Jeffrey Gundlach says bonds ‘wickedly cheap’ than stocks, shows way to earn high returns

American businessman Jeffrey Gundlach has come up with a way to get a high return without much risk. Gundlach has also said that bonds are ‘wickedly cheap’ in comparison to stocks.

Gundlach, who is a longtime Buffalo Bills fan, recalls a Crown Royal whiskey commercial in which the referee urges drinkers to take a break.

"Stay in the game," Gundlach said in a Twitter Spaces discussion hosted by Jennifer Ablan, editor in chief, Pension and Investments. "The Feds started the party. It's a euphemism for austerity—one shot, two shots, three in a row, now three more. Hey, drink some water, okay? To slow down."


According to Gundlach, there is a risk of tightening too much and overusing the downside significantly as the Fed shrinks its balancesheet through quantitative tightening. Lowering inflation to 700 basis points could result in a much more significant overshoot. The CPI may drop to minus 4% or 2%."

According to the bond market, inflation is between 8% and 9%. Reducing inflation is the only logic for squaring a circle.




He thinks the S&P 500 SPX could go as low as 3,000, possibly even lower than it is now. Not surprisingly, he sees plenty of opportunities in the bond market, known as the king of bonds. "Bonds are very cheap compared to stocks," he said. This comes from someone who said in January that stocks were overvalued but bonds were cheap. "Things have changed."

Now, is an excellent time to buy bonds. Because nobody wants to buy bonds, according to him, a bank loan fund would be a good investment for investors with low-risk tolerance. He said there is a 300 bps difference between short-term and long-term rates. If the Fed raises interest rates to 4%, investors can return 7% but buy less than 95 bonds with a default rate of less than 1%.

Gundlach sees an easy way to make money right now, but that could change if the Fed cuts interest rates to zero.

FAQs

1. Who is called the King of Bonds?
   Jeffrey Gundlach
2. Which team is Jeffrey Gundlach a fan of?
   Buffalo Bills