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CNBC Exclusive: CNBC Transcript: Jeffrey Gundlach, CEO & CIO of Doubleline Capital on CNBC's "Squawk on the Street" Today

WHEN: TODAY, TUESDAY, September 9, 2014

WHERE: CNBC'S "SQUAWK ON THE STREET"

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Jeffrey Gundlach, CEO & CIO of DoubleLine Capital today on CNBC's "Squawk on the Street." Video of the interview is available on CNBC.com.

All references must be sourced to CNBC.

FABER: EARLIER THIS YEAR DOUBLELINE CAPITAL CEO AND CHIEF INVESTMENT OFFICER JEFFREY GUNDLACH MADE A CALL THAT INTEREST RATES WOULD FALL RATHER THAN RISE BETTING THAT TREASURIES WERE UNDERVALUED SELLING PRESSURE ON THE DOLLAR WAS LIKELY OVER. TURNS OUT HE WAS RIGHT AND IT IS PAYING OFF DOUBLELINE'S TOTAL RETURN BOND FUND OUTPACING ITS PEERS AND HAS SEEN INFLOWS FOR AT LEAST THE LAST SEVEN MONTHS. JOINING ME NOW IN AN EXCLUSIVE IS THE MAN HIMSELF, JEFFREY GUNDLACH. YOU TURNED IT AROUND, DIDN'T YOU, IN TERMS OF THAT INTEREST RATE CALL. 2013 WAS NOT THAT GOOD TO YOU WHEN IT CAME TO THE BONDS BUT THIS YEAR HAS BEEN VERY GOOD TO YOU. DOES IT KEEP UP?

GUNDLACH: I THINK BONDS ARE GOING TO REMAIN FAIRLY STABLE THIS YEAR. OBVIOUSLY, WE STARTED THE YEAR, THERE WAS OVERWHELMING CONSENSUS THAT RATES ARE GOING TO RISE. IT'S KIND OF FUN TO GOOGLE INTEREST RATES WILL FALL IN 2014 AND SEE WHAT YOU GET. BECAUSE YOU GET A WHOLE BUNCH OF HITS THAT TALK ABOUT SELL YOUR BONDS IMMEDIATELY, RATES ARE GOING TO RISE. BOND PRICES ARE GOING TO FALL. BUT YOU DO GET A HIT THAT SAYS GUNDLACH SAYS RATES WILL FALL IN 2014. I REALLY THOUGHT THEY WOULD GO DOWN TO ABOUT 230, 240 THEY MADE IT ALL THE WAY TO THE BOTTOM. I DO WEBCASTS EVERY QUARTER OR SO. I'M ACTUALLY DOING ONE THIS AFTERNOON AT 4:15 EASTERN. YOU CAN FIND LOG-IN INFO AT DOUBLELINEFUNDS.COM. BUT AT THE LAST WEBCAST IN JUNE I SAID I THINK FOR THE REST OF THE YEAR RATES WILL RANGE ON THE TEN YEAR BETWEEN 2.2 TO 2.8. TODAY AS WE SIT HERE AT THE NEW YORK STOCK EXCHANGE, THEY ARE LITERALLY EXACTLY AT THE MID POINT OF THAT BAND 2.2 TO 2.8.

FABER: IS THE MARKET THOUGH PERHAPS NOT APPRECIATING JANET YELLEN WHO HAS BEEN WARNING SINCE JUNE THE FED COULD RAISE RATES MORE AGGRESSIVELY IF THINGS START TO IMPROVE IN THESE VERY MONTHS THAT WE ARE IN AND PERHAPS NOT TAKING IT AS SERIOUSLY?

GUNDLACH: I DON'T REALLY HEAR JANET YELLEN SAYING THAT. I HEAR A LOT OF HER ASSOCIATES SAYING THAT. SHE SEEMS TO BE MORE CONCOCTING EXCUSES WHY NOT TO RAISE INTEREST RATES ANYTIME SOOM. I DON'T THINK JANET YELLEN WANTS TO RAISE INTEREST RATES AND I DON'T REALLY THINK THERE IS NOT MUCH OF A REASON TO RAISE INTEREST RATES.

FABER: WHY NOT? WHY ISN'T THERE A REASON TO RAISE INTEREST RATES WITH THE POOR PERCENT GDP PRINT?

GUNDLACH: WELL WHAT ABOUT THE NEGATIVE 2 GDP PRINT RIGHT BEFORE THAT? IT IS FUNNY HOW WE DON'T LIKE TO THINK ABOUT THE NEGATIVE ONES. FIRST HALF OF THIS YEAR, GDP WAS ABOUT 1% WHEN YOU AVERAGE THE TWO QUARTERS TOGETHER. AND TRUE TO FORM THE LAST THREE, FOUR YEARS, AT THE BEGINNING OF THE YEAR ECONOMISTS ALL BELIEVED AS A CONSENSUS VIEW POINT THE ECONOMY WOULD GROW AT 3%. THAT WAS WHAT STARTED AT THIS YEAR. THEN IT GOT DOWNGRADED ALL THE WAY TO 1.7%. NOW LOOKS LIKE IT MIGHT COME IN IN THE LOW 2% AGAIN. THE GDP GROWTH TODAY IS ACTUALLY NO DIFFERENT, SLIGHTLY LESS THAN IT WAS IN 2012. IN 2012 NOBODY WAS TALKING ABOUT THE ECONOMY BEING TOO STRONG, THAT INTEREST RATES NEEDED TO RISE. IN FACT IN SEPTEMBER 2012 WAS WHEN WE EMBARKED ON QE-3, $85 BILLION OF BOND BUYING PER MONTH. IF THE ECONOMY WAS TOO WEAK IN 2012 TO RAISE RATES AND NEEDED STIMULUS SUPPORT, WHY IS LOWER GDP TODAY NEEDING HIGHER RATES?

FABER: ALL RIGHT WHEN WE COME BACK TO THIS CONVERSATION ON BONDS WHICH YOU HAVE SO MANY TIMES I AM SURE EVERY DAY, NOT TO MENTION LATER ON YOUR WEBCAST, WHERE DO WE STAY? AROUND HERE TO 3%? IS THAT THE NEW NORMAL OR THE OLD NORMAL?

GUNDLACH: I THINK IT'S GOING TO BE DRIVEN. AND WHAT'S HAPPENING IN RECENT WEEKS AND EVEN MONTHS AND EVEN RECENT DAYS LIKE TODAY IS U.S. INTEREST RATES SEEM TO BE DRIVEN, NOT BY ATTITUDE SO MUCH ABOUT BY THE FED AS PEOPLE TALK ABOUT, THEY SEEM TO BE DRIVEN MORE BY WHAT'S GOING ON WITH EUROPEAN INTEREST RATES. IT IS INTERESTING THAT EUROPEAN INTEREST RATES ROSE ACTUALLY FAIRLY SHARPLY IN THE PERIPHERY LAST NIGHT. GERMAN RATES HAVE PEAKED OVER 1% ONCE AGAIN.

FABER: IT'S SHOCKING.

GUNDLACH: YEAH AMAZING A RATE OF A BIG 1%. YOU CAN GET 1% ON THE THREE-YEAR TREASURY, NOW TOO. WHICH IS A FIRST TIME IN A WHILE. BUT THE THING THAT'S BEEN PULLING U.S. INTEREST RATES DOWN DRIVING RELATIVE TO EUROPEAN RATES, IS THEY TOWER OVER THE RATES IN COUNTRIES LIKE FRANCE AT 1.35% RATE. GERMANY AT A LOW 1%. I TALKED ABOUT THIS IN THE BEGINNING OF THE YEAR

FABER: ITALY AND SPAIN ARE BELOW.

GUNDLACH: SURPRISINGLY. THAT SEEMS HARD TO BELIEVE. IT SEEMS LIKE THE'S A VERY EASY TRADE NOT TO OWN SPANISH BONDS WHEN YOU PICK UP A HIGHER YIELD IN U.S. BONDS. BEYOND THAT THE U.S. DOLLAR HAS BEEN KILLING IT. THE U.S. DOLLAR HAS FINALLY STARTED TO STRENGTHEN IN A REALLY MAJOR WAY. IT BOTTOMED OUT WAY BACK IN 2011, BUT HAD BEEN PAINFULLY RANGEBOUND.

FABER: SO IS THAT A FURTHER TAIL WIND FOR U.S. TREASURIES?

GUNDLACH: OF COURSE IT'S A TAIL WIND FOR U.S. TREASURIES. BECAUSE IF YOU ARE A EUROPEAN INVESTOR, IT'S KIND OF A NO-BRAINER. YOU GET A HIGHER YIELD NOT BY MUCH BUT AT LEAST YOU GWT A HIGHER YIELD. THERE IS GOOD REASON TO BELIEVE THE DOLLAR WILL REMAIN STRONG.

FABER: WHY?

GUNDLACH: U.S. ECONOMY IS STRONGER BY FAR THAN THE EUROPEAN ECONOMY. WE STILL HAVE MANY PROBLEMS, GROWING PROBLEMS IN GEOPOLITICAL WORLD WHICH TENDS TO SUPPORT THE DOLLAR. AND THE MOST LATEST THING WHICH I THINK IS SOMEWHAT IMPORTANT IS THE SCOTTISH SUCCESSION DEAL. WHICH AFTER ALL THE EURO IS ALL BASED UPON A HOPE OF UNITY AND COOPERATION. THEY'VE DONE A GOOD JOB WHEN THERE WERE RIFTS AND WORRIES BACK IN 2011, IN PARTICULAR, THE EURO MIGHT HAVE A PROBLEM. THEY DID A GOOD JOB KEEPING IT TOGETHER. BUT IF THERE IS SUCCESSION GOING ON. I KNOW IT'S NOT CENTRAL TO THE EURO, BUT THAT IS JUST KIND OF A REGIONAL IDEA WHAT ABOUT CATALONIA AND OTHER THINGS THAT HAVE BEEN IN THE NEWS.

FABER: SO YOU ARE WATCHING THAT VOTE CLOSELY?

GUNDLACH: I THINK IT WILL BE A NO VOTE, BUT I AM WATCHING IT CLOSELY. I THINK YOU HAVE TO WATCH IT CLOSELY. I THINK IT IS ONE OF THE REASONS, IT IS THE REASON, I THINK, WHY RATES ROSE IN THE EURO ZONE LAST NIGHT. I THINK WHAT IS GOING TO HAPPEN. IT WENT TO A 51%, LET'S SECEDE VOTE IN THE POLLS. I DON'T THINK IT IS GOING TO PASS. I THINK AT THE END OF THE DAY WHEN PEOPLE WALK INTO THE VOTING BOOTH AND HAVE TO PULL THE LEVER, THEY KIND OF LOSE ALL OF THEIR BRAVADO AND RHETORIC AND KIND OF SAY, WHAT I AM EXACTLY DOING HERE IF WE SECEDE FROM THE UK? SO I THINK IT WILL GO DOWN. BUT THE PROBLEM IS, IT'S NOT GOING TO GO DOWN IN A WAY THAT IS OVERWHELMING. SO THE ISSUE OF WHAT'S GOING TO HAPPEN WITH THIS HAPPY FAMILY IN EUROPE AND EVEN IN THE UK WILL LINGER ON, I THINK. I THINK THAT'S GOING TO PROBABLY MEAN THAT THE BOTTOM MAY BE IN THIS YEAR FOR EUROPEAN RATES, I DO THINK THE BOTTOM IS PROBABLY IN FOR U.S. RATES AND OF COURSE IF WE GO ALL HE WAY BACK TO THE BIGGER PICTURE, THE LOW IN U.S. RATES WAS IN JULY 2012. SO U.S. RATES ARE RISING. THEY ARE JUST RISING VERY SLOWLY. I THINK THAT IS GOING TO REMAIN THE CASE FOR A COUPLE MORE YEARS.

FABER: COUPLE MORE YEARS. YOU ARE NOT IN THAT CAMP THAT SAYS, BE CAREFUL FOR THAT PERHAPS VIOLENT RISE THAT SEEMS SOMEWHAT UNEXPECTED? THAT WILL DISLOCATE A LOT OF ASSET CLASSES, WITH EVERYBODY SAYING WELL IT WILL JUST MEAN IT'S A REFLECTION OF STRENGTH IN THE U.S. ECONOMY, ALL THESE STRATEGISTS WE BRING ON, THAT IT WILL ACTUALLY WILL REALLY BRING A LOT OF PAIN, YOU ARE NOT A BELIEVER?

GUNDLACH: I'M NOT A BELIEVER. I THINK THE FED FOLLOWS THE LONG END OF THE MARKET A LOT MORE THAN PEOPLE WANT TO RECOGNIZE. I'VE BEEN AT THIS GAME 30 YEARS. THE FED IS NOT LIKELY TO RAISE INTEREST RATES IN ANY KIND OF MAJOR WAY IF THE LONG END IS STABLE, LET ALONE BEING LOWER THAN IT WAS AT YEAR END. ALSO WHAT I FIND FASCINATING, IS THAT THIS YEAR THE YIELD CURVE HAS FLATTENED. IN OTHER WORDS LONG RATES HAVE COME DOWN. SHORT RATES GONE UP. IT ALMOST SEEMS LIKE THE ACTION OF THE BOND MARKET IN RECENT DAYS AND WEEKS IS SUGGESTING SOMETHING TRULY BIZARRE. THAT IS THAT IF THE FED RAISES INTEREST RATES, THE YIELD CURVE BELIEVE IT OR NOT MIGHT FLATTEN AT 3%. BECAUSE WHAT ENDS UP HAPPENING, WHEN ECONOMIC DATA COMES OUT WEAK LIKE THE EMPLOYMENT REPORT WAS KIND OF WEAK LAST FRIDAY, WHAT YOU SEE IS THE LONG END DOESN'T DO MUCH IN TERMS OF RALLYING. THE SHORT END RALLIES. THAT MUST BE BECAUSE PEOPLE THINK WELL THE FED IS GOING TO BE LOW LONGER. AND THEN WHEN DATA COMES OUT THAT'S STRONG, YOU SEE THE LOWER END OF THE YIELD CURVE THE SHORT END OF THE YIELD CURVE GOING UP IN RATE. THE LONG END BEGRUNGINGLY, IT'S ALMOST LIKE THE LONG END LIKES THE ECONOMIC DATA BECAUSE IT THINKS THE FED MAY MAKE A HUGE MISTAKE AND START ACTUALLY DOING WHAT PEOPLE ARE FEARFUL OF OR PREDICTING, RAISING RATES IN THE FIRST QUARTER OF 2015, WHICH MIGHT LEAD, WOULD BE THE MESSAGE OF THE BOND MARKET, I'M JUST BEING AN INTERPRETER HERE, I'M NOT SAYING THIS IS NECESSARILY MY MACROECONOMIC ANALYSIS. BUT IF YOU READ THE TEA LEAVES OF THE BOND MARKET,IT MIGHT BE IF THE FED RAISES RATES EVEN MODERATELY LIKE TO 1% OR 2%, MAYBE THE ECONOMY CAN'T TAKE IT.

FABER: HOUSING. WHICH WE MAY NEED TO CARRY OVER THIS CONVERSATION OVER TO AFTER THE BREAK. BUT I WANT TO MOVE IT TO STOCKS. I SAW YOU BACK IN MAY. YOU MADE A CALL. SHORT THE HOME BUILDERS. HAS THE BOTTOM BEEN PUT IN THERE?

GUNDLACH: NO THE BOTTOM IS NOT IN HOME BUILDERS ARE DOWN SINCE MAY.

FABER: I KNOW SO THAT'S MY POINT. IS THAT TRADE PLAYED OUT OR DO YOU THINK THERE IS MORE TO GO?

GUNDLACH: THE THING ABOUT THAT TRADE IS IT WORKED BUT IT HAS NOT WORKED BY VERY MUCH BECAUSE THE STOCK MARKET GENERALLY THE S&P 500, THE BETA OF STOCKS HAS BEEN PRETTY REWARDING. THE BEST TRADE WOULD HAVE BEEN TO BE SHORT THE HOME BUILDERS AND LONG THE S&P 500 BECAUSE IT'S REALLY A RELATIVISTIC TRADE. BUT I THINK THE HOME BUILDERS WILL CONTINUE TO DISAPPOINT. I NOTICED THERE WAS DISAPPOINTING NEWS OUT OF SOME OF THE HOME BUILDER INDIVIDUAL NAMES LAST WEEK.

FABER: TOLL BROTHERS. A DECENT NUMBER BUT GAVE SOME COMMENTARY--

GUNDLACH: LOOK AT THE GUIDANCE. THE POINT I MADE IN MAY THAT I'M STILL PRETTY COMMITTED TO, PEOPLE ARE REALLY MISINTERPRETING THE PROSPECTS FOR THE HOME BUILDERS, NEW HOME SALES, SINGLE FAMILY HOME SALES. NOT MULTIFAMILY, WHICH I THINK IS CLEARLY, FAIRLY ROBUST. BECAUSE THEY ARE MISSING KIND OF THE DEMOGRAPHIC SHIFT OF PREFERENCES AND OF ECONOMICS. HOUSING ISN'T NEARLY AS AFFORDABLE AS PEOPLE THINK. HOME PRICES ARE UP A LOT. INTEREST RATES ARE UP A LOT. NOT A LOT, BUT MODERATELY FROM WHERE THEY WERE AT THE BOTTOM. IF YOU REALLY THINK INTEREST RATES ARE GOING TO RISE BASED ON A STRONGER ECONOMY, IF YOU ACTUALLY HAVE RISING HOME PRICES AND RISING INTEREST RATES, EVEN IF IT'S MODERATE, THAT'S A HORRIBLE RECIPE FOR AFFORDABILITY. BEYOND THAT, YOUNG PEOPLE AS WE ALL KNOW ARE UNDEREMPLOYED, LIVING IN THEIR PARENTS' BASEMENT, CAN'T GET A JOB A COLLEGE DEGREE IS REALLY SUPPOSED TO SUPPORT, TONS OF STUDENT LOAN DEBT. AND SO THE PROBLEM IS THESE DAYS PEOPLE TO BUY A HOME NEED SOMETHING CALLED A DOWN PAYMENT. OLD FASHIONED CONCEPT THAT WENT OUT THE WINDOW ABOUT EIGHT YEARS AGO. BUT NOW IT'S BACK. HOW ARE YOU GOING TO GET A DOWN PAYMENT WHEN YOU ARE UNDEREMPLOYED, RENTS ARE GOING UP, STUDENT LOAN DEBT, WAGES AREN'T RISING. IF YOU REALLY LOOK AT ALL THE METRICS OF HOW, WHAT MAKES HOMES ATTRACTIVE AND AFFORDABLE, THEY ARE NOT IN PLACE LIKE THEY WERE TEN YEARS AGO. I MAKE THE CASE THEY NEVER WILL AGAIN. I DON'T THINK YOU'LL SEE SINGLE FAMILY HOUSING STARTS HIT $1.5 MILLION EVER AGAIN IN MY CAREER. NOT ONE TIME.

FABER: OKAY. WE'LL HAVE A LOT MORE UPLIFTING THOUGHTS WITH JEFFREY GUNDLACH.

FABER: WELCOME BACK. WE ARE JOINED ON SET BY JEFFREY GUNDLACH. I KNOW SARA AND SIMON HAVE SOME QUESTIONS FOR YOU.

EISEN: YOU SAID YOU THOUGHT THE DOLLAR LOOKED LIKE IT WOULD CONTINUE TO GO STRONG. WE DIDN'T TALK ABOUT THE JAPANESE YEN WHICH HAS BEEN A REAL MOVER OVER NIGHT HITTING THE LOWEST LEVEL SINCE SEPTEMBER 2008. DOES THAT TRADE HAVE MORE OF A RUN?

GUNDLACH: I THINK SO. THE THING THAT WAS KIND OF SURPRISING ABOUT THE YEN, WAS IT HAD THAT HUGE MOVE IN 2013 THROUGH MAY OF 2013, FROM 2012 TO 2013. AND THEN WENT ABSOLUTELY FLATLINED IN A WAY FRANKLY THAT ALMOST LOOKS LIKE IT'S MANIPULATED. BECAUSE IT STAYED AT $102 DAY AFTER DAY AFTER DAY. IT WAS STRONG WHEN IT WAS AT $100 AND WEAK AT $103. I THINK THIS BREAKDOWN IN THE YEN HAS PRETTY HIGH MOMENTUM. I WOULDN'T BE SURPRISED TO SEE THE YEN GET SUBSTANTIALLY WEAKER.

EISEN: LIKE WHAT LEVEL?

GUNDLACH: WELL, I'M GOING TO SAY A CRAZY NUMBER.

EISEN: DO IT.

GUNDLACH: I'M DOING THIS FOR A LONG-TERM POINT OF VIEW. AND I SAID THIS IN NOVEMBER 2012 I LIKE THE YEN OVER LONG TERM, I MEAN YEARS HERE, IS GOING TO $200. $106, OKAY. WE ARE ON OUR WAY.

EISEN: LIKE TEN YEARS?

GUNDLACH: I THINK LESS THAN TEN YEARS. MAYBE THREE TO FIVE YEARS. BECAUSE THE ONLY POLICY THEY HAVE THERE IS NOTHING TO DO THAN TO DEBASE THE CURRENCY. IT IS THE MOTHER OF ALL DEBASEMENT. THEY HAVE THE WORST DEMOGRAPHICS OR AMONG THE WORST DEMOGRAPHICS IN THE WORLD. THEY ARE IMPORTING ENERGY, UNLESS THEY GO BACK TO NUCLEAR. WHICH THERE HAVE BEEN SOME FEARS OF UNDERSTANDABLY. THEY HAVE TO IMPORT THEIR ENERGY. THEY HAVE NEGATIVE BIRTH RATE. THEY HAVE HUGE GOVERNMENT DEBT. DO YOU HAVE ANY IDEAS? I THINK ALL YOU PRETTY MUCH HAVE IS DEBASING.

SIMON HOBBS: I KNOW THAT EVERYBODY WANTS TO GET ON AND TALK ABOUT APPLE AND TESLA. BUT JUST BEFORE WE LEAVE THAT, THE CENTRAL PREMISE OF WHAT YOU ARE SAYING HERE. THAT INTEREST RATES IN THIS COUNTRY WILL ONLY RISE VERY GRADUALLY OVER THE NEXT COUPLE OF YEARS.

GUNDLACH: YES.

HOBBS: YOUR READING OF THE BOND MARKET IS THAT IT MIGHT NOT BE ABLE TO TAKE A 1%, 2% OR THE ECONOMY MAY NOT BE ABLE TO TAKE A 1%, 2% INTEREST RATE RISE FROM THE FED. WHAT THEN, I MEAN, ARE YOU LAYING OUT LIKE A SCENARIO VERY SIMILAR TO A DEPRESSION? BECAUSE SURELY AT SOME POINT THE FED HAS TO EXIT IN ORDER TO COME BACK IN AND STIMULATE THE ECONOMY WHEN WE TURN DOWN AGAIN. I MEAN, WHAT IS – WHAT HAPPENS IN 3 TO 5 TO 7 YEARS?

GUNDLACH: YEAH, WELL, THAT IS SORT OF THE LOGIC – THE BEST LOGIC FOR RAISING RATES AT ALL IS WHAT YOU SAID, SIMON, IS LET'S GO TO 2% SO AT LEAST WE HAVE SOME ABILITY TO STIMULATE ON THE WAY DOWN. THE PROBLEM IS, THE BOND MARKET SEEMS TO BE TELLING THE MESSAGE THAT IF YOU ARE GOING TO RAISE INTEREST RATES, THE ECONOMY COULD WEAKEN. SO WE MIGHT RUN INTO SORT OF A RECESSION FIRST. AND THEN MAYBE, THE ONLY RESPONSE IS SOME SORT OF TRUE INFLATIONARY POLICY. ONE THING THAT PEOPLE DON'T THINK ABOUT WHICH IS REALLY IMPORTANT IS WE NEVER REALLY FINANCED THE 2012, 2013 BUDGET DEFICIT. THE FED BOUGHT IT. THOSE BONDS ARE GOING TO MATURE ONE OF THESE DAYS. AND THEY START MATURING A FEW YEARS FROM NOW, LIKE 2019, 2020. AND THAT'S ALSO EXACTLY THE TIME PERIOD WHEN THE ENTITLEMENT PROGRAMS GO FROM A COPACETIC PERIOD, WHICH IS WHAT WE ARE IN NOW, WHERE THEY ARE ACTUALLY PRETTY STABLE.

FABER: WELL WE BENT THE CURVE ON HEALTHCARE COSTS TO A CERTAIN EXTENT SO THE CBO NUMBERS ON MEDICARE HAVE BEEN COMING DOWN. THAT'S A GOOD THING.

GUNDLACH: FOR NOW. IN 2017, THE ENTITLEMENT NUMBER – SOCIAL SECURITY, MEDICAID, MEDICARE AND THE LIKE AREN'T THAT BAD, BUT THEN THEY KIND OF HOCKEY-STICK UP AGAIN, BASED ON DEMOGRAPHICS. RIGHT AT THE TIME WHEN THE FED STARTS HAVING ITS BONDS MATURE. SO YOU EITHER HAVE TO BUY THEM AGAIN, WHICH MEANS QE HAS TO COME BACK IN 2020 OR ELSE SOMEBODY HAS TO BUY THOSE BONDS. THE PROBLEM IS THAT THE DEMOGRAPHICS OF MANY COUNTRIES THAT HAVE BEEN BUYERS OF OUR BONDS – JAPAN, BACK IN THE DAY. CHINA, RECENTLY. DON'T REALLY SUPPORT THEM BUYING THEM. I THINK THE SCENARIO OF RATES ARE GOING TO GET OUT OF CONTROL ON THE UP SIDE IS A VERY PLAUSIBLE SCENARIO, BUT NOT FOR ANOTHER FIVE YEARS OR SO.

FABER: WOW.

GUNDLACH: I THINK UNTIL THEN, WHAT WE ARE LOOKING AT, KIND OF A LOW INTEREST RATE ENVIRONMENT. POSSIBLY THE FED NEEDS TO RAISE RATES TO HAVE THE ABILITY TO STIMULATE. BUT I BELIEVE THAT IT WILL CAUSE A NEGATIVE MOVEMENT THAT WILL LEAD TO FEARS OF DEFLATION.

HOBBS: -- BUBBLES ARE GOING TO BURST?

GUNDLACH: FEARS OF DEFLATION, YES, THAT END UP BEING IN REQUIREMENT OF SOME SORT OF FAIRLY RADICAL POLICY OF INFLATION.

FABER: WHAT DO YOU DO, THEN? BUY A LOT OF GOLD? WHAT ARE YOU DOING?

GUNDLACH: WELL NOT NOW. I MEAN, THAT'S WAY – EVERYTHING ABOUT – DON'T TELL ME WHAT TO –

FABER: WHAT DO YOU MEAN? DON'T TELL US 2020 IS FIVE YEARS AWAY. THAT FEELS LIKE TEN MINUTES TO ME AT THIS POINT IN MY LIFE.

GUNDLACH: DON'T TELL ME WHAT TO BUY, TELL ME WHEN TO BUY IT. I MEAN, FIVE YEARS IS A LONG TIME. I DID A STUDY EARLY IN MY CAREER THAT I DID PERFECT FORESIGHT. THAT IF YOU HAD PERFECT FORESIGHT USING HISTORICAL DATA, IF YOU KNEW WITH CERTAINTY WHAT WAS GOING TO BE THE BEST SECTOR OVER FIVE YEARS, IT WAS AMAZING HOW LOUSY RETURNS OFTEN WERE FOR THE FIRST TWO TO THREE YEARS. AND I CAME TO THE CONCLUSION, A FIVE YEAR HORIZON DOESN'T WORK, BECAUSE EVEN THOUGH YOU WERE GOING TO BE RIGHT, YOU WOULD LOSE ALL OF YOUR CLIENTS. BECAUSE AFTER TWO OR THREE YEARS OF LOUSY RETURNS, EVERYBODY FIGURED YOU HAVE LOST YOUR TOUCH.

FABER: JEFFREY, WE ARE RUNNING OUT OF TIME. WE'VE GOT TO DO A LIGHTNING ROUND HERE ON SOME STOCKS. LET'S START WITH – ACTUALLY, LET'S START WITH CHIPOTLE. BECAUSE I'VE GOTTEN A LOT OF TWEETS SAYING YOU'VE BEEN DEAD WRONG ON THIS THING.

GUNDLACH: TOTALLY WRONG, TOTALLY WRONG. BECAUSE IT'S ALL BASED ON VALUATION. AND I THINK IT'S HORRIBLY, HORRIBLY OVERVALUED. BUT –

FABER: IT COULD KEEP BEING HORRIBLY OVERVALUED FOR A LONG TIME.

GUNDLACH: IT'S THE OLD CHEAP AND GETTING CHEAPER, IT'S RICH AND GETTING RICHER. DEAD WRONG.

FABER: ALRIGHT. APPLE.

GUNDLACH: APPLE IS EXACTLY THE SAME TODAY IN MY VIEW AS IT WAS IN 2012. IT'S A FANTASTIC STUDY IN SENTIMENT SHIFTS WHEN VERY LITTLE HAS ACTUALLY HAPPENED AT THE COMPANY. EVERYBODY LOVED IT AT 600-700 IN 2012 THEN THEY HATED IT AT 400 BACK IN 2013. I BOUGHT IT A 405, I SOLD IT AT 610. I THINK APPLE LOOKS EXACTLY LIKE IT DID BEFORE. IT'S OVERBELIEVED. THEY HAVE TREMENDOUS OPTIMISTIC GUIDANCE. PEOPLE LOVE IT. THE INNOVATION HAS BEEN, WHAT I EVEN PREDICTED FACETIOUSLY BACK IN 2012. TUTTI-FRUTTI COLORS, AS IF THAT IS ANY KIND OF INNOVATION. SLIGHTLY BIGGER SCREENS. YES, THEY ARE DOING FAIRLY WELL AND THEY ARE BULLISH ABOUT THEIR NEW ROLLOUT, BUT I THINK THAT'S PRICED INTO THE STOCK. I DON'T THINK I WOULD BUY IT. I WOULD SELL IT.

FABER: AND FINALLY ON BUYING THE BUFFALO BILLS.

GUNDLACH: BUFFALO BILLS, I HEAR TODAY ARE POTENTIALLY GOING TO BE AN ANNOUNCEMENT IN A DAY OR TWO. I'M HOPEFUL THAT THE BUYER OF THE BUFFALO BILLS KEEPS THEM IN BUFFALO.

FABER: IT'S NOT GOING TO BE YOU? OR A GROUP YOU ARE ASSOCIATED WITH?

GUNDLACH: I MAY BE INVOLVED, I MAY NOT BE INVOLVED. MY INVOLVEMENT HAS BEEN COMPLETELY CENTERED AROUND KEEPING THEM IN BUFFALO. I MAY CONTINUE TO HAVE INVOLVEMENT IN THAT AREA.

FABER: OK, SO YOU MAY BE INVOLVED IN KEEPING THEM IN BUFFALO WITH A GROUP THAT MAY ANNOUNCE THAT THEY ARE BUYING THEM.

GUNDLACH: I WON'T BE THE MAJORITY OWNER, BUT I MAY BE INVOLVED WITH THE OWNERSHIP TEAM IF WE ARE CERTAIN THEY WILL KEEP THEM IN BUFFALO.

FABER: SAID LIKE AN OLD BUFFALONIAN. BUFFALONIAN?

GUNDLACH: GO BILLS.

FABER: THERE YOU GO. GO BILLS. JEFFREY GUNDLACH, THANK YOU AS ALWAYS. APPRECIATE IT.

GUNDLACH: THANKS, DAVID. GOOD TO BE HERE.

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