Eoin Treacy's view

Here is a link to the full report.

Jeff Gundlach has a good record of spotting trouble early and he appears to share the view espoused by Ray Dalio that the Federal Reserve is going to need to adopt even more extraordinary measures to tackle the next downturn because of the quantity of debt outstanding.

The portion of the talk I found most interesting is his contention that in order to get from the current suite of policies to outright control of the yield curve; where the USA adopts the same policies as Japan and Europe, there is going to be a crisis. He anticipates that a significant rally in yields will be the catalyst to force the Fed into this course of action.

Meanwhile, US Treasury yields remain in a downtrend. There has been some steadying in the region of the March low over the last few sessions but a sustained move above 2.6% would be required to begin to question demand dominance.

I think the simplest logic is often the most reliable. If the USA can’t possibly afford to make the debt payments on its debt, then either we are going to need some incredible new form of productivity growth to appear or the 40-year compression of yields needs to continue. It is likely we get both but electric cars catching fire while parked suggests technological innovation can be bumpy.