One of Doubleline's bond mangers Jeff Gundlach had a conference call last week and made some interesting macro observations we thought we would share with readers.
Below is a summary of his thoughts:
- There’s been no real household income growth since 1970, which is why people still feel like the US is in a recession.
- Household debt has quadrupled over the past few decades and has formed a scheme of borrowing to keep up nominal income growth.
- Similar to the Roman Empire, R&D as well as infrastructure spending have been declining.
- The debt ceiling raises from 2011 were supposed to take us past the November election, but it looks like, due to increased spending, the ceiling will be breached before the election.
- He thinks taxes are too low. Top earners pay an average of 34.2% today, compared to 70% in the 1950's.
- Incredibly, 60% of the US population has seen taxes rise since the 1950’s while top earners have seen declines.
- Exploding Central bank balance sheets have helped prop up global equity markets.
- To make serious money in the market you need to wait for single digit PE on the broad market and we are not there yet.
- Says the Federal Reserve will only raise rates if there is real inflation.
- Biggest risk to the economy and assets is skyrocketing interest rates.
