Some financial commentators deserve your attention more than others. As CNBC and Bloomberg need to trot out wealth advisors and research analysts every hour to fill up air time, it’s hard to separate the wheat from the chaff. Stanley Druckenmiller is one of the rare voices worth listening to every time he speaks. And what he said is nothing short of frightening for the average investor.
But first, why should you listen to Stan?
Stanley Druckenmiller Is A Notorious Investor
Unlike most buy-and-hold investors, who accept 50% portfolio corrections are par for the investing course, Stanley Druckenmiller has a wicked distaste for losing money.
There is an irony to the fact that Warren Buffett has a golden rule: don’t lose money, but it is Stanley Druckenmiller who has almost never had a losing year. His tenure at the Quantum fund with George Soros provided him the foundation to springboard to greater successes at Dusquesne Family Office.
Famously, Druckenmiller doesn’t concentrate on earnings and margins as much as he does on liquidity measures, supply and demand.
“What does a high margin matter when everyone is selling?” would be typical of the way Druckenmiller thinks. And that matter-of-fact way of viewing markets is what has catapulted Druckenmiller to enormous riches. He’s reportedly worth about $6.4 billion.
In short, Stan has a winning track record through booms and busts, has reportedly had either zero or one losing year ever, and is a self-made billionaire with a keen sense of how the world works. So what does he think is coming for the economy?
The Horizon Is Bleak
At a recent conference, Druckenmiller did not equivocate.
“I Will Be STUNNED If We Don’t Have A Recession In 2023” he boldly claimed.
Druckenmiller is forecasting a recession that he believes will be “larger than your average garden variety”, meaning a recession that is worse than average.
He’s not ruling out something “REALLY BAD” as quantitative easing turns to quantitative tightening following an asset bubble.
One of the major concerns he has is the depletion of the Strategic Petroleum Reserve (SPR) below 1984 levels, particularly given that oil consumption is much higher than 1984 levels.
In his view, short-sighted policies have delayed liquidity shrinkage. For example, Janet Yellen could have sold 10-year Treasuries at under 1% but instead decided to run down the Treasury savings account.
All of this has masked a liquidity shortage but eventually the chickens will come home to roost. For example, depleting the Strategic Petroleum Reserve can happen for a while – as can other stimulative policies – but Druckenmiller concludes with a terrifying warning:
By Q1 2023, all these stimulative measures will go away so Druckenmiller’s central case is for a HARD landing by end of 2023.
How Should You Invest?
Perhaps no better person to turn to than Druckenmiller himself to figure out how to invest during these perilous times.
Interestingly, Druckenmiller’s largest holding is Coupang – a South Korean e-commerce company – which represents 17.9% of his portfolio holdings at Dusquesne Family Office.
Microsoft represents his second largest holding at 13.7% while Chevron rounds out his top 3, and holds an 8.57% weighting.
The rest of his top ten is comprised of:
- Eli Lily
- Freeport McMoran
- Willscot Mobile Mini Holdings
He has also got a long list of stocks spanning energy, information technology, healthcare, materials, and consumer discretionary.