Salient to Investors:

Jeffrey Gundlach at DoubleLine Capital says:

  • The first phase of the coming debacle was the 27-year buildup of corporate, personal and sovereign debt to 2008.
  • The third phase will be deeply indebted countries and companies defaulting sometime after 2013.
  • Buy gemstones, art and commercial real estate and other hard assets.
  • Chinese companies, US natural gas producers and gold-miners are bargains.
  • His Total Return Bond Fund is 78 percent in low duration residential mortgage-backed securities including the low duration nonguaranteeds, which Philip Barach at DoubleLine said would have few defaults if higher interest rates meant the economy was improving and housing prices recovering. Sarah Bush at Morningstar cautioned on July 18 about the use of volatile mortgage-backed derivatives such as inverse floaters.
  • No country will default in 2013. However, Japan is running out of policy tools.
  • Inflation could rise by 2 percent if the Fed buys more government debt.
  • Obama will not be able to reach an accord with Congress to make significant cuts in the deficit. Tax hikes on the wealthy won’t bring in enough to have a significant impact and politicians won’t cut entitlement programs much because the public overwhelmingly supports them.
  • There will be no grand compromise on the fiscal cliff if an agreement isn’t reached by January, so expects politicians to push the deficit issues into 2013 and beyond. Obama won’t give on anything, and the Republicans won’t roll over.
  • There are opportunities in emerging-markets equities, particularly in China.
  • Demographics in some emerging markets will support their sustained growth. Developed nations will have fewer than 3 workers for every retiree by 2025 versus 6 to 7 for Brazil, India and Mexico.
  • US companies don’t have much potential for growth.
  • Gold-miners and natural gas producers are cheap.
  • Apple will struggle to reach its earnings potential without an innovator like Steve Jobs at the helm.
  • Investing in natural gas is similar to buying gold in 1997.

Jeffrey Sherman at DoubleLine said Chinese stocks make up the majority of the 6.7% of international equity holdings in his fund.

Luz Padilla at DoubleLine said the only reason asset prices are up is because of all the liquidity in the system, but this could turn very quickly.

Larry Fink at BlackRock says the US banking system is in good shape and the large supply of natural gas in the US will create jobs, and is long-term very bullish on the US.

Richard Pildes at NYU said the constitutionality of Congress creating independent agencies like the Fed has been long settled.

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