From the October 2012 issue of Investment Advisor • Subscribe!

September 25, 2012

Through the Looking Glass

Developing countries are now better fiscal stewards than developed countries.

Read more about Jeff Gundlach in this month's cover story. Read more about Jeff Gundlach in this month's cover story.

DoubleLine’s Jeff Gundlach hosted a Web seminar in mid-September titled, “Mirror, Mirror on the Wall,” a theme he’s trumpeted in a number of venues recently. No, it wasn’t another star manager waxing rhetorical to a demonic image in a foggy-looking glass, although with the size of the egos of some, you’re forgiven the thought. Rather, it dealt with the contrarian nature of the investing world in which we all currently reside, especially when compared with traditional models, sectors and assumptions.

The theme certainly isn’t new, as fellow fixed-income journeyman Bill Gross routinely notes with his concept of new normal. But the examples Gundlach gave brought into stark relief the notion of just how far afield we’ve gone.

“If you look into a mirror, obviously everything looks backwards,” Gundlach said, when explaining the title of the seminar. “It’s a way to get a very different view of the world and what’s happening in it.”

As an example, Gundlach noted that the discussion used to be about basket cases like Argentina and other developing countries, but he reminded listeners that developed countries are now the biggest debtors.

“Developing countries are now better fiscal stewards than developed countries, and this has played out in Europe.”

Forget banana republics; maybe “schnitzel democracies” are now the worry.

Gundlach is a quirky guy, employing sculpture as metaphor throughout the presentation. He noted the fragility of many of the pieces of famed artist Anish Kapoor, even though many of Kapoor’s pieces are reinforced with steel.

“I’m similarly impressed by the fragility of our economic system, even though it’s been reinforced with so many heavy measures by governments around the globe: ECB bond buying programs and zero interest rate policies here in the [United States], for instance.”

It’s that kind of color that punctuated our interview for this month’s cover story, which took place a few weeks prior to the Web seminar. In between quotes from Shakespeare and other flowery prose, Gundlach gave us his insight into current goings-on in China, Europe, the United States, the Spanish stock market, Apple, gold and much more.

Just as he did with the Web seminar, he was able to explain complicated concepts in a way that made them universally understood, and we felt smarter for his having done so. It’s this kind of communication, seemingly off-putting at first but so subtle you’re in deep before you know it, that’s one reason for his stratospheric increase in AUM in three short years. Well, that and his equally solid performance. Enjoy our interview, beginning on page 28.

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