The Legends Are Bailing on the Markets… For Good Reason

Phoenix Capital Research's picture

The capital markets have become artificial with all risk being mispriced due to Fed intervention.


The problem with this is that when the capital markets “break” due to a loss in credibility, the shift tends to be both swift and violent. I noted before that the yield on the ten-year Treasury is the basis for the pricing of all risk in the capital markets. With this yield being manipulated by the US Federal Reserve to the tune of $70 billion per month, the entire landscape for risk has become distorted.


This is not to say that there will not be substantial opportunities to make money in the capital markets going forward. Rather, I am stating that the capital markets will not be the safest, most stable places to do it. Risk in general is being mispriced today. There will be an adjustment and all investment in the capital markets needs to keep this in mind.

I wish to note that I’m not alone in the view that the capital markets are offering limited opportunities.


Stanley Druckenmiller founded his hedge fund Duquesne Capital in 1981. From 1986 onward he maintained average annual returns of 30%. He also managed George Soros’ Quantum Fund from 1988-2000. During that latter period he famously facilitated Soros’ “breaking of the Bank of England” trade: the legendary trade which netted over $1 billion in a single day.


Druckenmiller closed Duquesne Capital in 2010, stating that he was no longer able to meet his investment “standard[s]” in the post-2008 climate (he made money in 2008 before the Fed began to alter the risk landscape).


Druckenmiller’s key strength has always been macro-economic forecasting. That he would feel the capital markets were not offering him the opportunities he needed says a lot.


Seth Klarman is another investment legend who is returning capital to clients. Widely considered to be the Warren Buffett of his generation, Klarman recently cited a lack of “investment opportunities” as the cause for his decision to downsize his legendary Baupost Group hedge funds.


Other legends or market outperformers who have returned capital to investors or closed their funds to outside investors are Carl Icahn and Michael Karsch. Indeed, even value legend Warren Buffett is sitting on the single largest amount of cash in the history of his 50+ year career as an investor, stating that stocks are “fully valued” at current levels (Buffett largely does not believe in shorting the market, so his decision to be in cash is a strong indicator of opportunities).


These men are masters of the capital markets. They are voting with their feet and pulling their capital out of them. Given that their personal compensation is closely linked to assets under management and profit sharing, this decision is akin to the choice to forego additional wealth that could be made quite easily (none of these individuals would have trouble raising several billion more in capital) rather than trying to find opportunities in a challenging market.


For a FREE Special Report outlining how to protect your portfolio from this, swing by:


Best Regards

Phoenix Capital Research 



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rocker's picture

Really, Tell us what we don't know, Just read the title. The FED has one job.  To make Banksters Richer. Nobody else.

Helping the "Economy":s their excuse to garnish the likes of Goldman and JPMorgan.

DarthVaderMentor's picture

If they are voting with their feet why aren't they shorting the market more? Where is the rise in shorts?

Pee Wee's picture

Great question! I got crushed by being short from 2008-12.  The simple fact is creative destruction no longer exists.  The Fed has completely rigged the so-called "market."  It has eliminated consequence for failure and chose its own pet companies (the banks).

I actually feel like a pro reading this as I completely abandoned the market in 2013.  No debt, no mortgage, no 401k, no Roth - it is all liquidated.  I'm not gambling when the Fed is picking winners and losers for corrupt politicians.

This politicalization of market has me never coming back.  No value, no fundamentals, distorted risk, etc. equals no way.  Now its all about hard (infallable) assets and protection.

El Hosel's picture

" The Markets".... Nuff Said

doctor10's picture

The American "leadership class" has really screwed the pooch in this.  Not more than a generation ago even, America was one of the most profitable places in the world to invest capital. Presently there is no possible return.


Even aside from the fact that the NSA has essentially abrogated intellectual property advantage, the local, state and federal tax and regulatory environment basically strangles the baby in the cradle.

kurt's picture

Because they beleive that the market will go down so fast that the trades will blow up and go unpaid as will the etf's and most other transactions. A giant swirling black hole escalating to actual blood in the streets opens. Most of this to be powered by derivatives unsatisfied, untransacted while an actual seizing of credit and international settlements occurs. Talks of "reset" and "jubilee" and punishment ensue. The NSA suspected of spying on and knowing everything starts making stuff up because it, too, can't keep up with the implosion. The people demand creditable guilty parties. The whiff of guilt will have to do for actual guilt and punishment. Like Bagdad utilities start rolling brownouts because they, likewise, will be confused as to whether, even they are getting paid. 

Spankrupt's picture

In other news...Benjamin Strong says the markets are undervalued.

steveo77's picture

I will be in Hawaii next week, but I will not be SCUBA diving.   Pressure on the food chain is causing a 500% increase in serious and fatal shark attacks.   Real data is here.

Laughing Stock's picture

Another moronic post from Feenix

toadold's picture

Hmmm, I wonder if they are turning a percentage of that cash into gold or are they waiting to use the cash to pick up bargins when the market drops like a gut shot goose?

satoshi101's picture

How can I subscribe to the phoenix newsletter? How much? Do they take BTC's?

How do I know what is advertisement and what is news here?


Old timers have been gettting out forever, this is not news.

They get old, and yes, the reward/risk is so low now that its essentially a lose-lose proposition, everybody is doing a 'GALT'

Soon the only people in these kinds of BIZ will be fraudsters who dont' care if the client loses his money, ... WAIT  a minute, isn't that what we have now?

SAT 800's picture

Good points this article makes; if it saves one person from leaving their 401 balance in a stock fund it'll be a real social service.

ebworthen's picture

They know that the easy money from the five year FED ramp job has been made.

Buck Johnson's picture

Exactly, and they know this whole thing is about to crash and crash badly.

Wilcox1's picture

Stanley is good at macro and apparently isn't seeing long opportunities. He must be looking straight down the middle of mainstreet.