WHEN: Today, Wednesday, December 13, 2017
WHERE: CNBC's "Fast Money Halftime Report" – Live from DoubleLine Headquarters in Los Angeles
Following are excerpts from a CNBC EXCLUSIVE interview with DoubleLine Capital CEO Jeffrey Gundlach and CNBC's Scott Wapner on CNBC's "Fast Money Halftime Report" (M-F 12PM-1PM) today, Wednesday, December 13, 2017. Following are links to video on CNBC.com: https://www.cnbc.com/video/2017/12/13/jeffrey-gundlach-this-has-been-a-great-year-for-investors.html, https://www.cnbc.com/video/2017/12/13/jeffrey-gundlach-the-fed-is-clearly-going-to-hike-rates.html, https://www.cnbc.com/video/2017/12/13/jeffrey-gundlach-tax-plan-could-have-unintended-consequences.html, https://www.cnbc.com/video/2017/12/13/jeffrey-gundlachs-view-on-bitcoin.html, and https://www.cnbc.com/video/2017/12/13/jeffrey-gundlach-investors-should-add-commodities-to-their-portfolios.html.
All references must be sourced to CNBC.
JEFFREY GUNDLACH ON WHAT DRIVES THE DOLLAR:
SHORT-TERM FED MOVES ARE NOT WHAT DRIVES THE DOLLAR. IT CORRELATES MUCH MORE TO WHAT THE BOND MARKET THINKS VIS-À-VIS THE FED SAY 18 MONTHS FORWARD. SO IF YOU ACTUALLY ROOK AT THE BOND MARKET PRICING FOR 2019 NOW, THERE'S A PRETTY BIG DISCREPANCY BETWEEN THE BOND MARKET AND THE FED, SO THAT'S GOING TO BE REALLY INTERESTING IN DRIVING THE DOLLAR, AND THIS TIME I THINK THE BOND MARKET IS GOING TO BE RIGHT.
JEFFREY GUNDLACH ON WHY THE MARKETS ARE SO CALM:
I THINK IT'S BECAUSE OF CENTRAL BANK PEGGING OF RATES AND QUANTITATIVE EASING GOING ON FULL BORE IN EUROPE AND IN JAPAN. ONE OF THE CHARTS THAT I LOVE TO REFERENCE IS THE NEARLY LINEAR RISE IN CENTRAL BANK BALANCE SHEET HOLDINGS EVER SINCE 2011, WHERE THE FED STOPPED QUANTITATIVE EASING BACK THREE YEARS AGO, AND JAPAN AND THE ECB JUST TOOK OVER THE SLACK, AND IT'S JUST A LINEAR RISE.
JEFFREY GUNDLACH ON MARIO DRAGHI, PRESIDENT OF THE EUROPEAN CENTRAL BANK:
THAT'S GOING TO SLOW THINGS DOWN A LITTLE BIT, BUT THE REAL WORRY FROM THE CENTRAL BANK ACTIVITY WOULD BE FORWARD ABOUT A YEAR. BECAUSE MR. DRAGHI HAS SAID ASTONISHINGLY THAT THEY'RE GOING TO CONTINUE 30 BILLION EUROS PER MONTH OF QUANTITATIVE EASING AT LEAST UNTIL SEPTEMBER AND THEN HE THREW IN, JUST TO PUT A CHERRY ON TOP OF THE CAKE OF STIMULUS, HE SAID, AND NEGATIVE RATES WELL PAST THE END OF QUANTITATIVE EASING. WHICH MEANS – SOUNDS TO ME YOU'LL HAVE NEGATIVE RATES AS LONG HAS MR. DRAGHI IS AROUND WHICH IS A LITTLE UNDER TWO YEARS.
JEFFREY GUNDLACH ON TAX CUTS AND BONDS:
IF THERE IS A NET TAX CUT, IT HAS TO BE BOND UNFRIENDLY. WE ALREADY HAVE GROWING BOND SUPPLY. WE'VE BEEN LIIVING IN A WORLD FOR THE LAST THREE YEARS THANKS TO QUANTITATIVE EASING OF NEGATIVE NET BOND SUPPLY, REALLY, FROM SOVEREIGN BONDS IN THE DEVELOPING WORLD. AND THAT'S GONNA FLIP BECAUSE THE FED IS NOW LETTING BONDS ROLL OFF, THE BUDGET DEFICIT IS INCREASING, A TAX CUT WOULD INCREASE THE DEFICIT FURTHER, AND TO THE EXTENT THAT A TAX CUT MIGHT BE STIMULATIVE TO THE ECONOMY, THAT'S BOND UNFRIENDLY, BECAUSE BONDS DON'T LIKE ECONOMIC GROWTH AND ALSO IT'S MORE BONDS, EXPANDING THE DEFICIT, SO EVEN MORE SUPPLY.
JEFFREY GUNDLACH ON TAX HIKES AND RISK:
IF I'M CORRECT AND I'M GOING TO RECEIVE A SEVEN-POINT BUMP IN MY TAX RATE, WHICH IS ACTUALLY ABOUT A 15% TAX INCREASE, I HAVE A FEELING THAT I'M PROBABLY GOING TO BE LESS ABLE AND WILLING TO BUY RISKY ASSETS OR BUY ALL THE OTHER THINGS THAT ARE BUBBLING UP THESE DAYS, AND MAYBE THAT SIDE OF THE NARRATIVE WILL START SHOWING UP.
JEFFREY GUNDLACH ON STIMULATING THE ECONOMY:
WHILE WE'RE NOT PROBABLY GOING TO GET 3% REAL FOR THE YEAR, WE'VE HAD IT FOR TWO QUARTERS IN A ROW. AND GDP NOW AT THE ATLANTA FED HAS BEEN BOUNCING AROUND BUT IT'S AROUND 3% FOR THE THIRD QUARTER. WHEN IS THE LAST TIME WE HAD SOMETHING LIKE 3% GROWTH FOR THREE QUARTERS IN A ROW? IT'S A LONG TIME. WHY WOULD YOU BE STIMULATING THE ECONOMY?
JEFFREY GUNDLACH ON WHY INVESTORS SHOULD ADD COMMODITIES:
INVESTORS SHOULD ADD COMMODITIES TO THEIR PORTFOLIOS. THERE IS A REALLY REMARKABLE RELATIONSHIP BETWEEN A MARKET CAP OR THE TOTAL RETURN OF THE S&P 500 AND THE TOTAL RETURN SOMETHING LIKE THE GOLDMAN SACHS COMMODITIES INDEX. THE CYCLICALITY IS REALLY REPETTIIVE.
JEFFREY GUNDLACH ON CARRIED INTEREST:
I'D JUST – THERE'S A LOT OF THINGS ABOUT THIS TAX PLAN THAT ARE BEING DISCUSSED THAT ARE TROUBLING TO ME. THE KIND OF MICRO MANAGEMENT OF IT IS TROUBLING TO ME. THIS FIRST IN FIRST OUT THING, IT'S JUST – THEY ARE TRYING NICKEL AND DIME, FIND WAYS TO SQUEEZE YET MORE MONEY OUT OF INVESTORS AND OUT OF PEOPLE LIKE ME, AND I – I DON'T MIND PAYING TAXES. I ACTUALLY FEEL IT'S A CIVIC DUTY TO PAY TAXES. BUT WHAT REALLY GETS MY GOAT AND STAN WAS ON WITH KELLY – STAN DRUCKENMILLER YESTERDAY WAS ON WITH KELLY ABOUT THIS CARRIED INTEREST THING. AND I MEAN HOW MANY TIMES DID CANDIDATE TRUMP GO ON THE CAMPAIGN TRAIL AND RAIL AGAINST THE UNFAIRNESS OF THE CARRIED INTEREST DEDUCTION? HE DID IT A LOT, IT WAS ONE OF THE THINGS – ONE OF THE TALKING POINTS ON HIS STUMP SPEECHES. AND SOMEHOW CARRIED INTEREST SURVIVES IN THIS TAX PLAN. AND I THINK STAN USED THE WORD OFFENDED, OR OFFENSIVE, AND I COULDN'T AGREE MORE. IT IS JUST UNBELIEVABLE TO ME THAT THAT SURVIVES IN THE CONTEXT OF TRYING TO HAVE A TAX REFORM. AND THEN BEYOND THAT, YOU HAVE THIS IDEA OF THE PASS-THROUGH RATE, WHICH SOUNDS KIND OF INTERESTING, BUT THEY SPECIFICALLY CALL OUT INVESTMENT MANAGEMENT BUSINESSES AS BEING A SERVICE COMPANY THAT CANNOT DO THE PASS-THROUGH. AND IT'S SORT OF LIKE – I DON'T KNOW – IT IS THE SURGICAL NATURE OF THIS. LIKE CALLING OUT, "YOU'RE A WINNER, YOU'RE A HEDGE FUND BILLIONAIRE, AND YOU'RE A WINNER ON CARRIED INTEREST." AND YOU CAN BE A SMALL – WE'RE NOT SMALL – BUT THERE CAN BE A SMALL MONEY MANAGEMENT FIRM. AND FOR SOME REASON, THEY ARE DOING THE EXACT SAME ACTIVITY, THEY'RE TRADING SECURITIES, THEY'RE INVESTING OTHER PEOPLE'S MONEY, THEY'RE MAKING INCOME OFF OF THEIR FEES. AND THEY'RE BEING TREATED COMPLETELY DIFFERENTLY. IT TO ME IT DOES NOT SOUND LIKE DRAINING THE SWAP, IT SOUNDS LIKE MAINTAINING THE SWAMP. SO THE TAX PACKAGE, IT REALLY BOTHERS ME AND ALSO, OF COURSE, THE DEDUCTIBILITY OF STATE AND LOCAL TAXES. IT SEEMS ALMOST VINDICTIVE BECAUSE THOSE ARE THE STATES THAT DIDN'T VOTE FOR TRUMP.
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