Skip past the menu Skip to accessibility controls

DoubleLine Capital's Jeffrey Sherman: “It Sure Feels Like 1987”

Finanz and Wirtschaft  ( Original )
MAR 7, 2018

The Deputy Chief Investment Officer for Jeffrey Gunlach’s DoubleLine Capital sees the writing on the wall. And he also understands that for all the theories as to what will cause the next crash, what will perpetuate and fuel it is basic human fear.

For all the talk about the automation of financial management, as long as people have the login and password to their accounts, they can sell. Today’s long-term financial strategy is only as good as tomorrow’s resistance to panic selling. History has shown time and time again that in the face of a deeply red tape, panic trumps planning.

“From a short-term perspective, it sure feels like 1987: a little spookiness in the stock market and yields rising. So there are a lot of parallels to 1987. For example, tariffs, a weak dollar and a new Fed Chairman.

And remember, there was the crash before the crash. That year, the stock experienced some jitters already in April and about six months later you had the big crash on Black Monday.

Last year, most equity markets advanced more than 20% in dollar terms. So I think some of the risk this year is this naive extrapolation of this recent experience. It’s this recency bias that people think that it just can continue forever. So the risk is that people get complacent and think that equities can always go up.

I’m optimistic for the precious metals as well. If we do get inflation signs you will see that in the gold and silver price.”

ORIGINAL SOURCE: «It sure feels like 1987» by Christoph Gisiger at Finanz and Wirtschaft on 3/5/18