Odd Lots

Jeffrey Gundlach Says Almost All Financial Assets Are Now Overvalued

November 17, 2025

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  • Jeffrey Gundlach is deeply concerned about the financing of long-term U.S. Treasuries due to ongoing deficit spending and inflationary policies, predicting that long-term interest rates are likely to rise in the next recession, contrary to historical patterns. 
  • Private credit is identified as a major risk area, exhibiting the trappings of past financial crises through non-transparent valuations (marking assets at 100 or 0) and the dangerous mismatch of offering daily liquidity vehicles for fundamentally illiquid assets. 
  • Gundlach advocates for a significantly lower allocation to financial assets, suggesting a maximum of 40% in equities (mostly non-U.S.), 25% in fixed income (including non-dollar debt), 15% in gold/real assets, and the remainder in cash due to high overall valuations. 
  • The provided transcript segment primarily contains advertisements for Brightview Greenberg, PayPal, and Hills Pet Nutrition, offering no direct financial insights related to the episode's main topic featuring Jeffrey Gundlach. 
  • The PayPal advertisement highlights a holiday promotion offering 5% cash back when using 'Pay in Four' with no fees or interest. 
  • Hills Pet Nutrition promotes its science-led nutrition as a way for pet owners to mitigate feelings of guilt related to pet care responsibilities. 

Segments

Bond Market Changes Since 2015
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(00:02:41)
  • Key Takeaway: The fixed income landscape has fundamentally changed since 2015, evidenced by higher benchmark yields and the experience of inflation.
  • Summary: The 10-year Treasury yield is now above 4%, compared to 2% in 2015, marking a significant shift in fixed income. Despite this change, perennial concerns like funding the U.S. deficit and bond vigilantes persist. Credit spreads remain historically narrow, even with recent credit events, suggesting investors are not being adequately compensated for risk compared to a decade ago.
Private Credit Growth and Risks
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(00:04:30)
  • Key Takeaway: Private credit has grown orders of magnitude since 2015, but investors lack a real handle on its risk scenarios and underwriting quality.
  • Summary: The growth of private credit, previously termed shadow banking, is now much larger and under increased scrutiny. Endowments like Harvard have faced liquidity issues, forcing them to borrow, highlighting potential underlying problems in illiquid allocations. Private credit executives are using cautious language like ’tension’ and ’lack of runway,’ signaling underlying concerns.
Treasury Market Concerns and Deficit
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(00:05:54)
  • Key Takeaway: Gundlach is concerned about financing long-term Treasuries given inflationary policies and the increasing proportion of tax receipts dedicated to interest expense.
  • Summary: The Treasury Department’s desire to artificially lower rates conflicts with current inflation levels, leading to a focus on short-term issuance (80% of the last 12 months’ issuance is under one year). Historically, long-term rates decline after Fed cuts, but this time they have risen, suggesting the secular decline in long-term rates is over. Gundlach projects that by 2030, 60% of tax receipts could go to interest expense under current borrowing regimes.
Private Credit Valuation Illusion
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(00:12:43)
  • Key Takeaway: The perceived low volatility of private credit is an illusion created by infrequent, non-market-to-market pricing, as demonstrated by a recent $150M issuance going to zero.
  • Summary: The Sharpe ratio argument for private credit relies on underreporting volatility, similar to private equity marking down assets only when public markets fall. The recent collapse of a private credit issuance (Renovo) from a reported value of 100 to zero highlights this issue, where assets were listed below $50,000 against liabilities of up to $500 million. This structure mirrors the dangerous mismatches seen in subprime mortgage packaging.
Optimal Portfolio Allocation Strategy
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(00:25:56)
  • Key Takeaway: Investors should reduce overall financial asset allocation, favoring non-U.S. equities and non-dollar fixed income over traditional U.S. holdings.
  • Summary: Gundlach recommends a maximum 40% allocation to equities, with most of that exposure in non-U.S. markets due to the expected decline of the dollar. Fixed income allocation should be reduced to about 25%, including non-dollar emerging market debt, which has been the top fixed income performer for dollar-based investors this year. The remaining 35-40% should be split between gold/real assets (around 15%) and cash due to high valuations.
Dollar Strength and Investor Habit
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(00:31:02)
  • Key Takeaway: The stickiness of U.S. asset dominance is driven by investor habit and the psychological difficulty of changing long-standing, previously successful paradigms.
  • Summary: Investors are reluctant to change allocations after being right for a long time, as successful past performance provides psychological satisfaction. Gundlach himself only pulled the trigger to reduce his 100% dollar exposure about 18 months prior, acknowledging the difficulty of abandoning a strong-dollar belief. This inertia explains why U.S. assets remain heavily allocated despite clear challenges to the government’s fiscal trajectory.
Yield Curve Control Likelihood
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(00:34:09)
  • Key Takeaway: The base case is that the Fed will eventually implement drastic measures, like yield curve control, when long-term Treasury rates become uncomfortably high for the Treasury Department (estimated around 6%).
  • Summary: The current environment, where long rates rise while the Fed cuts short rates, is historically unprecedented and unsustainable given deficit spending. Intervention could involve the Treasury Department buying Treasuries, causing a massive rally in long bonds, or manipulating mortgage rates via agency purchases. Such intervention would represent a radical change in the rule system, similar to the Fed buying corporate bonds in 2020.
Longevity in Investing and Hit Rate
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(00:48:57)
  • Key Takeaway: Successful long-term portfolio management requires a time horizon between 18 months and two years to survive inevitable periods of underperformance.
  • Summary: A study on perfect foresight showed that even the highest-performing asset class over a five-year horizon often underperformed significantly in the first two years. Gundlach found that a time horizon of 18 months to two years yields a 70% hit rate for his investment calls. Portfolio managers must avoid three consecutive years of underperformance, as this typically leads to being fired or losing mandates.
Surprising Fed Actions and Rule Changes
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(00:53:28)
  • Key Takeaway: The magnitude of money printing in 2020-2022, specifically the Fed illegally buying corporate bonds, proves that seemingly ‘set in stone’ rules can be radically changed.
  • Summary: The Fed’s purchase of corporate bonds was surprising, though it followed their precedent of modifying mortgage rules during the GFC. This demonstrates that when paying off debt in today’s dollar terms becomes impossible, radical changes to the rule system, such as restructuring Treasury coupons or implementing yield curve control, become plausible. Younger generations’ lack of belief in institutions reflects this perceived instability.
Brightview Senior Living Ad
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(01:04:44)
  • Key Takeaway: Brightview Greenberg offers comprehensive senior living services including independent living, assisted living, and memory care.
  • Summary: Brightview Greenberg provides various daily programs and cultural events for residents. Services include chef-prepared meals, safety and security, transportation, and resort-style amenities. The Welcome Center for this location is opening soon.
PayPal Holiday Promotion
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(01:04:56)
  • Key Takeaway: PayPal is promoting a holiday offer providing 5% cash back when utilizing the ‘Pay in Four’ option.
  • Summary: The PayPal promotion allows users to earn 5% cash back when paying in four installments without incurring fees or interest. Users must save the specific offer within the PayPal app to qualify. Terms and approval are subject to conditions outlined on their website.
Hills Pet Nutrition Ad
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(01:05:23)
  • Key Takeaway: Hills Pet Nutrition positions its science-led food as a solution for pet parents experiencing guilt over inadequate care or attention.
  • Summary: The advertisement addresses common sources of pet parent guilt, such as leaving pets alone or running out of supplies. Hills offers science-led nutrition designed to help owners provide more care than might otherwise be humanly possible. Consumers can find the right food via their website.