Jeff Gundlach Sells Apple; Warns High Yield Bonds "Most Over-Valued In History"

Tyler Durden's picture

The default cycle that should have occurred, given historical patterns of issuance cycles, has morphed (thanks to the Fed) into a refinancing cycle; but while DoubleLine's Jeff Gundlach suggests that fundamentals are supportive, "the valuation of junk bonds as a category is at its all-time overvalued versus long-time treasury bonds." So despite Yellen exclaiming that she sees no bubbles, one of the world's largest bond fund managers has never seen corporate bonds (investment grade and high yield) more expensive. Gundlach goes on to note he has sold some Apple (but believes it will remain range-bound), is baffled by the valuation of Chipotle, and sees 10Y Treasury yields dropping to 2.5% or lower.


...a lot of companies that under normal circumstances might have defaulted got to refinance instead.


Gundlach likes EM bonds (on a valuation basis):

...the real risk in emerging market bonds seems to be the currency risk more than anything else. If you go dollar denominated obviously you don't have that currency risk. Last year corporate junk bonds in the US had a 7% positive return and emerging market debt had a negative 5% return or so... and that kind of a divergence is historically very, very rare. There is something to mean reversion.


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Frank N. Beans's picture

but what does Gartman say???

wee-weed up's picture

This is just another nail in the coffin of this MOMO market.

max2205's picture

2.5%?   That'll be 17.500 on the dow thank you very much

Gankfest's picture

The numbers are so fucked up, no one really knows where it's going anymore.

Boston's picture

No, that'll be about 15,000 on the Dow. Just look back a WEEK ago---the Dow was ~15,300 and the 10yr yielded about 2.59%.

If the Dow corrects to below 15,000, the 10yr falls to 2.5% easy. If the Dow falls harder, to say 13,000, then the 10yr falls much lower.

HaroldWang's picture

Maybe he should just buy YELP and add every day. No bubble there. 
Or, perhaps he should buy any biotech, anyone he pulls out of a hat. Guaranteed to quadruple in minutes. 

TheRideNeverEnds's picture

Don't forget to throw in some of the titans of industry like TSLA and TWTR, a portfolio is not complete without at least a few hundred shares of those bellwethers. 

derek_vineyard's picture

debt has no risk priced in..........its is financial suicide

zirp knows no bounds

Wahooo's picture

Do historic comparisons even matter anymore?

TrumpXVI's picture

"The default cycle that should have occurred, given historical patterns of issuance cycles, has morphed (thanks to the Fed) into a refinancing cycle."


- Right.  I get that.  Now can someone explain to me how long that can go on?  And why can't it/won't it go on indefinitely/forever?  (Much to my, and to many, many other people's eternal frustration.)

Grande Tetons's picture

No debt repayment would lead to the end of the system as we know...and love...or hate it. 

TrumpXVI's picture

Well, that certainly would have to be the conventional (my) understanding of things......but apparently, that's no longer the case.  Apparently, now, there is no end to the refinancing cycle....bad debt just gets recycled endlessly under a never ending series of redefined payment terms.

Life of Illusion's picture



When we get a crisis corporate debt will be moved onto FED balance sheet,,only after politically correct purchase on cheap during crisis knowing they can flip to FED.

The_Ungrateful_Yid's picture

There is no doubt at least to me that events leading up to an anti-christ are real and forthcoming. God said He would welcome those who believe in His words into His Kingdom. That I believe.

Dr. Engali's picture

Baffled by the market value of Chipolte? WTF? Have you seen Twatter, Netflix, Amazon, or Fartbook....the list goes on. In a real market none of these valuations could be maintained. It's called too much liquidity. There is no market to put a true value on anything, there is only the fed.

NotApplicable's picture

Didn't you hear? Chipolte is gonna save the world!

One black bean at a time.

TrumpXVI's picture

"Chipotle" isn't even spelled correctly.

It's supposed to be spelled, "chilpotle" (with two "L"s), right?

starman's picture

Exactly Doc the only buyer in town is the Fed and the banks! Gotta have  the show  go on.

linrom's picture

...the real risk in emerging market bonds seems to be the currency risk more than anything else.


No shit Jose! It's time to load up on Turkish Lira and Argentinian Peso. It's as automatic lossless investment as it gets.

Winston Churchill's picture

I've got some Weimar ,and Zimbabwe bonds that say you are wrong.

Spungo's picture

I call BS. It's perfectly normal for junk bonds to pay only 6% interest.

Professorlocknload's picture


Note the effective yield peaks in recessions. Might there ever be another one? 

Its_the_economy_stupid's picture

i don't kn ow a lot bout valuations but, Chipotle is a rockin chain. The 18 to 25 set LOVES this restaurant. The food is wholesome and the servings are HUGE. Tghe number of new franchiksees per year even beats the shit out of Subway. So if if the cost vs earnings is some huge number, I would venture that until the franchise action shows signs of cooling, it will keep rising no matter what the earnings per share is today.

disabledvet's picture

It's been a while since we've had a total meltdown in the shit paper space...but Janet Yellen just might have answered all those prayers.

With Apple spending tens of billions buying back stock, Boeing, GE, etc starting the year getting crushed...GM looking like its heading right back into bankruptcy...lot of room for a lot to go wrong here.

I still like equities actually because they're generating huge amounts of free cash flow even now.

Professorlocknload's picture

Might be right, vet. See max2205 above.

razorthin's picture

Junk to get junked.