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Druckenmiller Interview - June 3rd


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Drukenmiller is a smart guy and very much worth listening to. But it seems like his strategy is very sub-optimal from a tax stand point. If he turns over > 100% per year, he would pay a lot of taxes when he is right. When you are compounding at 30% a year I guess it is ok but he says he doesn't make anything close to it these days.

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Drukenmiller is a smart guy and very much worth listening to. But it seems like his strategy is very sub-optimal from a tax stand point. If he turns over > 100% per year, he would pay a lot of taxes when he is right. When you are compounding at 30% a year I guess it is ok but he says he doesn't make anything close to it these days.

 

Seems to be working all right for him. I think if he knew how to make the same returns without constantly turning on a dime, he'd do it, but his talent is mostly reacting quickly to things before the market understands them.

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Drukenmiller is a smart guy and very much worth listening to. But it seems like his strategy is very sub-optimal from a tax stand point. If he turns over > 100% per year, he would pay a lot of taxes when he is right. When you are compounding at 30% a year I guess it is ok but he says he doesn't make anything close to it these days.

 

He is mostly trading futures, which is taxed 40% long term cap gain 60% short term gain no matter how long you actually hold them.

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Brilliant. Absolutely brilliant.  His ability to see things systematically is unparalleled.

 

I was aware of his views on inflation, innovation, and productivity but it's the first time I hear him using arguments trying to quantify it. (amount of google searches, it is free and thus not included in inflation etc.)

 

 

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How do we know he doesn't Invest via an offshore structure with no tax ? You can do alot of things when you don't pay capital gains tax (eg a private investor in Belgium) or the rate is very low like averaging a few points in several offshore countries and EU . I guess that's what helps the rich get richer , being based in the right country, if in name and formalities only.

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Brilliant. Absolutely brilliant.  His ability to see things systematically is unparalleled.

 

I was aware of his views on inflation, innovation, and productivity but it's the first time I hear him using arguments trying to quantify it. (amount of google searches, it is free and thus not included in inflation etc.)

In my household, I would say that 99% of circulating photos, clicks, likes, searches, videos watched (the number of which has been growing sequentially and quasi-exponentially) should NOT be counted in GDP. Unless we made it to the leisure society but I think the economic possibilities are not quite there yet.

I like the anecdote (which seems reasonable for him) when he decided to sell all long exposure and buy treasuries instead, on the spot, while playing golf. He says it was a tweet and I guess he felt the wind change.

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How do we know he doesn't Invest via an offshore structure with no tax ? You can do alot of things when you don't pay capital gains tax (eg a private investor in Belgium) or the rate is very low like averaging a few points in several offshore countries and EU . I guess that's what helps the rich get richer , being based in the right country, if in name and formalities only.

 

Also, he manages Soros’ open society foundation, which is a charity right?

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Druckenmiller has his own foundation.  Does he really manage one of Soros's foundations' assets as well?  Where did you read that?

 

How do we know he doesn't Invest via an offshore structure with no tax ? You can do alot of things when you don't pay capital gains tax (eg a private investor in Belgium) or the rate is very low like averaging a few points in several offshore countries and EU . I guess that's what helps the rich get richer , being based in the right country, if in name and formalities only.

 

Also, he manages Soros’ open society foundation, which is a charity right?

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Drukenmiller is a smart guy and very much worth listening to. But it seems like his strategy is very sub-optimal from a tax stand point. If he turns over > 100% per year, he would pay a lot of taxes when he is right. When you are compounding at 30% a year I guess it is ok but he says he doesn't make anything close to it these days.

 

I don't think you need 30% per year to justify a high turnover strategy...  A > 2% "alpha" is likely enough for most people.

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Druckenmiller has his own foundation.  Does he really manage one of Soros's foundations' assets as well?  Where did you read that?

 

How do we know he doesn't Invest via an offshore structure with no tax ? You can do alot of things when you don't pay capital gains tax (eg a private investor in Belgium) or the rate is very low like averaging a few points in several offshore countries and EU . I guess that's what helps the rich get richer , being based in the right country, if in name and formalities only.

 

Also, he manages Soros’ open society foundation, which is a charity right?

 

He is so famous that I thought this is a wildly known fact.

He was named Soros' 8th successor after Soros fired his first 7 successors. Then he magically hang on and worked well for Soros for many many years. I haven't heard any news that they parted their way yet, so I assume he is still Soros's successor.

 

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Yeah I think your information might be a little out of date.

 

Druckenmiller has his own foundation.  Does he really manage one of Soros's foundations' assets as well?  Where did you read that?

 

How do we know he doesn't Invest via an offshore structure with no tax ? You can do alot of things when you don't pay capital gains tax (eg a private investor in Belgium) or the rate is very low like averaging a few points in several offshore countries and EU . I guess that's what helps the rich get richer , being based in the right country, if in name and formalities only.

 

Also, he manages Soros’ open society foundation, which is a charity right?

 

He is so famous that I thought this is a wildly known fact.

He was named Soros' 8th successor after Soros fired his first 7 successors. Then he magically hang on and worked well for Soros for many many years. I haven't heard any news that they parted their way yet, so I assume he is still Soros's successor.

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Brilliant. Absolutely brilliant.  His ability to see things systematically is unparalleled.

 

I was aware of his views on inflation, innovation, and productivity but it's the first time I hear him using arguments trying to quantify it. (amount of google searches, it is free and thus not included in inflation etc.)

In my household, I would say that 99% of circulating photos, clicks, likes, searches, videos watched (the number of which has been growing sequentially and quasi-exponentially) should NOT be counted in GDP. Unless we made it to the leisure society but I think the economic possibilities are not quite there yet.

I like the anecdote (which seems reasonable for him) when he decided to sell all long exposure and buy treasuries instead, on the spot, while playing golf. He says it was a tweet and I guess he felt the wind change.

 

That's a good point.

 

So, let's say you don't have these free services anymore. Are you not going to print pictures and would it not cost money?

 

How much information are you getting now free that would have cost you money before?

 

How many times have you looked up some info and used it, instead of relying on paid experts?

 

How many free youtube videos?

 

Email? What would be the alternatives and would they be free?

 

etc.

 

Even if you somehow not spend any money if all of these are turned off tomorrow (unlikely) it would not negate the fact that they added value and increase productivity, for free.

 

 

 

 

 

 

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Brilliant. Absolutely brilliant.  His ability to see things systematically is unparalleled.

 

I was aware of his views on inflation, innovation, and productivity but it's the first time I hear him using arguments trying to quantify it. (amount of google searches, it is free and thus not included in inflation etc.)

In my household, I would say that 99% of circulating photos, clicks, likes, searches, videos watched (the number of which has been growing sequentially and quasi-exponentially) should NOT be counted in GDP. Unless we made it to the leisure society but I think the economic possibilities are not quite there yet.

I like the anecdote (which seems reasonable for him) when he decided to sell all long exposure and buy treasuries instead, on the spot, while playing golf. He says it was a tweet and I guess he felt the wind change.

 

That's a good point.

 

So, let's say you don't have these free services anymore. Are you not going to print pictures and would it not cost money?

 

How much information are you getting now free that would have cost you money before?

 

How many times have you looked up some info and used it, instead of relying on paid experts?

 

How many free youtube videos?

 

Email? What would be the alternatives and would they be free?

 

etc.

 

Even if you somehow not spend any money if all of these are turned off tomorrow (unlikely) it would not negate the fact that they added value and increase productivity, for free.

 

Transportation: much, much more efficent with Google maps; how is this economic and life improvement captured in GDP data?

Education: much, much better with the internet; how is this economic and life improvement captured in GDP data?

 

Software is transforming every aspect of life. Banking is a great example of this transformation. Not that long ago i used to get paid with a paper check that i would then have to go to the bank, stand in line and deposit. Need cash to buy something? Go to the bank, stand in line and withdraw cash. I would write a check to pay someone (who would then go to the bank, stand in line and make a deposit). Need to pay your utility bills? Go to the bank, stand in line and pay. Want a second account? Go to the bank stand in line and open. Investing was pretty much impossible for most people; so they bought Canada Saving Bonds or left their money in a savings account at their bank (my monther-in-law still does this). If you did have investment accounts, most people paid big fees. This was life a few short years ago.

 

Today everything is done electronically. Much, much quicker. Much more accurate. Much, much cheaper. Much more selection. Quality of life is much, much better. How are all of these improvements captured in GDP data (maybe they are .... not sure)? And for banks, their cost structure has to be way, way lower. All the people they no longer need must be a big drag on GDP (layoffs or separation or someone leaves and are not replaced).

 

And we are just getting started with software improving pretty much every aspect of ones life...

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How are all of these improvements captured in GDP data (maybe they are .... not sure)?

 

They aren't.  GDP has always been a flawed measure of prosperity because it doesn't count things that are "free" (like clean air, home cooking, ...) and this is just another instance of the same "problem."

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Yeah I think your information might be a little out of date.

 

Druckenmiller has his own foundation.  Does he really manage one of Soros's foundations' assets as well?  Where did you read that?

 

How do we know he doesn't Invest via an offshore structure with no tax ? You can do alot of things when you don't pay capital gains tax (eg a private investor in Belgium) or the rate is very low like averaging a few points in several offshore countries and EU . I guess that's what helps the rich get richer , being based in the right country, if in name and formalities only.

 

Also, he manages Soros’ open society foundation, which is a charity right?

 

He is so famous that I thought this is a wildly known fact.

He was named Soros' 8th successor after Soros fired his first 7 successors. Then he magically hang on and worked well for Soros for many many years. I haven't heard any news that they parted their way yet, so I assume he is still Soros's successor.

 

It is. He worked for Soros for awhile. Then he started his own fund and did well. Now he manages  his one family office I think.

 

Still a brilliant dude with an exceptional track record even if he got whipsawed by the internet craze in 2000

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Brilliant. Absolutely brilliant.  His ability to see things systematically is unparalleled.

I was aware of his views on inflation, innovation, and productivity but it's the first time I hear him using arguments trying to quantify it. (amount of google searches, it is free and thus not included in inflation etc.)

In my household, I would say that 99% of circulating photos, clicks, likes, searches, videos watched (the number of which has been growing sequentially and quasi-exponentially) should NOT be counted in GDP. Unless we made it to the leisure society but I think the economic possibilities are not quite there yet.

That's a good point.

So, let's say you don't have these free services anymore. Are you not going to print pictures and would it not cost money?

How much information are you getting now free that would have cost you money before?

How many times have you looked up some info and used it, instead of relying on paid experts?

How many free youtube videos?

Email? What would be the alternatives and would they be free?

etc.

 

Even if you somehow not spend any money if all of these are turned off tomorrow (unlikely) it would not negate the fact that they added value and increase productivity, for free.

Transportation: much, much more efficent with Google maps; how is this economic and life improvement captured in GDP data?

Education: much, much better with the internet; how is this economic and life improvement captured in GDP data?

 

Software is transforming every aspect of life. Banking is a great example of this transformation. Not that long ago i used to get paid with a paper check that i would then have to go to the bank, stand in line and deposit. Need cash to buy something? Go to the bank, stand in line and withdraw cash. I would write a check to pay someone (who would then go to the bank, stand in line and make a deposit). Need to pay your utility bills? Go to the bank, stand in line and pay. Want a second account? Go to the bank stand in line and open. Investing was pretty much impossible for most people; so they bought Canada Saving Bonds or left their money in a savings account at their bank (my monther-in-law still does this). If you did have investment accounts, most people paid big fees. This was life a few short years ago.

 

Today everything is done electronically. Much, much quicker. Much more accurate. Much, much cheaper. Much more selection. Quality of life is much, much better. How are all of these improvements captured in GDP data (maybe they are .... not sure)? And for banks, their cost structure has to be way, way lower. All the people they no longer need must be a big drag on GDP (layoffs or separation or someone leaves and are not replaced).

 

And we are just getting started with software improving pretty much every aspect of ones life...

I agree that marginal utility can be significant (efficiency and fun). But I remain unsure if, as a whole, we are getting more productive in a revolutionary way (vs evolutionary).

Transportation: For example, productivity improvements have been phenomenal for 3rd party logistics providers (CHRW, EXPD). But given innovations and technological advances, why is commute time getting longer in North America? (compare to railway and internal combustion engines introduction).

https://www.npr.org/2018/09/20/650061560/stuck-in-traffic-youre-not-alone-new-data-show-american-commute-times-are-longer

Education: Is the value of education getting better? Is the education industrial complex getting more efficient and productive with technology?

Banking: GDP share of finance has gone up in tandem with the introduction of technological tools and, based on aggregate measures of intermediation costs (which remained stable during previous historical revolutionary changes in technology), those costs have been going up in the last 20 or 30 years (during the IT revolution). Lower transaction fees have been more than compensated by a significantly increase in the number of transactions such as when people follow a rinse-and-repeat strategy :)  People may consider using credit cards as a great personal advantage but may not fully realize that merchant fees and rewards do not meet the free-lunch definition.

 

In another life, was involved in assessment of the value in introducing technological tools and was always amazed how allocators of funds (especially if not their funds) considered technology to have a magical appeal. Technology perhaps should be seen as a tool and not as your master.

 

Of course, technology allows discussions and debates that otherwise would not occur. ;)

 

I read the following recently and it seems relevant:

https://blogs.wsj.com/cio/2019/03/29/the-productivity-paradox-digital-abundance-scarce-genius/

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Thanks for this new one.

 

I'm always slightly curious as to why he does something like CNBC.  I understand the other one - it's a friend, but he doesn't need to do CNBC - nothing to promote?  Maybe when I watch/read transcript it'll make sense.

 

Anyway, I really enjoyed the first one.  He's not always right, but always interesting.

 

I thought it noteworthy his line that most of his profits are from Bonds and Currencies.  It's a reminder that perhaps one shouldn't take so much notice of his 13Fs (even discounting the fact he's a trader, not a holder).

 

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