Gundlach: ‘Treasurys look vulnerable to me’
By David Enna, Tipswatch.com
A few years ago, I was working in the kitchen and listening to CNBC in the background. A guest came on and talked, talked, talked about debt investments and risks. The CNBC anchors, apparently in awe, said nothing and just let him talk for 10 minutes straight.
The guy was talking sense. I thought: Who is this guy? I ran over to the TV to catch his name: Jeffrey Gundlach.
That was the first time I heard of Gundlach, who is sometimes called “The Bond King.” He is the billionaire founder of investment firm DoubleLine Capital and a man who likes to speak his mind.
Gundlach appeared last week on an episode of Bloomberg’s Odd Lots podcast, hosted by Joe Weisenthal and Tracy Alloway. He raised lots of controversial topics, including a withering argument against the booming private credit market, which he considers very risky. But he also warned of dangers in the Treasury market and stock market.
Here is the podcast in full, streaming on YouTube:
While some might consider Gundlach’s arguments alarmist, my conclusion is: This guy makes a lot of sense. Stocks are overpriced. Bonds are overpriced. Private investments are a powder keg. Government deficits are out of control. If he is right (he says he is right 70% of the time), we might need to reconsider our view of risks in financial assets.
Let’s focus on U.S. Treasurys. Gundlach says:
Yeah. I’m concerned about the financing of long-term Treasurys, primarily because we are issuing a lot of them. And there’s inflationary policies that are being run and probably likely to be further doubled down upon when Jerome Powell leaves as Fed chairman. …
I’ve heard different numbers out of President Trump. He wants rates at 2%, 3%, but inflation is running above 3% on the headline CPI. And it’s not likely to come down to the Fed’s 2% target. …
And so there’s a lot of interest in artificially lowering lowering interest rates and perhaps taking the maturities of Treasurys ever increasingly to under one year in maturity. A lot of investors aren’t aware of the fact that something like 80% of all Treasurys issued in the last 12 months … are less than one year. …
This time, all interest rates are outside of the two year are higher than they were before the Fed’s first rate cut. That just never happens historically. …
And I’ve been saying this for five years now, that the secular decline in interest rates at … long-term maturities is over. In fact, in the next session, long-term interest rates are likely to go higher, not lower. …
And so where we stand on fixed income is we don’t like long term during the next recession. The deficit is going to go up because it always goes up during a recession. … So what happens if the deficit goes from 6% of GDP to 10% of GDP, or 12% of GDP, or 14% of GDP?
All of those are possible. What happens is that you have to blow up the entire system, because all the tax receipts would go to interest expense. We’re already at a large percentage, or about $1.4, $1.5 trillion of the $7 trillion budget is now interest expense. Of course, we have a $2 trillion budget deficit. So there’s only $5 trillion of taxes. And, you know, 30% of that is going to interest expense and that is going to go higher.
Gundlach goes on to predict that by 2030 — under current spending and tax policies — if a severe recession hit, the budget deficit could go to 120% of incoming tax revenue.
Well, by around 2030, you would have 120% of tax receipts going to interest expense, which of course is impossible. So that means that something has to happen. … So long-term Treasurys look vulnerable to me.
At this point in the podcast, Gundlach has been talking for about 15 minutes without any interruption or break. Tracy Alloway jumps in with: “Jeff, first of all, I hesitate to ask a question here because, you know, we could just let you go on.” I laughed. And then he launches into opinions on the stock market (overvalued), private credit (a dangerous “illusion”), foreign investments, gold, emerging-market debt (which he likes), the value of the dollar and even an oddball proposal for a tax on older Americans.
The entire podcast is worth a listen.
Thoughts
Gundlach is an aggravating truth-teller, sort of like the prophets that got stoned to death in the Bible. But there is no denying that the United States is running a $2 trillion deficit at a time of solid economic growth. That should not be happening. It should not be allowed to continue, but it will continue for potentially five more years.
Let’s be honest. We are all aware that this is rather terrifying problem that can’t be solved under current political conditions. So we end up ignoring it. And the end result could be higher long-term interest rates, possibly much higher, no matter how much cutting the Federal Reserve attempts at the short-term end of the curve.
If the nominal yield rises to 6% on the 10-year Treasury note, we could easily see a real yield of 3.25% to 3.50% on the 10-year TIPS. That would result in a hard hit for investors in bond funds and TIPS funds. It is something to think about.
Holders of I Bonds and TIPS held to maturity would survive. The resulting higher real and nominal yields would look attractive, but at least I Bonds and TIPS provide protection against a surge in inflation.
Do we need to rethink the theory that a 2.0%+ real yield is “historically attractive”? Possibly, if the U.S. economic future looks nothing like the past two decades. At this point, I am staying the course with a conservative asset allocation.
• Confused by TIPS? Read my Q&A on TIPS
• TIPS in depth: Understand the language
• TIPS on the secondary market: Things to consider
• TIPS investor: Don’t over-think the threat of deflation
• Upcoming schedule of TIPS auctions
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Treasury Inflation-Protected Securities 
This is a review of Gundlach’s 2024 predictions I saw on the “Robert’s Substack”
Before reviewing Gundlach’s forecast for this year, let’s see how accurate his predictions were a year ago. In his “just markets” webinar, he made five core predictions:
All five of Gundlach’s predictions were incorrect. That may explain why, in this webinar, he provided an in-depth analysis of the economy and markets but made few specific predictions.
One scenario I did not see mentioned in the comments is a tame Fed buying long-term treasuries to depress interest rates. This is the same “quantitative easing” that was done out of necessity in recent financial crises. It used to have a more accurate and descriptive name: monetizing the debt. It leads to inflation and de facto devaluation of the dollar.
Well, isn’t the $64 dollar question for a TIPS watcher, where to put already earned money to be assured to be able to sustain or provide for yourself or other’s years from today?
All you have to do to realize real yields are not attractive today is to look at a longer chart of the ten year real yields. Before the global financial crisis they were consistently above current levels, despite inflation (in the 90s) being ~2.7%.
So we face a normalization of real yields AND likely higher inflation.
Deficits themselves are not inherently a problem; the government can print money without consequence as long as the deficits are not too large. The problem is they are now running 6% of GDP in a good economy. marce has given chapter and verse, but raising taxes has to be part of solving the deficit. It’s just math.
People are sleepwalking about the government dysfunction and what it means for US debt.
A balanced budget amendment is needed.
Gundlach does a quarterly webcast through DoubleLine. The next one is 12/9. Registration is required. Individuals can view. They are always worth the time to view.
What does this mean for retirees who have long-term treasury ladders? Is the solvency of those treasuries affected per his scenario? Also how does this portend for those us who are desperate for higher rates for long-term treasuries as we extend our ladders? From this perspective, I don’t know whether to be worried about the treasuries I hold or excited about the possibility of higher long-term rates.
Reader, my feeling is “stay the course.” If we get remarkably higher nominal and real yields in coming years (without greatly increased inflation) I would move more money into Treasurys held to maturity. Nothing is certain.
David, could the government ever abrogate the fixed rate guaranteed by an I-Bond at issue? This podcast got me thinking, especially the part about unilaterally reducing coupon payments by fiat…
I don’t think the U.S. government would break its deal with Savings Bond holders. But anything seems possible these days. That sort of breach would probably come late in the “disaster cycle.”
They would also have to keep us from cashing them in, assuming there was a better place to invest the funds…
The 20 year Treasury at market close on Sept 17 (a Fed cut day) was 4.65%. The Fed cut again on Oct 29. The current yield on the 20 year Treasury is 4.68%, as of Nov 21, higher than Sept 17 yield. The yield on the 10 year Treasury is about the same now as it was on Sept 17. No change or higher yields after 50 basis points in cuts. The Fed has no control over long term Treasuries (maybe somebody should tell this to Trump), which is probably why the Fed wants to shift to selling more Treasury bills.
If so, go with a short TIPS fund,
As always, my favorite TIPS fund is Vanguard’s VTIP ETF, with holdings up to 5 years. (But I don’t currently own it.)
“If the nominal yield rises to 6% on the 10-year Treasury note, we could easily see a real yield of 3.25% to 3.50% on the 10-year TIPS.”
I think it is worth considering how the US government dealt with the national debt during and after World War II.
During that time, the Federal Reserve capped interest rates at the same time that inflation surged, forcing real interest rates deep into negative territory for a decade or so. This policy of “financial repression” effectively inflated the debt down to a manageable debt-to-GDP level.
This is a decently strong possibility, with a Fed willing to take that action.
David: You write:
“If the nominal yield rises to 6% on the 10-year Treasury note, we could easily see a real yield of 3.25% to 3.50% on the 10-year TIPS. That would result in a hard hit for investors in bond funds and TIPS funds. It is something to think about.”
Your unstated assumption seems to be that 10-year Treasury note yields might increase, without any change in inflation. It seems to me more plausible that an increase to 6% on the 10-year Treasury note, would reflect actual or anticipated increases in inflation and in CPI adjustments to TIPS. In that scenario real yields would not have to increase and I do not see it as something that would come “easily”.
I would be delighted to see real returns on TIPS above 3% again, but I am not holding my breath.
You could be right, if inflation rises as nominal yields hit the 6% to 7% range. But in a different scenario, if the longer-term rate increases are part of a bond-market revolt over higher deficits, there’s a good chance of recession and deflation. Neither scenario is desirable.
The quoted statement from Mr Grundlach that :
A lot of investors aren’t aware of the fact that something like 80% of all Treasurys issued in the last 12 months … are less than one year. …”
doesn’t seem to amount to much once you think about it. It is simply a commonplace fact of a complex debt market.
The average maturity of Treasury debt now outstanding is about 6 years and about one third of the total Treasury debt has a maturity of less than one year.
Assume for simplicity that the ⅓ of the total debt with a maturity of less than one year has an average maturity of 4 months (⅓ of a year) and thus has to be replaced roughly three times over the course of the year. The total turnover of this debt each year will then be roughly equal to the gross amount of ALL debt outstanding.
Assume further that the remaining balance of the debt that has a maturity of more than one year (⅔ of the total debt) has an average maturity of three years so that roughly ⅓ of it needs to be replaced each year. The total turnover of this debt will then equal 22+% of all debt outstanding (⅔ times ⅓ equals 2/9 or 22+%).
Under these assumptions, which are not indicative of a crisis, the total debt sales in a year would equal 11/9 (or roughly 122%) of the total debt outstanding and the sales of the short term (under one year maturity) debt would be 9/11 (or roughly 82%) of the total debt sales for the year.
I won’t be losing any sleep over this.
The Trump administration has skewed debt issuance to T-bills over the last several months (as a stated policy). If we get a rate-cutting Fed chairman next year, the theory is the deficit could be funded through very short-term T-bills with very low yields. Longer-term yields would remain high, of course.
Per T Rowe Price (July 2025): “Currently, 20% of the overall U.S. Treasury debt stack is in bills as opposed to coupons. We anticipate that this will increase to the 23%–25% range when the government boosts bill issuance to fund the fiscal package.”
These percentages are not abnormal and are well within the range of Treasury Bill funding over the past decades, again per T Rowe Price:
“The peak percentage of bills in the total Treasury debt stack was nearly 35% in November 2008, when relatively high longer-term yields encouraged the Treasury to keep as much of its debt as possible in short-maturity instruments. The proportion of bills reached a recent low of 10% in October 2015 as the Treasury took advantage of near-zero long-term rates to lock in attractive financing for years.”
Lots of great comments. Reality is when the govt is so massive and intrudes into every part of your life, avoiding politics is impossible for a meaningful conversation (sports is mostly safe still).
Since it hasn’t been mentioned, a famous line: When the people find that they can vote themselves money, that will herald the end of the republic.
Longer read here:
https://www.johnikerd.com/finding-common-ground/plato-on-democracy
“When the people find that they can vote themselves money, that will herald the end of the republic.”
I think this concept is very true, but I would apply it differently:
When the military-industrial complex finds that they can lobby themselves money, that will herald the end of the republic.
This all makes sense.
It is my very clear, and often unpopular opinion, that substantially raising taxes is essential. Period.
Yes, there are additional mechanisms to address the deficit and debt, but without returning to tax rates in place before Reagan, the rest of it is not nearly enough. Almost 80% of US federal expenses are for 5 categories: social security, medicare, medicaid, debt interest, and national defense. Laying off federal employees and cutting many other services has relatively inconsequential effects on expenses.
Perhaps if we all quit complaining about income taxes, IRMAA, corporate taxes and the like and realize substantially higher taxes are essential to reducing deficit/debt, income inequality, and maintaining the quality of life we say we want, this could be solved.
It starts with compassion and not just looking out for number one. I retain hope despite the broad and damaging anti-tax sentiment in the US.
Guess it needs saying …
The US doesn’t have a taxing problem; they have a spending problem.
Health Outcomes are worsening; Medicare and especially medicaid (younger people potentially not working!) need an overhaul to create incentives for health – the best RX is movement/exercise (if possible, I know not everyone can do that).
Notaname, I totally agree on “keep moving.” Very important for long-term health. But in my opinion we do have a taxing problem, with the latest evidence being “no tax on TIPS, no tax on overtime, no tax on car loan interest, bigger senior standard deduction” all at a time of a strong economy.
No, I would say Scott was right the first time. The phrase “we don’t have a tax problem, we have a spending problem” is a good-sounding false narrative. Debt is a function of under-taxing, over-spending, and economic growth that does not make up the difference. One area is not responsible for the debt — all three are. And all three must be part of the solution to our debt crisis. But our politicians and media won’t tell you that, because the former want to get re-elected and are afraid of telling us the truth and being held accountable for it, and in the latter case, the media amplifies what the politicians tell them.
In 2025, we have historically and unsustainably low income tax rates, an affordability crisis, and a budget bill that added more tax cuts at a cost of over $4 trillion added to our national debt over the next decade without addressing spending in a year-to-year declining growth rate economy and higher inflationary environment triggered by unprecedented and indiscriminate tariffs (which are, in fact, a regressive tax on the American consumer and American corporations). It’s a bad mix, and cutting taxes through higher deficit spending at a time when the debt is astronomical is completely irresponsible policy. With income inequality at record levels, this low rate of taxation especially on the wealthiest Americans that have gotten the largest benefit of the last two major tax cuts is creating an unsustainable and unfair bifurcation in our culture and an economy that does not work for everyone. It’s not a healthy situation for our society.
So, what are the solutions. Tax rates on higher earners are going to have to increase after years of reductions, across-the-board tariffs have to be terminated so prices on everyday items can ease, and spending is going to have to be more modest without gutting healthcare for those who aren’t old enough for Medicare, poor enough for Medicaid, or fortunate enough to get coverage from their employers.
Notaname-absolutely we have a spending problem. I work in State Government procurement and see it firsthand. In fact, I just did a $6,500 purchase order for promotional merchandise, stuff like lip balm, shopping bags, and keychains for our agency funded by the ARPA grant, or the American Rescue Plan, funding that was passed by the Biden Administration for Covid. Stuff that will sit in boxes and wind up in a landfill. The cost justification was “incentives,” and “outreach.” This is precisely the problem: wasteful spending on stuff with no return on investment. The government grant program feels rife with fraud and waste, as many executors of those funds have very little financial or business background, and sometimes even select vendors that they know personally. Meanwhile, back at my middle-class household, I have to watch my every penny, and budget accordingly, while even though I’m in the lower federal tax bracket of 12%, my total taxes (federal, state, local, real estate, excise, sales, etc.) adds up to well over 30% of my income. Tax revenues as a total are historically high right now. So YES, it is a SPENDING problem, first and foremost. If that gets reined in more first, then we can talk about raising taxes.
My single largest yearly expense is property taxes on my 1000 sq. ft. house. I feel ok about this because a fair amount of it goes to education and city services.
I had a friend whose income was growing by leaps in the 90s, but no matter how much he made his debt increased. Reason: His wife spent it faster than he made it even though they had talked about this. After the divorce he asked her if her spending was some kind of revenge. She answered, of course it was.
With regards to what Gundlach “buys,” He is referring to his bond funds. Their strategy will necessarily be different than an individual investor. For example, if Double Line bought 30 year Treasuries that later dropped in value due to rising rates, they could see redemptions and be forced sellers. We individual investors have a distinct advantage in that we can avoid selling with proper cash flow planning.
For whatever reason his funds also avoid the Muni market, which continues to offer great long-dated tax equivalent yields – and is not reliant on Washington. I see my Muni portfolio as a diversification tool in case the US does the unexpected. Corporate bonds would do the same but their spreads are tight at the moment.
Of course, diversify and avoid the blue states: CA, IL, NY.
They have flown past the Laffer Curve on revenue in past few years (CA at 13% and considering a wealth tax).
PS – Happy T-week!
Not a name: If taxes, gas, and/or homes, etc were that bad why haven’t more left California? Those in the state argue, “we need more to leave and if only one spouse income then that would be the icing on the cake, too!” Too many $s floating around…look at everyone complaining about IRMMA tax…go back to work and/or lower your expenses…maybe your spouse may stay!
Without trying to get into some philosophical political debate. I am not a person with a lot of money. I am 65. I do not have anywhere near a million dollars in total net worth. I really can not afford to lose what I have which is why I follow this blog. It is very troubling to me to see how the government manages our money. To see where we are and to hear the doomsayers. The worst thing is a lot of it seems completely fixable with some common sense and everyone in the US giving a little. Something that is very apparent to me, as person that has always been middle class or lower middle class at some periods, is just how much money people in this country have. It is enormous. I usually winter in Florida, just take a boat ride down the intercostal waterway. The wealth is obscene. It goes on for 1,000miles like that, and that is just Florida. You can arrive at different figures but roughly there is 160 trillion dollars in the private sector. 97% of that wealth is held by 50% of the country. As Chris Rock said. If people only knew how much money rich people have there would be riots in the streets. The rich people of course control everything. After all money is power. These people are the ones making our laws and our tax policies. Look at Nancy Pelosi. Liberal champion. Just read her disclosed net worth is $250 million. She started her career with 800k. Good for her. I am not opposed to people being wealthy, I just feel that things have gotten out of hand. I am not a Bernie guy but I tell you what, the election in NY……there is something brewing from Magas hating “elites” to progressives looking toward socialism. I think it is all part of the same thing. I think what the bottom 50% are hearing is “let them eat cake” We need to get our house in order. The bottom half can only do it with pitchforks. I suggest the top 50% come together and make some tough choices for the benefit of us all.
Hi Chris,
Sometimes we think only the wealthy or semi-wealthy have financial wisdom. Your post shows great wisdom re: personal finance.
I have always been solidly middle class (Software Engineer 37 years) and never had to really pay too much attention to my checkbook balance. That changed over the last several years as inflation took its toll and my company stopped all raises even COL. I now am on a budget that I have to adhere to closely.
I also am not political so I hope this doesn’t come across as such. My company has moved ALL jobs to India and we in the US are all being laid off. Those are historically well paid white collar jobs that are gone forever. The AI bubble is masking the bloodbath that is going on for Software jobs. If you don’t have AI skills, there are very few jobs right now. I believe the policies in place have made this necessary for companies and long term I worry for the young college educated people and what will be available for them in terms of employment.
I have managed to save ~3.5mil by educating myself over the years. Much gratitude to this website and bogleheads, etc. for all the help:) I mostly worry, as the article talks about, what changes Congress will have to make to deal with our interest debt and Social Security. Higher tax brackets will make me regret not doing more Roth conversions and SS benefit cuts will skew my plans. I have a 10 yr TIPS ladder meant as a bridge to taking SS at 70 with ~1.8% real. Makes me wonder if policy may mess with the inflation calculations and that + my real return won’t meet my planned needs.
Regards,
Pat
Go to a DSA meeting. You might be pleasantly surprised.
I think it’s got to be more than 160 trillion. That’s only about $600K per adult. Seems to me there’s an enormous amount of property that isn’t tracked (not even necessarily the offshore accounts and church property and all that, but just stuff people own that they aren’t required to tell anyone about). And of course the dollar amount people own at any given time isn’t the whole story anyway. The number of dollars moving around in the economy (the velocity of money, I think it’s called) matters a lot more. Giving money to people who will spend it is a good idea, because that does more for the economy than giving it to people who will hoard it.
Two thoughts:
“But there is no denying that the United States is running a $2 trillion deficit at a time of solid economic growth. That should not be happening. It should not be allowed to continue, but it will continue for potentially five more years.”
I’m not sure where the “5 more years” comes from but this, what you write here, is the key. We should have been, and should still be, addressing our deficits and debt during “good” economic times.
I’ve said this for many years. You can’t lower the debt until you eliminate our structural annual deficits and start yielding a surplus. The problem is we have both parties spending above our revenue and one party refusing to budge on tax increases. Tax increases are one of the three ways to increase revenue the others being cutting spending and increasing economic growth.
The end result tips into the political. Every president GOP president since Reagan has left office with a higher deficit than he inherited. Every Democratic president since Reagan has left office with a lower annual deficit than he inherited. But only one, Clinton, ever balanced the budget and achieved a surplus, working with a GOP Congress. At some point along the way since then, the prevailing wisdom is that deficits don’t matter when you print your own money. And all this is why we find ourselves where we are today.
This interview says the quiet part out loud, what we all fear could be happening without any ability to stop it because there’s no political will or incentive for our elected officials to do so. We focus on everything but this.
CRFB.org: “The projected federal budget deficits for the next five years are expected to be around $1.7 trillion in 2026, increasing to approximately $2.6 trillion by 2030.”
Okay, but five is not a magic number. The OBBB is projected to increase our national debt by over $4 trillion over the next 10 years. Right now, there is no end in sight.
Thanks for your post.
My shallow understanding is that Clinton partially benefitted from the dotcom boost in revenues. I recall he did make an attempt to cut spending though.
Ross Perot is the only candidate that I recall running on a platform of debt reduction. Perhaps it’s time for another – but affordability seems the most effective message du jour.
Clinton also benefited the end of the Cold War, a thriving U.S. economy, higher top-end tax rates, and Republicans and Democrats in Congress at the time who cared about reducing the deficit.
Clinton also raised taxes in 1993.
“One party refusing to budge on tax increases” — fortunately we were able to get $400 billion or so of annual tax increases in place (in the form of tariffs) without the other party being able to block it. Thank goodness, since that could reduce the deficit by $4 trillion or so over the next 10 years (compared to what it otherwise had been) . . . which is a start.
“One party refusing to budge on tax increases” — fortunately we were able to get $400 billion or so of annual tax increases in place (in the form of tariffs) without the other party being able to block it. Thank goodness, since that could reduce the deficit by $4 trillion or so over the next 10 years (compared to what it otherwise had been) . . . which is a start.“
It’s not a start, it’s the wrong policy. You are referring to the regressive tariffs that Congress (not just the other party) never authorized which disproportionately impact low and middle class Americans in the form of higher prices that we were falsely promised would be paid for by foreign countries? The same ones that are destroying farmers (especially those who sell crops like soybeans) by increasing costs on fertilizer and machinery, while also decreasing demand for exports due to retaliatory tariffs from other countries — so much so that a $12 billion farm aid bailout package is needed? The ones that have caused inflation, which had finally receded back towards the Fed’s 2.0% target, to rise from 2.3% in April to 3.0% in September? The ones on more than 200 food products, including coffee, beef, bananas, and orange juice ,that had to be rolled back in abject failure because they did fuel inflation despite false assurances they would not? Those tariffs, which are gone? And trust me, this is only the start of the inevitable rollback.
The fiscal year 2025 deficit of $1.8 trillion was essentially the same as fiscal year 2024, despite the last six months with tariffs in effect, and added $2.17 trillion to the national debt, which brought the total outstanding debt to over $38 trillion. That’s almost 6% added to our debt in one fiscal year. As a share of the economy, the debt held by the public increased from 97.4% of GDP at the end of FY 2024 to 99.8% of GDP by the end of FY 2025 which ended in September. CBO projects a similar deficit in 2026, despite the tariffs, which are constantly in flux.
By no means is this commentary meant to imply that the cause of deficits is not bipartisan. While it is true that our annual deficits have increased more under Republican presidents and decreased more under Democratic presidents, the national debt has skyrocketed since Reagan whether Democrats or Republicans are in charge of the Executive and Legislative branches of government. That is because we continue to have annual deficits, which is a function of our broken political system. The revenue the government takes in is insufficient to cover its spending which means we never get to a surplus which would enable us to start paying down our debt. It is a bipartisan problem of our own making, one that is continually out of reach and has been ignored and worsened by policies like tax cuts skewed to the wealthiest Americans who absolutely do not need the relief that are never paid for which regressive tariffs cannot fix, and because of increased costs for the government programs that people need and support, such as Social Security, Medicare, Medicaid, Obamacare, SNAP, and National Defense. Fiscal discipline has taken a five decade hiatus to the detriment of our fiscal health as a nation, and it’s only getting worse to the point where it may be impossible to address.
It’s really not debatable that we need an all-of-the-above approach to tackle our debt crisis. That includes progressive tax increases from the place where it is most concentrated and has seen the greatest benefit from recent regressive tax cuts, which is the top 1%-10%. One party doesn’t want to hear it. That needs to be coupled with spending restraint and spending reductions. The other party doesn’t want to hear that. And we also need to continue to drive productivity gains and economic growth, which investments in education, research, and technological innovation have and can continue to achieve.
I wonder if the precedent of a stiff federal consumption tax in terms of the tariffs, sends us down the path to a value-added tax sometime in the 2030s.
What a great video! Thanks for sharing it. My favorite part: the last 10 minutes, which starts with Gundlach talking about his surprise at the magnitude of money-printing that occurred in 2020-2021-2022.
Well Gundlach is wrong 30% of the time apparently. I do not really trust that he is right on stock market calls. That is too tough a timing game especially for a bond guy.
He has mentioned that lately he is positive on 5 year Treasuries. Comforting.
Only recently did I find out that crypo can be leveraged extremely high unlike stocks. That is very dangerous and hopefully a big selloff does not spill into stocks and quality bonds as speculators sell to cover crypto margin calls or panic.
I wonder if he (or anyone) has an explanation for why long-term bonds’ rates went down this year. In May the 30 year treasury was over 5%, then again in Sept. it was nearly 5%. Since the recent rate cuts its down to 4.7%, which is what I predicted would happen.
I definitely understand the argument that long bonds may go up from here, but it seems that historically they’ve gone down when the Fed lowers short term rates.
Nevertheless, no one wants to acknowledge the apparent truth that the only way to pay back our debt is to hyper-inflate, which will eventually lead to the collapse of the currency, and likely the formation of a new currency (I like to call it the New US Dollar, NUSD), which has, of course, happened in many other countries many times in the past.
I believe he was referring to the 30 year yield being higher since the Fed started cutting rates in September 18, 2024. On that date, the 30 year US Treasury was yielding 4.03%. On September 30, 2024 the 30 year US treasury yield was 4.14%. On 1/1/2025, the 30 year US Treasury yield was 4.79%, on Friday of this past week, it was 4.71%. All of those rates being higher than the day the Fed announced the first cut in this cycle.
Abolishing the penny is treating the symptoms rather than the disease.
Very interesting post! I loved the linked podcast also. At one point, Gundlach mentions that the US could restructure its Treasury debt by just reducing coupon rates, by fiat. I believe he’s correct.
Neither he nor you mention how payment on TIPs might also be manipulated. The most obvious way would be to understate published inflation statistics, something Argentina did under a previous Peronist government.
I stumbled across this podcast episode on YouTube, and really enjoyed all of his viewpoints. He has been pounding the table for many years about the spiraling debt problem (as many bearish billionaire investors do…think Ray Dalio and Bill Ackman too), and they’re usually right 25% of the time when we eventually have a recession. But the interesting thing about Gundlach is that he really delves into the mechanics of the markets, and connects all the dots so deftly. I found his idea of an “age tax” to be quite possible, considering our shift to populism politically, and what he described as an emerging nihilistic view of the world by most younger people, folks that have lost faith in institutions (academic, religious, and political), and how they cant afford housing, have big piles of student debt (with potentially worthless degrees in the age of A.I.), and are in favor of more socialist policies now (like Mandami). Plus, neither political party can “take our medicine” when it comes to deficits. The very idea of a $2,000 tariff rebate in a midterm election year is akin to Biden’s student loan forgiveness in an attempt to buy votes and will only further fuel the fire of inflation and more debt. Gundlach went on to also float the idea of the Treasury just changing coupons on existing held debt to effectively lower the interest expense, essentially saying that the government can do what ever they want in a crisis situation. He advised a portfolio of 40% equities (mostly foreign), 25% gold, 25% short to intermediate term Treasuries, and 10% cash. For more similar content to Gundlach’s borderline alarmist, or what I feel is more realist possibilities, I would recommend listening to Ray Dalio’s 30-min animated presentation on YouTube called Principles for Dealing with the Changing World Order for more debt perspective too. It truly leaves you feeling that all roads lead to gold.
That is interesting that 80% of borrowing is for under 1 year instruments. Makes sense.
But this issue isn’t just about investing in treasuries, is it? It is about the entire economic system if the US can no longer bridge the deficit gap and pay for the expenditures that the public is accustomed to.
My advice to you David would be to keep traveling while the dollar retains some of its value.
Great food for thought, but I’m thinking I should wait until Monday to read your Sunday columns!
Thank you for bringing this up. I watched it as well and usually feel Gundlach is a straight shooter (and pretty sharp). I too have a conservative asset allocation. I have been working on a 30 yr TIP ladder in my IRA (thanks to you). I will continue to hold those to maturity. I still have some 12 years to fill further out so I will be watching for your posts. I appreciate all your years or experience and knowledge you are sharing with us. I look forward to learning more. Appreciate this website.