Worth a listen - Rosenberg and Gundlach intereview (Oct 26)

Some folks believe that bond investors are smarter than the equity people. I tend to agree.

Gundlach is the "Bond King" after Bill Gross. I always find his views useful. He sat down with David Rosenberg for an interview in Oct 26. Worth a listen. YouTube link below.

https://www.youtube.com/watch?v=JvNEH9W3QZA&t=3982s

Feels like the world is on the cusp of something... More than likely changing for the worse, per Gundlach.

A quick summary of some of the points from the interview:

1. Gundlach compared the US market (equities and bonds) to that of a tree (with a hollow core). On the surface, the tree looks healthy enough. But until a branch falls off, no one can tell the tree is not healthy.

2. The new Fed Chairman (Warsh) is adding uncertainties to the market. Warsh changes its message frequently.

3. He saw the Fed as being tasked with two opposite goals - keep inflation in check, while striving to keep interest rate low due to the high level of debts in USA. He thought inflation won't be coming back in a hurry. Rates are resetting to higher level. AI/hyperscalers are competing with govt for loans as well these days.

4. Gundlach saw 6% as the trigger for "new" interventions. A likely move is "Operation Twist". The US govt/treasury will sell or raise money by selling short term treasuries. Then aggressively buy back long term bonds (to keep long rates lower than otherwise).

5. His view was the government in US is not prepared to tackle the deficit. Govt debts can expand from US$40trn to US$50trn by 2030.

6. He was concerned about private credit in USA. A fund with 8% write down probably meant 10-20% of the portfolio got wiped out. He also shared that some insurance companies (newly set up/domicile in Caribbean) were set up to enable shifting of these private credit loans to "gullible" investors.

7. He cited Shiller PE of 40X at present.. Future return from stocks/USA would be negative at current valuation. See Pic2.

8. He liked gold (he would buy aggressively at $3800), emerging FX bonds (countries with no default record), mortgage back securities.

In summary => Don't trust the stock market. Lots of stocks are down 15-20% YTD. The rising bond yield is signaling a regime change is in the offing ?