Jeff Gundlach is still puzzled that bonds can selloff against a near-record spec short.
Gundlach started warning about the potential for a sharp drop in yields back on August 19 when, in a characteristically bombastic tweet, the DoubleLine boss flagged the “massive increase in short positions against 10 & 30 year” bonds. “[That’s the] highest for both in history, by far”, Jeff continued, adding that it “could cause quite a squeeze.”
Fast forward to September 11 and, in his latest webcast, Gundlach took the hyperbole up another notch. “What could get you there is a monumental short squeeze, because the speculative short positioning in the 10-year is off the charts”, he said.
Needless to say, that didn’t pan out. 10Y yields have risen some 30bps since his webcast and the shorts are still, well, short.
That brings us to Thursday, when Jeff made a cameo on CNBC to talk about the bond selloff, among other things. Here’s what he said about that short squeeze pseudo-call that didn’t materialize:
One of the things that is really fascinating about this sell-off in bonds is that it’s happening of the context of a really high short position against the Treasury market. With this sell-off you’d have thought that maybe it would be braked a little bit by all of that short positing maybe looking to take profits because rarely do you have this crowded positioning in a market and they’re all making money on it.
Right. So now, in step with reality, Jeff is kinda, sorta calling for even higher yields:
If you look at the charts and you look at the way the market’s behaving and you think about the trends that are underneath the bond market, it wouldn’t be surprising at all to see the 30-year [yield] go to 4 percent before this move of the breakout above 3.25 percent is over.
Gundlach also weighed in on Donald Trump’s Fed criticism. In case you’re somehow unaware, Trump has called the Fed “crazy”, “loco” and “out of control” in a series of egregious remarks over the past 24 hours. Commenting in the same CNBC interview, Jeff said this:
When it comes to President Trump, it’s clear to me that he’s being crazy like a fox with this Fed rhetoric where he doesn’t want to take the blame.
I guess. But being “crazy like a fox” usually means it’s not readily apparent to everyone else what it is you’re trying to do. I don’t think there’s anyone with a shred of sense that doesn’t understand that the President is simply trying to deflect blame and set the stage for Jerome Powell to take the fall in the event the bottom finally falls out for the longest- running bull market in history. He continued:
[Trump] calls out everybody. It would be completely out of character for him not to point fingers and leave blame at other people’s feet. He does that all the time. President Trump is just a different kind of guy.
Yes, Trump is “the kind of guy” who screws things up and then blames other people, which really doesn’t make him that much “different” from the rest of humanity because let’s face it, nobody likes to take responsibility for their own actions.
Gundlach also made sure to give Trump an out by stating the obvious:
I think it’s kind of a myth that the Fed is really all that independent. They say they’re independent, but they’re constantly, I think, having discussions about about what’s going on.
Thanks Jeff, but the fact that the fact doesn’t function as designed doesn’t thereby mean we should perpetuate that malfunctioning by allowing the President to explicitly commandeer monetary policy.