“Stock Markets Should be Down Massively,” but Investors “Hypnotized that Nothing Can Go Wrong”

Monday, August 1, 2016
By Paul Martin

Bond bull Gundlach U-turns, goes “maximum negative” on Treasuries

by Wolf Richter
WolfStreet.com
July 31, 2016

Stock investors have entered a “world of uber complacency,” Jeffrey Gundlach, CEO of DoubleLine Capital in Los Angeles, explained – we assume with some bafflement.

On Friday, the S&P 500 hit another all-time high, after it was reported that the US economy grew at a painfully slow rate of 1.2% annualized in the second quarter, after a first quarter of 0.8% growth, which produced a first-half growth of 0.9% annualized, the worst in four years.

Even “adjusted” ex-bad-items earnings of S&P 500 companies have declined on a year-over-year basis for four quarters in a row. Total business sales in the US have declined since mid-2014. Defaults of companies rated by Standard & Poor’s have jumped to the highest level since the Financial Crisis. Overall business bankruptcies are soaring. Yet, stocks march higher.

So Gundlach told Reuters in a telephone interview: “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,” he said.

The Rest…HERE

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