Clash of the Bond Kings

After getting knocked down a few pegs by Jeffrey Gundlach last year, Bill Gross is back, bigger than ever, and ready to bet big on banks once again. But guess who’s ready for round 2?

“You want to be underweight banks,” Gundlach told clients of Los Angeles-based DoubleLine Capital in a Jan. 5 conference call. “Certainly, we are.”

Here we go again.

It’s rare to see two heavy hitters duke it out in public, but I swear, these guys practically fade each other on every bet. Gundlach killed it when Gross got creamed shorting treasurys, and he cashed in while Gross kept buying underperforming financials, so you can bet your ass that Gross is out for redemption on this one. Question is, who do you think is right this time?

Bill’s sticking to his guns, saying that banks are poised to rally now that every central bank’s firing up the presses, adding that their balance sheets are stronger than ever. Gundlach’s group on the other hand is saying that stronger balance sheets aren’t enough, and that their business model is a little wanting.

“It’s not enough to have stronger balance sheets,” she (DoubleLine’s Bonnie Baha) said in a telephone interview. “Going forward how are they going to make any money? What’s the business model?”

Personally I’m going with Gross on this one; banks have been beaten to death already and monetary policy couldn’t be any better. Besides, I wouldn’t want to hold these forever. How about you monkeys? Who do you think is right?

The old bond king? Or the new one?

Have a good one WSO.