From the June 2012 issue of Investment Advisor • Subscribe!

May 22, 2012

The Endangered Perma-Bear

Whatever you do, don’t call Jeff Gundlach pessimistic.

“It’s not pessimism, it’s reality. The numbers take you to the answer,” DoubleLine Funds’ famed fixed income manager stated emphatically in a recent interview.

Gundlach (left) was reacting to my suggestion that he might be a “perma-bear.” It’s funny how every perma-bear I’ve ever interviewed recoils at the label—as if they’ve been accused of being unpatriotic or a Justin Bieber fan. I’d just heard Gundlach deliver his second speech in two weeks that was undoubtedly pessimis … um, negative about debt and spending around the globe. He doubts lawmakers have the political will to do something about it, certainly not before the election. But so does the great majority of the country; nothing wrong with saying it.

His contemporaries at the latest conference agreed, so much so that it was a running theme throughout, with each defending himself vigorously against the scurrilous charge before launching into a full-throated explanation of the desperate hour in which we currently reside.

“We are living in a global realignment that our children and grandchildren will be talking about,” said PIMCO’s Mohamed El-Erian. “We can’t see it because we are so close to it, but make no mistake, it’s there.”

The “Japanese experience,” that country’s lost decade of stagnant GDP growth, “is the template for where we are headed,” economist Lacy Hunt added. “They, too, thought they could solve their debt crisis by taking on more debt. It didn’t work.”

“All I said [was] these things are happening,” Gundlach concluded. “Call it pessimism if you like.”

I agree with his inferred point; labels do nothing to change the situation, and you better find a qualified manager who can take you through it—whatever “it” might be.

So we did.

Rupal Bhansali is the full package; educated around the globe with a few advanced degrees and a 20-year track record of outperformance in good markets and bad. The chief investment officer with Ariel Investments’ international equity portfolio understands and acts on sophisticated strategies (she once worked for George Soros), yet can explain and relate to the common man, which she does in this month’s cover story with her three questions every money manager should be asked.

“First and foremost, investors and advisors need to think more about the destination than the journey, which is to say, ‘What is the end game?’’ she says. “There are too many people focused on what happens to the day-to-day gyration of the market or the daily performance of certain portfolios or managers that they own.”

Despite volatility, regulation, Europe or oil, she demonstrates that it doesn’t have to be that complicated. In other words, no matter what other managers might be thinking, she still sees plenty of room on the ice floe in which to run.

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