Like most predictions, calls for markets to go higher or lower have a 50% chance of getting it right, and a 50% chance of coming up short. But more than just getting the direction right, people want to know if prognosticators can identify the big moves, and investing heavyweight Jeff Gundlach of Doubleline has made a few outstanding calls in the last year. Cases in point: his suggestions to go short Apple/long Natural Gas in April of 2012 and short Yen/long Nikkei in December 2012. Besides spurring lots of attention, Gundlach’s recommendations both posted some impressive gains when we looked at them earlier this year.
With those two big calls looking to be wrapped up, does Gundlach have another predication to follow? Yep … Gold. Just yesterday we wrote about how Gold is coming off a historic high, and has been continuing on a downward slope. It just so happens, Gundlach predicts a continuation of falling gold prices:
“I’m not really that fond of gold,” Gundlach said. “I think gold makes it to 12 handle, maybe $1280.”
Gundlach’s earlier predictions proved quite prescient… but with Gold already down significantly, his call here is more in the domain of trend following rather than top and bottom calls. But as long as he keeps making bold predications like this, we’ll find out in the long run whether or not he’s just flipping coins.
By the way – here’s Gundlach’s previous two “calls” through present day.
Short Apply/long Natural Gas continued its upward course, peaking at nearly a 75% return in March (and remember, his original call was to leverage both up to 10x). Since then, a bit of a rebound in Apple and a stall in the Natural Gas climb has suggested that the run might due for a break.
And how about that short Yen/long Nikkei call from the beginning of 2013?
It’s a similar story, with an amazing run up that has fallen off a cliff over the past month. Since the beginning of 2013, Short Yen/Long Nikkei surged up to 44% gains in May, before dropping back down to just under 30% now. Quite a few CTAs we track were enjoying one or both of these trends, and we saw many of them suffer the same loss of open trade equity toward the end of May as Japan’s market and currency suddenly reversed directions.