Sheer Lunacy

I typically do not comment on sheer lunacy but do so this time because the person who said it, Jeffrey Gundlach, is DoubleLine Capital CEO.

Gundlach says The U.S. Could Split Up. He also explains how to invest for that outcome, and he predicts Trump will win the election.

Donald Trump is most likely to win re-election, but no matter the outcome of the presidential race, the U.S. could find itself broken into more than one country as unrest and acrimony grip the electorate, noted investor Jeffrey Gundlach said Monday.

Could America lose faith with democracy? “People are strongly committed to the concept of democracy and yet China has had massive growth and way better infrastructure under totalitarianism,” Gundlach mused. “What are we doing when our outcomes are inferior? Is it possible we could change in that regard? Yes, it is possible. I think we are going to see substantial changes in the next six years.” That might even include the U.S. breaking into more than one country, he said.

Now, Gundlach said, “I think we’re going to move into an area that has fat tails.” Skyrocketing inflation is just as likely as disinflation or outright deflation, he thinks.

“I hate long bonds, but I still think you’re supposed to own some, and in a deflationary environment, you would want your portfolio to have that hedge,” he said.

No Constitutional Provision

There is no provision for states to declare independence. 

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Nor would the US allow for that outcome if a state did declare independence.

We can debate whether a state should be allowed to break away, but there is no way to invest for an outcome that has no chance.

Fat Tails vs Fat Tales

I agree with Gundlach on the likelihood of substantial change and fat tails but not the fat "tale" that he proposes.

Interestingly, the subject of fat tails came up twice today.

The author of Black Swan, a book about fat tails, brought up the subject today as noted in Nassim Taleb Accuses Trump of Incompetence and Denial.

Mish