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Gundlach says the global stock market is signaling ‘something bad’ is happening

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Jeffrey Gundlach believes the U.S. stock market can’t diverge from global equity markets forever.

The bond investor noted the S&P 500 was strangely outperforming the rest of the world’s equity markets since the summer into this month.

“I said [before] … if the global stock [market] is going to take out the low and put in a new low, something bad must be happening. I don’t think the U.S. can hold in there,” he said Thursday on CNBC’s “Fast Money Halftime Report.” “Well what happened as rates broke to the upside … the global stock market ex-U.S. did take a new leg down and did go to a 12-month low. And it’s interesting the S&P 500 did what I said. … That is join the global stock market on the way down.”

Relative performance of S&P 500 (blue) versus Rest of World ex-U.S. (green) YTD

Source: FactSet

On Wednesday, the Dow Jones Industrial Average declined by more than 800 points and the S&P 500 fell by 3.3 percent as investors worried about the negative effects from the rising interest rate environment .

The sell-off came a day after the 10-year note yield traded above 3.25 percent hitting its highest level since 2011. This occurred about a week after Federal Reserve Chairman Jerome Powell said in an interview with PBS that the central bank is a “long way” from getting rates to neutral, which pointed to a possibly more aggressive path for rate hikes.

The iShares MSCI ACWI ex U.S. ETF, which tracks the performance of a rest of the world ex-U.S. equity index, is down 10 percent this year through Wednesday versus the S&P 500’s 4 percent gain.

Gundlach is founder and CEO of DoubleLine. He is known for his investment acumen in the fixed income markets. DoubleLine has assets under management of more than $120 billion, according to its website.

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Tesla CEO Elon Musk: extreme micromanager

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Tesla’s future as a mass-market car company hinges on efficient, automated production of the Model 3. Tesla will lose $6,000 for every $35,000 Model 3 it sells, says UBS analyst Colin Langan. It only breaks even if the car sells for over $41,000. Tesla has yet to produce the $35,000 base model of the Model 3.

Tesla did meet the goal of producing more than 5,000 Model 3 vehicles in a week during the third quarter. It made 80,142 vehicles (including 53,239 Model 3’s), beating Wall Street analysts’ expectations. But the company is nowhere near the 500,000 mark Musk promised in 2016. As of the end of Q3, Tesla has produced 167,975 cars this year. To put that in context, Ford makes that many cars approximately every 10 days.

Tesla promised investors that it will achieve positive cash flow and profitability in the second half of 2018. But some investors and analysts are deeply skeptical this will happen. Tesla’s debts are quickly coming due: The company has to pay around $230 million in November, part of a larger $1.3 billion debt bill coming due in March 2019, according to AP.

Faith in the Tesla CEO is being tested like never before. Investors are wary of his social media and legal battles, attitude toward regulators and recreational drug use.

Many employees think Musk is essential to the company’s success. They praise his creativity, sense of humor and inspiring speeches. Some credit his hands-on management style with building a great company. A former Tesla and SpaceX employee, Spencer Gore, who is now the CEO of Impossible Aerospace, explained:

“Elon Musk is in a position most will never experience — trying to deliver an industry-defining product on a limited budget. He can’t afford to make decisions slowly, or even always compassionately. When he involves himself in low-level details it’s to enhance execution speed. For some engineers, this can be frustrating, at times heartbreaking — but Elon’s unconventional style is what built the Tesla we all chose to join.”

But other employees describe how Musk’s management style has increased costs and complexity in the factories.

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Saudi Arabia says journalist Jamal Khashoggi was killed after a fight broke out in consulate

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A man holds a poster of Saudi journalist Jamal Khashoggi during a protest organized by members of the Turkish-Arabic Media Association at the entrance to Saudi Arabia's consulate on October 8, 2018 in Istanbul, Turkey. 

Chris McGrath | Getty Images News | Getty Images

A man holds a poster of Saudi journalist Jamal Khashoggi during a protest organized by members of the Turkish-Arabic Media Association at the entrance to Saudi Arabia’s consulate on October 8, 2018 in Istanbul, Turkey. 

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Top VC deals: Instacart hits a $7B valuation; Bill Gates raises an EU energy fund

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 A weekly recap of the most interesting venture capital deals, funds and start-ups.

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