essays pieces of the puzzle
Sunday, December 30th, 2012
peak gundlach

12 1230 peak gundlach zDLTNX

During the DoubleLine conference call on December 11, David Schawel tweeted, “#PeakGundlach.”  It was at once a clever poke at the tendencies to create hashtags on Twitter and to forecast the “peak” of this and that — and also a reminder that the adulation that Gundlach has received of late might be akin to that for other gurus before they flamed out.

It was not a prediction by Schawel that Gundlach is headed for a fall.  He’s a fan and wrote to me that it is “remarkable how Gundlach went from ‘dead in the water’ after his TCW exit to somewhat of a cult hero and media darling.”  That’s what we do with gurus.

Gundlach is a fascinating character and 2012 has been quite a year for him.  He was the victim of a robbery at his home this fall — the culprits were caught and the art returned unharmed, thanks in part to a bit of sleuthing on his own.  All of that and more was chronicled in a glowing portrait published by Bloomberg in November.

I have written about Gundlach before, including in simultaneous postings in October of 2011 that showed the performance of the flagship DoubleLine fund out of the gate — and considered the issues regarding a manager that presents degrees of difficulty beyond the norm for those doing due diligence.  (Yesterday’s pix on manager risk is an appropriate read too.)

But let’s focus for now on the past rather than the future, by looking at the chart above.

As pronouncements from Gundlach go, the one at the IMCA conference in April was a doozy:  “I would go long natural gas and short Apple and leverage it 100 times.”  In the top panel above, you can see that it was quite a call, even without the leverage.  (The legend should read “percent change in the price ratio . . . .”)  Perhaps in future years those who produce this chart will scrawl “Gundlach Peak” next to the summit.

Back at his home base of the fixed income markets, the middle panel shows that Gundlach’s return looks great so far versus the ETF that mimics the Barclays Aggregate (AGG).  That’s not a very good benchmark given the fund’s approach, but it’s the one Gundlach used on the conference call.

The line at the bottom shows the stupendous growth in assets (in billions) for the retail and institutional versions of the DoubleLine Total Return Bond Fund since it opened.

Could this moment be “peak Gundlach”?  Definitely not in terms of assets and probably not in terms of performance.  But none of us really know.  Skepticism is better for investors than faith, especially if you leverage them a hundred times.  (Chart:  Bloomberg terminal.)

See also:  Some of the best of 2012.