Gundlach Likens Rising Debt to Shoppers Maxing Out Credit - EcoFinBiz Blog

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Gundlach Likens Rising Debt to Shoppers Maxing Out Credit

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(Bloomberg) -- DoubleLine Capital’s Jeffrey Gundlach sounded alarm bells on the growth of the U.S. national debt, calling it a “horrific situation.”

Gundlach warned that the national debt swelled in fiscal 2018. He likened it to every household in America maxing out three $5,000 credit cards. That ballooning debt could pose a greater threat to the economy than people realize: “Are we really growing at all, or is it just debt-based?” he asked.

The Los Angeles-based firm’s chief investment officer was speaking Tuesday on his annual “Just Markets” webcast. DoubleLine had an estimated $121 billion in assets under management as of Dec. 31.

Other Key Takeaways

  • The government shutdown is adding to rising worries on top of wobbly stocks and concerns about the U.S.-China trade impasse.
  • The money manager walked through recession indicators and noted that some are now flashing yellow, such as junk bond spreads, consumer expectations and homebuilder confidence.
  • It’s a time to invest in emerging markets “relativistically,” Gundlach said. Emerging market stocks will beat the S&P 500 Index if the U.S. dollar weakens.
  • He also spoke about Fed chairman Jerome Powell, calling his comments on Friday a capitulation: “He went from pragmatic Powell to Powell put and the markets have been throwing a party since then.”
  • Gundlach reiterated that he sees Europe as a value trap.
  • On Bitcoin, which he rightly predicted would fall last year, Gundlach said in this year’s presentation that the cryptocurrency’s price could easily make it to $5,000. But it’s “not for the faint of heart,” he said.
  • When it comes to the bond market, Gundlach said it’s probably still in a long-term yield uptrend despite a recent rally.
  • Investors should use the recent strength of junk bonds “as a gift, and get out of them,” focusing instead on companies with strong balance sheets this year. “That’s going to be the way to survive the zigzags in 2019.”
  • For more on the webcast, see our TopLive blog here.

--With assistance from Brian Chappatta, Sarah Ponczek, Charles Stein and Alan Mirabella.

To contact the reporters on this story: John Gittelsohn in Los Angeles at johngitt@bloomberg.net;Annie Massa in New York at amassa12@bloomberg.net;Katherine Greifeld in New York at kgreifeld@bloomberg.net

To contact the editor responsible for this story: Margaret Collins at mcollins45@bloomberg.net

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