Big Call From Jeff Gundlach: “The US will ‘Politely Default’ on its Debt”
by Tyler Durden
Legendary investor Jeff Gundlach, who recently handed the most polite version of F#*$ you possible to former litiginous employers TCW, by reporting last week that DoubleLine had now raised $1 billion within the first quarter of its debut, is out with an even bigger call on the economy: “some type of polite default, at a minimum, will happen.” And yes, he is talking about the United States.
Jeff Gundlach: The US will ‘Politely Default’ on its Debt
By Robert Huebscher of Advisor Perspectives
Today’s economic problems, it seems, can be understood through the lens of pop artist Andy Warhol. Warhol, who DoubleLine’s Jeff Gundlach calls an “absolute futuristic genius” in his ability to depict trends in American consumerism, showed through his illustrations of everyday objects, such as Coca Cola cans, that products used by the upper crust of society were accessible to anyone in America. That accessibility made it natural for consumers to borrow money to improve their standard of living, leading to a three-decade long explosion in public debt.
Gundlach delivered the keynote address at last week’s Morningstar Investor Conference in Chicago. He is the chief investment officer of DoubleLine, the firm he founded after leaving TCW last year. DoubleLine now manages just over a $1 billion in bond funds, mostly in mortgage-backed securities, where Gundlach’s expertise is highly regarded. Gundlach’s presentation shared a similar theme with many he gave while he was at TCW, documenting the immensity of U.S. debt obligations and the lack of options for alleviating that burden. As he has stated in the past, he does not consider inflation to be a threat in the capital markets today. He cited six options open to policy makers, but believes a seventh – some form of default – is most likely.