market folly

Legendary investor/trader Stan Druckenmiller appeared at The New York Times Dealbook conference recently and was interviewed by Andrew Ross Sorking.  They talked about a myriad of topics related to the economy, markets, and investing.

He says he doesn't know what the Federal Reserve's endgame is, but that it's going to end badly.

"Everybody's managing for the short-term now, and that's the problem with the Fed."

Druckenmiller paid special attention to the elevated level of stock buybacks and noted that corporations buyback stock when speculation is rampant.

He says he's anticipating chaos but is "playing around like everybody else.  I'm watching and leery and ready to move."

In equities, he's "working under the assumption that we may have started a primary bear market in July."  He's said he was short value stocks and the Euro.

While it sounds like he covered shorts in the recent volatility, he has also been neutral/long the high beta and high growth plays; companies that he thinks will do well with low/nominal growth.  He pointed out his fondness for Amazon (AMZN) because they're constantly investing in their future and their dominating AWS platform.

On the market in general, he noted "I could see myself getting really bearish.  I can't see myself getting really bullish, so I'm kind of on the sidelines in equities in terms of exposure."

On being a successful investor, Druckenmiller says one of his biggest assets is his openness and ability to change his mind very quickly.

On shorting, he opined that "It's very hard to short stocks.  It sounds great in theory,  it's very difficult because you're basically playing against the house."

Embedded below is the video of Druckenmiller's interview: