Druckenmiller at the Ira Sohn conference
- According to Taylor Rule, Fed should be at 3%
- Fed is less data dependant than ever
- Easy money that's led to housing bubble pales compared to current environment
- Leverage has increased since the crisis
- Wildly dovish Fed is causing "recklessness at the government and corporate level"
- "The Fed has no end game"
- Fed objective seems to be making sure the market doesn't fall 20% in next six months
- Fed raising odds of tail risk event they are trying to avoid
- This feels like just before the financial crisis
- Fed policy allows government to avoid problems like tax reform
- Corporate sector is stuck in mismanagement, questionable capital allocation and growing indebtedness yet investors pay 18 times earnings
Sooooooo sunshine and rainbows?
Onto China:
- Chinese 'zombie lending' can't stop
- Credit growth is responsible for Chinese GDP rise and it's dangerous
- Chinese people don't need more debt and houses
In his own words: "Three years ago on this stage I criticized the rationale of Fed policy but drew a bullish intermediate conclusion as the weight of the evidence suggested the tidal wave of central bank money worldwide would still propel financial assets higher. I now feel the weight of the evidence has shifted the other way; higher valuations, three more years of unproductive corporate behavior, limits to further easing and excessive borrowing from the future suggest that the bull market is exhausting itself."
His overall theme is myopic policies.
- Bull market is exhausting itself
- Negative rates are 'absurd'
- Get out of stocks and buy gold
