DoubleLine's Gundlach: avoid Deutsche Bank securities for now

Thu Sep 29, 2016 5:19pm EDT
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By Jennifer Ablan

NEW YORK (Reuters) - Jeffrey Gundlach, chief executive of DoubleLine Capital, said on Thursday that investors should tread carefully when trading Deutsche Bank AG (DBKGn.DE: Quote) shares because a government bailout is not out of the question.

Earlier on Thursday, the bank's U.S.-traded shares hit a record low.

"I would just stay away. It's un-analyzable," Gundlach told Reuters by phone about Deutsche Bank shares and debt. "It's too binary. The market is going to push down Deutsche Bank until there is some recognition of support. They will get assistance, if need be."

Gundlach, who oversees more than $100 billion at Los Angeles-based DoubleLine, said investors who are betting against shares in Deutsche Bank might find it futile.

"One day, Deutsche Bank shares will go up 40 percent. And it will be the day the government bails them out. That jump will happen in a minute," Gundlach said. "It is about an event which is completely out of your control."

Concerns over the stability of Germany's largest bank pushed its U.S-listed shares down as much as 9.1 percent to a record low of $11.185. Daily volume was also at a record, with more than 43 million shares changing hands.

The latest fall came after Bloomberg reported that a number of funds that clear derivatives trades with Deutsche had withdrawn some excess cash and adjusted positions held at the lender because of its problems.

Gundlach, known on Wall Street as the "Bond King," said financials and banks have been poor relative performers all year.   Continued...

Jeffrey Gundlach, Chief Executive Officer, DoubleLine Capital LP., speaks at the Sohn Investment Conference in New York City, U.S. May 4, 2016.  REUTERS/Brendan McDermid