Influential
bond investor Jeffrey Gundlach, the CEO of $150 billion DoubleLine
Capital, sees trouble brewing in the debt market, despite interest rates
hovering near historic lows.
In
a recent discussion with Yahoo Finance, Gundlach compared the current
expansion to the boom that took place nearly 100 years ago. But the next
decade will be the opposite of the roaring 1920s, he said, as the debt
bomb the U.S. is sitting on becomes untenable in the next economic
downturn.
"It's
pretty interesting because the 20s in the 20th century, the 20s were
super boom times. And weirdly, I think the 20s this time will be very
much different than that, with real turmoil," the 60-year-old
billionaire said in a recent wide-ranging interview with Yahoo Finance.
In
Gundlach's view, the 2020s will see "the crescendo" of many
unattractive trends that have been talked about for years, but finally
come home to roost.
"[We're] going to have to face Social Security, health
care, all of these things, deficit-based spending — all of that is
going to have to be resolved during the 2020s because the compounding
curve is just so bad," the billionaire added.
According to the Congressional Budget Office,
the federal deficit will top $1 trillion every year beginning in 2022.
Yet Gundlach said the agency’s forecast may be too rosy, given that it
assumes a "pretty benign future" with no recession and interest rates
that are not very high.
Interest
costs to the government, as a percentage of gross domestic product are
expected rise from 1.25% to at least 3% by 2027. “That's a big, big
increase. And that's coming,” the investor told Yahoo Finance.
“And when you do that, it kind of says, ‘Hey, GDP is going to be knocked by 2%-2.5% because we have to pay interest,’” he added.
Note EU-Digest: these economic problems will be compounded by a totally inept Trump Administration, which has turned the Republican party of Lincoln, Eisenhower and Reagan into a Trump loyalist party which is now based on State Planning and Crony Capitalism
Read more at: Gundlach: The 2020s will see 'real turmoil' as US debt woes come home to roost
