Tags: US | Investment | Conference | Tax | Increases

Bond Expert Gundlach: Double-Dip Recession Coming

Thursday, 24 Jun 2010 06:59 AM

Bond expert Jeffrey Gundlach emphatically believes we're headed for a double-dip recession.

The co-founder and CEO of DoubleLine Capital LP, a Los Angeles-based bond fund manager, said the U.S. government will move to increase taxes next year in an attempt to balance the budget and alleviate the national debt of about $13 trillion. The downside to that, however, is it will hammer the fragile economic recovery and push economic growth back into negative territory.

"I think you have a tax increase coming and a radical policy shock that will affect investments and the economy," he said during the opening keynote speech at the Morningstar Inc. annual investment conference in Chicago. More than 1,300 fund industry pros and financial advisers are gathering this week to hear top experts discuss the economy and market trends.

He said public sentiment has turned against government funded bailouts, which have pumped trillions of dollars into banks and automakers.

"You can see a movement societally toward increasing taxes," he said.

It won't happen before the mid-term congressional elections in November, but after that, watch for it.

He said the large debt has to be tackled and public realization is sinking in that it will take sacrifice, whether it's through program cuts or tax increases.

Some taxpayers may say spending cuts are the way to go, but realistically "no one in Washington gets elected by saying I want to cut entitlement payments," he said.

Gundlach also said the most attractive U.S. bonds are those with longer maturities such as 10-year notes, poised to benefit from the flight to quality and deflationary pressures.

"If you're going to own government bonds, be at the long end," said the well-known bond fund manager who had forecast the financial crisis at a previous talk at the same conference in 2007.

He said he favored some municipal bonds chiefly because taxes are likely to rise to support them.

In a few cases, such as short-to-medium bonds in California, "they become almost too tempting to stay away from," he said in his remarks.

He also said some stocks might do well, such as those of companies that provide services to developing markets where demand will likely increase.

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Bond expert Jeffrey Gundlach emphatically believes we're headed for a double-dip recession.The co-founder and CEO of DoubleLine Capital LP, a Los Angeles-based bond fund manager, said the U.S. government will move to increase taxes next year in an attempt to balance the...
US,Investment,Conference,Tax,Increases
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2010-59-24
Thursday, 24 Jun 2010 06:59 AM
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