Explaining Southern California's economy

Jeff Gundlach shows why US economic growth has become very expensive

The U.S. has added a huge amount of debt since the financial crisis, but it hasn't yielded higher levels of growth.

Southern California is home to a trio of important bond funds: PIMCO, TCW, and DoubleLine Capital. All of these have executives who routinely comment on the global financial system, although PIMCO and DoubleLine usually get most of the attention.

At Newport Beach based PIMCO, which manages $1.8 trillion, co-Chief Investment Officer Mohamed A. El-Erian acts as a sort of wise man for both his firm and for a variety of blue-chip news outlets (and the co-CIO and founder Bill Gross is a regular on CNBC and other financial broadcast outlets). 

Bond fund managers tend to be very macroeconomic and global in their outlook. They can see wheels within wheels and large-scale patterns because bonds are how countries, states, cities, and companies all fund themselves. If something is going right, bond markets can tell you. And if things are going to go wrong, bond markets can send the signals. Just ask Greece. Or California, which has one of the lowest credit ratings of any of U.S. state.

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L.A. bond king Jeff Gundlach ups reward for stolen art to $1.7 million

SANTA MONICA BURGLARY

Courtesy of Santa Monica Police Department

An assortment of fine art paintings, some pictured here, were among the loot stolen from a Santa Monica home last week. Owner Jeff Gundlach has offered $1.5 million in addition rewards for the Piet Mondrian and the Jasper Johns.

UPDATE: Actually, it's $500,000 for the Jasper Johns PLUS several works by Joseph Cornell. No questions asked! Just give me back my art, says Jeff Gundlach. Some very nice works, I must say.

 

At a press conference today, DoubleLine Capital CEO Jeffrey Gundlach announced a substantially increased reward for information related to stolen two paintings from a recent $10-million heist at his home in Santa Monica.

Gundlach had already offered a $200,000 reward, but today he added to that, offering $1 million for information related to or the intact return of "Composition (A) en Rouge et Blanc," painted in 1936 by Dutch modernist master Piet Mondrian; and $500,000 for a work by Jasper Johns from 1956 titled "Green Target."

Both paintings can be seen here.

Gundlach may very well be concerned that, as highly collectable fine art is a difficult thing to sell when stolen, the theives may destroy the paintings they made off with.

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For a guy who just had $10 million in art and his Porsche ripped off, Jeff Gundlach was impressive on CNBC

Porsche-Carrera-4S

Porsche

SoCal's new bond king, Jeff Gundlach, is missing one of the these: a 2010 Porsche Carrera 4S. Along with $10 million in art and a few bottles of wine.

There are three big names in bonds these days, and they're all in Southern California. Together, Bill Gross and Mohamed El-Erian run Newport Beach-based PIMCO, the world's largest bond fund, overseeing a jaw-dropping $1.8 trillion in assets. Meanwhile, former '80s rocker Jeff Gundlach has been coming on strong in the past year.

His L.A. firm, DoubleLine Captial, has grown significantly, with now more than $40 billion under management. Gundlach's old firm, TCW (which he left in a cloud of controversy in 2009), is also in the news: It's being bought by the Carlyle Group, one of the world's biggest private equity firms.

PIMCO is in the midst of much speculation about whether El-Erian will be able to run the find as effectively as Gross once Gross decides to call it quits. This has created plenty of opportunity for Gundlach, who was already well known for his ability to make piles of money, to position DoubleLine as a better, faster PIMCO and a smarter, punkier TCW. Back in May, Businessweek's Roben Farzad captured the meteoric ascent of DoubleLine, which has gone from zero to $40-ish billion since 2010, and Gundlach, the new "bond king."

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Carlyle Group buys TCW, and the Euro crisis comes home

TCW-Getty

Getty Images

TCW was just bought by the Carlyle Group, a huge private-equity firm. The sale could helo TCW and former parent, struggling French banking giant Société General.

The Carlyle Group, one of the world's biggest private-equity firms, is buying TCW, an institutional investment management firm based in L.A., with roughly $130 billion on the books and a good reputation for fixed-income. In fact, the bond side of what TCW does is such a big part of the business (about 60 percent) that David Lippman, who ran fixed income for TCW, will become CEO of the new, Carlyle-owned enterprise. 

The last thing that popped TCW onto the radar was a meltdown in 2009 that involved its star bond trader, Jeff Gundlach. But there's a meltdown behind the Carlyle deal, as well. And it's all about how TCW former parent, French back Société Générale, is suffering from the ongoing eurozone crisis and from the aftermath of the financial crisis.

Banks around the world are now required to basically keep more money in the vault (so to speak). It's called the "Basel Accord," and it's now up to its third iteration, Basel III. SoGen, France's number two bank, is in the process of bolstering its balance sheet and cutting lines of business in order to comply with Basel III. It's been a rough time for the bank, which is suffering from its exposure to Greek debt — it wrote off three-quarters of its investment last year.

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