Billionaire investor Stanley Druckenmiller is warning of continued volatility in the stock market and says he is taking “massive leveraged positions” in safer assets than equities.
Druckenmiller, who previously ran the Duquesne Capital hedge fund and managed money for George Soros, made the comments about the current state of the stock market during an appearance on CNBC this morning (Nov. 1). He said that the stock market remains “very challenged” and that only the most disciplined investors are likely to be rewarded in the current environment.
Stanley Druckenmiller Is Nervous About the Stock Market
Druckenmiller’s comments on CNBC follow similar comments he made recently at the Robin Hood investor conference in New York City. The investor reiterated that he is “really nervous” about the stock market right now and worried that something in the economy is about to break with interest rates at their highest level in 22 years.
Due to his concerns, Druckenmiller says he has taken big positions in short-term bonds and other assets that are considered less risky than stocks. He added that he sees little to get excited about in the current market and that a fundamental adjustment needs to be made in the market’s pricing as he feels that the pricing-to-earnings (P/E) ratio has been pushed out of whack.
“All I know is every sale I made I’m happy about and every buy I made I’m not thrilled with,” said Druckenmiller at the Robin Hood event.
Fiscal Realities
Druckenmiller has also been sounding the alarm on the fiscal situation in Washington, D.C., saying, “We are spending like drunken sailors.” He singled out the federal deficit of $1.7 trillion, up 23.2% from the previous fiscal year, and U.S. debt of nearly $34 trillion as being unsustainable and likely to cause further shocks to the economy and markets.
Druckenmiller said government entitlement programs, which make up nearly half of the federal government’s budget, need to be reduced to curb what he characterized as runaway government spending. Specifically, he proposed cutting Social Security benefits for seniors, saying that current seniors shouldn’t “expect to get 100 cents on the dollar.”
What’s Next
Stanley Druckenmiller isn’t alone in his concerns about the stock market or the fiscal situation in Washington, D.C. In recent weeks, other prominent investors such as Michael Burry and Bill Ackman have also voiced worries about the market. At the same time, multiple credit rating agencies have issued warnings about the U.S. government’s debt and budget shortfalls. However, Druckenmiller is another prominent voice in the debate, and his concerns are worth considering, especially as U.S. stocks have now declined for three consecutive months.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
