In his recent interview with The Market, Jeffrey Gundlach discusses the one thing more powerful than fear and greed. Here’s an excerpt from the interview:
Gundlach: You have to buy when prices are low. I’m not making a joke, I mean it.
Every time when there is a problem in the bond market, money pours out. There is greed and fear: Greed is powerful, but fear is more powerful. Yet, there is one thing that is even more powerful: need.
When you need something, you have to have it. If people need to make a certain investment return, what they will do when opportunities go down is increase their risk because they need a higher return. They can’t live on a 3% return, they need 6%.
So when there is no 6%, they try to manufacture a 6%. As a result, their risk goes up, up, up, up, up, and then they’re maximum exposed to risk.
Next, prices collapse, and then they sell because their fear is so great. Instead, they should be buying. Right now, the bond market is very attractive, but no one is listening because everybody is selling. You’re supposed to be buying when people are selling, and that opportunity is still very strong today.
You can read the entire interview here:
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