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DoubleLine CEO Jeffrey Gundlach, known as ‘The Bond King,’ gives insight into the short-term squeeze and how investors got here, as well as the political and financial divide in the United States.
Government stimulus checks aimed at shielding the U.S. economy from the economic downturn caused by the COVID-19 pandemic are primarily to blame for the volatility of stocks at companies like GameStop Corp., according to billionaire bond fund manager Jeffrey Gundlach.
| Teleprinter | security | Latest | Change | % Change |
|---|---|---|---|---|
| GME | GAMESTOP CORP | 325.00 | +131.40 | + 67.87% |
The actions of GameStop Corp. climbed 1,545% since Jan.12 after a group of investors rallied on the WallStreetBets bulletin board on the Reddit discussion website to press on short sellers who had bet against the company and others like her who , according to them, had poor fundamentals. .
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“I think the resources from the government stimulus are really the cause,” said Gundlach, CEO and CIO of Los Angeles-based DoubleLine Capital, which has $ 148 billion in assets under management, on Friday. to Charles Payne of FOX Business in an exclusive interview. .
On December 29, the U.S. government began sending checks for $ 600 to most Americans, which enabled the second round of direct payments since the COVID-19 pandemic began in March 2020.
The first batch has fueled a day trading craze that has not yet ceased as Americans have more time to monitor their investments while working remotely.
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Working from home and increased volatility led to a more than 50% increase in the number of households transacting last year, according to Charles Schwab, and an increase in the volume of transactions. Last year, SEC Chairman Jay Clayton expressed concern about the rise in retail when speaking to FOX Business’s Maria Bartiromo. “I want to make sure our retail investors know that leverage of all types comes with risk,” he said. The SEC is monitoring current developments.
Gundlach said 2.1 million investors organized themselves on the bulletin board and pooled purchasing power of $ 20 billion, which dealt a killing blow to short sellers who had racked up a position representing 150% of outstanding shares.
The money allowed investors, or speculators, to “push” hedge funds, forcing them to hedge their short bets for substantial losses, Gundlach detailed.
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The hedge fund Melvin Capital received an injection of $ 0.2.75 billion on Monday from two other hedge funds after suffering losses of nearly 30% since the start of the year.
“Hedge funds can do whatever they want, but if they act recklessly, eventually they will win the problems of their business,” Gundlach said.
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