GUNDLACH CALLS FINANCIAL STOCKS BELOW CRISIS PRICES ‘FRIGHTENING’
By John Gittelsohn
- Deutsche Bank, `powerhouse’ Credit Suisse cited as examples
- Manager runs top-rated DoubleLine Total Return Bond Fund
DoubleLine Capital’s Jeffrey Gundlach said it’s “frightening” to see major financial stocks trading at prices below their financial crisis levels.
Hecited Deutsche Bank AG and Credit Suisse Group AGas examples in a talk outlining bearish views at a conference in Beverly Hills, California, on Friday. Both banks fell this week to their lowest levels since the early 1990s in European trading.
“We see the price of major financial stocks, particularly in Europe, which are truly frightening,” Gundlach said. “Do you know that Credit Suisse, which is a powerhouse bank, their stock price is lower than it was in the depths of the financial crisis in 2009? Do you know that Deutsche Bank is at a lower price today than it was in 2009 when we were talking about the potential implosion of the entire global banking system?”
The manager of the $54.7 billion DoubleLine Total Return Bond Fund said the dollar is headed lower in 2016 and that he’s buying non-U.S. currencies for the first time in five years. The euro is likely to strengthen against the greenback as the probability that the Federal Reserve will increase borrowing costs at its March meeting is virtually zero, and only 50 percent for the rest of the year, hetold the TIGER 21 conference for high-net-worth investors.
Gundlach, 56, said he’s considering buying corporate bonds later this year as prices continue to fall, including investing his personal money.
“The whole question for me is when am I going to buy enormous amounts of corporate credit, because it’s crystal clear that that’s the next opportunity that’s out there,” Gundlachsaid. “There’s plenty of things out there that will have 100 percent returns. It’s a whole question of: Don’t tell me what to buy, tell me when to buy it.”
Debt related to energy and mining is still very risky, because of weakness in China’s economy and a worldwide oil glut, he said.
“There’s simply no bullish case for oil right now,” Gundlach said.
While he’s considering buying corporate debt, Gundlach said he’s moving away from municipal bonds, which have become overpriced. Puerto Rican general obligation bonds, which are priced for a haircut, are an exception, he said. The possibility for a workout is high because of the large number of Puerto Ricans in Florida, which is a key battleground state in this year’s presidential election, Gundlach said.
“My guess is if you get defaulted on, you’re probably going to get something like 70 cents anyway,” he said.
Gundlach’s main mutual fund ranks in the top 1 percent of peers for the past five years, according to data compiled by Bloomberg. It gained 1.5 percent this year through Thursday, mostly by investing in mortgages while avoiding volatile corporate debt.