DoubleLine's Gundlach Suggests Buying Emerging Markets ETFDoubleLine's Gundlach Suggests Buying Emerging Markets ETF

By Sam Forgione

NEW YORK, May 8 (Reuters) - Jeffrey Gundlach, chiefexecutive and chief investment officer of DoubleLine Capital,said on Monday that investors should buy the iShares MSCIEmerging Markets exchange-traded fund, short an ETFtracking the S&P 500, and leverage it one time.

Gundlach, speaking at the Sohn Investment Conference in NewYork City, said U.S. stocks could continue to grind higher intothe middle of the year or beyond but that there was "just not alot of upside." He said the trend since 2010 of the S&P 500out-performing emerging market stocks had been "broken."

"It's already starting to work in terms of favoring emergingmarkets versus S&P 500, just on an index fund basis," saidGundlach, who oversees more than $100 billion in assets at LosAngeles-based DoubleLine and is known on Wall Street as the"Bond King."

He said that the cyclically adjusted price-earnings or"CAPE" ratio of emerging markets was half that of the UnitedStates.

Gundlach said that, while some investors avoid buyingemerging market assets on fears that tighter Federal Reservepolicy will lead to a stronger dollar, such a view that hawkishFed policy necessarily means a stronger greenback was a "myth."

Gundlach also called passive investing a "myth" and said hewas neither bullish nor bearish on the dollar. He told theconference he had opened a Twitter account "@TruthGundlach."(Reporting by Sam Forgione; Editing by Meredith Mazzilli andGrant McCool)