Billionaire 'bond king' Jeffrey Gundlach blasted stimulus checks for distorting markets - and warned inflation could threaten stock prices

• Billionaire investor Jeffrey Gundlach warned stimulus checks are distorting markets.
• The DoubleLine Capital CEO said sustained inflation could hit stock prices.
• Gundlach called crypto the "poster child" of the speculative mania in markets.
• See more stories on Insider's business page.

Jeffrey Gundlach underlined the risks of excessive federal stimulus in a Yahoo Finance interview this week. He also warned sustained inflation could hammer stock prices, and suggested bitcoin's recent slump might indicate that market speculation is on the decline.

The billionaire founder and CEO of DoubleLine Capital, whose nickname is the "bond king," said multiple rounds of stimulus checks have distorted several parts of the economy. They have fueled the sharp rise in US house prices over the past year, he said, and discouraged some recipients from working because they're "making more money sitting at home watching Netflix."

"One of the dangers that we've opened the door to is these stimulus checks are starting to feel like they might not go away," Gundlach added.

The DoubleLine boss was caught off-guard by inflation data this week that showed consumer prices jumped the most in 11 years last month. His firm's models were predicting higher inflation in another month or two, and he still expects the peak to be in July, he said.

"If we keep going higher from there, then I think people are going to be seriously worried," he continued, explaining that it would rule out a temporary increase in prices due to the economy reopening.

Moreover, sustained inflation could pressure the Federal Reserve into raising interest rates and pumping less liquidity into markets. "That's gonna be problematic for the valuation of the stock market," he said.

Gundlach linked the cryptocurrency boom and meme-stock frenzy to stimulus checks later in the interview.

"Gamestop, all these things, a lot of people are just playing with this funny money," he said. "They feel like they're playing with the house's money, so it actually does resemble a casino to them, psychologically."

Gundlach, who was bullish on bitcoin last year, compared it to the pre-revenue tech startups that went public in the months before the dot-com crash. "Every era of really highly valued markets, after they've run a lot, has some sort of a poster child," he said. "Here I think it's really these cryptos."

The investor suggested bitcoin's recent correction might indicate the rampant speculation in markets has peaked and may now be easing. "Maybe it's only temporary, but when you're looking at a speculative fervor, I look for the poster child to roll over last," he said.