"This Is The Wildest Market I've Ever Seen": Druckenmiller's Must-See Goldman Interview
On January 29, Tony Pasquariello, global head of Goldman Hedge Fund Coverage (whose observations we have frequently profiled on these pages) spoke to investing legend Stanley Druckenmiller, head of the Duquesne Family Office, about his current outlook on the market, his approach to risk management throughout his career, and his perspective on the conversation surrounding the role of capitalism in American society. The result was a fascinating conversation that was anything but the canned talking points one would expect from such a high level interview (h/t to @JohnStCapital for bring it to our attention).
Without missing a beat, Druck admitted that this "is the wildest cocktail I've ever seen in trying to figure out a roadmap." Below we summarize some of his key observations.
“The recession we had was 5x the average since WWII but it occurred in 25% of the time,” Druckenmiller said adding that “more bizarrely in a year when 11 million more people were unemployed, we had the largest increase in personal income in 20yrs during an economic downturn, due to massive policy support. The CARES Act added trillions in fiscal stimulus. How big was it? In three months in 2020 we increased the deficit more than the past 5 recessions combined (1973, 1975, 1982, the early 90s', the dot com bust and the GFC). The Fed in 6 weeks bought more treasuries than in 10yrs under Bernanke/Yellen. Corporate borrowing, which almost always goes down in a recession, which had already increased from $6trln to $10trln going into the crisis due to the Fed’s free-money policies, went up $400bln. Putting that in perspective, it went down by $500bn during the GFC.”
"So we had this massive increase in liquidity and stimulus which is the background and all of this stimulus has flown into financial markets, into commodities, into financial interests so it's a bizarre background."
"The juxtaposition of the various policy responses is somewhat breathtaking. Since 2018, M2 in the US has grown 25% more than nominal GDP; a 25% increase in liquidity. In China M2 to nominal GDP is where it was 3 years ago. So China hasn't borrowed anything from their future and we've had a massive liquidity input and frankly very little investment. It's primarily been transfer payments and Fed Stimulus. We've done a horrific job with the virus. The Chinese and Asia in general they've pretty much defeat the virus."
https://youtu.be/K_u2AI7ZWAk
https://www.zerohedge.com/markets/wildest-market-ive-ever-seen-druckenmillers-must-see-goldman-interview