Gundlach: 'Vicious cycle' possible in oil, $70 is line in sand

Bond guru Jeffrey Gundlach said Monday he expects the Federal Reserve to raise rates in 2015, but not on the strength of economic fundamentals.

Speaking with CNBC's "Squawk Alley," the CEO and CIO of DoubleLine Capital said Fed policymakers may seek to raise rates because that is what is expected of them.

"The Fed should not be raising interest rates, and yet they don't want to be at zero. They're in a conundrum," he said. "They might raise rates just to see what happens."

Jeffrey Gundlach
Harriet Taylor | CNBC
Jeffrey Gundlach

Gundlach also predicted that oil prices will go even lower than they already have this year. Oil markets are in their "second part of the cycle" wherein prices will drop because producers are getting squeezed after oil settled below $80.

Production will see an increase "maybe on the sly" by countries that depend on oil revenue, he said, creating a "vicious cycle" for the commodity's price. He predicted that $70 is the "line in the sand" for West Texas Intermediate: Any drop below that level will lead to a significant fall in price, he said.

He also said an oil price around $75 would suggest that the consumer price index should probably be near zero—meaning that there is no inflation in the economy. At the time of the interview, WTI traded around $76.70.

Read MoreOil traders increase bets on OPEC action

As for bond predictions, Gundlach said his big bet on the future is that U.S. Treasurys' yield curve will flatten "at a level previously thought unthinkable" sometime in 2015 or 2016.

Gundlach has seen nine consecutive months of inflows into his firm, including more than $2 billion in October. DoubleLine's Total Return Bond Fund boasted $1.82 billion in inflows that month, and $5.6 billion so far this year.

Bond fund investments have been in flux since Bill Gross, co-founder of DoubleLine rival Pimco, left his post in September to join the smaller Janus Capital Group. According to data from Morningstar, Pimco saw investors withdraw $48.3 billion in October.

A recent magazine article suggested that Gundlach may be ready to inherit the title of "Bond King" from Gross. "I never really try to court that kind of a thing," he said of that praise. "I was surprised by that headline, frankly."

Despite the recent string of victories, Gundlach's predictions have not been perfect: In October he told CNBC that 2.20 percent would be the floor for 10-year U.S. Treasury yields—they fell to about 2.15 the next day.

Gundlach has also been consistently negative on Apple, telling CNBC on Sept. 9 that he would sell the stock. The company's share price has risen about 20 percent since then. On Monday, he admitted that his call may not have accounted for new innovation by the company, but said he still is not interested in buying the stock.

Read MoreGundlach: Alibaba probably the top for stocks for year

"I think that what's happened to Apple is this Apple Pay thing seems to be potentially a big deal," he said. "I don't like buying things when they're at an all-time-high—I'm a buy-low kind of person."

Gundlach did, however, say that he liked Tesla, despite the fact the company's stock is near its highs. He said believes it "has the ability to be the major, major deal" on the strength of its battery technology.

—Reuters contributed to this report.