Billionaire ‘Bond King’ Jeff Gundlach Rings The Recession Alarm, Says Bitcoin Is Hugely Overvalued, And Warns Against Investing In China

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The billionaire investor Jeff Gundlach rang the recession alarm, touted emerging-market stocks, and said bitcoin was massively overvalued during a Yahoo Finance interview that aired on Saturday. The DoubleLine Capital boss — whose nickname is the “Bond King” — also cautioned against investing in China, argued that US house prices are less heady than they seem, and explained why he was staying away from nonfungible tokens, or NFTs.

Here are Gundlach’s seven best quotes from the interview, lightly edited and condensed for clarity:

1. “The relationship between the size of the Fed’s balance sheet and the market cap of the S&P 500 is what I call ‘Gundlach’s law of financial physics.’ That’s what investors should worry about.”

2. “Valuations have been this extreme before, but it usually hasn’t ended real well. Now the Fed is in the reverse gear of what they were in for nearly two years; that’s going to cause headwinds for investors.” — Gundlach said that if the Federal Reserve hiked interest rates and slashed its bond holdings, it could weigh on asset prices and tip the economy into a recession.

3. “The bond market is already suggesting an economic slowdown. The economy keeps buckling at lower and lower interest rates, so I think the Fed only has to raise rates four times and you’re going to start seeing a plethora of recessionary signals.”

4. “It’s certainly a nonzero probability that you get a recession in the later part of 2022.”

5. “As overvalued as stocks are by historical comparisons, they’re actually cheap relative to bonds. It’s a tough choice for investors. You look at stocks, and the price-earnings ratios are in the danger zone, and yet bonds have these wildly negative yields, and inflation is going to continue to go up for at least the next couple of months.”

6. “For the not faint of heart, at some point in 2022 I think you’re supposed to buy emerging-market stocks. They are so cheap compared to US stocks by historical standards.”

7. “Bitcoin is for speculators at the present moment. I would advise against buying it. It will be volatile as people get out. Maybe you should buy it at $25,000.” — Bitcoin’s price has fallen to under $42,000 from over $67,000 in November.

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