Need to Know: Jeffrey Gundlach says bonds are wickedly cheap compared to stocks and offers one way to get a 9% return...
You can forgive Jeffrey Gundlach, a long-suffering Buffalo Bills fan, if he has the NFL on his mind now that the team he supports looks like the Super Bowl favorite. The chief executive of DoubleLine Capital says he recalls an ad for Crown Royal whisky, in which a referee tells drinkers to take a water break.
The tagline is stay in the game,' said Gundlach, in a Twitter Spaces conversation hosted by Jennifer Ablan, the editor in chief of Pension and Investments. [The Fed] started partying which is a euphemism for tightening one shot, two shots, back-to-back three shots, and now three more like dude, have a water, you know? Slow down.
Gundlach says theres a serious risk the Fed will overtighten, and overshoot on the downside just as it overshot on the upside, particularly as its also reducing the size of its balance sheet through quantitative tightening. Since theyre trying to get [inflation] down 700 basis points, the overshoot may be even bigger, he says. Maybe it moves down to negative 4% on CPI, or negative 2%.
He says thats what the bond market is saying with inflation running at between 8% and 9%. Why is anyone buying a 3.50%-ish 30-year Treasury TMUBMUSD30Y, 3.546% ? The only logic that squares the circle is that inflation will overshoot to the downside.
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