Stanley Druckenmiller: Prices Could Adjust Immediately With the End of QE

By on September 12, 2013

Stanley Druckenmiller - Duquesne Capital ManagementBloomberg Television’s Erik Schatzker and Stephanie Ruhle interviewed hedge fund legend Stanley Druckenmiller, founder of Duquesne Capital Management LLC. Druckenmiller was a former business partner of George Soros.

Druckenmiller began the conversation by addressing the topic of entitlements and the inter-generational theft, or the “nation of takers,” as he sees it.

Druckenmiller brought up a chart showing entitlement transfers as a percentage of federal budget outlays. In 1960 the percentage was 28% and it’s now 72%, Druckenmiller pointed out. The elderly have benefited from the shift, but it is crowding out outlays for infrastructure, education, and other investment spending, Druckenmiller added.

Druckenmiller then pulled up a “kind of shocking” chart of the change in average net worth by age group showing a dramatic difference in the wealth accumulation between older and younger generations from the year 1983 to 2010. The age group encompassing 29-37 year-olds actually experienced a decline in net worth of 21%.

Druckenmiller said most seniors are not aware of the huge difference in entitlements between the generations. He explained U. S. indebtedness is really $200 trillion when accounting for the promised entitlements.

Druckenmiller then spoke of his investment record describing how he made most of his money in the bond market and currencies by speculating on economic developments and profiting from chaos, which “I’m not very proud of.”

Druckenmiller initially supported President Obama, “drinking the hope and change koolaid,” as he put it. However, his hopes that Obama would move to the center like President Clinton were obviously not realized.

Regarding his investment strategy, Druckenmiller said he’s cut back on his big positions and he’s waiting to see who becomes Fed chairman because it will be very important to the markets. His feeling is the market is topping, but warned he’s predicted seven of the last three bear markets. “Right now I’m lost,” he declared.

Regarding hedge funds he said there are too many of them, they don’t really hedge, and he doesn’t understand the 2 and 20 fee concept.

Druckenmiller said as long as the Fed is printing money we’re not close to a bear market. When QE is removed the market will go down and prices could adjust immediately, he explained.

As far as his current positioning Druckenmiller would only say he was long some Japanese equities, while short some Yen.

Druckenmiller addressed Soros’ famous British pound short.

Druckenmiller said he’s been waiting for the decline in bonds, but totally missed it because he felt the economy was still softening.

One Comment

  1. Edward Vedder

    September 13, 2013 at 1:49 pm

    Enjoyed this interview, especially the comment from Mr. D that he’s lost. I 2nd that sentiment.

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