Interview with Jeffrey Gundlach on the State of the Financial Market

Interview with Jeffrey Gundlach on the State of the Financial Market

In a recent Virtu-Mindshare interview, DoubleLine CEO Jeffrey Gundlach offered straight talk on the state of the financial markets and the deficit.

Here is a summary of Gundlach’s comments:

The risk inherent in the U.S. Treasury’s current level of debt issuance and purchasing, he said, is in “how you extricate yourself.”

Gundlach described the current debt levels as “getting hilarious compared to what we used to call a troubling deficit,” adding that the level has surged to over 16% of GDP. Even so, he noted, the figure is conservative as it doesn’t include items such as defense spending and disaster relief. “Over the past twelve months,” he said, “the deficit has grown by a staggering 23% of GDP.”

Given levels of government spending–which has reached nearly $8 trillion per year (of which 57% is borrowed)—Gundlach argues that we are “almost willingly turning ourselves into a third-world country.” He notes that other factors include “crumbling infrastructure, massive wealth inequality and something very close to money printing,” but points out that we have something “no third world country has ever had; massive amounts of people that want to immigrate.”

Regarding how we will unwind the large amount of debt, Gundlach says we either have to restructure it, which he adds is a “gentle word for default” or create a new and different economic system to correct our current “level of brokenness.”

Gundlach predicts market volatility to pick up in “unprecedented proportions.” He noted the examples of oil prices dropping in the negative realm and the surge in retail investors as contributing factors.

“If you think what’s happening now is weird,” Gundlach concludes, “you ain’t seen nothin’ yet. This train of the insane is picking up steam on a daily basis and we are going to end up reorganizing which is painful when you’re doing it but leads to a framework through which the society can actually prosper and go into a phase of great opportunity and optimism.”