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Bond God: The Fed's Actions Are 'Unthinkable'By
Tuesday, February 16, 2016
"What's scaring people is the 12 rate hikes in three years in the dots," DoubleLine Capital founder Jeffrey Gundlach told Reuters in a phone interview last week. And he's right...
The "dots" that Gundlach is talking about are the Federal Reserve's projections of interest rates over the next three years – which are published in a "dot-plot" format.
The Fed's dot plot shows short-term interest rates rising from next to nothing today to more than 2% by the end of next year... and more than 3% by the end of 2018.
Gundlach called the Fed raising rates in today's environment "unthinkable."
"The market is going to humiliate the Fed," he said. "It's bizarro to have rate-hike projections while at the same time, [Federal Reserve Chair Janet] Yellen is talking about negative rates. What a mess."
If you know anything about Gundlach, he's worth listening to...
Gundlach has earned the nickname of the "Bond God" for his correct calls in the markets...
Last year, he correctly predicted that oil prices and junk bonds would fall... and that China's slowing economy would hurt emerging markets and commodities. He also correctly predicted that interest rates on Treasury bonds would go down – which was a prediction against most of the crowd.
Investors have realized Gundlach is the best... He's currently managing $85 billion, mostly in bonds.
So... who would you rather pay attention to when it comes to interest rates? Gundlach, the best guy on the planet at making money from interest rates? Or a group of government employees? It's your call...
Right now, Yellen and her staff are predicting the Fed will raise interest rates 12 times through 2018.
Meanwhile, the REAL money – real-money bets in the futures markets – says the Federal Reserve won't raise interest rates at all until 2017.
The difference between the "real-money experts" and the "government employees" today is massive.
Who are you going to believe? My money is on the experts... My money is on guys like Gundlach.
Gundlach is exactly right. The Fed raising interest rates in this environment is unthinkable. So when is the Fed going to change the dots?
The Fed is predicting higher interest rates each year for the next three years. But don't believe it. The real money says interest rates won't be raised until 2017 – at the earliest.
Good investing,
Further Reading:
"The Federal Reserve says it will raise interest rates to 1.375% by the end of 2016," Steve wrote in December. "DON'T BELIEVE IT!" See why he says interest rates won't go above 1% this year right here.
"The Fed is hiking rates for the first time since 2006 right now," Steve writes. "But the start of a rate-hiking cycle is not a bad thing, based on history." Get the proof here.
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