Although polls show Joe Biden leading his nearest competitor by more than 15 percentage points, Jeffrey Gundlach says he will not be the Democratic nominee for the 2020 presidential election.
Q1 hedge fund letters, conference, scoops etc
Gundlach is the founder and chief investment officer of Los Angeles-based DoubleLine Capital. He spoke via a webcast with investors on June 13. His talk was titled, “YouTube University,” and the focus was his firm’s flagship mutual fund, the DoubleLine Total Return Fund (DBLTX). The slides from his presentation are available here.
Although best known for his market insights, Gundlach was one of the few who correctly predicted Donald Trump’s victory in 2016.
Despite his lead over rivals Bernie Sanders and Elizabeth Warren, Gundlach said the important factor is that 70% of Democratic voters don’t like Biden. That is despite the fact that, given his 30-plus-year political career, voters know “everything about him,” Gundlach said.
Biden has launched two prior presidential campaigns, yet has not managed to secure a single vote from a Democratic delegate.
Biden is not the most electable Democrat, Gundlach said. “The Democrats better hope they have someone more electable than a guy who has never won a delegate.”
President Trump calls Biden “Sleepy Joe,” but Gundlach had his own nickname for Biden – “Jurassic Joe.” That is not a reference to his age, he said, but to the fact that he is “a politician from a bygone era.”
“Biden will not be the nominee,” Gundlach said.
Let’s turn to Gundlach’s comments on the markets and economy, which were not as contrarian as his political prediction.
Tariffs and trade
Gundlach said he chose his title, “YouTube University,” based on a conversation with an Uber driver, who told him that his education came primarily from YouTube videos and their ability to simplify complex topics. Gundlach said his goal in the webcast was to simplify the major economic themes underlying his market outlook.
For the last several webcasts, Gundlach has been focusing on Deutsche Bank’s weak stock price. It is down 95% from its high, and is firmly below $10. It stopped falling in the last week and may have “hit a resistance point,” he said.
The reason behind Deutsche Bank’s troubles is that its price follows the German 10-year bund yield, which is -0.26%. “How can a bank make money when interest rates are negative?” Gundlach asked, rhetorically.
Deutsche Bank’s problems are compounded by the threat of a global slowdown, which he said has become more likely due to tariffs. German exports have failed dramatically since 2018, as has the Korean economy, which is highly export-dependent, according to Gundlach.
“Trade wars are a very big deal,” Gundlach said.
Neither Trump nor Chinese President Xi want to give ground in trade negotiations. Trump said he got something for not putting tariffs on Mexico. It may have been something, Gundlach said, “but not very much.” That might embolden China to take a harder negotiating stance.
First quarter growth may have been helped by the threat of tariffs, as consumers accelerated spending in advance of Trump’s threats. Gundlach gave a small amount of credence to the logic that Trump paradoxically wants the economy to slow, in order to position it for a rebound prior to the 2020 election or to get Powell to lower interest rates.
Oil prices have been “cratering” because of lack of demand, Gundlach said, also suggesting that global growth is slowing. (Oil prices rose somewhat in the last week, corresponding to the attacks on tankers in the Straits of Hormuz.)
Read the full article here by Robert Huebscher, Advisor Perspectives
