DoubleLine's Gundlach pulls back on bitcoin's 'dangerous' volatility

Bond king tones down enthusiasm as cryptocurrency loses roughly $10,000 in value since hitting a record above $41,000 last week, but it's still up 89% over past month

DoubleLine's Gundlach pulls back on bitcoin's 'dangerous' volatil
Jeffrey Gundlach, chief executive of DoubleLine Capital, said bitcoin has hit "bubble territory" once it passed $23,000, and he doesn't feel comfortable with the coin's current levels. File photo-illustration by Reuters.

(ATF) Jeffrey Gundlach, the billionaire chief executive of investment firm DoubleLine Capital and prominent Donald Trump supporter, said on Tuesday January 12 he has cooled on bitcoin.

Gundlach also said he has shifted his outlook for bitcoin to neutral from overweight. The cryptocurrency dropped more than 11% on Monday and remains 15% below the all-time high it hit on January 9.

"This looks like a dangerous market with this type of volatility," Gundlach told US business TV channel CNBC. "I don't like having to worry that I'm going to lose 20% in an hour." 

He said bitcoin has hit "bubble territory" once it passed $23,000, and he doesn't feel comfortable with the coin's current levels. "I don't like bitcoin here, I don't like things that are up on a stilt like that," the DoubleLine Capital founder said of the coin that rallied nearly 300% in 2020.

While bitcoin has lost roughly $10,000 in value since hitting a record above $41,000 last week, it is still up nearly 89% over the past month.

Gundlach suggested bitcoin's run-up has happened all too fast. "People seem to be so much on one side of the boat that I just really don't really believe the boat can sail that well, and I think that's where bitcoin is on the bullish side right now," he said.

In a DoubleLine webcast in December, he said: "I'm not a bitcoin pro or con person. I'm not in the cult, and I'm not in the anti-bitcoin cult. I just look at it as a fascinating representation of animal spirits and speculation."

Stretched valuations

Gundlach, whose Los Angeles-based firm manages more than $140 billion in assets, said valuations across financial markets appear stretched given massive amounts of global economic stimulus in response to the coronavirus pandemic. "We remain mired in a house of mirrors," Gundlach said on a webcast reported by Reuters.

He noted that some long-term market trends may be stalling, such as the outperformance of U.S. equities versus the rest of the world and large-cap U.S. equities rallying more than small-caps.

Gundlach forecast that the U.S. may experience additional rounds of layoffs focused on middle-management as companies make some work from home policies permanent given worker preferences.

The U.S. economy shed jobs for the first time in eight months in December, with the majority of job losses coming in sectors such as hospitality and leisure that remain battered by the coronavirus pandemic.

DoubleLine was founded in 2009 when Gundlach split from Trust Co. of the West, taking 45 colleagues with him. However, two of its founding partners have left in the past two years, as well as several executives from the corporate credit group.

Gundlach has courted controversy in recent weeks with his sympathy for Trump supporters seeking to overturn the November presidential election. In March 2020 he described Joe Biden as "unelectable".

He suggested in a Twitter post that former presidential candidate Andrew Yang pretended to move to Georgia so he could vote in the January 6 runoff elections that helped secure Democratic control of the US Senate. Yang visited the state to canvass on behalf of candidates.

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