“Survivor”: Jeff Gundlach Live Webcast

As if there wasn’t enough drama today, here is Jeff Gundlach who hardly needs an introduction, with his latest live DoubleLine webcast (register here or click on the image below).

We doubt the always outspoken portfolio manager will be at a loss what to discuss in his latest webcast titled “survivor”, especially after Powell’s market moving testimony, but one thing we would ask is if Gundlach still believes, as he did at the start of the year, that the Fed will not hike above 5%.

Gundlach, extolling his ability to survive in any market, starts off by presenting a chart he hasn’t shown in a while, the US Federal Budget Balance, saying that it is something that has to be addressed by 2028 as it’s getting out of control.

Echoing what we said just this morning, Gundlach says that a big part of the budget deficit is because the Fed is now a drain of cash, having to pay almost $1 billion in interest (on IOER and Reverse Repos) to the various banks that have trillions parked at the Fed.

Chair Powell, is it true that you are now paying $700MM every day in interest to banks, a number which will hit $800MM daily when rates hit 5.5%, resulting in record “unrealized losses” for US taxpayers? pic.twitter.com/7x9cP6OIY6

— zerohedge (@zerohedge) March 7, 2023

Gundlach then look at the magnitude in fiscal response to recessions, observing the “ever larger doses of opioids” required to fight downturns, which will be a problem when considering the ballooning debt and deficits.

The next chart speaks for itself: with government interest surging, Gundlach says that once the Fed hikes another 25bps or 50bps, this chart is going “straight vertical.”

Going back to one of his favorite topics, Gundlach says that the Fed (and specifically the Fed Funds rate) should be ended, and replaced with the 2Y Treasury.

A novel visualization of the accelerating yield curve inversion which today hit -104bps on the 2s10s.

Another of Gundlach’s favorite charts: copper/gold ratio vs 10Y TSYs. Based on this he calculates that the 10Y yield is 100bps too high.

Turning to economic cycles, Gundlach looks at the Leading Econ Indicators and speculates that we may already be some 2 months into a recession…

… something which the ISM PMI also strongly suggests.

And then there is of course the 2s10s yield curve which as of today is a whopping 104bps! The silver lining here is that the curve hasn’t started to steepen just yet: and every recession sees a powerful steepening before it starts.

Another timing indicator: consumer expectations less current situation…

… and consumer credit, both of which are ominously red cycle.

Another failsafe indicator and favorite of Gundlach is the spot unemployment rate vs the 12 month moving average – any time these lines cross, there is a recession.

And while they haven’t crossed yet, when one overlays the Bloomberg U-3 unemp consensus shows that we have just a few months before the two lines do cross.