Think all this talk of a 2012 apocalypse based on the Mayan calendar is hogwash? Well, one investors thinks that timing is just about right.
But his reasoning isn’t theological or based on some ancient calendar system. It’s based on a more sinister and recent trend that involves the piling up of debt — corporate debt, consumer debt and sovereign debt — that will cause the global economy to melt down very soon.
DoubleLine Capital co-founder and CEO Jeff Gundlach has been making the rounds, predicting a financial catastrophe. In a big story for Bloomberg Markets, the bond guru doesn’t mince any words when he says he expects stocks to go “kaboom.”
His reasoning is based on three phases of our current crisis:
- The first phase was the growing addiction to debt that started in the 1980s. We began to rely on false wealth in homes, businesses and governments to fund our lifestyle.
- The second phase is when the debt mess started to unravel in 2008. Foreclosures in the U.S., sovereign debt troubles in Europe and corporate balance sheet problems began to come hot and heavy as borrowing became unsustainable.
- The third and most sinister phase is a crisis deeper even than the one we saw four years ago. It involves widespread corporate bankruptcies, sovereign debt defaults and massive inflation as central banks try to keep the unmanageable obligations under control.
“I don’t believe you’re going to get some sort of an early warning,” Gundlach has been saying. “You should be moving now.”
His advice? Hoard real estate, art, precious metals and gemstones. Seriously. Gundlach has a massive personal collection of art as well as commodity holdings and other hard assets. And his DoubleLine firm has been doing the same — along with some stock in Chinese companies, U.S. natural gas producers and gold-mining firms because it considers them to be bargains that will weather the crash better than conventional equity investments.
Gundlach has a decent track record when it comes to this stuff. His $35.8 billion DoubleLine Total Return Bond Fund (MUTF:DBLTX) has annual returns north of 13% since its 2010 inception. And he also was one of the few experts to correctly anticipate the mortgage meltdown.
Anyway, read a full profile of Gundlach and his doom-and-gloom prediction here via Bloomberg. It’s a curious and interesting read, though I admittedly am not quite so bearish on 2013.
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.