DoubleLine CEO and CIO Jeffrey Gundlach, also known as The Bond King, warned that America is headed in an appalling direction on Making Money with Charles Payne Thursday, based on his take on the state of the markets and the U.S. economy.
Gundlach told the mainstream media that it's appalling that we wring our hands over the tragedies that occur because there's shootings of six or eight or 15 people. Every single day, people are dying of fentanyl. The only answer I can come up with is because we don't want to. We're allowed to allow all of these deaths, and that's an appalling answer. Gundlach wrote an open letter to President Biden on December, calling for his administration to address the border crisis and illegal activity along it.
Dear President Biden, please get tough on fentanyl, he tweeted. It is a much more urgent issue than crack you focused on a long time ago. On average, 300 Americans are killed each day. After Biden's first visit to the border this week, Gundlach expressed disappointment that the president didn't urgently address fentanyl deaths.
We know it's coming through Mexico, the Mexican border. We know it's coming from China, but we don't do anything about it. I just have to scratch my head and ask the question, why are all of these deaths due to this fentanyl? The CEO posited. I just wish that we cared about some very substantial problems instead of focusing on multi-trillion dollar spending bills that nobody reads. Gundlach weighed in on the framework of Federal Reserve Chair Jerome Powell, saying that a radical shift could come from the central bank under the right conditions, referring to the Biden administration.
If the two-year Treasury yield drops below 4%, The Bond King said, I think you're going to see a radical shift in Fed rhetoric. There are so many recession indicators that are now flagging. The leading economic indicators are very important. It's very negative and the Fed needs to get in line with the bottom line. According to Gundlach, Powell has so far raised rates in order to avoid a long-term inflation problem, and believes that the consequences of being entrenched by inflation could be worse than a moderate recession.
He said that the ultimate result of the entrenched inflation and elevated inflation expectations led to a really intractable problem. I think he should stop worrying about the inflation problem at this point because inflation is going to come down further in the next few months. The question really is, what happens beyond that? When it comes to rising interest rates, Gundlach advised investors to listen more to the bond market than the Fed and switch their portfolio from a 60 40 stock-to- bonds split to a 40 60 balance.
The Bond King has cited tremendous income up for grabs on a mix of bonds, including high-yield bonds, corporate bonds, emerging market bonds and asset-backed securities.
Bond portfolios are down in the 80 s or even 70 s due to the interest rate increases. Gundlach said it's easy to see bonds priced at 75 going up to 85 or 95. It sounds like there is a lot of profit potential in the stock market. That's a good case. Bonds are cheap compared to stocks because you have four times income flow and less downside.