The new bond King, Jeffrey Gundlach, who has been very bearish on markets due to the Federal Reserve position on rates, is both worried and opportunistic in recent comments.
He cites ‘frightening’ equity valuations of some major financial institutions, that are trading below 2009 crisis levels, as something to worry about. On the other hand, he sees corporate credit as the ‘next opportunity’, with 100% gains out there for the picking.
“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?”
Gundlach, 56, said he’s considering buying corporate bonds later this year as prices continue to fall, including investing his personal money.
‘Next Opportunity’
“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,” Gundlach said. “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.
“My guess is if you get defaulted on, you’re probably going to get something like 70 cents anyway,” he said.
Naturally, it’s not a question of what to buy, as Gundlach said, but when.
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Well my post about corporate credit looking weak sort of falls in line with what he’s seeing. I’ll be picking up short dated puts on $LQD and not push my luck, dip my toe in once or twice.
Young Jeffrey is correct on the european banks. Just the other day I started a large-ish position in DKT, the Deutsche Bank 8.05% preferred. And I have a position in SAN. I’m patient with both of these – who knows how long or wrong the mispricing will get. On DB, though, it’s a bit of a problem that they lost over $6B last year. Technically speaking, that’s not good banking.
Technically speaking, I think you’re being ironic, lol
Go ask Janet
I think she’ll know…
Either way it’s obvious this market needs a rate hike STAT!!!
every president who departed office in my lifetime left a festering mess for the incoming administration. just sayin’
“My guess is if you get defaulted on, you’re probably going to get something like 70 cents anyway,”
Gundlach is one of my favorite managers and i have a huge amont of respect, but some of the European banks have MASSIVE amounts of derivative exposure…..and arent derivatives effectively paid out prior to hypothetical BK? betting on a worst case 70% payout in BK from DB seems dubious at best.