It’s mid-October, and Jeffrey Gundlach is giving a stump speech to a luncheon crowd of about 200 financial advisers and investors at Los Angeles’s City Club. The renowned money manager’s theme: the financial catastrophe on the horizon.
Pacific Investment Management Co. is wagering at least $10 billion in the credit-default swaps market that U.S. corporate bonds will gain as the Federal Reserve extends unprecedented stimulus into 2014, according to traders and investors.
Hedge funds lifted their bets on a gold rally as signs of an improving U.S. economy drove prices lower in the longest slump since April, while this year’s bullion declines spurred losses for billionaire John Paulson.
Top-tier junk bonds produced safer returns than debt from the most creditworthy borrowers and the U.S. government over the past five years, a period that included the bankruptcy of Lehman Brothers Holdings Inc. and the biggest bond market swings on record.