DoubleLine Capital, Released on 1/22/25 (Recorded on 1/9/25)

For Part 1 of this interview, CLICK HERE

For Part 3 of this interview, CLICK HERE

The market segment of Round Table Prime’s 2025 edition, among other topics, explores rare bear-steepening in Treasuries, a possible bubble in private credit, an impairment reckoning coming to small and regional banks, AI stock leaders as the bringers of Schumpeter creative destruction to the economy and the S&P 500 at CAPE ratios last seen in 2021, 1999 and 1929. Participating are DoubleLine CEO Jeffrey Gundlach and as moderator DoubleLine Deputy Chief Investment Officer Jeffrey Sherman with their “returning champions” James Bianco, President and Macro Strategist at Bianco Research; Danielle DiMartino Booth, Founder and Strategist of Quill Intelligence; Charles Payne, CEO-Founder of Wall Street Strategies and Fox Business Anchor; and David Rosenberg, Founder and President of economic consultancy Rosenberg Research & Associates. Round Table Prime 2025 was held Jan. 9 at DoubleLine’s downtown L.A. office.

Highlights:

(6:10) The implications of the U.S. debt and deficit spirals for U.S. Treasuries and, as Jeffrey Sherman asks, “When does it matter?” Jeffrey Gundlach says, “It’s starting to matter in real time,” as the volume of new government borrowing and refinancing of existing debt coincides with the higher rates in the Treasury spot market.

(7:17) The de-inversion of the Treasury yield curve in 2024 and the likelihood of further steepening in 2025. “I think we’re going to see more and more issuance at the longer end,” Mr. Gundlach says. “And I think there’s going to be less and less acceptance of it, and those rates might go up.”

(11:31) The rare appearance of a bear steepening in the yield curve, i.e., “the yield curve steepening in the face of higher interest rates,” James Bianco notes. “That is somewhat unusual for the yield curve to invert and steepen that way. Normally it steepens in a falling rate environment with short-term rates falling faster because the Fed is panicking that the economy is weakening and going into recession – not with rates rising and long rates rising faster.”

(25:35) Record corporate bankruptcies in 2024 as forecast by Danielle DiMartino Booth, “a lot of creditor-on-creditor violence,” “double defaulting,” banks on the hook of impaired credits and “bankruptcy in drag.”

(30:04) Equity market allocations, including Magnificent Seven stocks, artificial intelligence plays and the choice of whether to stay in high-momentum positions or close out. “There’s never been a group of names that have made this much money, that had this much free cash flow,” says Charles Payne. Among lessons learned in his career, he cites the risk of exiting a winning trade too early. “This is a unique period in time that it’s hard to bet against. At some point the trade will fail, but I think you have to ride it until it does.”

(42:01) China, its equity market, its collapsed bond yields and its barriers to innovation amid, as Mr. Bianco notes, outside the periods of the COVID-19 lockdown and Tiananmen Square crackdown, the lowest levels of GDP growth in 50 years.

(46:55) Japanese equities amid a nascent reversal of Japan’s quantitative easing process. “Liquidity is going to become increasingly constrained, in an economy where it’s had no bounds for decades and decades and decades,” says Ms. DiMartino Booth.

(53:33) U.S. stock market valuations. “Valuation is not a timing tool. Fair enough,” David Rosenberg says. “The one valuation metric goes back 100 years, that is a 10-year smooth multiple, so it covers the entire cycle: CAPE, the cyclically adjusted price-earnings multiple. And right now in January, the S&P 500 CAPE, you know what that number is, right? It’s 37. OK, when was the last 37? December of 2021, and 2022 was not a very benevolent year for a long-only equity manager. It was last year here in 1999 and last here in 1929.”

Jeffrey Gundlach is the Chief Executive Officer and Chief Investment Officer of DoubleLine Capital. He is recognized as an expert in bond and fixed income investments. His investment strategies have been featured in leading publications from around the world In 2013, he was named “Money Manager of the Year” by Institutional Investor. He is a graduate of Dartmouth College summa cum laude holding a BA in Mathematics and Philosophy. He attended Yale University as a PhD candidate in Mathematics.

David Rosenberg is the chief economist & strategist of Rosenberg Research & Associates, an economic consulting firm he established in January 2020. He received both a Bachelor of Arts and Masters of Arts degree in economics from the University of Toronto. Prior to starting his firm, he was Gluskin Sheff’s chief economist & strategist. Mr. Rosenberg was also chief North American economist at Bank of America Merrill Lynch in New York and prior thereto, he was a senior economist at BMO Nesbitt Burns and Bank of Nova Scotia. Mr. Rosenberg previously ranked first in economics in the Brendan Wood International Survey for Canada for seven straight years, was on the US Institutional Investor All American All Star Team for four years, and was ranked second overall in the 2008 survey.

Jim Bianco is President and Macro Strategist at Bianco Research, L.L.C. Since 1990 Jim’s commentaries have offered a unique perspective on the global economy and financial markets. Unencumbered by the biases of traditional Wall Street research, Jim has built a decades long reputation for objective, incisive commentary that challenges consensus thinking. In nearly 20 years at Bianco Research, Jim’s wide ranging commentaries have addressed monetary policy, the intersection of markets and politics, the role of government in the economy, fund flows and positioning in financial markets. Prior to joining Arbor and Bianco Research, Jim was a Market Strategist in equity and fixed income research at UBS Securities and Equity Technical Analyst at First Boston and Shearson Lehman Brothers. He is a Chartered Market Technician (CMT) and a member of the Market Technicians Association (MTA). Jim has a Bachelor of Science degree in Finance from Marquette University (1984) and an MBA from Fordham University (1989).

Danielle DiMartino Booth spent nine years as an advisor to Richard W. Fisher at the Federal Reserve Bank of Dallas. Danielle left the Fed in 2015 to found Money Strong, LLC, an economic consulting firm and launched a weekly economic newsletter She is the author of Fed Up: An Insider’s Take on Why the Federal Reserve is Bad for America. DiMartino Booth began her career in New York at Donaldson, Lufkin & Jenrette and Credit Suisse, where she worked fixed income and the public and private equity markets. Danielle earned her BBA as a College of Business Scholar at the University of Texas at San Antonio. She holds an MBA in Finance and International Business from the University of Texas at Austin and an MS in Journalism from Columbia University.

  charles payne, david rosenberg, investing, Jeffrey Gundlach, Jim Bianco, markets, stocks