Sunday, May 08, 2016

Stanley Druckenmiller Sees
The Global Economy & Financial Markets
Approaching The Endgame
Druckenmiller sees central banks as borrowing more from future consumption than ever before .. not just in China, but also in the U.S. & elsewhere in the indebted western world .. "The Fed has no end game. The Fed’s objective seems to be getting by another 6 months without a 20% decline in the S&P and avoiding a recession over the near term. In doing so, they are enabling the opposite of needed reform and increasing, not lowering, the odds of the economic tail risk they are trying to avoid. At the government level, the impeding of market signals has allowed politicians to continue to ignore badly needed entitlement and tax reform .. Most of the debt today has been used for financial engineering, not productive investments." .. Druckenmiller worries about the reckless debt-fueled stimulus programs in China, how it will likely lead to more problems .. conclusion: "The lack of progress and volatility in global equity markets the past year, which often precedes a major trend change, suggests that their risk/reward is negative without substantially lower prices and/or structural reform. Don’t hold your breath for the latter. While policymakers have no end game, markets do. On a final note, what was the one asset you did not want to own when I started Duquesne in 1981? Hint…it has traded for 5000 years and for the first time has a positive carry in many parts of the globe as bankers are now experimenting with the absurd notion of negative interest rates. Some regard it as a metal, we regard it as a currency and it remains our largest currency allocation." - gold.
LINK HERE to the article

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