Sohn Preview: Will Jeffrey Gundlach Explain Last Year's Bet on Puerto Rico?

 | May 03, 2016 | 1:20 PM EDT
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It is difficult to pin down DoubleLine Capital's Jeffrey Gundlach's interests. Although he is primarily a fixed-income investor -- some have even called him the "Bond King" -- his presentations at investment conferences span asset classes, sectors and countries, which means Wednesday's Sohn Investment Conference attendees are due for a surprise.

Gundlach spooked equity investors earlier this year when he said, during a wide-ranging March webcast, that betting on stocks was a losing proposition and that the S&P 500 has only 2% upside and 20% downside. (Year-to-date the S&P is up 0.6%.) Perhaps Gundlach's concerns were of a personal nature as Reuters reported in March that DoubleLine was planning to close its three-year-old DoubleLine Growth Equities Fund. The fund was down 12.27% in January and lagging 94% of its peers, Reuters reported.

Last week, Gundlach spoke in favor of so-called "helicopter money" being used to stimulate the U.S. economy, in an interview with Reuters. Helicopter money is a term popularized by Milton Friedman that suggests funding fiscal stimulus with newly printed money, rather than from changes in government spending and tax revenue.

In an interview with the Financial Times last month, Gundlach weighed in on a several topics including a Brexit (not going to happen, in his view), Donald Trump -- calling him "the unconstrained bond fund of the political arena" -- negative interest rates, and his own art collection.

Sohn attendees can expect a similarly wide-ranging presentation from Gundlach Wednesday, though he usually hones in on a single theme, if not a single investment.

At last year's Sohn, Gundlach made a controversial choice: Puerto Rican general obligation bonds. Nearly $13 billion of Puerto Rico's $70 billion debt load is in the form of general obligation bonds, according to data compiled by Bloomberg. (General obligation bonds are normally secured by a government's tax revenues.) At the time, Gundlach called the bonds a "risky thing" that could get cheaper as they were priced for default. In the months following last year's Sohn Investment Conference, Gundlach said he was still buying bonds.

Puerto Rico's troubles became more well known last summer when the U.S. territory defaulted on a $58 million debt payment in August. Most recently, Puerto Rico announced Sunday that it was unable to make a $422 million debt payment. The U.S. territory has $805 million in general obligations coming due in July.

Sohn attendees will be looking to see if Gundlach has updated his thinking on Puerto Rico as well as his latest commentary on the U.S. economy.

The Sohn Investment Conference, which will be held in New York on May 4, 2016, brings together some of the top minds in the financial world for a day of sharing investment ideas. It is held in honor of Ira Sohn, a Wall Street professional who lost his battle with cancer when he was 29. Proceeds from the New York conference, as well as other conferences the Sohn Conference Foundations holds, are dedicated to the treatment and cure of pediatric cancer and other childhood diseases. The foundation has so far raised more than $65 million.



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