Last Friday afternoon, Reuters ran a story about Jeffrey Gundlach, the chief executive of DoubleLine Capital. He is advising people to “sell everything” because “nothing here looks good.” While I have tremendous respect for Mr. Gundlach, I completely disagree with this statement for the following reasons:
1) For a guy who is nicknamed the “Bond King,” he seems to have many strong opinions about the equity markets. He’s a genius in the fixed income markets, so stick to what you know best.
2) Giving blanket advice to people is irresponsible. You don’t know the person’s age, risk tolerance, timeframe, etc. While I might state my opinions on this blog, it is understood that people should do their own due diligence and not follow ANYONE blindly.
3) The premise behind my bullish stance is that the Central Banks continue to provide a globally coordinated effort to keep rates low and the markets high. Until this changes, why fight it?
4) Jeff is a value investor. I agree that certain sectors have high valuations on a historical basis, but again, you have to make adjustments due to the liquidity provided by Central Banks. In other words, the S&P 500 is not supposed to ONLY trade at 15x earnings for the rest of our lives. Sometimes it trades at 8x earnings and other times at 25x.
One thing I have learned from doing this for the past 20 years is that moves in the market (in both directions) usually go on longer than most people can imagine. Do I think the market will go up in a straight line forever? Of course not. But until the Central Banks stop being accommodative, I say stick with the trend. Does this all end badly? Of course it does! I just think that the move will go on longer than most people expect and when the warning signs show up, I will change my tune. Good luck, but don’t “sell everything.”
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