Gundlach recommends shorting homebuilders

At a New York investing conference, the DoubleLine bond fund manager takes a bearish view on housing

May 5, 2014 @ 11:56 am

By Trevor Hunnicutt

Jeffrey Gundlach may be one of the industry's top bond fund managers, but he's certainly no optimist when it comes to the U.S. housing market.

“I believe single-family housing is overbelieved and overrated,” he said. “For all the hype and talk that you hear about the strength of the housing market, you see that new home sales are right flat on their back — just like they were at the depths of the recession.”

Speakers at the Sohn Conference Foundation event in New York on Monday, including hedge fund managers such as William Ackman and David Einhorn, offer bite-sized, investible ideas at a fundraising event for the benefit of pediatric cancer research.

But Mr. Gundlach was less than charitable when it came to his take on the housing market. He recommended taking a short position in the SPDR S&P Homebuilders ETF (XHB), a bet the index will decline in value. (It did decline Monday, by about 1.57% in afternoon trading.)

Mr. Gundlach discussed a series of charts pointing to first-time buyers, household formation, housing starts, subprime loans and rent prices, which he said for the most part point to a market propped up by cash transactions and second-lien borrowing, rather than traditional mortgages and organic demand from first-time homebuyers.

The remarks match those by another legendary investor, Warren E. Buffett, who in an interview Thursday with CNBC said that housing is “not that strong yet."

And some data on the market has been weak. The Commerce Department reported last week that slowing real estate construction was a drag on economic growth. They said a measure of investment in residential real estate fell 5.7% in the first quarter.

To Mr. Gundlach, the absence of first-time homebuyers is due in no small part to the declining job prospects, ballooning student-loan debt, rising rent costs and shifting values of younger Americans.

“The kids aren't alright,” he said. “Young people in particular were shocked and scarred by the housing crisis."

The DoubleLine Total Return Bond Fund (DBLTX) managed by Mr. Gundlach managed $31.7 billion at the end of March.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

Events

Geoffrey Brown: What's top of mind at NAPFA?

NAPFA is looking ahead at the rest of 2018 and has a broad agenda that includes improving diversity in the advice industry. What's next? Geoffrey Brown offers his insights.

Latest news & opinion

The unique nature of working with celebrity clients

Athletes and entertainers are just like everyone else — aside from complex tax issues, a lack of financial savvy and a need for prenups

Top 10 IBDs ranked by revenue

These independent broker dealers generated the most revenues in 2017.

8 podcasts advisers listen to when they aren't working

Listening to podcasts for the fun of it.

UBS continues to cut loans to recruits, while increasing compensation to brokers

The wirehouse reduced recruitment loans 20% and increased bonus loans 68% in the first quarter.

Things are looking up: IBDs soared in 2017

With revenue up, interest rates rising and regulation easing, IBDs are soaring.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print