Stanley Druckenmiller interview (2018)

[Liberty]

Another hour-long interview with Druckenmiller:

 

https://www.bloomberg.com/news/videos/2018-12-18/druckenmiller-on-economy-stocks-bonds-trump-fed-full-interview-video

[Viking]

Great second interview. So. Much to learn from these cagy old veterens; great to hear him talk for a full hour and explain his change in thinking. The internet really is an amazing thing. And free :-)

 

“What are the qualities or characteristics that a money manager should have today”

1.) intellectually curious

2.) really open minded

3.) courage

      a.) bet big / concentrate

      b.) fight your own emotions

 

He said this with 2 minutes left in the video. Great advice for anyone who wants to be successful at investing. 

 

And it will be very interesting to see what the Fed does tomorrow especially what they say about the path of future rate increases. If they increase rates tomorrow and stay hawkish (dot plots telegraphs 3 more increases in 2019) get ready for a shit storm in stocks. If the Fed gets more dovish then perhaps we get a short term relief rally. Very murky right now.

[Cigarbutt]

Great second interview. So. Much to learn from these cagy old veterens; great to hear him talk for a full hour and explain his change in thinking. The internet really is an amazing thing. And free :-)

 

“What are the qualities or characteristics that a money manager should have today”

1.) intellectually curious

2.) really open minded

3.) courage

      a.) bet big / concentrate

      b.) fight your own emotions

 

He said this with 2 minutes left in the video. Great advice for anyone who wants to be successful at investing. 

 

And it will be very interesting to see what the Fed does tomorrow especially what they say about the path of future rate increases. If they increase rates tomorrow and stay hawkish (dot plots telegraphs 3 more increases in 2019) get ready for a shit storm in stocks. If the Fed gets more dovish then perhaps we get a short term relief rally. Very murky right now.

The stock market needs a fix in order to finish the year with a Santa Claus rally.

[savant]

Another hour-long interview with Druckenmiller:

 

https://www.bloomberg.com/news/videos/2018-12-18/druckenmiller-on-economy-stocks-bonds-trump-fed-full-interview-video

Can anyone explain what he means in the 41.53 mark onwards when he is asked if it is time to short credit:

"Its easy t short credit if you are long treasuries becauseif rates are going up I don't want to be short credit because they are an interest rate instrument and if I make money in treasuries its because the economy fell apart and they'll be a lot of good credit shorts. So 5-6% absolute nominal yields for stuff that would be 8 or 9 in an environment like this the risk-reward is just terrible in an environment like this, for credit"

 

 

Thanks!

 

[SHDL]

Another hour-long interview with Druckenmiller:

 

https://www.bloomberg.com/news/videos/2018-12-18/druckenmiller-on-economy-stocks-bonds-trump-fed-full-interview-video

Can anyone explain what he means in the 41.53 mark onwards when he is asked if it is time to short credit:

"Its easy t short credit if you are long treasuries becauseif rates are going up I don't want to be short credit because they are an interest rate instrument and if I make money in treasuries its because the economy fell apart and they'll be a lot of good credit shorts. So 5-6% absolute nominal yields for stuff that would be 8 or 9 in an environment like this the risk-reward is just terrible in an environment like this, for credit"

 

 

Thanks!

 

I can’t read his mind (obviously) but here’s my interpretation:

 

First, he thinks (at least a certain segment of) corporate bonds are overpriced and he is therefore shorting them.  Second, he is hedging against the risk of an interest rate decline (which would make the bond prices go up) by going long treasuries at the same time.  Third, he thinks this is a good bet in part because it is one that makes money precisely if/when the economy/market goes to hell.

 

I’m quite certain about the first two points.  He’s not as explicit about the third point, but at least that’s how I would think about this trade.

[Spekulatius]

I am guessing that Druckenmiller is betting on increasing spreads. he may do this directly buy going long treasuriesnwnd shoring corporate bonds or indirectly by shorting financials.

 

FWIW, increasing interest rates are rarely a problem by itself. What is far worse are increasing credit spreads. Credit spreads were at record low and I think this is because of QE. There is quite a bit of trash credit out there (private equity) or companies that leveraged up with buyouts that will probably have issue when spreads start to rise to normal level and junk bonds are again in the vicinity of 8% interest rates rather than 5-6%. HYG (junk bond ETF) is already looking sickly.

[Spekulatius]

Besides the bravado around macro, Druckenmiller basically pitched cloud plays and specifically mentioned NOW. I put it on my watch list around. $165 and it now trades at ~$220. Not bad at all. It would have been better if I had bought it myself. ::)

[thelads]

Hi Spekulatius,

 

On the spread side, there are very liquid derivative instruments he is probably using just to have DV01. Beyond that, I suspect he has a bunch of analysts looking for corp. bonds that were priced in 2016 through mid 2018 that went into the ECB and other non-fundamental buyers, to see if there is anything that jumps out. As he finds names that look fishy, he can just short them outright...Just a suspicion...

[meiroy]

I've recently been going through an existential crisis, following countless failures to prove that I am Not A Robot; it seems I am unable to identify crosswalks and cars.  Could it be, that in this simulation I am but a failed AI?

 

Obviously, this has led me to ponder existential macro issues.  It seems to me that the reason there are so few brilliant guys like Druckenmiller and Soros is that they have a genetic capability to see the systemic whole.  We are under the failed belief that people can simply spend time and effort earning their economics PHD and that would give them a clue (e.g. people working at the Fed), but surely this is not sufficient.  Great methamiticians and artisit have a certain genetic component that allows them to be so, and surely it's the same when it comes to perceiving reality, or rather, perceiving that we cannot perceive it and seeing what we can.

 

[Jurgis]

I've recently been going through an existential crisis, following countless failures to prove that I am Not A Robot; it seems I am unable to identify crosswalks and cars.  Could it be, that in this simulation I am but a failed AI?

 

Obviously, this has led me to ponder existential macro issues.  It seems to me that the reason there are so few brilliant guys like Druckenmiller and Soros is that they have a genetic capability to see the systemic whole.  We are under the failed belief that people can simply spend time and effort earning their economics PHD and that would give them a clue (e.g. people working at the Fed), but surely this is not sufficient.  Great methamiticians and artisit have a certain genetic component that allows them to be so, and surely it's the same when it comes to perceiving reality, or rather, perceiving that we cannot perceive it and seeing what we can.

 

It's not genetic component. It's good drugs.

 

 

 

Where's ScottHall when we need him.

[tede02]

I've recently been going through an existential crisis, following countless failures to prove that I am Not A Robot; it seems I am unable to identify crosswalks and cars.  Could it be, that in this simulation I am but a failed AI?

 

Obviously, this has led me to ponder existential macro issues.  It seems to me that the reason there are so few brilliant guys like Druckenmiller and Soros is that they have a genetic capability to see the systemic whole.  We are under the failed belief that people can simply spend time and effort earning their economics PHD and that would give them a clue (e.g. people working at the Fed), but surely this is not sufficient.  Great methamiticians and artisit have a certain genetic component that allows them to be so, and surely it's the same when it comes to perceiving reality, or rather, perceiving that we cannot perceive it and seeing what we can.

 

I'd have to agree. These guys are so rare. But they somehow have a knack for putting the puzzle together despite having the same information as everyone else. It's kind of amazing. In an ironic twist, what seems to mislead people (including myself) is some of these legends make their approach sound so simple. Buffett is the textbook example. His approach is simple, but not necessarily easily executed. It requires a lot of work, superior judgement and mastering all the psychological traps. It's really tough to put it all together. I sense he's been telling everyone to index in recent years because he's observed, despite all the wisdom he's delivered over the decades, few people really have what it takes to out-perform the market over time. 

[tede02]

Great second interview. So. Much to learn from these cagy old veterens; great to hear him talk for a full hour and explain his change in thinking. The internet really is an amazing thing. And free :-)

 

“What are the qualities or characteristics that a money manager should have today”

1.) intellectually curious

2.) really open minded

3.) courage

      a.) bet big / concentrate

      b.) fight your own emotions

 

He said this with 2 minutes left in the video. Great advice for anyone who wants to be successful at investing. 

 

And it will be very interesting to see what the Fed does tomorrow especially what they say about the path of future rate increases. If they increase rates tomorrow and stay hawkish (dot plots telegraphs 3 more increases in 2019) get ready for a shit storm in stocks. If the Fed gets more dovish then perhaps we get a short term relief rally. Very murky right now.

 

I really enjoyed both videos. Watched each multiple times. Over the last two years my mind has really opened up to investment approaches outside of value investing. It started by reading Ed Thorp's autobiography.

 

Druckenmiller's approach is so different from bottoms-up fundamental analysis. It's incredibly intriguing to hear someone, who reportedly delivered 30% for multiple decades without a negative year, discuss their approach. The concerns regarding central bank tightening were striking. I worry that a lot of people who are piling into index strategies are doing so not realizing the surge in asset prices has largely been driven by zero interest rate policy and QE. What is going to happen as those policies reverse? Indexing may be good long term but it wouldn't surprise me in the least as the money flows peak into those strategies, the trend flips.

 

[nickenumbers]

 

I'd have to agree. These guys are so rare. But they somehow have a knack for putting the puzzle together despite having the same information as everyone else. It's kind of amazing. In an ironic twist, what seems to mislead people (including myself) is some of these legends make their approach sound so simple. Buffett is the textbook example. His approach is simple, but not necessarily easily executed. It requires a lot of work, superior judgement and mastering all the psychological traps. It's really tough to put it all together. I sense he's been telling everyone to index in recent years because he's observed, despite all the wisdom he's delivered over the decades, few people really have what it takes to out-perform the market over time.

 

Right on!  I don't have to salt your cooking.

 

I have heard Charlie Munger correct WEB a couple of time in the annual meetings where WEB makes the whole concept of investing sound simple and WEB ties it up with a pretty little bow.  Munger will chime in "but not everyone can do it."  It is WEB forgetting his genius and assumption of shared understanding, and Mungers recognition and reprisal to WEB that not everyone is a genius, or even rarer a RATIONAL GENIUS like WEB.  [The 2 are also different.]

[Cardboard]

Regarding Buffett, has any of you calculated or has in hand the rate of return of his disclosed stock investments within Berkshire since around 1998 vs the S&P 500?

 

I don't think there is any outperformance at all.

 

The reason why Berkshire has done so well on per share book value growth over the last 20 years is the structure of the company or built-in leverage via float and acquisitions using stock trading above book value.

 

In terms of stock picking ability, I don't think that there is so much alpha to speak of.

 

This is not to minimize what he has achieved via his company but, if he was a regular hedge fund manager, I can't see how he would have achieved such wealth at the size he got into in the last 20 years?

 

Cardboard

[Liberty]

Sorry if this has been posted before, but I hadn't seen it.

 

Paul Tudor Jones interviewing Stanley Druckenmiller (in 2017):

 

https://vimeo.com/351446016

[Liberty]

https://www.cnbc.com/2019/12/18/stanley-druckenmiller-says-he-couldnt-have-been-more-wrong-this-year.html

[Liberty]

Video of the 50-min interview here:

 

https://www.bloomberg.com/news/videos/2019-12-18/druckenmiller-on-2020-outlook-monetary-policy-u-s-election-video

[Viking]

Thanks for posting link to 50 minute interview. Very interesting to get his views one year later. He sounded pretty bullish about stocks in the near term: monetary easing, decent economy, some improvement on trade front. My concern is i am hearing this from lots of people...

[muscleman]

Thanks for posting link to 50 minute interview. Very interesting to get his views one year later. He sounded pretty bullish about stocks in the near term: monetary easing, decent economy, some improvement on trade front. My concern is i am hearing this from lots of people...

 

It is more important to focus on data than anecdotal.

I am bullish because I like what I see here.

[Guest cherzeca]

Thanks for posting link to 50 minute interview. Very interesting to get his views one year later. He sounded pretty bullish about stocks in the near term: monetary easing, decent economy, some improvement on trade front. My concern is i am hearing this from lots of people...

 

It is more important to focus on data than anecdotal.

I am bullish because I like what I see here.

 

how are outflows calculated? 

 

if I sell equity there is no outflow because someone bought my equity.  then I could take my cash and put it into bond market, which is an outflow, but how does anyone know what I did with my cash on the second step of the chain? 

 

I think this is a bogus stat, but correct me if I am wrong

[Guest cherzeca]

as for druck, cant argue with success.

 

but he does sound like someone who is chasing the crowd, and shoot, I can do that too...

[Cardboard]

Lost all respect.

 

The guy is all about rear view mirror. Looks awfully old for 66. Is bitter.

 

If you don`t compete anymore then wtf are you doing giving interviews on Bloomberg about stock market, currencies and bond predictions?

[TwoCitiesCapital]

Thanks for posting link to 50 minute interview. Very interesting to get his views one year later. He sounded pretty bullish about stocks in the near term: monetary easing, decent economy, some improvement on trade front. My concern is i am hearing this from lots of people...

 

It is more important to focus on data than anecdotal.

I am bullish because I like what I see here.

 

how are outflows calculated? 

 

if I sell equity there is no outflow because someone bought my equity.  then I could take my cash and put it into bond market, which is an outflow, but how does anyone know what I did with my cash on the second step of the chain? 

 

I think this is a bogus stat, but correct me if I am wrong

 

My guess is they look at the net creation/destruction of fund shares.

 

If a mutual fund experiences more withdrawals then deposits, assets are sold and the share count is reduced. If that cash doesn't flow into another equity mutual fund increasing the share count, then you've ended up with a pretty clear net reduction in equities via a net reduced share count of equity mutual funds.

 

Not a perfect system for measurement as it overlooks individual security contributions, but probably a reasonably good measure

[Spekulatius]

How can a market go up when money flows out? This does t make any. sense. Sure there are buybacks, mergers and equity swap for debt, but those are long term trends. It would posit that Markets can go up, if money flows in.

[Cigarbutt]

^The following table could be helpful:

https://www.marketwatch.com/story/buybacks-are-the-dominant-source-of-stock-market-demand-and-they-are-fading-fast-goldman-sachs-2019-11-06