Long time readers will recognize bond guru Jeffrey Gundlach, who is starting to emerge out into the financial media more often than in the past. Still not a fraction of the face time Bill Gross gets. Today we have a 9 minute video via CNBC – email readers will need to come to site to view.
Bob Pisani of CNBC with a quick overview
1) in the old days, the Fed could mount a pre-emptive strike against inflation; there is no way that can happen now. There is no way the Fed will raise rates as long as inflation is more "theoretical" than actual.
The reason: the average rate on Treasurys was 6 percent a few years ago, it is now 2.5 percent. If rates were to rise to 6.5 percent, there would be trillions of dollars of new debt added to the $15 trillion debt level. The Fed cannot afford to let that happen.
2) because of that concern, the threshold for action on inflation is now higher. Gundlach believes the Fed will not act unless CPI is over 4 percent. It is already above their price of 2 percent, but the Fed is insisting that rise is "temporary"
What about the big rise in necessities like milk and gasoline? Isn't that inflation? Gundlach says it is, but there is no inflation in the two most important indicators: wages and housing. That’s giving the Fed cover.
3) there may be one more Treasury bond rally, but even if there is one, you make very little money.
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund's holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog