Jeffrey Gundlach sheds light on a raft of issues relating to stocks, bonds, inflation, and President Biden’s tax-and-spend agenda in his recent DoubleLine hour plus vlog.
Jeffrey Gundlach is the founder of DoubleLine with 135 billion USD assets under management, he is known as the bond king, and he is receiving a lot of airtime these days on the mainstream business channels.
“Jeffrey Gundlach is the founder of DoubleLine with 135 billion USD assets under management, he is known as the bond king”
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President Biden’s tax-and-spend agenda dominates the first part of the presentation where Jeffrey Gundlach sheds light on the impact this could have on investing
So, the billionaire bond king started his presentation by slamming Biden’s plan to hike capital gains taxes on taxpayers with more than $1 million in earnings.
Jeffrey Gundlach argued that fears of higher capital gains taxes are already weighing in the market.
Jeffrey Gundlach sheds light on the recent sell-off in high-beta stocks and other speculative investments like bitcoin which have the most to lose due to a hike in capital gains
He argued that if half of the winning is going to be handed over to the government, then investors might think twice before investing in high growth high-risk stocks.
“Today is an important day because the president has made good if you want to call it that on his promise to begin raising taxes and the capital gains tax if you make more than a million dollars a year in California the capital gains tax if the proposal goes through that was launched today will be 57 capital gains tax that’s the federal tax plus the California tax” said Jeffrey Gundlach.
“Today is an important day because the president has made good if you want to call it that on his promise to begin raising taxes and the capital gains tax”
Jeffrey Gundlach sheds light on a massive 57 capital gains tax, which he believes will stifle investments, particularly in growth sectors of the economy
If you want to reduce something tax it and if you want to increase something subsidize it.
“It’s getting pretty ugly and I think it’s going to have some very significant effects which we started to see the minute that this tax proposal was launched today we’ve seen bitcoin a very speculative darling investment these days go down about 20 from its high in the last couple of weeks and a lot of people would think twice about speculating on something like bitcoin if they felt that if they won meaning the price went up from their cost that 57 percent of a highly speculative gamble if it hits if it hits, would go to the federal government but the stock market also fell pretty sharply upon that no wonder it’s surprising that people haven’t been contemplating this already” said Jeffrey Gundlach.
“A lot of weird things happened once the pandemic hit” – Jeffrey Gundlach
Jeffrey Gundlach sheds light on the federal government’s decision to embrace MMT-like monetary policy fusing fiscal spending and monetary stimulus to try and paper over the economic damage caused by COVID-19
Jeffrey Gundlach is highly critical of MMT. He noted that between stimulus checks, which were supposed to be temporary, and all the expansions of unemployment and other benefits, the percent of personal income comprised of government payments soared. Government handouts funded by a skyrocketing money supply M2 supported 34% of household spending in April.
“A lot of weird things happened once the pandemic hit….it was a steady march to dependency on the government by a larger and larger fraction of the US population went vertical what this chart represents is what percent of personal income which is a government statistic what percentage of the government of personal income is made up of government giveaways which we call transfer payments back in the 60s it was down near five percent” he said.
Jeffrey Gundlach sheds light on the surging public deficit which has already blown out under President Trump and is set to now widen further
The US public deficit has rocketed to over T28 USD, according to the US debt clock.
Jeffrey Gundlach notes that the Fed’s balance sheet exploded as the central bank monetized much of the new debt.
Moreover, Jeffrey Gundlach pointed out that the surge in the debt doesn’t fully capture how much money the federal government owes.
“The government giveaway programs and the programs that we put in place to battle the economic impact especially to people who were suddenly unemployed and there were about 20 million people that were suddenly unemployed those stimulus packages were originally thought to be temporary but now they’ve become a fixture and we can see that the blue line in recent months has needed has grown again as a requirement in funding these non-stop stimulus programs so the US government now has over 28 trillion dollars in debt and the US government has $163 trillion in unfunded liabilities when you roll it all together federal-state uh and local level that amount of unfunded liabilities is 775% of our current total economic output” said Jeffrey Gundlach.
“there’s no feasible way the US will be able to pay off its debt”
– Jeffrey Gundlach
Jeffrey Gundlach sheds light on the likelihood of the debt being paid off, which he believes is remote
“If we wanted to pay that off, Gundlach observed, it would have to put 10% of our economy, and have negative economic growth, for 77 and a half years. In other words, there’s no feasible way the US will be able to pay off its debt. Instead, the US has no choice but to continuously refinance” said Jeffrey Gundlach.
Towards the end of the presentation, Jeffrey Gundlach sheds light on inflation
Jeffrey Gundlach highlighted the Fed’s failures to anticipate the collapse of the subprime mortgage market as one reason to be skeptical of Fed Chairman Jerome Powell’s rhetoric about rising inflation being “transitory”.
“I’m not going to accept that their crystal ball is any clearer on this inflation up move being transitory” said Jeffrey Gundlach.
“How do they know that? How do they know that the inflation rate going up is just going to be transitory? I’m reminded of the subprime banking crisis that started in 2006 2007. It started and Ben Bernanke was the chairman of the Federal Reserve and Ben Bernanke said don’t worry about the subprime loan problem that we have subprime is contained” he said. And the rest is all history.