Hedge fund icon and former Chairman, President and CIO of Duquesne Capital, Stan Druckenmiller joined Bloomberg Television’s Stephanie Ruhle and Erik Schatzker on “Market Makers” for a full hour and said, the government must address entitlement spending “This is the first generation where a 30-year-old’s net worth is less than his parents…If you look at the older people, there net worth has doubled.” Druckenmiller also said it would be a big deal for financial markets if the Federal Reserve were to completely end its asset purchases over the next 12-months.
Druckenmiller said he sees no bear market as long as fed prints money, prices will respond to actual QE exit, he doesn’t see many investing opportunities, he is very focused on who the next Fed Chairman is, and thinks there are too many hedge fund managers.
On Next Fed Chair: “I am a little concerned that the Fed chairmanship could be hung up. It has become a complete circus. You have economists and politicians and newspaper people pining on it. My God, Obama should just go in the rose garden and appoint whoever he wants to appoint. That is his privilege and his job.”
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Druckenmiller on why his college tour is so important:
“It really solidified to me during the sequester period when the whole debate was going on about cutting government spending in our fiscal issues, and that is when I first came to understand the lack of knowledge on this topic, not just from seniors, but future seniors. If you listen to the sequester debate in spending and where the debt is, I find it inconceivable they didn’t know the facts, including I would be surprised if the President knew the facts given the statements he was making. During the sequester, you may remember he said, we are not going to balance the budget on the backs of our seniors. If you look at the situation where we are today, seniors are doing very, very well in the last 30 years. It has been a remarkable accomplishment. And because the mandate went well, the poverty rate is down from 35-percent to 9-percent for seniors. But their wealth is also increasing dramatically. Looking forward, we have a very though picture because of the demographic situation, seniors about to explode as a portion of the population and the benefits we promised them, there is no way to cover them given the current situation we have.”
Druckenmiller on whether he blames the voters or politicians for being ignorant and uninformed:
“I would say both. This is a country of special interests, as we all know. As we all know, old people vote or seniors vote. They vote consistently and young people don’t. Young people have other interests than say the future economic situation at the age of 20. I sure did. They’re not necessarily focusing on the stuff.”
Druckenmiller on whether his goal is to get young people out to vote, to vote with their consciences:
“It won’t be their conscience. They should be mad as hell. Part of what I’m doing is to inform seniors of the situation… I’m sure they care. Maybe some don’t. But I would bet a lot of money that 85-percent of seniors today, if they knew the numbers were going to go over, they wouldn’t be comfortable with this this what they were leaving to their grandchildren and great-grandchildren.”
Druckenmiller on what he is most uncomfortable about:
*chart discussed is at the 4 minute mark of video “seniors are stealing from our young”
“Let’s first set the table and looking at what is going on in the last 35-years. Then I want to get into the demographic problem and why it is so scary from here and why I don’t understand the current dialogue that is taking place over the situation. It is completely uninformed. This chart on the screen is federal government entitlement transfers and percent of government budget outlays. If you go back to 1960 when I was sever years old, about 20-percent of the federal budget government outlays were transfer payments or what we call entitlement. That number has gone up to 72-percent over this 35 year period. The problem with that, first of all, the good news on that, as I said, seniors are much better off, it’s been a tremendous accomplishment, poverty rate is way down for seniors, but these are transfer payments and there is no productive investment or no looking to future coming out of this. If you look at how we get form 20-percent to 70-percent, almost all of that money went to the elderly. If you took an elderly person back in 1960, 40-percent of government outlays per capita went to them. That number is 71-percent all stop where did that come out of? It came out of children, came out of investments and things like education, infrastructure, thing like that. And that crowding out effect creates a problem going forward because these are not productive investments.”
Druckenmiller on response he is getting from influential youths:
“The answer is, I don’t know. Jeff Canada and I, my partner, well, I am sort of the tagalong, we went up to Bowdoin College to see where this went. I had a number of people contact me after your show. I did not expect that… We went up to Bowdoin college and give a presentation just trying to outline the facts of what we’re looking at the next 30 or 40 years. The response was overwhelming. So based on that, we’re going to do about 10 to 12 colleges in the next two months. Mr. Zuckerberg is focused more on immigration than this stuff.”
Druckenmiller on the net worth by age group:
*chart discussed is at the 7 minute mark of video “seniors are stealing from our young”
“It is important shaping the debate. We have always heard the term, ‘you don’t want to leave the next generation with less than the current generation.’ This chart when it was first shown to me, and it is from the Federal Reserve board survey of consumer finances, it is kind of shocking. Because of the previous chart I showed where these transfer payments have gone primarily to the elderly and have been substantial, look at what has happened. If you are A 29-37 year old in this country, your net worth is less than 29-37 year old in 1983. Those are staggering statistics. This is the first generation where a 30-year old is worth literally is worth less than his parents. If you look at older people, their net worth has doubled over this timeframe. Again, because this money has been transferred.
Druckenmiller on whether he worries that people will overlook what he is saying because he is a billionaire:
“Well, modestly, the way I