Macro & Markets
Global Macro Themes

A Rare Druckenmiller Appears

About a week ago, Stan Druckenmiller gave a relatively rare interview and Q&A session on a variety of macroeconomic topics and themes that he is paying attention to during these uncertain times. For those unaware, Stan is one of the GOAT macro investors and traders of the last several generations, and has had an illustrious investment and trading career.

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I have highlighted some of Stan’s thoughts on the US Dollar, as it is one of the key themes that we have been highlighting for the past year.

  • Stan thinks that this is one of the most uncertain/hard to predict times with respect to macro that he has been in (this is saying something as he is a GOAT macro trader with decades of experience)

  • Big piece of advice is that when there isn’t a clear and obvious trade, just sit on your hands and wait. He still thinks we are due for a hard landing, likely later this year.

  • However, one area that Stan feels comfortable in is shorting the US Dollar, after admitting that he missed the run-up in the US Dollar last year, acknowledging that this was one of the biggest misses in his career with respect to currency trades

  • His reason for missing? Stan couldn’t bring himself to own Joe Biden and Jerome Powell (a damning indictment of the current fiscal and monetary leadership regimes).

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So what is Stan’s thesis for being short the US Dollar, aside for his obvious disdain for the current fiscal and monetary leadership regimes?

  • Roughly $13Tn has come into markets over the last 10 years or so. Currency markets move like big long waves (think 2-3yr cycles).

  • Domestic tech companies dominating investment flows, particularly from sovereign wealth funds

  • The United States began tightening sooner AND faster than the G7 counterpart economies – and Stan still thinks further to go is necessary

  • Stan is less clear about USD reserve currency status moving forward and posits the question, ‘why did we even get it in the first place?’ He states several factors, including: rule of law, better fiscal behavior 30-50 years ago, Volcker was actually a good CB chair. Many of these things have deteriorated significantly over the last 2 decades.

  • Stan also believes that the US has been abusing the reserve currency status using it to get away with behaviors that the market would otherwise punish. Think weaponization of SWIFT, or even the Liz Truss Debacle in Britain (collapse in pound, thrown out of office).

If Stan is right, it is safe to assume he thinks the USD chart will look something akin to the below. HOWEVER, he literally says ‘please do not go out and short the dollar as soon as you hear this’.

For the full conversation, an audio recording can be found here.

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