Gundlach charges the Fed is propping up rickety companies

ChiefInvestmentOfficer/Larry Light

antique image of humpty dumpty clinging precariously to wall“The central bank’s program to buy corporate debt just delays the inevitable collapse and makes it worse, the Bond King contends. … Gundlach, the CEO of DoubleLine Capital, argued that ‘the price of corporate bonds isn’t really real. There’s no price discovery mechanism that’s being pegged. There’s no message; there’s just a target price that the Fed has been doing, and that led to a pop-up in corporate bonds.'”

USAGOLD note:  Gundlach’s complaint has become a common one among knowledgeable money men. Ray Dalio recently told Bloomberg that after the 2008 financial crisis, the Fed applied its largesse to a small coterie of banks and financial institutions that it deemed systemically important.  “Now,” he says, “the whole economy has become systemically important.” …… To what end no one knows.

Repost from 7-6-2020

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