Over the past two years, Jeff Gundlach has been alternating between dispensing fire and brimstone, and doom and gloom. More importantly, he has also been right which explains why as his arch nemesis Pimco has been losing billions in AUM, Gundlach's DoubleLine has been getting bigger by the day.
Today, in another email exchange with Reuters, the DoubleLine chief stayed true to form: "credit fund bankruptcies are coming," said Gundlach, who shortly after this website, warned in December that the Federal Reserve will regret raising rates because of deteriorating financial conditions. "It's not a market to be flopping around in. The trends are relentless and powerful."
Gundlach also told Reuters that "clearly, weaker-than-hoped-for global growth is the major factor in this weakness" in credit markets. "That and the credit overload I have been warning about ad nauseum."
More troubling for the bulls who are unable to get the much needed close of trading panic flush as a result of daily last hour levitations is Gundlach's call that the VIX needs to surge above 40 before a bottom can be made in the high-yield junk bond market. Today the VIX closed up 11% to 26.00, a long way off from the panic and revulsion that would send it north of 40. Indeed, the last time the VIX rose above that level was on August 24, when the VIX calculation actually was broken for a brief period of time to avoid crushing countless VIX-linked investors.
Gundlach also writes that "this is not a trader's market" and instead "it is a freight train that you want to stay in sync with. There's too much order and belief in markets in spite of big losses."
He said equities are in a bear market, with the Nasdaq down 18.3 percent from its highs and "many, many, many stocks down over 25 percent from their highs." On Monday, the Dow Jones industrials average was down more than 200 points.
And if that wasn't scary enough, last Friday he told Bloomberg that it’s "frightening" to see major financial stocks trading at prices below their financial crisis levels.
"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?"
If you didn't before today, you do now after the giant German banks was forced to "go there" and actually address its liquidity sources and uses over the next two years in a public statement following today's near record plunge in the stock.
"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."
Today we know: the market needs to have an August 24 type capitulation for Gundlach to start waving it in.
Finally, on the topics of oil of muni bonds, Gundlach said that "there’s simply no bullish case for oil right now," and that while he’s considering buying corporate debt - but not before the abovementioned market panic - he said that he’s moving away from municipal bonds, which have become overpriced.