Wednesday, May 25, 2016

Market Pundit States Stocks Are "Dead Money"

This week Jeffrey Gundlach said a few things about the market. For those that have no idea who he is I'll give you some quick background. He runs a massive $95 billion asset management company called DoubleLine Capital.

Mr. Gundlach basically came out to say that stocks, specifically the S&P 500, are "dead money". That's a dangerous statement to make. For one it can be interpreted by those who did not read his full interview statement as a reason to sell stocks. He did state he was waiting for confirmation for the market to break one way or another as confirmation of the trend.That's what smart professionals do is wait for a confirmation of the trend. However most people are not professionals. The market has been testing it's support and resistance areas for 18 months. So a true break in either direction is still possible. Retail investors will see the "dead money" statement and become convinced stocks are heading lower so now is a good time to sell their positions without any further research.

Also when he says "dead money" does he mean for the next 2 months or next 5 years? That's a distinct difference. A few months is just a blip on the traditional long term investors radar. For traders that's an eternity so it depends on what camp you fall in. Remember traders and investors are not the same people, but both are market participants.

Now I'm not going to say the market is heading higher or lower.  Nor will I ever admit to being the smartest person or the brightest investor. Just a person that puts a damn good amount of research into the decisions I do make in hopes of minimizing my losses while still making plenty of money.The market will tell us which way it plans to go and we just need to pay attention. Yet owning pieces of business' are a vital part of each persons long term investment strategy. What proportion is dependent upon each individuals strategy, risk comfort, and goals.

However I hope Gundlach is short the S&P 500 and gets the s*** squeezed out of his position as the market continues to rally this week. For all we know he is either personally short, or his company is short equities, and he is hoping his statement can have a short term impact on the market to exit his position.  I'm always skeptical when people who manage massive amounts of money open their mouths. There is usually more going on behind the scenes.

If I were running a company with that much money under management(maybe one day) I'd keep my mouth shut.  Honestly in the long run my words would make no difference to the market. The market will do what it wants to do and make 99.9% of people look like absolute fools for everything they said. However to an individual those words can have a devastating impact even if they don't realize it at first.

No comments:

Post a Comment