Why are the World’s Biggest Money Managers So Bearish on Stocks?

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August 5, 2016 8:05am NYSE:DIA NYSE:SPY

bear 600X300Excerpted from Mike Larson: Many of the world’s biggest money managers have turned ultra bearish on stocks (not to mention bonds), and it’s time to examine why.


I always like bold calls. So I couldn’t help but take notice when Jeffrey Gundlach, the outspoken chief executive of DoubleLine Capital said this a few days ago:

“The artist Christopher Wool has a word painting: ‘Sell the house, sell the car, sell the kids.’ That’s exactly how I feel — sell everything. Nothing here looks good” … “The stock markets should be down massively but investors seem to have been hypnotized that nothing can go wrong.”

Powerful stuff for sure. That’s especially true when you consider Gundlach oversees a pool of more than $100 billion in capital at his firm. Just about the only thing he does like is gold and gold miners. He added that he thinks the Fed is “out to lunch” in its analysis of the economy, and that the Bank of Japan is out of bullets because, “You can’t save your economy by destroying your financial system.”

Of course, Gundlach is far from alone. Janus Capital’s Bill Gross just released his latestInvestment Outlook, and he rained on Wall Street’s parade, too. His take on today’s markets:

“I don’t like bonds; I don’t like most stocks; I don’t like private equity. Real assets such as land, gold, and tangible plant and equipment at a discount are favored asset categories. But those are hard for an individual to buy because wealth has been ‘financialized’.”

You probably also remember my columns from this spring, the ones that noted how many of the nation’s billionaires were the most bearish on stocks they’ve been in years. The list includes everyone from Carl Icahn and Stanley Druckenmiller to Sam Zell and George Soros.

What accounts for the bearishness? I mean, didn’t the major averages just hit all-time highs? I think it all goes back to valuations and to where we are in the economic and credit cycles.

Valuations on all kinds of assets are completely ridiculous. They’ve been inflated to some of the highest levels ever by too much funny money from the world’s central banks. Almost nothing is cheap anymore, especially taking into account how far into the economic cycle we are.

Billionaires know this. Gross and Gundlach know this. And judging from the incipient tightening of lending standards I told you about earlier this week, an increasing number of bank executives are now seeing the writing on the wall.

On the flip side, you have a handful of government bureaucrats and Ivory Tower economists trying to hold back the tide. Their latest Hail Mary idea is fiscal spending, particularly in Japan. But it turns out that, just as I suspected, the “massive” stimulus over there is mostly smoke and mirrors.

We’re at the tail end of the biggest “Everything Bubble” in history. That means you have to stay cautious with your stocks, own gold, avoid taking too much credit or duration risk in bonds, and hold more cash now than you have at any time since the bull market began in 2009.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) posted small gains in premarket trading Friday. The DIA has gained about 5% since the start of 2016.

DIA-2016-08-05

This article brought to you courtesy of Money and Markets.


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