The cash allocation to build up in preparation for the next crisis, which Bond King Gundlach gives a name to, also changing the bet on gold.
The amount of overvalued assets has now become so high that, according to Bond King Jeffrey Gundlach, rather than suddenly finding yourself in trouble and trying to make last-minute repairs, it’s better to prepare by making early adjustments by reevaluating the cash component of your investment portfolio.
In a talk on the Bloomberg Odd Lots podcast, the "Bond King," as he’s been nicknamed by Wall Street thanks to his experience in the fixed income market, advised investors to raise their cash holdings (i.e., liquidity), to around 20% of their portfolios.
Even Gundlach Fears an AI Bubble: Here’s the Cash Allocation He Recommends
At a time when fears are mounting about the formation — or even bursting — of an AI bubble, Gundlach—known for making accurate predictions, most notably the 2007 housing market crash—has made headlines in recent weeks for urging investors to allocate to gold and other alternatives to the US dollar.
Today, the veteran Wall Street investor has made his voice heard again, issuing a warning against what he called “incredibly speculative” positioning.
The founder of DoubleLine Capital, the asset-management firm, has thus recommended investors hold a cash position of around 20% to protect themselves against a market implosion, which could be caused primarily, in his view, by a potential downturn in the private credit market.
In fact, private credit funds and similar lenders have extended overly large loans to certain companies operating in artificial intelligence (AI), in the belief and/or hope of seeing their profits soar, along with their stock prices.
The likely rude awakening from these bets could trigger a major earthquake, first and foremost in the private credit market, valued at $1.7 trillion and characterized, as the Bond King himself put it, by "low-quality lending."
Just think of the panic that erupted on Wall Street after the collapse of First Brands and Tricolor Holdings, which ended up triggering contagion in the stocks of Italian banks, as well as those of US regional banks: an alarm that quickly subsided, but remains latent.
Bond King Jeffrey Gundlach Predicts the Next Crisis and Adjusts His Stance on Gold
Moreover, as Gundlach explained, "the health of the US equity market is among the most precarious I have witnessed in my entire career," in the face of "a market that is incredibly speculative." And "speculative markets always reach irrational extremes. It happens every time."
The Bond King is therefore part of the growing group of analysts who see speculative excess on Wall Street, especially in the overly inflated share prices of companies leveraged to AI and data centers.
Consequently, a prophecy was made: "The next great crisis in the financial markets will emerge in private credit ," therefore of non-bank lending. A sector which, according to Gundlach, "presents the same structural characteristics as the subprime mortgage securitization wave of 2006 ," which anticipated the 2008 global financial crisis.
The Bond King said he still has faith in gold, but here too, there was another notable update.
After recommending that investors invest 25% of their portfolios in gold in mid-September, Gundlach advised investors to reduce their allocation to the traditional safe-haven asset to 15% during the Bloomberg podcast.
Original article published on Money.it Italy 2025-11-17 17:54:23. Original title: Il contante che il Re dei bond consiglia di avere per salvare il proprio portafoglio
