Billionaire bond investor Jeffrey Gundlach, founder and CEO of $ 137 billion dollars DoubleLine Capital, says his number one conviction over several years is that the US dollar will fall as a consequence of current economic policies, resulting in the US losing its only reserve currency status.
“My number one belief looking forward to a number of years – I’m not talking about the next few months at all, I’m talking about several years – is that the dollar will fall,” Gundlach told Yahoo Finance Live in an exclusive interview Monday afternoon.
It is Gundlach’s view that “places to be in the long run” are emerging markets and “non-US entities.” Although Gundlach has already rotated to European equities, the investor expects to “aggressively rotate into new markets”, but notes that it is “too early for that right now.”
“So the dollar is falling is another reason why we ultimately – we touched on gold – ultimately believe that gold is going to go much higher, but it is really dormant right now,” he added.
The 61-year-old “Bond King” later highlighted that the status of the US global reserve currency is in jeopardy.
“[The] The United States has enjoyed the status of the only reserve currency globally for decades, and that is an incredible advantage, ”Gundlach said.
He pointed out that in the wake of the global coronavirus pandemic and lockdowns, China’s economy has been “by far the strongest economy in the world.” While U.S. GDP has “jumped back with large spending, much of that spending goes to China,” he added.
“That’s one of the reasons why China has such a strong economy. So what we’re seeing in the United States is starting to fall behind in economic growth. It’s nothing new. It’s been going on for a generation, The United States is falling behind, “Gundlach said.
The investor also pointed out that estimates of when China’s economy will be the largest “will continue to be pulled forward”, noting that some economists’ projections show that China’s economy will surpass the US by 2028.
“We have debt to GDP that burns up most of our so-called economic growth. Then it’s really economic growth when you borrow money or print money, send checks to people who turn around and buy goods on Amazon in addition to maybe pay down debt and wonder if these goods are coming in from China? “said Gundlach.
He added: “We operate our economy in a way that is almost as if we are not interested in maintaining global reserve currency status or the largest military or global calls it superiority or control. As long as we continue to pursue these policies, and we are driving them more and more aggressively, we are not withdrawing them in any way, we are looking at a roadmap that is clearly heading towards the United States losing its only reserve currency status. “
According to Gundlach, with current economic policies in place, it is “almost certain” that the US dollar will fall.
“The value of the dollar is so high because we enjoy global reserve currency status and we do not respect it properly enough. We take it for granted, I think. We seem to take many things for granted these days in the United States compared to, how we thought about things in previous decades and generations.And I think we set the stage for ourselves, unfortunately … to experience the consequences of our actions, as we have been running a non-serious economic program now, really since 1980 “But it’s really accelerated so much in the last decade and there’s no sign that it’s holding up,” he said.
It is Gundlach’s view that the US dollar “has already peaked” when the US dollar index reached 103.
“I believe the dollar will remove the lowest levels in the previous down cycle. The dollar has been in a series of falling highs for decades – it goes back to the ’80s. That’s why I think when we get to the next break for the lower level, the dollar will go past the recent low of around 80 and even remove the low of 70. So I think there is easily 25% down in the US dollar. “
Julia La Roche is a correspondent at Yahoo Finance. Follow her on Twitter.
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