Jeffrey Gundlach, founder of DoubleLine Capital LP.
Adam Jeffery | CNBC
US debt has climbed to an alarming level, according to DoubleLine CEO Jeffrey Gundlach.
"People are beginning to realize that deficits and debts are completely out of control," Gundlach said on CNBC's mid-term report "Tuesday.
Guldach said" the main reason "the yield curve between three-year government bonds and 5- year bonds is steep, is the balloon deficit. Last year, US government debt increased by more than 6 percent of GDP, he said. An even bigger deficit could cause problems in a recession, Gundlach says, if DoubleLine has $ 1
Gundlach – sometimes known as "bonding King "- also marked problems in the corporate market, which" got down "in the" economic mess we are in. "
" The corporate bond market is so much worse than in 2006, "he said.
Among Gundlach's concerns: a Business market that has tripled, and a BBB bond market that is now larger than the junk bond market. By using the influences alone, "45%, not just BBB, but the entire corporate market would be undesirable t right now, "he said, quoting Morgan Stanley's numbers.
A recession or decline could "kick" a wave of downgrades from investment grade bonds to unwanted bonds, he said.
"The economy is in such a bad shape to resist a downturn again," Gundlach said. "National debt is exploding while we have some of the best GDP year after year that we have had in recent years."
Gundlach runs $ 50 billion DoubleLine Total Return Bond Fund. Its five-year performance is one of the best in its category, but saved most of its peers in 2019 with a gain of only 2%, according to Morningstar ratings.
If and when a recession is hit, Gundlach said that the US economy is unable to handle it without resorting to drastic measures.
"The economy is not in any state for the government to come to the rescue except for really vicious policies to let the ECB and the BOJ," he said.