DoubleLine Capital's CEO, Jeff Gundlach, doesn't see a robust housing recovery in 2013, the "Year of the Snake."
DoubleLine Capital's Jeff Gundlach presented his 2013 market outlook on Tuesday. DoubleLine, based in Los Angeles, is a fast-growing financial start-up. It has amassed more than $50 billion in assets under management (AUM) since CEO Gundlach left rival TCW — also L.A. based — in 2009, under controversial and eventually litigious circumstances.
With Newport Beach based PIMCO, DoubleLine and TCW form what I call a Southern California "bond triangle" — together the trio manages more than $2 trillion, dealing mostly with fixed-income investments (although PIMCO and DoubleLine have been edging toward equities as a greater portion of their portfolios).
Add in Pasadena-based WAMCO, with $450 billion under management, and you have a constellation of bond funds with portfolios that surpass the annual economic output of the entire state of California, which is about $2 trillion.
The Ford F-150 pickup had a very good December — and a nice 2012, as Detroit carmakers saw sales of pickups recover. But Japanese carmakers also fared well.
All the major automakers who sell vehicles in the United States have reported December sales and there are two main storylines:
•Trucks are back
•The Japanese are, too
Let's tackle the second one first. After the earthquake and tsunami of 2011, Toyota and Honda lost significant market share in the U.S., where both had thrived up to that point. The catastrophes severely disrupted the global automotive supply chain. Although both companies operate plants in the U.S., they weren't able to built enough vehicles to meet rising demand.
Nissan fared better, largely because its supply chains are less concentrated in Japan.
General Motors reclaimed the top spot in U.S. market share, and Ford was able to surge past Honda, which was entering something of an identity crisis as U.S. consumers fell out of love with the Accord and Civic sedans they had reliably purchased for years.
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A recovering housing market has yielding big returns for Southern California bond funds that have invested in risky assets.
Heather Perlberg and Pierre Paulden at Bloomberg have a good piece Wednesday about what I call Southern California's "bond triangle" - and its investment managers' relentless quest for returns when interest rates are at historic lows.
The major players in the story are PIMCO, the nearly $2 trillion fixed-income colossus based in Newport Beach; TCW, with $135 billion in assets under management and in the process of being taken over by the Carlyle Group, a big private-equity firm; and DoubleLine Capital, run by former TCW trader Jeff Gundlach and one of the fastest-growing financing startups in history, with more than $50 amassed in assets in three years. ( TCW and DoubleLine are based in L.A.)
Here's Perlberg and Paulden on how these firms' investment in a risky category of debt has paid off big time:
Buyers are looking to buy housing again. And according to the California Association of Realtors, they expect prices to rise.
It looks like the pendulum has swung back to the optimistic side for California home buyers. The California Association of Realtors released a study Tuesday showing that buyers are increasingly confident prices will go up in the future.
Which raises an obvious question: Are buyers in the state being too optimistic about rising prices, after being excessively pessimistic about prices falling in the aftermath of the housing bust? When the pendulum swings back, it often swings too far.
About 25 percent of the 800 home buyers surveyed by the trade organization think prices will be higher next year. That’s more than a threefold increase over what buyers said in 2009, in the depths of the housing crisis.
But that pales by comparison with the five-year and 10-year outlook. For those periods, home buyers expect 41 and 73 percent price increases, respectively. Clearly, there's a high probability that prices will be higher a decade from now than they are today. There's a little thing called inflation, after all, which typically runs at about 2-3 percent per year and, absent big upticks in home prices, provides the steady, reliable asset appreciation that homeowners buying for the long term are looking for. They don't call real estate a hedge against inflation for nothing.
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A sign is seen outside of a KB Home sales center in Richmond, California. It could take a while before business is back to normal.
Monthly real estate data has been pointing in one clear direction for the past few months: a lack of supply is driving up prices.
At this point, everyone from the California Association of Realtors to the National Association of Realtors to economists and firms that track the Southern California real estate market agree: We don’t have enough houses!
But wait — idn’t we just go through a massive housing bust? Yes, but now demand is surging, driven by low prices and low interest rates. Meanwhile, homebuilders are building again, but at about half the rate they did in the early 2000s.
The California Association of Realtors says there’s barely a three-month supply of homes to sell in the state. Twice that would be normal. But rationalizing the market could take time, with analysts predicting it could take anywhere from a few quarters to a year before the homebuilding business is solid again for firms like L.A.-based KB Home.