Is It Premature To Crown Gundlach "Bond King?"

Jeffery Gundlach, an aggressive, brash savant with a knack for making bold market predictions and profiting from them, just finishing making perhaps his boldest prediction to date.

It was just after leaving mutual fund TCW, where he reigned supreme for 14 years, he struck out on his own. It was a nasty divorce from TCW, who, after getting the idea that Gundlach might be leaving, fired him first, chasing the bond wonder kid out of their downtown LA office that same day.

TCW’s accusations against Gundlach

His bold prediction came after lawsuits and counter lawsuits had flown and the future was less than certain. In their lawsuit, TCW had accused the free-wheeling Gundlach of maintaining stashes of porno and pot in the office – something not entirely uncommon in the LA financial services sector – but more substantially charged the had stolen hard drives and intellectual property. Gundlach filed a counter lawsuit saying he was owed back pay. (Both TCW and Gundlach would technically win their respective lawsuits, but only Gundlach was awarded money, some $65 million.)

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What Gundlach had taken was 45 former TCW coworkers and they were nervous.  His bold prediction in the face of massive troubles was to these employees. His firm would succeed and if not, he pledged to find jobs for all the 45 workers who followed him from TCW into this new firm, DoubleLine.

Fast forward three years later and Gundlach is hosting a lavish party at a restaurant in the lobby of TCW’s downtown headquarters. The firm had become a smashing success, and a banner outside the restaurant greeted TCW employees as they went home for the day: “DoublineLine $50 billion,” crowing about the firm’s assets under management.

This is Gundlach, a man now on the door step of further greatness.

Gundlach the next “bond King”

Gundlach is heir apparent to the “Bond King” thrown, as a feature article in Forbes Magazine by Matt Schifrin, “Glory to the New Bond King,” proclaims.

It appears there is no question the former holder of the “Bond King” title, Bill Gross, has lost that claim.  While many have rightly turned to Gundlach as the next in line to wear that crown – Gundlach is a favorite among managed futures algorithmic traders who like to use his bond fund to generate interest income on their margin accounts – should proclaiming the next “Bond King” title take place after the market environment has switched?

Previous bond king Bill Gross operated in a market environment of falling bond yields and rising bond prices, notes Jeff Benjamin in an Investment News article. This is a great beta market environment from which to manage a bond portfolio.

In light of Gross’ famous departure from Pimco, Gundlach is coming out on top as winner along with other funds. But this is only a short term benchmark.  It is after interest rates start to rise – and bond values start to drop – that the true “Bond King” should be officially coronated.

Read the Forbes article here.

Read the Investment News article here.