“At first glance, Robert Shiller and Jeffrey Gundlach make an odd pair. Shiller, recently awarded the Nobel Prize in economics for his “empirical analysis of asset prices,” is soft-spoken and has the professorial demeanor befitting a Yale academic. Indexes bearing his name for stock valuations and home prices have become part of the nation’s financial lexicon,” Lawrence C. Strauss reports for Barron’s. “Gundlach is a brash, sometimes bombastic bond titan. He is CEO of DoubleLine Capital, a Los Angeles asset manager with $53 billion in assets, mostly in fixed income.”
“But the two have plenty in common. Gundlach, for instance, did doctoral work in mathematics at Yale and, like Shiller, has a good eye for bubbles; he spotted trouble in the housing market before it collapsed in 2008. Now, Gundlach and Shiller have launched the DoubleLine Shiller Enhanced CAPE fund (ticker: DSEEX), which Gundlach will manage,” Strauss reports. “The fund is tied to a Shiller innovation — the CAPE, or cyclically adjusted price-earnings ratio. That’s stock prices divided by their average earnings over the past 10 years, adjusted for inflation; the fund gravitates to low-CAPE sectors. We recently sat down with the pair to discuss stocks, bonds, and a monstrous housing bubble — this time in Norway.”
A snippet:
Gundlach: We sold Apple, and then it dropped a lot, and then we thought it would drop to $425, but it actually went below $400 last spring and summer. We bought it at $405, and we still hold it. I like Apple because it seems to be almost an asset class. It doesn’t seem to trade like the stock market. Apple seems to be very noncorrelated to the S&P 500, and it is cheap. It generates a lot of cash. The growth prospects were grossly overestimated a year ago. But it’s still a very, very large cash-flowing company. So at about $525, where it traded recently, Apple looks reasonable. I don’t think the stock is going to make a lot of money—it’s not going to $1,000—but it can grind its way higher.
Read more in the full interview here.