Odd Lots Podcast Summary

Episode: Jeffrey Gundlach Says Almost All Financial Assets Are Now Overvalued
Air Date: November 17, 2025
Hosts: Joe Weisenthal & Tracy Alloway (Bloomberg)
Guest: Jeffrey Gundlach, Founder & CEO of DoubleLine Capital

Episode Overview

This episode explores the current state of financial markets—focusing on fixed income, US Treasury issuance, credit spreads, and the rapid rise of private credit—with insights from Jeffrey Gundlach, one of the most influential voices in bond investing. Gundlach argues that nearly all financial assets appear overvalued and discusses the structural risks he sees in both the public and private sides of credit markets, persistent US deficits, and the potential for significant structural change—possibly even a crisis—in the coming years.

Main Themes & Key Insights

1. How Much Has Really Changed? (01:56–05:27)

• The hosts reflect on 10 years of financial market evolution. Despite higher rates, many themes persist (e.g., concerns about deficits and "bond vigilantes," debates about credit risk premia).
• Notable shift: benchmark 10-year yield sits above 4% (vs. 2% in 2015), but spreads on junk bonds remain historically tight. Private credit (a.k.a. "shadow banking") has exploded, but risk assessments remain challenging.

Quote

"Things have changed, but things have also kind of stayed the same in some respects." — Tracy Alloway (04:54)

2. Gundlach’s Market Worries: Treasuries, Credit, and Private Markets

(Timestamp: 05:31–21:32)

a) Treasury Financing Concerns

• The US is issuing a large proportion of short-dated Treasuries—80% maturing in under 1 year (06:41).
• Previous patterns have broken: Despite Federal Reserve easing (“150 basis points of cuts”), long-term Treasury yields have risen rather than fallen—unprecedented historically (08:25).
• US deficits are running at levels (“6% of GDP”) typically associated with deep recessions, even outside a recession.

Quote

"All interest rates outside of the two-year are higher than they were before the Fed's first rate cut. That's just never happened historically." — Jeffrey Gundlach (08:25)

b) Credit Market Quality and Risk Migration

• While public corporate credit markets are of higher quality than pre-2008, risky lending has migrated to private markets.
• Private credit over-allocations pose liquidity risks—even elite institutions like Harvard and Yale have allegedly faced liquidity crunches, forcing them to sell assets or borrow (10:18).

c) Private Credit: The Next Financial Crisis?

• Gundlach is very negative on private credit, likening it to subprime mortgages pre-2008 (14:21).
• He debunks the central sales pitch, noting that "low volatility" is a mirage due to lack of mark-to-market discipline. Recent blowups (like Renovo’s $150M going “from 100 to 0 real quick”) expose the risk (12:10–14:21).
• He asserts: “The next big crisis in the financial markets is going to be private credit."

Quote

"It's an illusion. They don't even claim it's liquidity. But if you package it into a publicly traded vehicle that trades on a daily basis, you have the perfect mismatch...gapping lower day after day after day." — Jeffrey Gundlach (44:28)

3. Portfolio Construction: Rethinking 60/40 & Asset Allocation

(Timestamp: 24:35–31:08)

• The classic 60/40 (stocks/bonds) portfolio is less compelling; Gundlach recommends lowering overall allocation to financial assets.
  • Suggests max 40% equities (mostly non-US), 25% fixed income (notably non-dollar and emerging market debt), 15% gold/real assets, and the rest in cash.
• US equity valuations are among the worst he’s seen, with classic valuation metrics "off the charts."
• Cautions on “mania” investing—referring to AI/data center stocks—likening today’s environment to past bubbles (electricity stocks in 1911, dot-coms, etc.).

Quote

"I think financial assets broadly should have a lower allocation than typical... And the health of the equity market in the United States, it's among the least healthy in my entire career..." — Jeffrey Gundlach (25:37)

4. Why the Dollar and U.S. Assets Remain Sticky

(Timestamp: 31:08–34:14)

• US assets retain global demand out of habit rather than rational evaluation of current risks.
• Gundlach notes the psychological challenge for investors to "pull the trigger" and reallocate after they've had success sticking with the US/dollar status quo.
• Personally, Gundlach shifted from being "100% dollar" to diversifying into foreign currencies about 18 months ago.

Quote

"One of the hardest things to do...is to significantly change your allocations after you've been right." — Jeffrey Gundlach (31:54)

5. Yield Curve Control and Government Intervention

(Timestamp: 34:14–41:26)

• Gundlach expects that the US will eventually move to "proper yield curve control" if Treasury yields get “uncomfortably high” (around 6%), similar to post-WWII US and Japan.
• Predicts: Initially, long-end rates will rise, then the government will intervene dramatically (possibly alongside outright purchases of mortgages/agency debt).
• Flags the possibility of outright Treasury restructuring—including the “Mar-a-Lago Accord” discussed in policy circles, suggesting coupon changes for Treasuries held by foreigners (or even for all holders).

Quote

"We cannot afford the market to set interest rates... Once the intervention comes in, there’s going to be a significant step function lower in yields." — Jeffrey Gundlach (35:17)

6. The Underappreciated Risks in Private Credit

(Timestamp: 43:28–48:37)

• Private credit is leveraged, with firms borrowing to buy more, creating “leverage upon leverage.”
• Though rebundling as seen pre-2008 isn’t as prevalent, the daily NAV/private credit public vehicles create systemic liquidity mismatches.
• Expected pattern: these vehicles will promise liquidity, but when redemptions surge, “the price at which you sell it will be gapping lower...day after day.”

Quote

"Trouble always comes in financial markets...when people buy something that they think is safe, it's sold to them as safe, but it's not safe. You buy a AAA-rated subprime mortgage pool, you think it's safe...but it's not safe." — Jeffrey Gundlach (46:41)

7. Timing, Conviction, and Portfolio Manager Survival

(Timestamp: 49:33–52:51)

• Gundlach emphasizes the challenge of being right on direction but wrong on timing—most money managers can’t withstand multi-year underperformance.
• Finds that an 18-month to 2-year time horizon is the "sweet spot" for investment theses.
• Avoids shorting private credit, as the “cost of carry” is too high—prefers simply not to allocate.

8. Surprises & Lessons of the Last Decade

(Timestamp: 53:46–56:53)

• The sheer scale of money printing in 2020–2022 and the Federal Reserve's law-breaking purchases of corporate bonds caught Gundlach off guard.
• The main lesson: Even rules and norms that seem set in stone can be broken in moments of crisis. Restructuring treasury debt is “possible” if not probable.

Quote

"What I've learned is that the rules can be changed, in spite of the fact that they seem to be set in stone." — Jeffrey Gundlach (54:11)

9. Political Generational Frustration and Structural Change

(Timestamp: 57:29–60:14)

• Gundlach describes a generational divide in America: younger people (under 35) have lost faith in institutions, lack economic prospects, and may drive political and fiscal changes (possibly even measures like an “age tax” for older, wealthier generations).
• Argues that neither Trump nor other "outsider" politicians can fix systemic fiscal issues single-handedly due to entrenched government forces, unless/until the electorate demands it.

Notable Quotes & Moments

• On Portfolio Allocation:
  “I was at one point advocating 25% of a portfolio in gold, like things, real assets, high quality land... I think that’s too high now...so probably 15% or so.” — Jeffrey Gundlach (28:35)

• On Private Credit & Liquidity: “When the S&P 500 goes from 100 to 50, the private equity firms mark their positions down from 100 to 80. Now they’re not worth 80…[it’s] a Sharpe ratio argument based upon the volatility being underreported that goes on in all these so-called private markets.” — Jeffrey Gundlach (13:14)

• On Manias and Market Bubbles:
  “Speculative markets always go to insanely high levels. This is not…obviously it happened in the dot com, it happened in the financials part of the GFC, it’s happening now in AI….All gets priced in very quickly and excessively.” — Jeffrey Gundlach (29:54)

Timestamps for Key Segments

| Segment | Description | Timestamp | | --- | --- | --- | | State of Bond and Credit Markets | Reflections on changes and constants | 01:56–05:27 | | Gundlach - Treasury/Deficit Concerns | Treasury market dysfunction, issuance trends | 05:31–12:10 | | Private Credit Critique | Risks, Sharpe ratio fallacy, "Renovo" collapse | 12:10–14:21 | | Systemic Crisis Warning | Private credit as subprime 2.0 | 14:21–21:32 | | The Case Against 60/40 | Asset allocation in today's climate | 24:35–31:08 | | Global Dollar Reliance | Paradigm inertia, Gundlach's own positioning | 31:08–34:14 | | Yield Curve Control Outlook | Pathway to government intervention | 34:14–41:26 | | Liquidity Mismatch in Credit | Mechanics and consequences | 43:28–48:37 | | Lessons from Past Drawdowns | Surviving as a portfolio manager | 49:33–52:51 | | Surprises of the Last Decade | Unlimited policy response, shifting rules | 53:46–56:53 | | Political/Generational Realignment | Youth disenfranchisement, political speculation | 57:29–60:14 |

Final Takeaways

• Gundlach is deeply skeptical of both long-term US treasuries and private credit, calling the latter the most likely source of the next financial crisis.
• Argues that almost all financial assets, especially US equities and long-term bonds, are overvalued—with a “mania” reminiscent of past bubbles.
• Advocates structural rethinking of portfolio allocation: less US, more real assets, emerging market exposure, and high cash positions.
• Predicts significant interventions (e.g., yield curve control or even debt restructuring) as unsustainable fiscal paths collide with market reality.
• Warns that investment (and even political) paradigms may shift suddenly, especially as younger generations reject the status quo.

Memorable Outro

“I’m Uncas, last of the Mohicans...I’m the last one standing.” — Jeffrey Gundlach (52:51)

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