Gundlach still a bull on Treasurys

|By:, SA News Editor

I see no reason for long-term rates to head higher, says Jeff Gundlach, appearing on CNBC. He doesn't see the taper coming soon - incomes are falling, the labor force participation rate is stuck, and inflation is non-existent. Further, why would Janet Yellen take the Fed helm and immediately begin to reverse a policy she's so supportive of?

Without the taper, he notes, QE is actually expanding on a relative basis thanks to a smaller budget deficit and less Treasury issuance needing to be mopped up by the central bank.

The best opportunity in fixed income continues to be closed-end funds trading at discounts to net asset value (his DBL being one of them). You can put together a basket of these, he says, yielding 8-9% and with a discount to NAV of 10%. Others possibilities (though we haven't checked their prices vs. NAV): PDI, PTY, PCI, PHK, PKO, PCN, PCI, PFN, PFL.

Treasurys continue their big rally, the yield on the 10-year now all the way down to 2.60%. TLT +0.8%, TBT -1.6%.

Turning to stocks: I don't like $300B market cap companies trading at 20x forward earnings, he says, suggesting GOOG be "harvested" for gains.

On TSLA: There's something wrong with this picture, he says, noting the company's $23B valuation while GM and Ford are hitting new highs. These massive Tesla sales being priced into the stock have to come from somewhere.