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Posted

Thanks!  I much prefer a transcript but can't always find them.  I still always find him interesting for inspiration - he's rare in having the humility to acknowledge that he doesn't know the answer, but provides interesting ideas to consider.

  • 2 weeks later...
Posted
54 minutes ago, VersaillesinNY said:

 


i always enjoy listening to Druckenmiller. Was he sounding a little gloomier than normal? An age thing? Interesting that he is neutral in terms of positioning: i.e. in a couple of years we could see 8% inflation OR deflation. Why such an extreme variation in outcomes? IT ALL DEPENDS ON WHAT THE FED DOES. 

 

Since 2010 all an investor has had to do to be successful is to follow the Fed. So what does the Fed do when inflation gets down to 3% and unemployment starts to increase? Do we get Burns or Volker? Of course, we don’t know that right now. Hence, Druckenmiller’s view we might get 8% inflation (Burns) or deflation (Volker). 

  • 4 weeks later...
  • 4 months later...
Posted

Interesting interview, but, as always, perhaps not very actionable, at least for me. But I liked his position on USD (after being wrong several times recently) this time: would love to hate it, until I look at every alternative available:))

Posted
3 hours ago, UK said:

Interesting interview, but, as always, perhaps not very actionable, at least for me. But I liked his position on USD (after being wrong several times recently) this time: would love to hate it, until I look at every alternative available:))

 

So I had this curve steepener trade on as a hedge and have closed it out.  The CME came out with a product called "Micro" yield futures that make the trade a lot more straightforward to put on.  The contracts are sized by CME to automatically match size  ($10 per basis point of yield) so you don't have to figure out a proper ratio of contracts to trade a spread like 2s-10s.

 

The interesting thing about this trade, as a hedge or otherwise, was that I was wrong on my thesis and the inversion still went away and I made the same profit.  I fully expected the 2-10 inversion to flatten because the 2 year would be very responsive to recession and the market's re-evaluation of short term interest rate direction - a "bull steepener".  The opposite occurred - we had a stronger economy than I expected (wabuffo was not surprised), and the 2 year stayed flat while the 10 year and 30 year yields moved up - a "bear steepener."

 

So the hedge designed to pay me in the event of recession ended up also paying me for the opposite outcome.

 

image.thumb.png.d0cf24581782bfdfc23f93c81c6fd717.png

Posted
24 minutes ago, gfp said:

 

So I had this curve steepener trade on as a hedge and have closed it out.  The CME came out with a product called "Micro" yield futures that make the trade a lot more straightforward to put on.  The contracts are sized by CME to automatically match size  ($10 per basis point of yield) so you don't have to figure out a proper ratio of contracts to trade a spread like 2s-10s.

 

The interesting thing about this trade, as a hedge or otherwise, was that I was wrong on my thesis and the inversion still went away and I made the same profit.  I fully expected the 2-10 inversion to flatten because the 2 year would be very responsive to recession and the market's re-evaluation of short term interest rate direction - a "bull steepener".  The opposite occurred - we had a stronger economy than I expected (wabuffo was not surprised), and the 2 year stayed flat while the 10 year and 30 year yields moved up - a "bear steepener."

 

So the hedge designed to pay me in the event of recession ended up also paying me for the opposite outcome.

 

image.thumb.png.d0cf24581782bfdfc23f93c81c6fd717.png

 

Interesting! Thanks for sharing.

  • 6 months later...
Posted

what did he mean when he said fannie/freddie were going arrange that you can take out a second mortgage but still keep your low COVID rate in your first mortgage?

Posted (edited)
8 hours ago, crs223 said:

what did he mean when he said fannie/freddie were going arrange that you can take out a second mortgage but still keep your low COVID rate in your first mortgage?

 

 

Fannie and Freddie are considering offering government agency guarantees of 2nd mortgages, which is somewhat analogous to a cash out refi but with a second mortgage you keep your original loan and add a second loan at market rate -

https://www.wsj.com/articles/return-of-the-housing-godzillas-fannie-freddie-biden-second-mortgages-f7ac7d77

 

Here is another opinion piece written by Meredith Whitney on the subject -

https://www.ft.com/content/1d287e0c-afda-46f0-9961-9da157b50101

Edited by gfp
Posted

^i would simply add the following:

From the FT article:

"What if I told you there could be an unprecedented stimulus injection into the US economy that will cost the government nothing and add not $1 to the national deficit? As early as this summer, a proposed move could begin to unleash almost $1tn into consumers’ wallets. By the autumn, it could be on its way to $2tn."

In fact, one could carry this free lunch idea even further with a potential of $11tn of "tappable" equity:

Homeowners are getting rich while renters get left behind (axios.com)

It's hard to figure out what is going on in Mr. Druckenmiller's mind but it may have something to do with the wealth effect on consumption and with future consumption pulled today but who knows?

A very interesting aspect of all this is that the author of the FT piece (The Oracle of Wall Street) recently suggested that home prices would soon enter a long period of decline (20 to 30% or more).

  • 5 months later...
Posted

He's a bright guy and I enjoy the few interviews I've seen with him.  By looking at his holdings, Coupang got on my radar and when it was half the IPO price I started nibbling, and when it turned cash flow positive I took a big bite and have been very happy with it. Even though the Soros alums seem to have different playbooks, it's really interesting to see the contrast between guys like him and Jim Rogers, Soros' first partner, who mentions that he was a founder of the Quantum fund, but never mentions him by name.  And a couple of times he's alluded to Soros doing something unethical which made him decide to quit, because his southern pride couldn't take working with someone who do [whatever unnamed thing he did]. 

 

I do worry what would happen if we had another 2008 great financial crisis, or COVID crash, no matter who is in office.  I did read a great book called The Other Side of Macro Economics by Richad Koo.  [NERD ALERT!]  It's the first good explanation I've seen about why Japan experienced it's lost decades of stagnation.  Basically, the traditional financial models don't differentiate between developing economies (pursuing economies), fully industrialized ones, and declining ones.  In an economy like ours (or Japan), if you get into a financial crisis and there is a lot of debt already in the system (from prior low interest rates), then you have a problem.  Cutting rates doesn't stimulate the economy.  If you bought a house (or a factory) at higher rates and it's value has fallen, cutting rates won't help you.  You can't refinance a home for a lower interest rate if you are underwater on it.  And a company that is losing money on past capex isn't going to borrow more money for new capex because they are trying to climb themselves out of a hole, not dig deeper.  

 

So in those instances, the government needs to be the borrower of last resort because there isn't enough private sector borrowing to re stimulate the economy.  But that requires things like government spending on bridges, highways, etc, and that type of spending is not what blue candidates prefer (they prefer social spending) and it's anathema to red candidates (smaller government, except for the military).  

 

Yes, the market seems to pricing in a red victory.  That might be good for companies like Google or Visa that are in the crosshairs of the DOJ.  A new attorney general might be more soft handed.  Great for Tesla, since Musk has been promised a role in the new government if the election goes that way. But what about a blue win (it's a dead heat now).  If the banks and tech companies get hurt, which companies will benefit under a Harris administration?  How would they respond to another great financial crisis?  

 

It's interesting to see that he was a holder of Nvidia. He sold out and lost that last 30-40%, but it seemed like a risky bet and he made most of the easy money and now has more cash to deploy.  And a triple is nothing to sneeze at.  A big change from the tech-averse version of himself that he was under Soros, and who switched and bought tech right before the 2000 crash. 

Posted

@Saluki, which companies would benefit from a blue sweep?  Infrastructure in my opinion - cement & aggregates and equipment rental, as well as apartment landlords.  Why?  If VP Harris is elected and can implement her agenda, the massive tax increases  (even the childcare cap plan is a massive marginal tax increase on most working parents) will send the economy into a deep recession + high inflation (say 5-10%.)  To get out of the recession, stimulus will be applied to build roads, bridges, housing, etc...

  • 3 weeks later...

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