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Bond giant Gundlach latest to bash bitcoin mania

Bond giant Gundlach latest to bash bitcoin mania

Bond veteran Jeffrey Gundlach has become the latest high profile name to take shots at cryptocurrency bitcoin.

Speaking in a web conference, the DoubleLine Capital CIO and founder backed up comments made JPM chief executive Jamie Dimon, who said he would fire any employee trading bitcoin for ‘being stupid’.

Gundlach recalled receiving an email from his 86-year-old mother on August 26 asking him whether she should buy the cryptocurrency, which had jumped to around $4,500 then, today it stands at around $3,993.

‘Maybe I’m just too old, but I’m just going to let this mania go on without me,’ said Gundlach who compared the current bitcoin craze to the scientific scare of a coming "little ice age" in the 1970s.

Gundlach referred to Dimon’s statement on the cryptocurrency at the Tuesday Delivering Alpha conference where Dimon said bitcoin was ‘not a real thing.’

‘It's worse than tulip bulbs. It won't end well. Someone is going to get killed,’ he said. 

While down on bitcoin, Gundlach was bullish long-term on gold despite the yellow metals near-term setback. 

‘The dollar for the short term has bottomed but I don’t think it’s going to endure,’ said Gundlach, adding that the dollar index, which tracks the dollar against a basket of six major currencies, could still grind higher to the 96 or 97 level. ‘I do think the dollar will take a leg down but just not right now.’

Positioning and plays

The bond manager also reiterated his position in the equities market, which was betting on the strength of emerging markets while shorting US stocks.

At the Sohn investment conference in May that Gundlach said he was long the iShares MSCI Emerging Markets ETF and short the SPDR S&P 500 ETF.

Gundlach, who still maintains that position, said he was not fond of EMs in the short term but long-term investors should stay the course. He said he has been ‘banging the drum for India for a long time’ but the returns would probably not be good in the near future.

In the fixed income market, the founder of DoubleLine Capital, said investors were in the midst of a 'Wack-O Season' and that the 10-year treasury yield was too low at 2.17%.

‘European junk bonds yield about the same on average as the 10-year US Treasury note. This is what I mean by Wack-O Season, when investors are pricing the two identically,’ he said. ‘I just don't like 10-year treasuries at this level, they don't have any business being down here.’

Gundlach, who has repeatedly warned against risk in the market, suggested that investors should ‘dial risk way down in bond funds.’ ‘I think this is a very poor time to be taking on a lot of risk,’ he said.

 

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