Druckenmiller - Corporate America, China And The Fed Are Stuck

Sohn Investment Conference
May 4, 2016

Stanley Druckenmiller was Managing Director at Soros Fund Management, where he served as Lead Portfolio Manager of the Quantum Fund and Chief Investment Officer of Soros and had overall responsibility for funds with a peak asset value of $22 billion.

Stanley Druckenmiller went on to found Duquesne Capital Management, which he ran until 2010 when the firm closed its doors to outside money. Today, Druckenmiller continues to manage money under the name Duquesne Family Office, but he tends to avoid giving stock-specific ideas at conferences. Instead, Druckenmiller tends to weigh in on broader economic topics with the odd political opinion thrown in.

“I have argued that the myopic policy makers have no endgame,” billionaire Stanley Druckenmiller said towards the end of a scathing twenty minute romp through all of the world’s economic problems. The U.S. debt is out of control, China is even worse, but the biggest offender of all is the Federal Reserve, Druckenmiller said.

Corporations in the United States are stuck in the mud, forlorn of growth, unwilling to invest, and addicted to share buybacks to gin up their stocks. It is a sentiment Druckenmiller has had for years, but the famed hedge fund manager indicated he really means it now. Eleven years ago, Druckenmiller warned the Sohn audience of then-Federal Reserve chair Alan Greenspan’s blunders in inflating an epic mortgage bubble, which was sure to crash.

On Wednesday, he said the bubble inflated by former chair Ben Bernanke and current chairwoman Janet Yellen is many magnitudes worse. The Fed, Druckenmiller said, is using low interest rates to ease borrowing costs and smooth over growing problems in the global economy. And this radical Central Bank accommodation is leading to unproductive investment, and is an issue that is even worse in China, an engine of global demand.

Whether it is S&P 500 Index corporations, U.S. households or the state-managed economy in China, Druckenmiller believes cheap money is borrowing from future growth, and will backfire spectacularly. ”While policy makers have no endgame, markets do,” he said.