Jeff Gundlach said the Federal Reserve could cause a recession if it tightened its monetary policy.
DoubleLine Capital's billionaire boss said only speculators would buy bitcoin at its current price.
Gundlach trumpeted emerging-market stocks and explained why he didn't invest in China or NFTs.
The billionaire investor Jeff Gundlach rang the recession alarm, touted emerging-market stocks, and said bitcoin was massively overvalued during a Yahoo Finance interview that aired on Saturday.
The DoubleLine Capital boss — whose nickname is the "Bond King" — also cautioned against investing in China, argued that US house prices are less heady than they seem, and explained why he was staying away from nonfungible tokens, or NFTs.
Here are Gundlach's 14 best quotes from the interview, lightly edited and condensed for clarity:
1. "The relationship between the size of the Fed's balance sheet and the market cap of the S&P 500 is what I call 'Gundlach's law of financial physics.' That's what investors should worry about."
2. "Valuations have been this extreme before, but it usually hasn't ended real well. Now the Fed is in the reverse gear of what they were in for nearly two years; that's going to cause headwinds for investors." — Gundlach said that if the Federal Reserve hiked interest rates and slashed its bond holdings, it could weigh on asset prices and tip the economy into a recession.
3. "The bond market is already suggesting an economic slowdown. The economy keeps buckling at lower and lower interest rates, so I think the Fed only has to raise rates four times and you're going to start seeing a plethora of recessionary signals."
4. "It's certainly a nonzero probability that you get a recession in the later part of 2022."
5. "As overvalued as stocks are by historical comparisons, they're actually cheap relative to bonds. It's a tough choice for investors. You look at stocks, and the price-earnings ratios are in the danger zone, and yet bonds have these wildly negative yields, and inflation is going to continue to go up for at least the next couple of months."
6. "For the not faint of heart, at some point in 2022 I think you're supposed to buy emerging-market stocks. They are so cheap compared to US stocks by historical standards."
7. "Bitcoin is for speculators at the present moment. I would advise against buying it. It will be volatile as people get out. Maybe you should buy it at $25,000." — Bitcoin's price has fallen to under $42,000 from over $67,000 in November.
8. "The NFT thing went from 'I don't know what an NFT is' to 'It's worth $70 million.' That's certainly not for me — that's for momentum investors on large doses of steroids."
9. "Bonds fit my culture of cowardice. I'm sort of an anti-momentum investor, and bitcoin is for momentum investors only, just like the FAANG stocks are for momentum investors only. The valuation is not good. I like buying stuff that's cheap."
10. "If you're a momentum investor, it's like playing roulette with a strategy that works as long as the wheel doesn't come up on the zero or double zero. You're making money, making money, and then eventually you get a double zero and you're busted. Momentum investors tend to go out in a blaze of glory."
11. "As strange as it is that home prices are up so much, they're actually way more affordable than they were prior to the global financial crisis. They're about the same level as they were in around 2004 in terms of affordability." — Gundlach said wages had risen faster than the interest rates on mortgages.
12. "I like buying quality; I've never really loved junky stuff. When it comes to art, just like real estate, you should really buy the highest quality, as those assets can appreciate very steadily."
13. "China is uninvestable at this point. I've never invested in China, long or short. I don't trust the data. I think there's a risk that investments in China could be confiscated."
14. "The markets are probably looking forward to the midterm elections because they're going to glue up the gears of government a little bit more. Wall Street seems to always like it when there's a split in the government."
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