Gundlach Warns of U.S. Debt Crisis, Advises Diversifying Away from Dollar

Jeffrey Gundlach, the chief executive of DoubleLine Capital, has raised concerns about the sustainability of the United States' debt burden and interest payments. He suggested that this situation could lead to investors pulling out of dollar-denominated assets. Speaking at a global credit forum, Gundlach stated that long-term U.S. Treasury bonds are no longer a rational safe-haven asset. He warned that a reckoning is imminent.

Gundlach's comments came during a wide-ranging discussion that also touched on the appeal of gold, high market valuations, the state of private credit, artificial intelligence, and long-term investment opportunities in India. He advised investors to consider increasing their holdings of non-dollar assets and revealed that his firm has begun incorporating foreign currencies into its funds.

The 65-year-old investor drew parallels between the current market environment and the periods preceding the 1999 dot-com bubble burst, as well as the 2006 and 2007 years leading up to the global financial crisis. He noted that the thriving private credit industry resembles the collateralized debt obligation (CDO) market of the mid-2000s, characterized by massive issuance and high acceptance.

Gundlach observed that the public credit market has outperformed the private credit market in recent months and suggested that the latter faces risks of overinvestment and forced sales. He cited examples of institutions like Harvard University, which may be compelled to sell private equity assets due to funding cuts. Harvard University has already explored offloading part of its endowment's private equity holdings.

Gundlach founded DoubleLine in 2009 after a controversial departure from TCW. As of March this year, DoubleLine manages 930 billion dollars in assets and employs over 250 people.