Beruflich Dokumente
Kultur Dokumente
Blockhead
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Recap
Central Bank Policy
European Central Bank (ECB)
o Sovereign net bond issuance has been negative as a result of ECB purchases
o Its difficult to make the case for rising yields in Europe given the negative net supply
due to ECB repurchase program or quantitative easing (QE)
o Mr. Gundlach believes the 10-year U.S. Treasury (UST) is more likely to dip below 2%
again than reach 3% during 2015
o Approximately 70% of European companies have higher yields on their stock than
their corporate debt
The Federal Reserve (Fed) Policy
The Fed
o In prior Fed tightening cycles, hourly earnings tended to rise with higher rates
o Mr. Gundlach believes the Fed will want to raise rates if is employment data remains
positive and oil stabilizes
Inflation
o Inflation as measured by the Pricestats Index year-over-year (YoY) is already negative
indicating deflation
o U.S. Core Consumer Prince Index (CPI) (using Eurozone definition) is also negative
o Mr. Gundlach does not believe inflation is a problem now but may be one several
years down the road
o Inflation outlook today is eerily similar to that of 1939; read Jim Grants latest issue
of Interest Rate Observer
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Recap
U.S. Dollar (USD) & Rates
o Speculative positioning is now 60% net long the USD
- Mr. Gundlach believes the USD could strengthen further
o Peak maturities in Fed-held Treasuries come due 2018-2019
o High Yield and Bank Loan also mature around the same time, 2018-2022
o Mr. Gundlach believes the Fed may follow the path of other central banks, which have
hiked rates and subsequently lowered them
Demographics
Japan, China and Europe have population-age distributions that have continued to widen as
citizens get older
The wider population-age distribution is not a problem now but may be down the road
The Bloodless Verdict of the Market
Year-to-Date (YTD) Winners:
o Convertible bonds (V0S0), High Yield bonds (J0A0) and Investment Grade Corporate
bonds (C0A0)
o By credit quality: CCC-rated (JOA3) and BB-rated (JOA1)
YTD Losers:
o Treasury Inflation-Protected Securities (TIPS) and local currency Emerging Markets
(EM)
Commodities
o Gold is holding up pretty well against a USD that has appreciated by 20%
o Mr. Gundlach believes gold will be supported by negative yields globally and could
trade up to $1,400 during 2015
Equities
o Historically, the largest cap-weighted stock in the S&P 500 has underperformed the
index as a whole
o Stock buybacks have been a huge source of demand in the equity market
o Growth (as measured by the Russell 1000 Growth) outperforming Value (as measured
by the Russell 1000 Value)
- Mr. Gundlach believes earnings of value companies may be impacted by the
stronger USD
o Since 2012 the S&P 500 has continued to outperform:
- European equities as measured by the MSCI EAFE Index
- EM equities as measured by the MSCI Emerging Markets Index
o Mr. Gundlach believes the Indian stock market (BSE) is a good long-term investment
(20+ years)
Interest Rates
o 2-year UST yields have risen for nearly 4 straight years
o 30-year UST yields may have put in a low during January and have had marginal price
action since
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Recap
Valuation
o We believe investment grade corporate bonds are overvalued having benefited
from strong performance as a result of a longer duration and low defaults
o High Yield bonds appear fairly valued after entering 2014 the most overvalued in
history
- Mr. Gundlach believes some of the High Yield Energy names will cheapen as oil
may reaches a new low in coming weeks
o We believe Agency Mortgage-Backed Securities (MBS) are fairly valued
o We believe EM fixed income is fairly valued; the prospect for EM worsens with a
stronger USD
o We believe TIPS are cheap but DoubleLine does not own any because of the weak
outlook for inflation
The DoubleLine Total Return Fund (DBLTX/DLTNX)
Characteristics
o Average dollar price of around $100
o The fund still holds a small amount of UST
o MBS characteristics
- Less than 1% in more esoteric securities (Interest Only, Interest Floater, etc.)
- Subprime MBS
Severities are worse than they were a few years ago due to the properties
lack of upkeep while awaiting foreclosure
Question and Answer
Mr. Gundlach is negative on the long-term future of old school car manufacturers due
to the potential efficiency of car use from Uber, driver-less cars, etc.
The bond market is more like the 04-06 than other Fed tightening eras because the Fed
is still active in the market. If the Fed raises rates, the long-end of the curve should
benefit
UST v. German Bunds: UST offers additional yield and should not be hurt by a strong USD
Mr. Gundlach believes Puerto Rico municipal bonds may head lower, but would be a
buyer should prices fall to the low 80s. He remains agnostic about the volatility. Puerto
Rico Municipals are attractive to wealthy clients, particularly in a high tax state.
The funds investment objectives, risks, charges and expenses must be considered
carefully before investing. The statutory and summary prospectuses contain this and
other important information about the investment company, and may be obtained by
calling 1 (877) 354-6311 / 1 (877) DLine11, or visiting www.doublelinefunds.com. Read
carefully before investing.
Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longerterm debt securities. Investments in lower-rated and non-rated securities present a greater risk of loss to principal and
interest than higher-rated securities. Investments in Asset-Backed and Mortgage-Backed Securities include additional risks
that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased
susceptibility to adverse economic developments. The Funds may use certain types of investment derivatives. Derivatives
involve risks different from, and in certain cases, greater than the risks presented by more traditional investments.
Derivatives may involve certain costs and risk such as liquidity, interest rate, market, credit, management and the risk that
a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount
invested. The Funds may also invest in securities related to real estate, which may decline in value as a result of factors
affecting the real estate industry
The Core Fixed Income Fund invests in foreign securities which involve greater volatility and political, economic and
currency risks and differences in accounting methods. These risks are greater for investments in emerging markets.
The Total Return Bond Fund intends to invest more than 50% of its net assets in mortgage-backed securities of any maturity
or type.
Credit Distribution is determined from the highest available credit rating from any Nationally Recognized Statistical Rating
Organization (S&P, Moodys and Fitch).
Diversification does not assure a profit or protect against loss in a declining market..
Fund Holdings and sector allocations are subject to change at any time and should not be considered a recommendation to
buy or sell any security.
Opinions expressed are subject to change at any time, are not forecasts and should not be considered investment advice.
While the Funds are no-load, management fees and other expenses still apply.
Important Information Regarding This Report
DoubleLine assumes no obligation to provide revised assessments in the event of changed circumstances. While this
information based on sources believed to be reliable, DoubleLine does not guarantee the accuracy of the information
provided. DoubleLine assumes no duty to update this information, which is not a complete discussion of all economic factors
reviewed by DoubleLine. DoubleLine reserves the right to change its investment perspective and outlook without notice as
market conditions dictate or as additional information becomes available. The opinions of any individual portfolio manager
does not necessarily reflect the opinions of all DoubleLine portfolio managers.
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