Stanley Druckenmiller interview (2018)

[VersaillesinNY]

Stanley's interview starts at 2 hours and 6 min:

 

 

Transcript: https://tidalwave.substack.com/p/transcript-druckenmiller-april-2023

[thowed]

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.

[VersaillesinNY]

 

[Viking]

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). 

[VersaillesinNY]

https://www.bloomberg.com/news/videos/2023-06-07/druckenmiller-on-how-ai-is-dominating-his-long-portfolio?sref=iO3LZPgY 

[Gregmal]

You know Drunkenmiller is a great trader. He has to be. Because he’s pretty much always wrong about his macro calls lol. 

[Spekulatius]

Pretty good interview and it’s not formost about AI. He does own NVDA.

To touches upon upon China (not a fan), Trump (ditto), Biden (ditto).

 

[VersaillesinNY]

 

[dcollon]

Thanks very much for posting. 

[UK]

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:))

[gfp]

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.

 

[UK]

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.

 

 

Interesting! Thanks for sharing.

[VersaillesinNY]

https://www.cnbc.com/video/2024/05/07/stanley-druckenmiller-the-fed-should-get-rid-of-forward-guidance-and-just-do-their-job.html

 

https://www.cnbc.com/video/2024/05/07/stanley-druckenmiller-ai-might-be-a-little-over-hyped-now-but-under-hyped-long-term.html

 

https://www.cnbc.com/video/2024/05/07/stanley-druckenmiller-why-were-spending-like-were-still-in-the-great-depression-is-beyond-me.html

 

https://www.cnbc.com/2024/05/07/cnbc-exclusive-cnbc-transcript-billionaire-investor-stanley-druckenmiller-speaks-with-cnbcs-squawk-box-today.html

 

 

Edited 1 hour ago by VersaillesinNY
Full free audio interview

[crs223]

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?

[gfp]

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 Wednesday at 12:32 PM by gfp

[Cigarbutt]

^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).