we had heard
08:54
Fed Chairman Powell in that press
08:56
conference and then lastly something if
08:58
you’re watching fix then come very
08:59
closely as your discussion was just
09:00
touching on yield curve control this
09:02
would be further fed intervention in the
09:04
medium term market for US Treasuries a
09:07
couple of participants after receiving a
09:10
briefing on the idea of capping medium
09:12
term perhaps three or five US Treasuries
09:14
remark that it could be quote a powerful
09:16
commitment device for the committee end
09:18
quote but did say and needed further
09:20
studying which means the Fed could be
09:22
getting a little closer to enacting such
09:24
a policy but again a number of Fed
09:26
officials still saying they need to
09:28
study the issue a little bit more so not
09:30
a done deal but again the big headlines
09:32
out of the FOMC minutes highly
09:33
accommodative monetary policy and an
09:35
expectation for some pretty shocking
09:37
second quarter numbers Julia Brian II
09:39
thank you so much for that breakdown
09:41
Jeffrey your reaction to that and also
09:43
even your reaction to the the yield
09:45
curve control part of that that just
09:47
came out I know it’s something you’ve
09:48
brought up on your webcast well I’m glad
09:50
that the Fed acknowledges that they have
09:52
highly highly accommodative monetary
09:54
policy it’s staring you in the face of
09:57
course and it would be disingenuous for
09:59
them to not admit that they have really
10:02
put the pedal to the metal and the that
10:06
they’re right that the economic activity
10:07
everybody knows this for the second
10:09
quarter is going to be terrible the
10:11
Atlanta feds GDP now shows an annualized
10:14
decline during the quarter of about 37
10:18
percent that’s actually improved it used
10:21
to be more like negative 45 for separate
10:23
that analyzes to roughly a 10 percent
10:26
drop off in economic activity for the
10:28
second quarter so yield curve control is
10:31
something that the Fed has been
10:32
telegraphing jpowel
10:35
and I give him credit jpowel which are
10:37
words I don’t speak very often that I
10:39
give him credit
10:40
but give him credit for talking strongly
10:44
against negative interest rates and so
10:47
he says that in the next recession which
10:48
of course were in that he doesn’t my go
10:51
to negative interest rates you can’t go
10:53
to negative interest rates United States
10:54
without a total catastrophe in my view
10:56
so I’m glad he says that so what’s left
11:00
is yield curve control which they’re
11:02
talking about which is just a code word
11:04
for suppressing interest rates there’s
11:06
there’s precedent
11:08
this they did in the late 1940s in the
11:10
early 1950s at the interest rate levels
11:12
that weren’t that dissimilar to where we
11:13
are today in a way to help manage the
11:16
world war two debt so what’s interesting
11:19
is to watch the 30 year Treasury I know
11:21
in the minutes there Brian talked about
11:23
the three and the five year they already
11:25
look like they’re being pegged to me
11:27
there’s very low levels but what what
11:29
seems to be a little bit left to fend
11:30
for itself is the 30 year Treasury bond
11:32
which has gone up in yield from its low
11:35
close by about forty three basis points
11:39
and from its intraday low by about
11:40
seventy basis points which is actually a
11:42
pretty big loss if a 30-year Treasury
11:44
bond goes up and yield by 70 basis
11:46
points you lose you lose about 15
11:49
percent or 12 percent or so which is a
11:51
pretty pretty big loss so the 30-year
11:53
Treasury bond if left on its own will be
11:56
going higher and the real signal to
11:58
watch for is what is the level at which
11:59
the Fed really gets uncomfortable with
12:02
the tenure but in particular 30 year
12:05
Treasury bond yield because the amount
12:07
of debt that needs to be floated that
12:09
the Fed has quantitative done
12:11
quantitative easing but we have a lot
12:13
more debt coming I mean we keep still
12:15
hearing about multi trillion-dollar
12:17
rescue packages and don’t forget we have
12:20
these one of the the programs like the
12:23
$600 program is running off I think at
12:25
the end of July and there’s other
12:27
assistance that runs off at the end of
12:29
the year and it’s going to be a really
12:31
big question as to how the economy can
12:34
handle the taking a way of direct
12:37
monetary payments to American citizens
12:39
that are you know don’t have any savings
12:41
and are in economic distress so if you
12:45
didn’t have the Fed you manipulate the
12:47
30 year Treasury bond I think with all
12:49
the supply that’s coming if we’re
12:51
allowed to actually float into the
12:52
market the rate would go quite a bit
12:54
higher but there’ll be a level at which
12:56
I think the Fed decides to do that yield
12:58
curve control and therefore suppress
13:00
that interest rate so it’s a very tough
13:02
environment for investors because there
13:05
are no market signals there’s just
13:06
targeted assets and targeted prices for
13:10
many sectors of the market and the only
13:11
way to succeed as a fixed income
13:13
investor is to really unfortunately have
13:17
to put in a tremendous amount of time
13:20
and energy
13:21
and with a lot of people working on it
13:24
into the areas that the Fed is not
13:25
supporting and when I talk about that a
13:28
lot of investors get really nervous
13:29
because we’re taught the things that the
13:31
Fed isn’t supporting our areas that have
13:33
a lot of economic question marks around
13:35
them like commercial mortgage-backed
13:37
securities like credit card receivable
13:40
debt these types of things I think we we
13:43
all know that some of these forbearance
13:47
and some of the non-payment is likely to
13:48
continue to increase over time and you
13:51
have to kind of understand that you’re
13:54
likely to take losses from par on some
13:57
of these securities the good news is
13:58
that we don’t think the losses are going
14:01
to take our beyond what the discounted
14:04
prices are already because everybody
14:06
knows that these sectors are in really
14:08
big trouble or this certain particularly
14:10
hotspots of them aren’t truly big
14:12
trouble you know like hospitality Cruise
14:14
Lines and the like but that’s what you
14:17
have to you have to do and investors are
14:19
reluctant to go into fixed income
14:22
securities when they think there’s any
14:24
risk there’s always risk of course but
14:27
when they can see the risk they get
14:29
afraid but that’s why the prices are
14:30
down it’s the paradox of investing
14:32
people don’t like to buy low they like
14:35
to buy high when everything when the Sun
14:37
looks like it’s shining in the sky is
14:38
blue and what it looks like there’s a
14:40
hurricane coming they want out but the
14:42
hurricane is priced in when you know
14:45
that it’s coming and so this is it it’s
14:47
a tough environment for standard
14:49
investment types I’m glad that we at
14:51
double I’ll always have a differentiated
14:53
more creative investment style because
14:55
it’s kind of a suited to this type of
14:57
environment better than more traditional
14:58
or certainly a passive investment style
15:00
which looks like almost doomed to fail
15:02
in in the environment that we’re in
15:04
Jeffrey I’d like to get your take though
15:07
on the economy and we keep hearing about
15:10
a v-shape recovering a u-shaped and L
15:13
shape a W a Nike swoosh what have you
15:15
what is your baseline scenario what does
15:18
it look like to you
15:19
well my baseline scenario is that a
15:22
v-shaped recovery so-called is highly
15:25
optimistic and I don’t think really
15:27
plausible what it basically implies is
15:31
that you can take 20% of the entire work
15:35
force the labor force United States and
15:37
put them in jeopardy
15:39
put him on unemployment benefits have
15:41
them produced nothing and instead
15:43
receive money that’s being lent by the
15:45
Federal Reserve to to buy the bonds and
15:48
that you could do that and nothing bad
15:51
happens and nobody gets hurt it just
15:53
doesn’t seem very likely to me that you
15:55
can have that type of hardship roll over
15:58
the economy and you just it’s like
16:01
nothing happened you know it’s like the
16:03
servpro economy like it never even
16:04
happened
16:05
and I just don’t believe that so when I
16:08
was when I finally started to ocean safe
16:11
I when I first started worrying about
16:13
the Cova 19 being a real thing which was
16:17
in in March in like the first week of
16:19
March I did an interview and I was asked
16:22
what do you think about this virus thing
16:24
and I said you know I I don’t know what
16:27
the consensus view point is about how
16:29
bad this is gonna get and what the
16:30
damage is gonna be to the system but
16:33
whatever that consensus view is I want
16:35
to take the over that it’s gonna be
16:37
worse than that and when it comes to the
16:39
economic outlook going forward here from
16:41
July 1st by the way welcome to the third
16:43
quarter in the second half of 2020 I’m
16:45
glad the first half is over I think that
16:49
whatever the consensus is on the
16:51
so-called shape of the recovery I’m
16:53
taking the under I think that you cannot
16:56
have this type of economic disruption
16:59
and fear that has been instilled in
17:02
people’s psyches I don’t think there’s a
17:04
good appreciation for how much economic
17:06
fear there is I can well imagine the
17:09
people that were making you know seventy
17:12
thousand dollars a year and they
17:13
suddenly got furloughed or laid off and
17:16
they look in their bank account and
17:18
they’re hoping to see something there
17:19
but unfortunately there was no magic
17:21
Genie that showed up and deposited money
17:23
and their balance is still five dollars
17:25
and so they suddenly are looking into an
17:28
economic black hole and I think that’s a
17:30
really major jolt to the psyche of those
17:34
people and I have a feeling that there’s
17:36
going to be more of that that goes on as
17:38
I said these programs roll off so some
17:41
of the people are going to start getting
17:42
economic eggs about that but beyond that
17:44
I believe that the people who are make
17:48
$100,000 to maybe a hundred and fifty
17:51
thousand dollars might be a risk also in
17:55
another wave of layoffs because those
17:57
people also don’t really have any
18:00
savings by and large but also the
18:03
government is unlikely I think to come
18:05
to the rescue for those types of people
18:07
quite as readily as they did for people
18:10
who are lead living paid more paycheck
18:12
to paycheck in a real literal kind of a
18:14
sense and it just seems to me that this
18:17
this economic situation from a jobs and
18:20
wages perspective is fundamentally
18:23
deflationary we have all these people
18:25
that are are working at our risk and you
18:30
might decide through work at home and
18:32
other things that there’s more efficient
18:34
ways of doing things and what we did
18:37
prior to February of 2020 and I could
18:40
see that there could be a round of
18:42
middle management layoffs that come
18:44
around because people might be revealed
18:47
for not being that productive when
18:50
you’re doing work at home it’s more easy
18:52
actually to tell this for me it’s more
18:54
easy for me to tell who’s really doing
18:56
work because who’s responding to the
18:58
emails who’s really contributing to the
19:00
team’s meetings and all that sort of
19:03
thing and I just think that companies
19:05
will realize that there’s a they could
19:07
right-size with the knowledge they’ve
19:09
gained through this pandemic and so we
19:13
could see people who are making $120,000
19:17
a year and if de minimis savings if they
19:19
get R it’s a pink-slipped
19:21
they’re gonna be in a real panic because
19:23
there’s not a lot of jobs open they’ll
19:26
probably have a lot of company in people
19:28
that are in that position and that will
19:30
put downward pressure on these wages
19:32
also we also know that the economy is
19:34
going to be unevenly affected we know
19:36
that make big cities are likely to
19:39
suffer an exodus we know that prices on
19:42
apartments and homes and the in the San
19:44
Francisco area are declining you know
19:46
that’s also happening relative to
19:48
Manhattan real estate and that means
19:50
that other parts of the country are
19:52
going to start to see perhaps inflow of
19:55
population we’ve been tracking a double
19:56
I kind of the the showings the the
20:00
request for showings of home
20:01
in various parts of the country and is
20:03
very uneven there are parts where that
20:07
are more suburban like I’m it’s a
20:09
reversal of the trend that we had a
20:11
decade ago and so there’ll be an uneven
20:14
type of type of effect to the economy
20:16
the other thing that’s going to happen
20:17
isn’t as being talked about nearly
20:18
enough is the states are really in
20:21
trouble the tax revenue from the states
20:23
has completely collapsed and it’s
20:26
unlikely to improve and so a lot of
20:29
these states are going to be looking for
20:32
or in some of them already asked for
20:33
more government bailouts so there’s a
20:36
long queue of entities that want or need
20:39
government bailouts and that’s just
20:41
going to keep further pressuring that
20:44
the situation so I think the economy is
20:47
going to feel the blow the effects of
20:50
the recession and that we’re in now for
20:53
quite some time to come I think it’s
20:55
very unlikely that we’ll get back to our
20:57
peak economic growth even in 2021 well
21:02
it’s certainly a confluence of forces
21:04
that you just highlighted there that are
21:06
playing into your thesis I guess Jeffrey
21:09
what does this mean for the social
21:11
fabric of the country does this actually
21:14
exacerbate the inequality especially if
21:17
you step back and look at some of the
21:18
response we’ve seen because you know a
21:19
stock market go up that we also know not
21:22
everyone owned stocks
21:23
well what’s there’s a lot a lot to that
21:27
question the stock market is partially
21:29
up because of all the money that the
21:31
government has given people who are
21:33
unemployed and if you see the
21:35
commercials on financial media they’ve
21:38
created the investment products that are
21:40
smaller in smaller denominations there’s
21:43
ones that it’s called slices and it can
21:45
buy $5 of a company $5 and you can buy a
21:49
10 stock portfolio and invest $50 and
21:52
it’s been well widely reported and it’s
21:54
true there’s been an incredible increase
21:56
in tiny retail investor activity in
22:00
terms of the accounts on robin hood and
22:01
in other platforms like that that have
22:04
just exploded in terms of size and I
22:06
think that’s pretty dangerous one thing
22:08
it was interesting at the top of the
22:10
stock market in February there was
22:12
really unusually high call option buying
22:15
activity by the little guy but that has
22:17
been far surpassed at the high of about
22:21
three weeks ago around June eighth
22:22
through June ninth where the number of
22:25
call options were purchased then was
22:27
fully fifty plus percent higher than the
22:30
call buying that was happening at the
22:32
peak in February which shows that
22:35
there’s kind of an you phoria weirdly
22:37
from people who made me maybe they would
22:40
normally gamble that money or about that
22:42
they’re getting from the government but
22:43
the casinos are closed so the racetracks
22:47
are closed so you so instead you can you
22:49
can take a flyer on the fans and the
22:53
super six I call includes Microsoft in
22:55
the light without the super six there is
22:57
no earnings growth the United States
22:59
stock market there’s an any for the past
23:00
five years if you take them out it’s
23:02
nothing and there’s no earnings growth
23:04
at all in small caps so this is all
23:06
being driven by by a price not by
23:09
earnings and of course earnings have
23:11
taken the humongous hit and earnings in
23:14
the stock market are now about the same
23:16
as they were in 2016 when the stock
23:18
market was like a third lower than it is
23:20
today
23:21
so the fundamentals are completely out
23:24
of sync with what’s how the markets been
23:26
manipulated I think and then we got of
23:28
course we got the social fabric that you
23:30
brought up which we’ve talked about in
23:31
the past and unfortunately I quite
23:34
certain not predicted this in Prior
23:36
interviews there’s just going to keep
23:37
getting worse and in fact this triple
23:39
crisis of the the economic recession the
23:42
Cova thing the protests and all that
23:44
stuff it’s really just the same problem
23:46
through different through different
23:48
lenses it’s all it all fits together and
23:51
it also fits together that we’ve got a
23:53
horrific allah bad presidential election
23:55
coming up where you know joe biden has a
23:58
real enthusiasm problem everybody knows
24:00
about that and nobody knows really what
24:03
his state of mind is these days because
24:05
he’s hiding out in a bunker and then
24:07
president Trump’s a basic strategy which
24:10
has been very successful for him for
24:12
decades really and certainly in the 2016
24:14
election has backfired his strategy is
24:17
hyperbole he likes to take a situation
24:19
that is pretty good and say that it’s
24:22
great and to take a situation that’s
24:25
great and say it’s the greatest thing of
24:27
all time
24:28
we had the greatest economy of all time
24:29
the first part of 2020 no he didn’t
24:32
that’s ridiculous
24:33
it’s I mean close to the greatest
24:34
economy of all time but this time the
24:37
hyper but in all of those instances the
24:39
hyperbole was on the right side of the
24:41
distribution it was a good economy he
24:44
just called it great he wasn’t saying it
24:46
was a terrible economy that was great
24:48
because that doesn’t resonate with
24:50
people it comes across as disingenuous
24:51
but with the virus he screwed up because
24:55
he’s got a situation where the virus is
24:57
bad and he keeps saying it’s gonna
24:59
disappear it’s not really a prop he’s on
25:01
the wrong side of the distribution the
25:03
virus is a negative side of the
25:05
distribution and he’s pretending that it
25:07
isn’t on the negative side he’s
25:09
pretending that it’s all pretty good and
25:11
it’s just gonna go away
25:12
and that’s I think why his unfavorables
25:15
going up people in the past people said
25:19
Trump’s a liar he was he was an
25:21
exaggerator there’s a difference there’s
25:23
a subtle difference but there’s a
25:25
difference now he’s not an exaggerator
25:27
he’s just changing the sign from a
25:30
cluster from a negative sign to a plus
25:31
sign on that variable and I think that’s
25:34
that’s a really problem for him and I
25:35
don’t know if he knows how to get
25:37
himself out of it so today I saw in the
25:39
news that they’re arguing the argument
25:41
now has become which of these two men is
25:43
more intellectually challenged I think
25:47
they’re safe they’re having to debate on
25:49
who’s more senile okay this is not an
25:51
inspiring conversation when you have to
25:54
ancient guys who they’re there debate is
25:57
centering around which one of them is is
26:00
you know in a greater slope of mental
26:04
decline so this is this is not
26:06
encouraging just having a conversation
26:07
about the election which is only four
26:09
months away at this point Jeffrey I I
26:12
look at the betting markets I know you
26:13
do too and unpredicted those bite and
26:16
beating Trump and also a Democratic
26:18
sweep yet the markets are still going up
26:20
and some people think when there is
26:21
usually a change in leadership that they
26:24
might go down on what do you make of
26:28
that well it’s true that Divine’s ahead
26:31
pretty nicely and unpredicted now and
26:34
it’s also true I think that there’s a
26:36
disconnect between that and the stock
26:38
market because Joe Biden and
26:40
the Democrats broadly they pledged
26:42
pretty loudly that they want to increase
26:46
corporate taxes they want to take that
26:48
tax benefit away from what Trump gave
26:51
corporations and since earnings aren’t
26:54
going up at all really it’s the tax has
26:57
had a lot to do with levitating the
26:59
stock market and if you review if you
27:01
reverse that that’s gonna be a really
27:03
big problem you know I was talking about
27:06
you talked the social fabric and I that
27:08
fits into the election I was listening
27:09
to this fellow who I think they call him
27:11
the president of New York black lives
27:13
matter his name is hawk Newsome and he’s
27:16
actually a pretty interesting guy and he
27:18
was talking on a Sunday program and he
27:20
was talking about politics and the like
27:22
and he was you know he’s got a
27:24
particular core issues that he hammers
27:27
home for his sort of constituency but he
27:29
started to go off on what you hold a
27:30
tangent and he said I don’t want to
27:33
digress too far but you know what’s
27:35
wrong here is I don’t trust any of these
27:37
politicians he said they always show up
27:39
about a year before the election and all
27:41
of a sudden they embrace us they want
27:43
our votes they never do anything for us
27:45
and that sounds that sounded to me to be
27:48
not not a digression or a tangent that
27:50
seemed to me to be really the point the
27:53
point is that there are a lot of people
27:55
that feel that they’re not sure what’s
27:57
wrong but they know that over the last
27:59
however many years twenty years whatever
28:02
thirty years ever it is that somehow
28:04
this economic arrangement is not working
28:06
for them and they understand that takes
28:08
many different forms and you know
28:11
there’s all kinds of data points you can
28:13
look at like wealth inequality but
28:15
there’s other things than that I mean
28:16
these these people these this political
28:19
regime has been in charge for a long
28:20
time and it’s it’s it’s awful how
28:24
they’re the investment in America is so
28:28
uneven how the quality of education is
28:31
so uneven and and really it’s just not
28:34
being addressed and what I hear the
28:36
president black lives matter in New York
28:37
say you know they’re they’re not paying
28:40
attention to us that starts to sound
28:42
like a third party to me I think that if
28:45
if the election were in 2021 and not
28:48
2020 I really think there’d be a third
28:50
party and one thing to watch on that
28:53
is the labor force participation rate
28:55
the number of people that are spoked it
28:57
can have a job that have a job is got
29:00
down I think it it uptick in the most
29:03
recent report but it was down to like 52
29:05
percent that 52 percent of the labor
29:08
force was engaged if that number goes
29:12
any meaningful amount below 50 you’ve
29:14
got a winning third party it’s called
29:16
the unemployment party it’s called the
29:18
omelet out party and I think that’s
29:20
what’s really happening here we’ve
29:22
talked about this in past interviews and
29:24
I just think that that will do nothing
29:26
but get worse and we will ultimately
29:29
I’ve even talked about civil unrest
29:31
during this summer in a past interview
29:33
with you in the context of the
29:35
conventions for this election and that’s
29:38
already here and I think that you were
29:40
going to see an escalation in these
29:43
problems as the voices of the unheard
29:46
remain unheard primarily except except
29:49
for all kinds of sound bites and you
29:52
know promises that I’ve heard a lot of
29:55
times before and so have a lot of other
29:57
people in American constituency yeah
30:00
Jeffrey yeah one final question before
30:01
we let you go one of the things about
30:03
double line even going back to the name
30:05
of it it’s don’t cross the double line
30:07
of risk and we have a lot of investors
30:09
watching a lot of retail investors too
30:11
and what is the risk right now that
30:15
people aren’t talking about enough
30:16
aren’t paying attention to enough that
30:18
they should be more aware of I think
30:22
there’s a real risk and it’s not
30:24
imminent exactly in fact I don’t I don’t
30:26
think it’s really in the next few months
30:27
but I think there’s risk that the dollar
30:30
starts to reverse into a significant
30:32
downtrend because the value of the
30:34
dollar versus other currencies is
30:36
greatly affected by the growth in our
30:39
budget and trade deficit the trade
30:42
deficit is shrinking right now because
30:43
economic growth is bad globally but it
30:46
doesn’t matter because the fiscal
30:48
deficit has just exploded higher I mean
30:50
we’re up at over three and a half
30:51
trillion already and the year in first
30:54
five months of this year in addition to
30:56
that and a lot of people say but the
30:59
dollar will be you say the dog is going
31:00
to go down against what because
31:02
everybody else is doing strange policies
31:04
to and
31:05
that’s a it’s a that’s an okay point
31:08
except it misses the fact that what
31:09
we’re doing here in the United States
31:11
Dwarfs the policies particularly what
31:14
the Federal Reserve is doing versus ECB
31:16
and other central banks what we’re doing
31:18
dwarfs what they’re what they’ve been up
31:20
to we’re really carrying the burden here
31:22
in terms of in terms of fiscal explosion
31:24
and that I think will ultimately lead to
31:26
a weaker dollar which means that you
31:28
might start to see some sort of
31:30
purchasing power problems you might also
31:32
see that the dominance of the US markets
31:36
will start to fade away and maybe not
31:39
turn into dominance but an inferior type
31:41
of a forward-looking
31:43
outcome so I think these people that are
31:46
buying slices of the stock market don’t
31:49
even know what they’re doing and if
31:51
probably lost money already because they
31:53
probably bought them Junaid I just think
31:55
they don’t think they understand that
31:57
this is a is a it’s not a fixed
32:00
situation and there’s all there there
32:02
are several more shoes if not Imelda
32:04
Marcos is closet full of shoes to fall
32:07
on this economic and market situation
32:09
something that we will be watching
32:11
Jeffrey gun lock the CEO of doubling
32:13
capital I thank you so much for this
32:15
great conversation I know our viewers
32:17
appreciate it it’s always great to be
32:18
with you