Gundlach: Well, I think the yield curve in the bond market is so steep that there is almost no reason to own the very short-term securities. I know a lot of people are worried about inflation, worried about raising interest rates and they say, maybe I should go into short-term securities. It seemed to me that we would be better off owning just true cash rather than short-term securities because short-term securities don't yield anything.
So, we can remember again one year ago, the Lehman experience, and in the aftermath of Lehman, we saw a real crisis in the money market industry with the breaking of the buck, and I think many, many funds really would have broken the buck if there hadn't been government intervention, and I think it would have broken the buck very, very substantially.
So short-term investments like money market funds offers zero yield with potential default risk, so they don't make any sense, so you need to move out at least in the intermediate-term bonds. And there are some reasonable opportunities there, even though the yields aren't very high, because there is deflation. So, if you can obtain yields from bond portfolios in the intermediate category that are 6% or so, which is definitely doable, that's actually a fairly a high real rate of return.
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I think investors domestically should be focusing on dollar-based investments. I know that that's a strongly contrarian opinion, but with the deflation that is going on and with the ongoing defaults, that the great debt bomb could end up resulting in, there could be a lot of dollar destruction on the credit side, and investors need to get away from that risk by divesting from the riskiest credits and also stay in dollars because when that default destruction comes, the dollar will actually be in a shortage, believe it not.
Everybody thinks there is going to be this surplus of dollars due to the government printing, but I don't think that's really the case. I don't think the markets are telling us that. I think the government is printing some money, but the destruction of value is greater than the printing of money and, therefore, the dollar is likely to move into a shortage position and go on a very big rally.
So, dollar-based investments are the way to go. And at this juncture with the rally that has taken place in the last six months, which has been so powerful, it is time to take profits.