CEO of DoubleLine, Jeffrey, Gundlach warned investors that America is not ready if there is a recession that is getting closer due to the rise in debt.
"Every reasonable investor will be concerned," says the "King of Bonds." "It sounds like a badly mixed cocktail of economic risk that will also strongly affect the bond market."
The billionaire investor argues that the US does not have the tools to stabilize the economy when the next recession occurs. He basically pointed to the current policy of the Fed to leave interest rates unchanged, and dovish the mood that boosted shares by last month. According to Gundlach, it seems that the economy can not "handle" an interest rate of 2.5%. He also pointed out that most of the US GDP is built up by the amount of money that is taken as debt.
"Growth in the economy is just debt growth," adds Jeffrey Gundlach. "This is the real reason behind GDP growth".
The risk of recession over the next two years is extremely high, while there is currently a 50% chance of this happening within a year. Gundlach believes the probability of a recession in the next six months is 30%.
Gundlach runs the $ 2 billion DoubleLine Total Return Bond Fund. His five-year performance is one of the world's best hedge funds.
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