Hi. Aaron Weinman here. The "Bond King" has spoken! Jeffrey Gundlach, the chief executive of DoubleLine Capital, is convinced recession is headed our way in 2023.
But not all is doom and gloom. He likes the look of lower-rated investment-grade securities, specifically those classified as triple B. He also fancies the double B bond, which is the highest rung of the high-yield market.
These are companies, or sometimes countries, securities that yield a lot more than the highest-rated borrower like Google or Apple, but do come with risks.
For Gundlach, that risk is worth it, especially with short-term interest rates rising. Borrowers living in the triple- or double-B spaces will have to make more costly interest payments in the coming months.
Insider's Hayley Cuccinello listened to the outspoken billionaire at an event in Huntington Beach, California. Check out her story here.
And, happy Friday, readers. It's time for the Banker of the Week!
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1. DoubleLine Capital's Jeffrey Gundlach has a thing for bonds. Despite believing a recession is around the corner, it's not all doom and gloom for the billionaire.
He shared his playbook for the bond market, and believes the sweet spot for double-digit growth for investors is between the lines of the investment-grade and sub-investment-grade markets.
Gundlach recommended buying securities rated double B (the highest non-investment-grade level) and triple B (the lowest investment-grade level).
He acknowledged that there is risk in this strategy, but not enough to ward him off gobbling up these securities. He said this move could net an investor as much as 12% yield.
That is helped by a rising interest-rate environment. Borrowers' bond and loan repayments are only going to get costlier for those with floating-rate repayment schedules.
Gundlach spoke at the Future Proof Festival. Read the full story here.
In other news:
2. Adobe has agreed to buy Figma for $20 billion. Investors believed Adobe overpaid for Figma, and the company's market value tumbled by more than $30 billion. Allen and Company advised Adobe, and Wachtell, Lipton, Rosen & Katz was legal counsel to the Photoshop maker. The deal is also one of the biggest for a venture-backed startup. Early investors like Greylock and Kleiner Perkins stand to win big.
3. Ethereum's Merge has finally arrived. The Merge will transition Ethereum's blockchain from a proof-of-work verification system to a proof-of-stake system. Fifteen crypto CEOs and founders share their thoughts on what this means for the digital-assets space.
4. Apollo is appealing directly to bond investors to finance M&A as banks pare back risk to private-equity firms' buyouts, Bloomberg reported. Barclays and Deutsche Bank are selling bonds for Apollo-backed Lottomatica on a best-efforts basis. That means they're raising the financing from investors without underwriting the debt on their own balance sheets.
5. Coming soon from Walmart: checking accounts. The world's largest retailer is expected to launch digital-bank accounts to its employees and customers, according to Bloomberg.
6. Student loan startup CommonBond is quietly winding down operations. The pandemic's interest and payment pause massively hit its core business of refinancing.
7. NextEra Energy sold $2 billion of equity units to Citi, Goldman Sachs, and Mizuho. The deal, which priced at $50 a unit, is one of the largest trades in the equity capital markets in recent months, where deal flow has slowed to a trickle.
8. Companies like Zoom and Roku are giving away more stock to woo talent, but that could dilute existing shareholders. Insider has compiled a chart that highlights some tech companies with the most expensive stock compensation.
9. The ultra wealthy are taking the concept of remote work to the next level. Demand for private islands has shot up since the onset of the pandemic. Here are four private islands for sale in the Bahamas.
10. And here's our Friday Banker of the Week. Meet Graham Weaver, founder and chief executive officer at Alpine Investors, a private-equity firm focused on software and services companies.
Weaver drummed up the idea for Alpine in a dorm room at Stanford Business School in 2001. He started out by borrowing against his credit card to invest in companies. Today, the firm manages $8 billion in assets.
Check out the full story, and Weaver's love of blogging and TikTok, here.
Curated by Aaron Weinman in New York. Tips? Email aweinman@insider.com or tweet @aaronw11.