Bond Investor Gundlach Buys Stocks, Sees 'Kaboom' Ahead

Found via the Corner of Berkshire & Fairfax.

It’s mid-October, and Jeffrey Gundlach is giving a stump speech to a luncheon crowd of about 200 financial advisers and investors at Los Angeles’s City Club. The renowned money manager’s theme: the financial catastrophe on the horizon.

The co-founder and chief executive officer of DoubleLine Capital LP explains that the first phase of the coming debacle consisted of a 27-year buildup of corporate, personal and sovereign debt. That lasted until 2008, when unfettered lending finally toppled banks and pushed the global economy into a recession, spurring governments and central banks to spend trillions of dollars to stimulate growth, Bloomberg Markets reports in its January issue.

In the ominous third phase, he predicts another crisis: Deeply indebted countries and companies, which Gundlach doesn’t name, will default sometime after 2013. Central banks may forestall these defaults by pumping even more money into the economy -- at the risk of higher inflation in coming years.

Gundlach, 53, doesn’t know when the third phase will get here, but he tells his audience they need to gradually get ready for it.

“I don’t believe you’re going to get some sort of an early warning,” Gundlach, who’s also chief investment officer at Los Angeles-based DoubleLine, tells his listeners. “You should be moving now.”