- Billionaire “bond king’ Jeff Gundlach discussed the coronavirus crash, the pandemic’s lasting impacts, day traders, the November election, and other subjects in a Yahoo Finance interview on Wednesday.
- The DoubeLine Capital CEO downplayed the prospect of a “V-shaped” economic recovery, and said the Federal Reserve is causing headaches for investors.
- Gundlach also accused amateur traders of gambling and warned a repeal of Trump’s tax cuts could threaten the stock market.
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Billionaire bond king Jeff Gundlach discussed the coronavirus crash, the pandemic’s economic and psychological effects, day traders, the presidential race, and other topics in a Yahoo Finance interview on Wednesday.
The DoubleLine Capital boss questioned the likelihood of a “V-shaped” economic recovery, underscored the difficulty of investing when the Federal Reserve is propping up asset prices, and suggested there could be another round of layoffs.
Gundlach also accused amateur traders of wildly speculating and warned Democrats that repealing Trump’s tax cuts could hit stock prices.
Here are his best quotes from the Yahoo Finance interview, lightly edited for clarity and divided into eight categories:
The coronavirus crash
"What we experienced in the last part of March was far worse than the very worst day in March of 2009."
"There were actually situations in large swathes of the fixed-income market where you simply could not sell assets."
The Federal Reserve's actions
"The Fed has propped up the economy with just the most incredible of fiscal lending that they've ever contemplated."
"It's a bridge further than they've ever gone before. They're spraying money all over the place."
The pandemic's psychological toll
"It's going to be a really big question as to how the economy can handle the taking away of direct monetary payments to American citizens that don't have any savings and are in economic distress," he said, referring to the end of enhanced unemployment benefits at the end of July.
"You cannot have this type of economic disruption and fear that has been instilled in people's psyches. I don't think there's a good appreciation for how much economic fear there is."
"They suddenly are looking into an economic black hole. I think that's a really major jolt to the psyche of those people."
The economic recovery
"A V-shaped recovery is highly optimistic and not really plausible. It implies that you can take 20% of the entire labor force and put them in jeopardy, put them on unemployment benefits, have them produce nothing and instead receive money and that you could do that and nothing bad happens and nobody gets hurt."
"It just doesn't seem very likely to me that you can have that kind of hardship roll over the economy and it's like nothing happened, it's like the servpro economy."
"There's a long queue of entities that want or need government bailouts and that's just gonna keep further pressuring the situation. It's very unlikely that we'll get back to our peak economic growth even in 2021."
The challenge for investors
"It's a very tough environment for investors because there are no market signals."
"The only way to succeed as a fixed-income investor is to really, unfortunately, have to put in a tremendous amount of time and energy - and with a lot of people working on it - into the areas that the Fed is not supporting."
"It's the paradox of investing. People don't like to buy low, they like to buy high when the sun looks like it's shining and the sky is blue. When it looks like there's a hurricane coming they want out, but the hurricane is priced in when you know that it's coming."
"A passive investment style looks like it's almost doomed to fail in the environment that we're in."
More layoffs to come
"There could be a round of middle-management layoffs because people might be revealed for not being that productive when they're doing work at home."
"Companies will realize that they could rightsize with the knowledge they've gained through this pandemic."
The day-trading boom
"There's been an incredible increase in tiny retail investor activity in terms of the accounts on Robinhood and other platforms that have just exploded in term of size. I think that's pretty dangerous."
"There's kind of a euphoria, weirdly, from people who maybe they would normally gamble that money that they're getting from the government, but the casinos are closed, the racetracks are closed, so instead you can take a flyer on the FAANGs."
"These people that are buying slices of the stock market don't even know what they're doing, and have probably lost money already."
"I just don't think they understand that this is not a fixed situation and there are several more shoes, if not Imelda Marcos' closet full of shoes to fall on this economic and market situation."
The presidential election
"We've got a horrifically bad presidential election coming up."
"They're having to debate who's more senile. This is not an inspiring conversation when you have two ancient guys. Their debate is centering around which one of them is on a greater slope of mental decline."
"Joe Biden and the Democrats pledge pretty loudly that they want to increase corporate taxes. Since earnings aren't going up at all, really it's Trump's tax cut that had a lot to do with levitating the stock market. If you reverse that, that's gonna be a really big problem."
