Stan Druckenmiller, Duquesne Capital Management founder, gives his views on Fed policy and leadership of the Federal Reserve during the financial crisis. Stan Druckenmiller, Duquesne Capital Management founder, discusses the Fed’s “aggressive” policy on deflation and interest rates. Druckenmiller says the current policy makes no sense from a risk-reward perspective.
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CNBC’s Joe Kernen speaks to Stan Druckenmiller, Duquesne Capital Management founder, about the current IPO and corporate credit market. Druckenmiller says IPO’s are on the border of where they were in 1999.
Stan Druckenmiller: Fed policy ‘baffling’
CNBC’s Joe Kernen speaks to Stan Druckenmiller, Duquesne Capital Management founder, about his view of the impact of the Federal Reserve’s QE program. He says he would make more market bets, but he just doesn’t have the guts anymore.
in the next year or two. i mentioned in my talk, ipos and credit. so ipos as you probably know were right on the border, we’re right on the border of where we were in ’89. 93% of ipos went public and never made a dime. today it’s 80%. the only time in history we’ve approached that. those who say how great ipos are encourage investment, how good for ept ploim. it’s myopic. good for employment today but not if all the high-tech firms in ’99, get a job, laid off or fired or your company goes bust. so that’s the ipos. when i look at credit, it’s a little more problematic. you probably saw in the economist this weekend, s&p this year, corporate credit is growing at a record rate. far faster than it grew in 2007, and s&p pointed out that 71% of debt issued is a b rating. or worse. to put that in perspective, in the ’90s, that number was 31%. do you remember all the hull la bao in ’07 about covenant light they did $100 billion in ’07, loans? and 38% of them were b rated. this year, we’re going to do 300 billion. we did $260 billion last year. up from $90 billion a year and 58% of them are b rated. so anybody who says they’re not a bubble, i just don’t agree with it, but you’ve asked the
CNBC’s Joe Kernen speaks to Stan Druckenmiller, Duquesne Capital Management founder, about his view of the impact of the Federal Reserve’s QE program. He says he would make more market bets, but he just doesn’t have the guts anymore.
i want to point out, i’m not for corporations paying zero. corporations are owned by their shareholders. orate level to the shareholder level. warren buffett’s tax rate will go up, mine will go up, all up to 40%. transparent knop more lobbying in washington. people wouldn’t be moving jobs to ireland and god knows where else. in fact, those jobs might come to us if we had a zero percent tax rate but you still get the money out of the people who own the corporations. corporations are paying it once, and paying it transparently. can you envisage some type of excrement hitting the scenario for me if you’re right about this? i mean, inflation, would it be inflation? would it be that the bond market gets out of control of the fed and crisises more quickly and people are on the wrong side of that? if this ends badly a year, 18 months, whenever it ends badly, any idea what it would look like? do you have — yeah. right now as is, let’s say, the fed starts tightening in the first quarter. right. we’re going to have a bear market. we’ve had bear markets. we’ve had a lot of them in history. we got in trouble when we tried to cancel them out with asymmetric mont tear policy the last 20, 30 years. i don’t think at this point anything systemic is going on. depending on my mood, maybe we can talk in a year, but right now, i think if we address this fairly soon, they’ll be a problem. you’ve mate a point, it would be nice if we had pulled back a little and had some dry powder in case something happens unforeseen again. it could be from anywhere around the globe that could cause a slowdown. could be oil, anything. you got nothing to throw at it. the markets are spoiled and the policymakers are terrified and spoiling them. i understand if we do some of this, you may have a market hiccup, and growth certainly won’t be for the next 10 or 12 months what it would have been if you don’t do something, but i’m willing to bet a lot of money better over the next five or ten years than it would have been. will you share, you don’t have to, but you could if you want, you told me when you were young and didn’t have much to lose, that you would bet with a lot of testosterone. didn’t really phrase it that way, but you were very — you’d be out there and could do 30%, 40% a year. you don’t do that anymore. you’re wealthy. you’re more concerned about wealth preservation. when you’re in that position, you can — you can’t do it. i’d like to blame it on wealth preservation. i just don’t have the guts i used to. you don’t anymore? apparently not. i’d like a really sure bet, you can see. i don’t have any — to test it out. when i look at results, i don’t even know who was in that body. i can forecast as well as i ever did. but for whatever reason, i just can’t pull the trigger in the same manner.
