Stan Druckenmiller Interview: Likes Amazon & Tencent, Short Retail

CNBC's Kelly Evans recently interviewed legendary investor Stan Druckenmiller, who previously worked with George Soros and then started his own firm Duquesne (which he now runs as a family office).

Regarding interest rates, he says he wants to see normalization, not so much just rates rising, as he noted there's a difference between the two.  The former, he says, is about re-establishing a hurdle rate for investment.

"Bitcoin, art, wine, equities, credit... you name it.  Everything is one way up.  And there's huge distortions taking place and it's all in the name of this 2% inflation target. And when you get a misallocation of resources, it really hinders growth over the longer term."

He notes there's companies out there borrowing tons of money that shouldn't be and gave Steinhoff as an example (which he mentioned he had been short).

He doesn't own any bitcoin as he says he trades only what he knows.  "It's worth what people are willing to pay for it."

This year, Druckenmiller says he's done well in stocks but he's really mistraded macro.  "I'm not up double digits.  I'm having, relative to the opportunity set, a terrible year."  He's had a bad time in currency trading apparently but his excellent equities returns have bailed him out, so to speak.

Turning to equities for 2018, he doesn't buy the narrative that this is all about earnings.  He says it's all about central bank radicalism.

But for specific stocks, he really likes the stocks he owns long-term.  There's a lot of disruption going on in tech.  He's also been short retail throughout the year and he expects that theme to continue.

On the long side: "I love Amazon (AMZN).  This company, which everyone keeps quoting the multiple... is selling for less than 3x sales.  They're dramatically underearning.  You have to look at the long-term earnings power of the company.  I think (CEO Jeff) Bezos is incredible."

In China, Druckenmiller really likes Tencent (700.HK) as they're in payments, videos, cloud, gaming, and a huge platform (WeChat).  Like AMZN, they're also underearning and trading at 40x with a 40% growth rate, he says you're getting it at 1x growth rate.

Regarding Tesla (TSLA), he said he doesn't like to short great products (he gave himself one for his birthday a while back).  He questions the long-term financial model of the company, though.

On Apple (AAPL), he doesn't find it as exciting as AMZN, Facebook (FB), or Alphabet (GOOG).  He thinks AAPL might be overearning and doesn't own it but isn't short either.  He likes Workday (WDAY) as it fits into the new economy.

He doesn't think tax reform will impact the stock market as it's already priced in and anyways he feels the market is driven by central bank policy anyways.

Embedded below is the video of CNBC's full interview with Stan Druckenmiller:

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You can also read the full transcript of the interview here.

Stan Druckenmiller: "I Basically Have a Large Bet on Economic Growth"

Duquesne Family Office founder Stan Druckenmiller appeared on CNBC today to give his thoughts on the markets and election. 

He noted that after the election a lot of regulation will be taken out of the system which should help get things going.  Other changes like tax reform, especially reducing the corporate tax rate encouraged him as he was "quite optimistic" on the economy.

Druckenmiller said that, "I have a large bet on economic growth ... I'm short bonds globally ... I'm short bunds, I'm short Italian bonds, I'm short US bonds.  I like sectors of the equity market that respond to growth, value, and materials, not things like staples and traditional growth stocks." 

He also added he likes the US dollar, with an emphasis against the euro.  And he has dumped his gold long (he actually sold during the night of the election).  He noted the reasons he previously owned it for 'might be ending.'

Druckenmiller also added, "If it wasn't for the messy conflict of rates rising with the stronger economic growth through fiscal policy, I would think there's so much low hanging fruit in terms of deregulation and tax reform, we could get a jolt of 4 percent growth for about 18 months."

That said, he's also cautious that interest rates rising could push that down to high 2, low 3 percent growth.  "I think the market is going to force this.  The market is going to push them to raise interest rates if my hopeful scenario turns out to be right."

He added that monetary policy essentially helped get Donald Trump elected as it caused a 'massive reallocation' of wealth from the middle class to the rich.

"Dr. Copper: have you seem him lately?  It's been rising.  Interest rates have been at stupid levels, they've been held down... they're like beach balls under water."

Embedded below are some of the videos from Druckenmiller's interview on CNBC

Video 1




Video 2

Stan Druckenmiller's Sohn Presentation & Transcript: The Endgame

The 2016 Sohn Conference New York just finished and we posted up notes here if you missed them.  Stan Druckenmiller of Duquese Family Office gave a presentation called "The Endgame" and the slideshow and transcript have been released.  They're embedded below:

Druckenmiller's Sohn Conference Presentation



You can download a .pdf copy here.


Druckenmiller's Sohn Conference Transcript



You can download a .pdf copy here.

And if you haven't already, be sure to check out our full notes from Sohn Conference New York featuring the likes of Larry Robbins, David Einhorn, Jim Chanos and more.

Notes From Sohn Conference New York 2016: Druckenmiller, Robbins, Einhorn & More

The 2016 Sohn Conference New York just concluded and featured top hedge fund managers sharing investment ideas in order to benefit the Sohn Conference Foundation which is dedicated to the treatment and cure of pediatric cancer and childhood diseases.  Here's the takeaways:


Notes From Sohn Conference New York 2016


Larry Robbins (Glenview Capital): “Get a Grip.” Theme was stocks can be a bumpy ride for investors, and hedge funds have taken a lot of hits in the press, but if you expect them to not be short-term traders, then don’t judge them by their short-term records.   He talked his book; claiming that fundamental investing is not dead.   He is long: VCA (WOOF) – Veternarian hospital, multiple has compressed as earnings have grown and “There is no Obamacare for Veternarian hospitals.” Also pitched his longstanding holding of Thermo Fisher Scientific (TMO).  Yes, it has FX issues, but it has EPS growth.  Pitched Lab Corp (LH) as well: hit by fears of new technology, but Theranos story shows that it’s not that easy to come up with new technology. On CBS (CBS): the viewing model is changing, with over-the-top (OTT), but content still has value.   Flextronics (FLEX): they got out of the low value business, but still grew revenue 3% and EPS 15% yet their P/E is only 8.5x.  The stock fell in February 19% and nobody knows why. Abbvie (ABBV): has a pipeline, Humira has IP protection, and biosimilars will take time to develop. Brookdale Senior Living (BKD): earning less, but still, oversold. Talked about Anthem (ANTM): 1.     Managed care is still a good business  2.     Cigna (CI) merger could lead to 20% accretion  3.     ANTM vs ESRX contract repricing spat could lead to more earnings  4.     Market pricing says deal breaks, he doesn’t think it will.


Carson Block (Muddy Waters):  Famed short seller says, “No such thing as alchemy in banking” and touts Bank of the Ozarks (OZRK) as a short because they’ve done a lot of aggressive construction loans and acquisitions. Best case stock re-rates due to unsustainable EPS growth rate, worst case, balance sheet pressure.


John Khoury (Long Pond Capital):  Value oriented, private equity approach. Hyatt (H) long. Says 65% upside, and low leverage gives a floor to valuation.  Admits Pritzker family controls company but says they make good capital allocation decisions. Low end, leisure hotels most vulnerable to AirBnB threat.  Hyatt has more corporate, higher end, which is relatively insulated. Not making a bullish call on all hotel stocks.  Saying Hyatt since 2010 IPO, EBITDA is up 66%, shares up only 14% while they have bought back 20% of shares outstanding.    Uses SOTP to get $79 PT, 65% upside.


Chamath Palihapitiya (Social Capital):  Silicon Valley investor. Says Amazon (AMZN) is a multi-trillion monopoly in plain sight. Walked through e-Commerce, Amazon Web Services (AWS), says this is just the beginning, that Jeff Bezos will make good investment decisions. Says AWS is not understood by the Street and could be worth a lot more. (Seems like the AWS bull case is already widely touted by AMZN bulls?) Lots of potential losers as AWS scales.


Jeff Smith (Starboard Value): Activists. In 12 years they have replaced 162 board members at 50 companies. Likes Depomed (DEPO) long, pain medication, like Oxycontin, less abuse potential. Not taking price increases. Horizon Pharma (HZNP) tried to buy them, they refused to deal. Starboard has nominated a new board- sounds like a proxy battle is brewing.   Also like Westrock (WRK), merger of Mead WestVaco and Rock Tenn.  Sounds like a commodity business, but he says it is not, and it’s still cheap, at 4.9x 2017E EBITDA. Has $71 PT, almost a double from here.


Richard Deitz (VR Capital):  They do a lot of emerging markets stuff. He says long Greek banks and Greek treasury bonds.  Went through the sordid history of bailouts, and says now things are better, the banks are finally strong, may need one more round of recapitalizations.  141% upside, 34% IRR over next 3 years.


Stanley Druckenmiller (Duquesne Family Office): In a sentence: we have low rates, high multiples on stocks, high leverage, sell stocks and everything, buy gold.  Fed is out of control, encouraging borrowing, reckless behavior. China is out of control, just buy gold.


Jeff Gundlach (DoubleLine Capital): Comedy show, with art talk in the beginning.  In other words, his usual type of presentation. Says short XLU (utilities) long REM (mortgage REITs.)  REITS are priced at 0.88x p/book, with 11% dividend, Utilities are 1.9x p/book with 3% dividend, you earn 8% net and you can lever it up 100% and earn 15%, plus the two should converge. He mocked the “low volatility” equities and showed that even utilities have had 56% drawdowns in the past. His most incendiary statement was that Donald Trump would be President, and “he’s comfortable with debt.”


Zach Schreiber (PointState Capital): He is the man that pitched oil short 2 years ago, when it was $100 per barrel.   Long USD, short the Saudi currency, he says.  He made a compelling case for why Saudi is in an “unsustainable equilibria” with lavish unfunded entitlements, unsustainable debt, and not enough currency reserves to protect their peg. Other oil producers’ currencies are down 25- 45% vs the dollar- Mexico, Norway, Russia, for example, yet the Saudi currency is unchanged.  Only costs 1.5% to put this trade on and very asymmetric pay off.


Sohn Investment Contest Winner (Mark Grow, Columbia Business School):   DXCM, Dexcom short was the pitch. Insulin device maker (continuous glucose monitoring ~ CGM) which is facing impending competition and is unable to increase price as revenue per user declines. Says stock can drop in half.


Adam Fisher (Commonwealth Opportunity Capital):  Real estate background, now a Macro guy. Says short Japanese rates, long European rates. Very compelling case for how long JGBs that yield only 30 bps have nowhere to go but up. Even a move to 40 bps yield wipes out 10 years of return.  Says maximum return for bondholders is 9% return over 30 years - that is not a CAGR of 9%, that is a TOTAL of 9%!  Huge convexity in the trade.


David Einhorn (Greenlight Capital): He pitched Caterpillar (CAT) short, says company is NOT at trough earnings yet and the mining sector will never recover to the heights of the China boom.  No catalyst on the short, other than EPS growth expected to take longer than expected.  Then he pitched General Motors (GM) as a long, admitting that US business would drop off almost 20% but the currently money losing segments in Europe and Mexico could make up for the shortfall.  Long deck with lots of charts and cartoons as usual.  GM pitch rested on low P/E of 5.6x to increase despite US EBITDA to decline.


Jim Chanos (Kynikos Associates): Got a dig in on Tesla (TSLA), which he had said he was short earlier that day on TV.  He said Elon Musk had not enough production, not enough batteries, and now not enough executives, but he pulls production forward 2 years.  “What a showman,” he said. His pitch was a complicated one, talking about weakness in South Africa, and Nigeria, which led to a short of MTN group, a wireless carrier which is also struggling with subscriber growth and declining average revenue per user (ARPU).  At $20B EV, this is a big company that he says is not cheap.

Stan Druckenmiller's Dealbook Conference Interview

Legendary investor/trader Stan Druckenmiller appeared at The New York Times Dealbook conference recently and was interviewed by Andrew Ross Sorking.  They talked about a myriad of topics related to the economy, markets, and investing.

He says he doesn't know what the Federal Reserve's endgame is, but that it's going to end badly.

"Everybody's managing for the short-term now, and that's the problem with the Fed."

Druckenmiller paid special attention to the elevated level of stock buybacks and noted that corporations buyback stock when speculation is rampant.

He says he's anticipating chaos but is "playing around like everybody else.  I'm watching and leery and ready to move."

In equities, he's "working under the assumption that we may have started a primary bear market in July."  He's said he was short value stocks and the Euro.

While it sounds like he covered shorts in the recent volatility, he has also been neutral/long the high beta and high growth plays; companies that he thinks will do well with low/nominal growth.  He pointed out his fondness for Amazon (AMZN) because they're constantly investing in their future and their dominating AWS platform.

On the market in general, he noted "I could see myself getting really bearish.  I can't see myself getting really bullish, so I'm kind of on the sidelines in equities in terms of exposure."

On being a successful investor, Druckenmiller says one of his biggest assets is his openness and ability to change his mind very quickly.

On shorting, he opined that "It's very hard to short stocks.  It sounds great in theory,  it's very difficult because you're basically playing against the house."

Embedded below is the video of Druckenmiller's interview:

Stan Druckenmiller on Oil, China, Interest Rates & More: Bloomberg Interview

Legendary investor Stan Druckenmiller, formerly of Soros Fund and Duquese Capital, recently sat down for a fantastic interview with Bloomberg's Stephanie Ruhle.

We highly recommend watching it in its entirety, but here's a few key takeaways:

On interest rates: "My fear is we’re not going to see anything for a year-and-a-half because they set up metrics eight or nine months ago…I have no confidence whatsoever that you’re going to see rate hikes in September or December or whenever because when they lay out metrics and then they change, and then they change again, and then they change again, who knows where -- when they’re going to go."

On oil: "Well, I'm pretty optimistic on crude prices.  I think they’re going to do better than the forward curve.  Well, because as my protégé, Zach Schreiber, said a year ago, the cure for high prices is high prices.  Well, he would also say now the cure for lower prices -- low prices is low prices."

On China:  "The Chinese stock market is up, I don’t know, 140 percent in six months after being in a downtrend for five to seven years, and it’s doing so on record volume with record breadth.  If it was any other stock market or certainly any developed market, I would tell you, being a market observer, there’s a 98 percent chance China will be in a cyclical boom 6 to 12 months from now.  Because it’s China, and we don’t know the nature of what we’re dealing with here relative to normal mature developed markets, I would downgrade that assessment from 95 percent, but I would still hold it over ... I would point out that the H shares in Hong Kong representing China are 10.1 times earnings"

On European stocks he likes:  BMW, Volkswagen, Airbus, Altice

On potential bubbles:  "I think tech valuations, at least in the private market, are kind of crazy."

On market dynamics:  "My first boss asked me a question when I was 22 years old.  Do you know happens to the money when the stock market goes down?  I said, I don’t know.  It goes into the bond market.  He said, no.  It evaporates.  It evaporates.  You know what happens when stock prices go up?  Wealth goes up.  Confidence goes up.  Economic activity generally goes up, so the more, the merrier."

Embedded below is the video of Stan Druckenmiller's interview with Bloomberg:



For more from this investor, we've also previously posted up past thoughts from Druckenmiller.

Stan Druckenmiller on Markets, The Fed, & Which Investors He Admires Most

Stanley Druckenmiller, a legendary hedge fund manager (formerly of Duquesne Capital), was interviewed by Kelly Evans on CNBC today and shared his thoughts on the markets and other topics.  Here's some of the key takeaways: 

On the current US markets:  "By historic, fundamental measures, we are extremely high.  Stock market to GDP, which I know is one of Mr. Buffett's favorite measures is probably the highest its been in the last hundred years with an eight month exception around the 1999-2000 period."

He also points to the strong dollar as a headwind for earnings.  He thinks stocks are high by historical measures, but the monetary policy has been so aggressive that they should be high.  He says you should short bonds, not stocks if you think interest rates are going up.

Lastly, he mentioned, "I have positions in the United States, but net-net because of the valuations we talked about and because I'm encouraged by what I'm hearing out of the Fed in terms of them tightening, I'm not all that excited about the U.S."

On the Fed:  He thinks it'd be great if the Fed acts now because he believes there's higher risk in the US economy by acting later.

On which investors he admires most:  He singled out "three lions" he thinks that are talented younger investors who will be considered great one day:  Zach Schreiber at Point State Capital (used to work with Druckenmiller at Duquesne), Chase Coleman at Tiger Global, and Eric Mandelblatt at Soroban Capital (all of which Market Folly covers.) 

On his thoughts on IBM:  He disagrees with Warren Buffett and quoted him saying, "An investor should never let someone else's opinion drive their decision in stocks."  Buffett thinks IBM's problem is cyclical, whereas Druckenmiller thinks its secular.

On foreign markets & positions:  "I just think Europe and Japan are much, much more attractive ... The majority of my long exposure is in Japan and Europe, not in the United States ... You know, a few months ago we started buying the-- I would say global consumer brands who are primarily stable in nature like-- Unilever or Pernod Ricard or L'Oréal. But recently we've shifted into more cyclical names like Volkswagen, BMW, Airbus. When you get the-- you get the tailwind of-- the euro having gone from 140 to 120, which will give them an earnings push in addition at a lower energy. And they are great consumer brand names in and of themselves."

You can read the full transcript of the interview here.

Stan Druckenmiller's Presentation at Delivering Alpha Conference

A few weeks ago, we highlighted Stan Druckenmiller's comments at the Delivering Alpha Conference.  Now, CNBC has released the full video of his talk which is worth viewing.

Embedded below is Stan Druckenmiller's presentation at the Delivering Alpha conference:



For more from that event, be sure to also check out Lee Cooperman's stock picks and Larry Robbins' best ideas.

Stan Druckenmiller's Thoughts at Delivering Alpha Conference

At CNBC and Institutional Investor's Delivering Alpha conference today, legendary investor Stan Druckenmiller shared his latest thoughts.

At the event, Druckenmiller said he can't bet as big as he used to these days.  He also noted that other investors like David Tepper and George Soros have the biggest (you know what) on Wall Street these days.

Also, he knocked IBM as a company that's spending all of its money on share buybacks instead of on innovating and this could come back to haunt them as they get passed by modern technology companies.

Regarding the latest slew of IPO's, Druckenmiller pointed out that 80% of those companies don't really have earnings.

Turning to the Fed, he also argued that the consequences of monetary policy will be a lot worse than they think and said their policy is baffling.

He thinks we have to keep dancing until the music stops, but the problem is most people won't be able to exit fast enough once it happens.

Legendary Investor Stan Druckenmiller's Recent Interviews

Legendary investor Stan Druckenmiller (formerly of Soros Fund and Duquesne Capital) has historically avoided the media spotlight but recently has given a few interviews that we wanted to consolidate into one post.  We've put them in chronological order with the oldest from 2 weeks ago first, then moving down to the most recent at the bottom.


Druckenmiller's Bloomberg Interview 

A few weeks ago, Druckenmiller sat down with Bloomberg and said that, "I probably have the smallest positions I've had (in a while)."  He also made it clear that he's very focused on who the next Fed Chairman will be and how that will effect QE and the markets.

In the interview, Druckenmiller said he thinks the market is topping.  However, since this interview, Larry Summers has withdrawn his name from consideration which has affected his thinking.  At the time, it seemed as though Summers would have been a negative for markets due to his desire to raise rates.

Druckenmiller went on to say, "It's my belief that QE has subsidized all asset prices and when you remove that subsidization, the market will go down." At this time, he said he was long some Japanese equities, short some Yen, but these position sizes are smaller than they were at the beginning of the year.


Embedded below is the video of Stan Druckenmiller's Bloomberg interview:




Druckenmiller's CNBC Interviews

He also appeared on CNBC and gave his thoughts on a myriad of topics. He said the Fed blew its chance to taper since the market was already somewhat expecting it and now it will be that much harder to actually start the process when it's time.

Druckenmiller also said that,  "I will bet from beginning to the exit, the wealth effect from QE will have been negative not positive" because he thinks once QE goes away, the market can effectively drop and re-price on 'no volume.'

On Yellen's potential appointment & no tapering:  "(It's) very bullish for markets intermediate term.  We're going into extra innings; the punch bowl was about dry and 2 new waiters are coming in and we're really gonna party now."  His comments in the prior paragraph are more long-term in nature but it's clear he sees these recent developments as bullish in the near-term.

Embedded below is video 1 (Druckenmiller's comments start around halfway through):




For more from this great investor, check out lessons from Stan Druckenmiller in Hedge Fund Market Wizards.

Stanley Druckenmiller's Sohn Conference Presentation: Commodities Conundrum, Short Australian Dollar

We're posting up notes from the Ira Sohn Conference 2013 in New York.  Next up is a summary of the presentation from Stanley Druckenmiller of Duquesne Family Office (previously of hedge funds Duquesne Capital and Soros Fund).  His presentation was entitled "The Commodities Conundrum" but he touched on a myriad of topics outlined below.


US Market & Quantitative Easing

Druckenmiller noted everyone is saying, "love the market long term, looking for a correction." He believes the opposite, loves market short-term, but hates it long term. Strongly disagrees with quantitative easing by Bernanke now. Only agreed with the first QE.

"His bond buying is controlling the most important price in the US economy." Says it will end badly, despite money-printing being beneficial to financial assets currently. When Fed slightly tightens, that will hurt things he says. Bernanke completely ignored strong economic data in January and February, but with slightly soft data later, he printed even more money. Expects a "melt-up" in the short-term, due to Fed's current policy.


On Japan

He feels this could be the beginning of a secular bull market in Japan.  Kuroda in Japan is doing QE x3 of the US relative to equity market capitalization. He actually thinks the Japanese QE makes sense, because they've been in deflation, particularly their currency strengthening against everyone else in the world.

He believes when the US economy improves and the Fed tightens, it will overwhelm the growth and cause the market to crash. He does not expect that in Japan, because it has been in a long-term deflation. Expects an 18-month run in Japanese stocks. Could be beginning of a new secular bull market for Japan.


Commodities Conundrum

Why have commodity prices gone down, with this explosion in monetary base around the world? He believes it is due to changes in China, slowing economic growth, and mix shift to economic activity away from commodity consumption. Huge surge of supply going forward.

He is betting that this is the end of the "supercycle" for commodities. China has huge credit growth, "shadow banking" growth, just like the US had right before the 2008 crash. Timing is uncertain, but China is possibly going to have a financial crisis.

"Commodities tend to go down while stocks go up” they hug the cost curve, which goes down over time. This was interrupted by a once in a lifetime burst of growth in China. Chinese consumption has exploded, and as they built their infrastructure, they were literally 50% of all commodity demand. They also used a huge stimulus in 2008, which crowded out productive investments, but most important mining companies ramped up production as if this growth rate would continue forever.

No matter how much Central Banks prints money over the next few years, it won't overwhelm the huge supply gains.


Druckenmiller's Picks

- Own companies that benefit from lower commodity prices, short the opposite.

- Growth over value.

- Avoid Brazil, Canada currencies.

- Short the Australian dollar. There is massive foreign ownership of Australian bonds.

- Long Japan; real estate, banks.

- Long: Google (GOOG), one of his biggest positions. In best 2 areas: search/data, and mobility. "Unlike other massive tech stocks engaged in financial engineering  prodded by hedge fund managers." Obviously, a dig at AAPL. "By the way, Google doesn't have any exposure to China." (Technically they do, via Android).


For more on this manager, head to lessons from Stanley Druckenmiller as well as a rare interview with Druckenmiller.

Check out the rest of the hedge fund presentations from the event: notes from Ira Sohn Conference 2013.

Lessons From Stanley Druckenmiller: Hedge Fund Market Wizards

Legendary investor Stanley Druckenmiller recently came out of the shadows and gave a rare interview on a myriad of topics.  Given the popularity of that post, we thought it'd be interesting to see what lessons we could learn from this great investor so we looked at Druckenmiller's interview in Jack Schwager's book The New Market Wizards to see what we could learn.

Druckenmiller formerly ran hedge fund Duquesne Capital as well as George Soros' Quantum Fund, and he saw annual average returns of 30% since 1986.  He managed around $12 billion before shutting down Duquesne.

A few years ago, he returned Duquesne outside capital and now runs a family office.  Many of his former employees founded PointState Capital with money from Druckenmiller and former Duquesne investors.


Lessons From Stanley Druckenmiller

In Jack Schwager's book The New Market Wizards, Stanley Druckenmiller provides the following bits of wisdom:


On achieving a superior track record:  "George Soros has a philosophy that I have also adopted: The way to build long-term returns is through preservation of capital and home runs ... The way to attain truly superior long-term returns is to grind it out until you're up 30 or 40 percent, and then if you have the convictions, go for a 100 percent year."


On what he's learned from George Soros: "Perhaps the most significant is that it's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong ... Soros has taught me that when you have tremendous conviction on a trade, you have to go for the jugular.  It takes courage to be a pig ... As far as Soros is concerned, when you're right on something, you can't own enough."


On when to take more risks: "Many managers will book their profits when they're up a lot early in the year.  It's my philosophy, which has been reinforced by Mr. Soros, that when you earn the right to be aggressive, you should be aggressive."


On analyzing companies: "I particularly remember the time I gave (the research director) my paper on the banking industry.  I felt very proud of my work.  However, he read through it and said, 'This is useless. What makes the stock go up and down?' That comment acted as a spur.  Thereafter, I focused my analysis on seeking to identify the factors that were strongly correlated to a stock's price movement as opposed to looking at all the fundamentals.  Frankly, even today, many analysts still don't know what makes their particular stocks go up and down."


On using both valuation and technicals:  "I never use valuation to time the market.  I use liquidity considerations and technical analysis for timing.  Valuation only tells me how far the market can go once a catalyst enters the picture to change the market direction.  The catalyst is liquidity, and hopefully my technical analysis will pick it up."


Learning from mistakes/Trading stories:  The book has too many great stories to list, but one of the main lessons Druckenmiller learned is that you can be right on a market/trade and then still lose your ass if excessive leverage is involved.

Druckenmiller tells numerous stories involving Soros and Paul Tudor Jones.  These tales are really remarkable, including one where he was 130% long the day before the 1987 stock market crash, yet he still was up for that month due to his ability to quickly recognize his error, minimize losses, and reverse his positioning.



Definitely pick up the classic book The New Market Wizards if you haven't read it, as it's full of wisdom from Druckenmiller as well as other traders/investors.

Stanley Druckenmiller on Equities, Where to Invest, and Hedge Funds (Rare Interview)

Hedge fund legend Stanley Druckenmiller (formerly of Duquesne Capital) sat down with Bloomberg TV and says he sees "a storm coming, maybe bigger than the storm we had in 2008, 2010."  In this rare interview, he talks about entitlement spending, but also about hedge funds and investing.

He been outspoken on entitlement spending as of late and says there's a demographic bubble and that seniors are essentially stealing from future generations.  But below we wanted to highlight his comments on equities, hedge funds, and investing.


Druckenmiller on Hedge Funds, Investing & More

On equities versus bonds: "One of the things that is kinda one of my pet peeves is hearing all these people on TV say, 'Well, you gotta go into equities 'cause they're so cheap relative to bonds and there's no other game in town.'  They are cheap relative to bonds.  But everything is cheap relative to bonds…So just because equities are cheap relative to bonds doesn't mean their price isn't subsidized.  I'm not making a forecast here because the subsidization could go on for a long time.  But real estate, gold, equities, they're all priced off of ZIRP, zero interest rates, and they're all subsidized."


On hedge funds: "Oh, I don't know.  I think the hedge fund's short-term thinking is just a manifestation of our entire society.  Whether it's the fed or whether it's-- the administration or whether it's Congress, no one bothers to think about the long term anymore.  And the hedge funds are just one more manifestation of that."


On where to invest now: "That's hard for me to answer.  Because I have the luxury of a lot of experience in sitting in front of a screen.  And I can go into currency markets where it's at a relative price.  So it's the one area where prices aren't subsidized.  And I'm arrogant enough to think I can time these things.  But I don't really know how to answer that question for public invest-- but let me just say that this idea that you've got go plowing into risk because rates are zero, that they will rue the day one day.  The music will stop.  And I would probably be invested right now thinking I'm smart enough to know that we're quite away from the music stopping.  I don't think Bernanke is about to end these policies for a while.  But let's just know what we're dealing with here."


Embedded below is the video of Druckenmiller's interview with Bloomberg TV on entitlements and we'll update with the rest of the interview once it's uploaded:

Hedge Fund Panel: Global Investment Landscape In 2010 (Druckenmiller, Singer, Dimitrijevic)

Yesterday, there was an introductory post that outlined key takeaways from the event. Then there was also a separate post that detailed the "Case For Global Equities in 2010" from a panel of prominent long/short equity hedge fund managers. The next panel discussed the Global Investment Landscape In 2010. Hedgies in this discussion included Duquesne Capital's Stanley Druckenmiller, Elliott Management's Paul Singer, and Everest Capital's Marko Dimitrijevic.

The Global Investment Landscape In 2010: The government's role, the global landscape, and monetary policy.


Paul Singer (Elliott Management): Singer talked about how government has always been a part of investing, but even more so now. He says that capital will flow to wherever it is welcome and wherever there are defined rules and laws. Singer honed in on some particular legislation that he feels will have damaging impacts. He focused on the Wall Street Reform and Consumer Protection Act of 2009. This would charge banks over $75 billion and hedge funds over $10 billion in open-ended assessment. He wonders why hedge funds would have to pay for the mistakes of 'highly levered and "mis-managed financial institutions'.

He also lashes out at the notion that this legislation designates institutions that are 'too big to fail'. He wonders how the government could identify those institutions ahead of time? Rather than forcing this definition on a few select companies, why not focus on making all of them NOT too big to fail. He thinks the way to do this is via margin requirements and regulations. Singer almost led a "call to arms" with his talk as his main point was that leaving capitalists worried about future punishment isn't the way to fix the system. On the topic of emerging markets, Singer actually thinks there is a "fair race" between the developed world and emerging markets going forward. Last year, we also covered Singer's thoughts at the Ira Sohn Investment Conference.


Stanley Druckenmiller (Duquesne Capital): Druckenmiller focused on monetary policy and asserted that it is not responsible for the financial crisis. He notes that zero and/or negative interest rates often cause dislocations that don't have anything to do with inflation. Instead, they affect other factors by discouraging saving, encouraging spending, and causing financial institutions to lever-up even more.

Druckenmiller did admit that cutting rates was appropriate as it truly was an emergency, but thinks an increase in rates is past due. (He disagrees with the assertion that low rates are needed for growth). Druckenmiller's thoughts overall could be summed up as bearish. In terms of investing, he mentioned that emerging markets offered much better balance sheets and faster growth. At the same time, he notes that the US dollar is the reserve currency and so monetary policy outside of America becomes less meaningful. We haven't covered Druckenmiller on the site much, but in the past have noted that he was on Forbes' billionaire list.


Marko Dimitrijevic (Everest Capital): Dimitrijevic focused on his niche topic of emerging markets and said they represent almost 13% of the MSCI index. He points out that this figure is misleading since nominally, emerging markets are a third of world assets. Additionally, emerging markets surged past developed markets on a purchasing power parity basis for the first time ever. One of Dimitrijevic's most intriguing points was the notion that the emerging market consumer overtook the US consumer and this shift seems to be overlooked. For more on Dimitrijevic, we've previously profiled Everest Capital.


This wraps up the "Global Investment Landscape In 2010" conversation. Head to the overview of the hedge fund panel and also coverage of the long/short equity panel. Check back tomorrow for summaries of the rest of the panels.