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Gundlach says bonds are wickedly cheap compared to stocks and offers one way to get a 9 return

edited September 2022 in Other Investing

9% ytm wow..
maybe get more. May get corp bond next wk [paid wk] will do research more.
becareful pick companies wont belly up
Or just Add Gundlach funds or ETF


  • The NAV of his flagship fund is still getting pounded, and I don't see how that turns around until most of the Fed rate raises are in the books or sufficiently telegraphed.
  • ...and that's going to take a while.
  • edited September 2022
    There are of course floating rate fixed income funds, but the question becomes whether loans' credit quality can withstand the rise in rates, whether some will start to default and what the recovery rate will be when they default. It's one of those sectors where good active management to avoid defaults can make a difference.
  • Gundlach may just be "talking his book", but I intend to start buying (high-quality) Bond funds closer to year-end - after the majority of rate increases are likely completed.
  • edited September 2022
    If you go by the chart of the Fed members' expectations/judgments, most of the increases will likely be done by the end of the year ... at ~ 4.4%.

    Not that they're always right on the money, to put it charitably. There's a lot of water yet to run under the bridge before the new year.
  • edited September 2022
    Interesting proposition. Thanks @JohnN for the post. Beyond my pay grade. I do think that as a “hedge” against a total wipe-out in equities and other assets he may be right. Nobody really knows. Returns on different assets are all relative - depending on the particular macro environment. Macro worsened today. Not only the Fed moves, but also Putin’s nuclear saber-rattling.

    Personally, I’ve held GNMAs in lieu of cash past few months. Didn’t work. Lost a bit. Not giving up.
  • What is he recommending to get the 9%? The article is behind a paywall.
  • edited September 2022
    Hi Wxman123
    He did not say

    ***Now, is an excellent time to buy bonds. Because nobody wants to buy bonds, according to him, a bank loan fund would be a good investment for investors with low-risk tolerance. He said there is a 300 bps difference between short-term and long-term rates. If the Fed raises interest rates to 4%, investors can return 7% but buy less than 95 bonds with a default rate of less than 1%.

    Gundlach sees an easy way to make money right now, but that could change if the Fed cuts interest rates to zero.***

    My hunches are invest in his funds or buy JNK HYLD Etf junkies bonds prob similar or better returns without extravaganza fees and they been beaten down badly last 9-12 months
  • edited September 2022
    Gundlach sees an easy way to make money right now, but that could change if the Fed cuts interest rates to zero.***
    This statement makes no sense at all. If the Fed chopped rates today from the current yield, and bond unloading by the Treasury slowed or stopped; the underlying price of bonds would soar. This is where the money would be made.
  • edited September 2022
    wxman123 said:

    What is he recommending to get the 9%? The article is behind a paywall.

    Not sure about that article specifically, but in his webcast a week ago, his emphasis was on Treasuries and agency issues delivering bigtime after Fed rate raises are ~ over. For the latter, he said his flagship fund DBLTX was buying beaten-down agencies yielding > 5%.

    I'd guess that projecting 9% would have to include capital gains when the Fed's done, (if) the economy has slowed, and investors dive into Ts thinking rates have peaked.

    As I mentioned in another thread, it's worth recalling that his old TCW fund and the then-new DBLTX made a mint for investors after 2008.

    So did Pimco Income, by the way. It'll be interesting to see what Pimco's saying about the opportunities they see in the near future.
  • @AndyJ
    Yes, after the melt in September, 2008 into December; in particular for us, is that junk bond funds had taken a bit hit. In the darkest days in the winter of 2008 and into March of 2009 time frame, many junk bonds had a yield nearing 20% as the prices had been whacked. Did a lot of bottom fishing with several funds for the yields; and of course, things turned with Fed/Treasury intervention. Then followed the large price gains, and of course; this was the real money maker side.
    An interesting period, albeit; sometimes scary period.

    Note: I did not access any of the Gundlach info.
  • edited September 2022
    Stocks are still somewhat expensive based on historical PE ratio. Plus, the outlook for future earnings (due to recession) is now in question.

    Current S&P 500 PE Ratio: 19.03 -0.12 (-0.60%) 1:38 PM EDT, Thu Sep 22

    Mean: 15.98
    Median: 14.90

    Min: 5.31 (Dec 1917)
    Max: 123.73 (May 2009)

    In general, Bonds outlook may look rosier at end of 4Q 2022. Just not quite yet.
    Stocks could look a bit better by then, too, if the current trend continues. Cash (earning closer to 4% range) may be king.
  • edited September 2022
    What is the source of optimism that inflation will be easily tamed?
  • edited September 2022
    I just checked a bunch of intermediate-term core/core-plus bond funds that I track.
    They're down 0.97% to 1.46% today.
    Gundlach's call might be a little premature...
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