DoubleLine founder Jeff Gundlach looks ahead in his latest podcast provocatively entitled,
“Hey Kid, Want Some Candy?” It is a thought-provoking sneer at policymakers push for Universal Basic Income (UBI) as a solution to a jobs crisis and stock price fairy tale valuations, particularly in tech stocks. Just recently, the Nasdaq marked the fastest 10% plunge in history, taking the wheels of a bullish rally.
“policymakers push for Universal Basic Income (UBI) as a solution to a jobs crisis and stock price fairy tale valuations”
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The central banks’ endless asset purchases, known as quantitative QE to infinity, have been short term fixes keeping asset prices propped up. Moreover, now the people’s QE in the form of UBI is being promoted as a fix providing immediate relief to households, but when Jeff Gundlach looks ahead, he sees a catastrophic outcome.
“You can teach a child: Don’t take candy from strangers” Jeff Gundlach, comparing this to the UBI unemployment benefits workers have depended on.
But child candy is a lot different from grownups’ need for food and shelter, which is typically obtained through the exchange of one’s labor for income in an economy.
So, what is the alternative to UBI when fourth revolution technologies threaten to displace most of those workers whose jobs require no super talent or skill, in other words, the majority of the workforce? To put it candidly, not everyone can be a fixed income investor wizard, like Jeff Gundlach, or blow the sax like Charlie Parker, or has the Hollywood looks and charisma to be a YouTube star.
“You can teach a child: Don’t take candy from strangers”
So just how will a digitalized, automated artificially intelligent driven economy provide work for hundreds of millions of mediocre displaced workers, the voting majority?
Jeff Gundlach looks ahead, seeing a long-term catastrophic outcome of UBI but what about the immediate outcome if policymakers were to do nothing
The Doubleline CEO noted that the economy was deteriorating for two years before the recession, but on an upbeat note, Jeff Gundlach looks ahead seeing a strong rebound in The US Purchasing Managers’ Index (PMI).
PMI date is an indicator of economic health for the manufacturing and service sectors.
“Coronavirus is going to be a large determinant of whether Trump will be re-elected or not” – Jeffrey Gundlach
Small business optimism along with the Home Builders Confidence index has also improved since lockdown measures were lifted in the second quarter of the year.
The Measure of US business confidence and consumer confidence chart shows a jump in small business and home builders’ confidence.
However, US consumer confidence continues to fall and there has also been a tepid recovery in CEO confidence.
Jeff Gundlach looks ahead, seeing the South Korean Kospi index as a real-time indicator of the export picture, which could give a heads up on US exports going forward
He also thinks the US Growth forecast should be stronger and he notes the negative divergence between economic performance and current stock valuations.
The global GDP forecast for the year is -3.9%, while in the US it’s -5.0%. He finds this strange as the US response has “really been one of the highest for the world”.
Regarding the US Presidential elections scheduled for early November, Jeff Gundlach looks ahead with his base case being that Trump will be re-elected
“Coronavirus is going to be a large determinant of whether Trump will be re-elected or not” he said.