By Katherine Burton (Bloomberg) -- Stan Druckenmiller, the billionaire
investor with one of the best long-term track records in money management, said
the bull market in stocks has "exhausted itself" and that gold is his largest
currency allocation. Druckenmiller, speaking at the Sohn Investment
Conference in New York on Wednesday, said while he’s been critical of Federal
Reserve policy for the last three years he expected at that time it would lead
to higher asset prices. “I now feel the weight of the evidence has shifted
the other way; higher valuations, three more years of unproductive corporate
behavior, limits to further easing and excessive borrowing from the future
suggest that the bull market is exhausting itself,” said Druckenmiller, who
averaged annual returns of 30 percent from 1986 through 2010 at his Duquesne
Capital Management. As bankers experiment with "the absurd notion of
negative interest rates," Druckenmiller said, he’s wagering on gold. “Some
regard it as a metal, we regard it as a currency and it remains our largest
currency allocation," he said, without naming the metal.
Metal Gains Gold futures climbed 20 percent this year in the best
start since 2006, helped by speculation that the U.S. Federal Reserve will be
slow to tighten monetary policy amid global risks to growth and as lending
rates in the euro area and Japan fell below zero. On the Fed,
Druckenmiller said the central bank has borrowed more "from future consumption
than ever before." “By most objective measures, we are deep into the
longest period ever of excessively easy monetary policies,” he said. “Despite
finally ending QE, the Fed’s radical dovishness continues today. By most
objective measures, we are deep into the longest period ever of excessively
easy monetary policies. In other words, and quite ironically, this is the least
‘data dependent’ Fed we have had in history.” Druckenmiller said
“volatility in global equity markets over 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.” To contact the reporter on this story: Katherine Burton in New
York at [email protected] To contact the editors responsible for this
story: Christian Baumgaertel at [email protected] Alan Mirabella
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