Stanley Druckenmiller
Toggle talk (May 28, 2021)
He sees some similarities with current valuations and the tech bubble.
The NASDAQ went down 95% after the tech bubble burst.
“Monetary policy is absolutely insane.”
We have an asset bubble now that’s not just in stocks, it’s in everything.
The guy from Shopify said that we went from 2019 to 2030 because of COVID.
You’re dead if you haven’t moved to the cloud because your competitors can move to the cloud and crush you with tech.
He thinks the big tech companies can grow into their current valuations, which wasn’t possible during the tech bubble.
Amazon at 3,200 is not a bubble stock.
Druckenmiller thinks these companies will be fine long term.
The biggest risk to the equity market is when the Fed starts tightening.
Druckenmiller thinks inflation will occur, but he can also see no inflation happening.
Druckenmiller is worried about Taiwan, but probably not a worry till after the Beijing olympics (2022 winter olympics). This is a big geopolitical issue.
When Druckenmiller started in the business, there were more retail investors than institutional investors and they got their information from their broker.
Retail investors are better informed than the investors of the 80s and 90s.
“Don’t confuse genius with a bull market”.
Druckenmiller thought the Japanese investors would come back to the market 5-10 years after the 1990 bubble burst and they still haven’t come back. Scarring can be real with big downturns.
Druckenmiller has been described as having a “stomach of a riverboat gambler”.
All the really great investors make large, concentrated bets when they have a lot of conviction.
If you have 35-40 positions, you may lose attention. If you have a large position, you will stay concentrated.
Mark Twain said “put all your eggs in one basket and watch it carefully”.
You need to know how and when to take a loss. He’s never used a stop-loss and thinks it’s a dumb concept.
If his thesis is wrong, then get out and move on.
You need to be disciplined and you’ll constantly be battling your emotions.
Just because a security is going down, doesn’t mean you should sell it. You may want to reevaluate your thesis, but it doesn’t mean you should sell it.
Druckenmiller’s biggest career mistake was selling everything in January 2000, then watching everyone else make a ton of money, getting emotional, buying back in, and losing $3 billion. It’s really hard to stay disciplined and not get emotional.
About 5-6 years ago, he thought crypto was a solution in search of a problem.
He never owned it from $50 to $70,000 and felt like a moron. Then it went back down to $3,000 and then he found the problem. The problem was Jay Powell and the world’s central bankers making fiat money more questionable than it had already been.
He found that 86% of the people that owned Bitcoin at $17,000 never sold it at $3,000. This was huge for Druckenmiller. This is something with a finite supply and 86% of the people holding it are religious fanatics.
He tried to buy $100 million at $6,200. Took him 2 weeks to buy $20 million (around $6,500). He got frustrated and stopped buying it. “My hearts never been in it, I’m a 68 year old dinosaur”.
He thinks Bitcoin won the store of value competition. It has a long track record and a solid brand.
The commerce, smart contract coin, Etherum, has a less certain future. This reminds him of Yahoo before Google came along. He could see a young genius come along and upend the payment system.
As long as Jay Powell keeps acting like he’s acting, he thinks Bitcoin and gold will have a tailwind. He thinks of Bitcoin as “high beta gold”.
Dogecoin and NFTs are manifestations of the craziest monetary policy in history. “I wouldn’t short it because I don’t like putting campfires out with my face”. He thinks so low of Doge that it doesn’t even bother him when it goes up.
You have no chance in the money management business if you’re not passionate about it. If you only want the money, then you don’t stand a chance. You’ll get outworked.
He went to get a PhD in econ and thought “these people are crazy, they’re trying to shove the economy into a math formula”.
Don’t let money be the driver of your decision. Maximize your happiness.
Current Fed policy is totally inappropriate (May 11, 2021)
Link.
The current fiscal / monetary policy is the most radical policy, by a long shot, that he’s seen relative to the economic circumstances.
We’re back to normal GDP and above trend on retail sales.
He understood the policy actions at the onset of the Corona crisis, but when the facts change, you have to change.
In normal circumstances, given the current economic numbers, the Fed would be looking at an interest rate hike right now.
In 6 weeks (last Spring), we did more QE than the entire 9 year period from 2009-2018.
Retail sales are now above trend. He has a problem with the Fed continuing to do QE now that the crisis is over.
He supported the first stimulus check. He didn’t support the second and third stimulus checks.
He thinks we’ve crossed the rubicon and the dollar will no longer be the reserve country of the world. It’s more likely than not that within 15 years the dollar loses reserve currency status.
Without the Fed buying ~60% of the bond market issuances, the market would be totally rejecting this.
We’re right now in the crux of when the baby boomer retirement will accelerate.
For 20 years, foreigners were buying Treasuries. This trend was reversed in Spring 2020. We went from a $500 billion a year into Treasuries to an outflow from Treasuries.