Real Vision interviewed billionaire Stan Druckenmiller. This legendary investor managed to return 30% annually over a 30 year period. Druckenmiller admits that he made 70% of his returns in the currency and bond markets and it is very challenging right now to operate in those markets. He is indeed a very shrewd investor. I have seen him at the Dealbook Conference a few years ago and he talked about shorting IBM when Buffett was buying the stock and buying Amazon.com when Einhorn was shorting it. He bested both investors as Buffett gave up on IBM and Einhorn is losing hundreds of millions of dollars shorting Amazon and other tech stocks. You can watch the 80+ minute video of the interview below:
Druckenmiller has been arguing for the last 2-3 years that interest rates are artificially low for a growing economy with low unemployment. Here repeated his macro view again in this interview. Here is what he said:
“You have negative real rates. And yet you have balance sheets being expanded by central banks, at the time, of a trillion dollars a year, which I knew by the end of this year was going to go to zero because the US was obviously going to go from printing money and QE to letting $50 billion a month, starting actually this month, run off on the balance sheet. I figured Europe, which is doing $30 billion euros a month, would go to zero.
So the question to me was, if you go from $1 trillion in central bank buying a year to zero, and you get that rate of change all happening within a 12-month period, does that not matter if global rates are still what I would call inappropriate for the circumstances? And those circumstances you have outlined perfectly. You pretty much have had robust global growth, with massive fiscal stimulus in the United States, where the unemployment rate is below 4. If you came down from Mars, you would probably guess the Fed funds rate would be 4 or 5/ and you have a president screaming because it’s at 175.
I, maybe because I have a bearish bias, kind of had this scenario that the first half would be fine, but then by July, August, you’d start to discount the shrinking of the balance sheet. I just didn’t see how that rate of change would not be a challenge for equities, other than PEs, and that’s because margins are at an all time record. We’re at the top of the valuation on any measures you look, except against interest rates.”
At the moment Druckenmiller is investing like a West Coast venture capital investor. Buying Chinese internet companies, high growth tech stocks and shorting retailers who are getting disrupted by the likes of Amazon.com. Stan Druckenmiller doesn’t consider himself a value investor and had the following to say about Warren Buffett:
“And for all the hoopla around Mr. Buffett, from ’98 to 2008– that’s a 10 year period– Berkshire Hathaway was down 40%. Nobody talks about that. If you had a hedge fund, you couldn’t have a hedge fund down for 10 years, 40%. They would have gone out of business in year 3, 4, somewhere in there. ”
Druckenmiller also shared his market outlook in the video. We won’t share any excerpts, you need to watch the video to see how right he has been over the last couple of months. It is really an educational interview, even for me, to watch. I want to share one more thing from this 80 minute interview: Druckenmiller’s comments about Alphabet Inc. (NASDAQ:GOOGL). By the way, Alphabet is one of the most popular stocks among hedge funds (check out the list of 30 most popular stocks among hedge funds now).
“… let’s just take Google, OK, which is the new bad boy, and they’re really a bad boy because they didn’t show up at the hearing. They had an empty chair because they only wanted to send their lawyer.
But it’s 20 times earnings. It’s probably 15 times earnings after cash, but let’s just say it’s 20 times. Let’s forget all that other stuff. And they’re under earning in all these areas, and losing money they could turn it off. And then I look at Campbell’s Soup and this stuff selling at 20 times earnings. And they’re the leaders in AI– unquestioned leaders in AI. There’s no one close. They look like they’re the leaders in driverless car. And then they just have this unbelievable search machine. And one gets emotional when they own stocks, when they keep hearing about how horrible they are for consumers. I wish everyone that says that would have to use a Yahoo search engine. I’m 65, and I’m not too clever, and every once in a while, I hit the wrong button and my PC moves me into Yahoo. And Jerry Yang’s a close friend so I hate to say this, but these things are so bad.
And to hear the woman from Denmark say that the proof that Google is a monopoly and that iPhones don’t compete with Android is that everyone uses the Google search engine is just nonsense. You’re one click away from any other search engine. I just I wish that woman would have to use a non-Google search engine for a year– just, OK, fine, you hate Google? Don’t use their product, because it’s a wonderful product. But clearly, they are monopolies. Clearly, there should be some regulation. But at 20 times earnings and a lot of bright prospects, I can’t make myself sell them yet.”