Having kept a relatively low profile for the past month, suddenly anywhere you look, there's Jeff Gundlach - between his presentation at Ira Sohn, his recent appearance on Twitter, and his latest DoubleLine webcast, the bond king has something to say. Today, as his preferred medium, he picked Reuters, where he told Jennifer Ablan what he said previously, namely that European and emerging markets equities are more attractive than U.S. equities, he also opined on volatility, saying that the VIX is "insanely low."
"I'd rather much be overseas than in U.S," Gundlach told Ablan, repeating what his told the Sohn audience on Monday.
"That's how I felt all year. Part of that was I felt - and it's fading a little bit but it's still a narrative - that the reason people were so bullish on the U.S. is A) it had done really well from 2011 B) they believed the dollar was going to go up a lot more. And I disagreed."
Confirming the great rotation out of the US and into Europe and other markets which we observed two weeks ago when we noted the biggest inflows - approximately $2.4 billion - into Europe since December 2015....
.... Reuters notes that the STOXX 600 index is up 9.7% YTD while the S&P 500 is up 7.1%. Gundlach said Europe as well as emerging markets are also "significantly cheaper" on a cyclically adjusted price-earnings or "CAPE" ratio and price-to-book basis, among factors. "Plus, they are no longer falling knives versus S&P," Gundlach added.
Asked about the VIX which earlier this week to its lowest close since 1993, Gundlach said "I think the VIX is insanely low. Anytime the VIX is below 10, if you could actually buy it, you should. But people can't buy the VIX. A regular Joe can't go long the VIX."
Actually, they can, and usually they do using the most self-destructive way possible, courtesy of ETFs such as VXX and UVXY which have seen an unprecedented inflow, from either retail of professional traders, in recent months, and which continue to be the biggest widowmaker in recent history thanks to its relentless decline as its painfully and meticulously losses of value with every roll of the of the VIX contract, adding insult to record low volatility injury.
Finally, in a separate matter, Gundlach took aim at bond bulls on Twitter where he said “Lousy 10 year Tsy auction. Where are all the investors who turned bullish at 2.17%, talking about a 1.5% target?!?! Buy low, sell high!" He was referring to today's "deplorable" as we dubbed it 10Y auction which was one of the ugliest in recent history. Recall Gundlach was a vocal bond bull when the 10Y was yielding north of 2.50%, and ahead of the Fed’s March rate hike he predicted that the bond market was set up for a rally. Afterwards he projected the 10-year yield would have a short-term drop below 2.25% before moving up toward 3%. If he is right, much more pain is in store for TSY bulls next, at least until a new record number of shorts swamp the 10Y, at which point the squeeze can restart again.
Lousy 10 year Tsy auction. Where are all the investors who turned bullish at 2.17%, talking about a 1.5% target?!?! Buy low, sell high!
— Jeffrey Gundlach (@TruthGundlach) May 10, 2017