Druckenmiller: "I See A Storm Coming"

Tyler Durden's picture




 

Hedge fund icon Stanley Druckenmiller sat down with Bloomberg TV's Stephanie Ruhle, saying that he’s decided to speak out now because he sees "a storm coming, maybe bigger than the storm we had in 2008, 2010." His fear is that the ballooning costs of Social Security, Medicare and Medicaid (which with unfunded liabilities are as high as $211 trillion) will bankrupt the nation's youth an pose a much greater danger than the debt currently being debated in Congress.  He said, "While everybody is focusing on the here and now, there's a much, much bigger storm that's about to hit... I am not against seniors. What I am against is current seniors stealing from future seniors." While not exactly Maxine Waters' sequestration-based 170 million job loss, this concerning interview is must-see for his clarity and forthrightness from who is to blame, to the consequences of gridlock, our society's short-term thinking, and the concerning demographics the US faces.

 

 

Druckenmiller on why he's speaking out now:

"I see a storm coming, maybe bigger than the storm we had in 2008, 2010.  And really, the reason could happen without people looking as for a lot of similar reasons that we could get into.  But  the basic the basic story is, the demographic bubble I was looking at way back in '94 that started in 2011, we are right at the first ramp-up of this thing that is about to hit."

On U.S. demographics:

"Something remarkable has occurred since 1994 until now, which is entitlement spending, or let me say transfer payments to be a little more correct.  Transfer payments which were 28% and 60, and were 50% when we were in the budget mess in '94.  Lo and behold, they've gone up to 67% of government outlays.  But they haven't gone up because of demographics. They've gone up because the seniors have a very, very powerful lobby.  They keep getting more and more transfer payments from the youth. But the demographic storm is just starting now. It reminds me of '05 when people just extrapolated housing prices going up for 50 years…Everyone sorta lives with their rulers in the past and doesn't look at coming changes. So what's going to happen is we now have a working population, this is the way entitlements work, where the current workforce is paying for the benefits of the seniors. And since 2000, we've had about 4.5 to 4.8 workers for every retiree.  By 2050, that number will drop to 2.4 workers per retiree.  Another catchy way to say it is by 2030, the average population of the United States is gonna be older than the average Floridian right now."

On who is going to stop seniors from stealing from the next generation:

"You asked me why I'm here.  And I think people like me and others need to speak out. It's about the future, not about the present where the problem is.  And let me just say one thing.  I am not against seniors, okay.  I love seniors.  Unfortunately I'm going to be one in the not-too-distant futures.  What I am against is current seniors to me stealing from future seniors."

On who should be blamed for hurting the economy:

"It's hard to tell who's going to be blamed-- if we don't act and this occurs…There's plenty of blame to go around. If I had to analyze how do we get into the financial crisis, I would say it started way back in the '90s when then-Chairman Greenspan refused to address the dot-com bubble, came up with some new theory of productivity and therefore we're not going to have a problem, so all these NASDAQ companies who were never going to earn money went to hundreds-of-times earnings and then of course, we had a major bust.  And instead of taking a recession and having the cleanup…they needed an offset. So they created the housing bubble. So now by hindsight, everybody says, 'Well, you had these horrible Wall Street actors,' and I'm sure there were quite a few horrible Wall Street actors.  And I don't doubt that they were part of the problem.  In fact, I know they were part of the problem.  But I also know it was negative real interest rates for 12 outta 20 years that enabled these actors to do the things they were doing and incented, yes, incented them to go out and gamble the way they were gambling."

On gridlock in Washington:

"I'm pretty frustrated.  This sequester thing-- if you just look at how it came about, first of all, every five minutes all the suffering and all this horrible stuff is going to happen in various sectors if this goes through.  But there's three things that are not on the table in the sequester.  I know you're gonna be shocked by this.  Medicare, social security and Medicaid, okay."

On why Medicare, Medicaid and Social Security are not on the table:

"I'm sure it's because of short-term politics.  The problem with politicians is, they really only do have a four-year life cycle.  The rest of us should have the responsibility to look a little further than that ahead.  But yeah, I don't know whether 'mad' is the word.  I'm extremely frustrated by their refusal to deal with this problem. And the sequester thing, I think the president made a deal. It was a deal so they would extend the debt ceiling, which they did, all right.  I am very much for tax reform.  But I don't think it should be part of this particular thing and we should be parading out the crowd we'd been parading about to say how horrible this is going to affect the economy. Let me tell ya, I don't know what the economy's going to do.  But it's just a little ridiculous to say a $600 billion tax increase over ten years and $150 billion increase in the payroll tax is going to have no affect on the economy.  But an $85 billion cut in discretionary spending is going to tank the economy?  If the economy were to soften, I can tell you it won't be because it will not be because of this $85 billion."

On why he doesn't become a policymaker:

"Because my wife loves New York and I love my wife."

On equities vs. bonds:

One of the things that is kinda one of my pet peeves is hearing all these people on TV say, 'Well, you gotta go into equities 'cause they're so cheap relative to bonds and there's no other game in town.'  They are cheap relative to bonds.  But everything is cheap relative to bonds…So just because equities are cheap relative to bonds doesn't mean their price isn't subsidized.  I'm not making a forecast here because the subsidization could go on for a long time.  But real estate, gold, equities, they're all priced off of ZIRP, zero interest rates, and they're all subsidized."

On whether the hedge fund industry could be in hot water 12-24 months from now and become even further consolidated:

"Oh, I don't know.  I think the hedge fund's short-term thinking is just a manifestation of our entire society.  Whether it's the fed or whether it's-- the administration or whether it's Congress, no one bothers to think about the long term anymore.  And the hedge funds are just one more manifestation of that."

On where investors should put their money right now:

"That's hard for me to answer.  Because I have the luxury of a lot of experience in sitting in front of a screen.  And I can go into currency markets where it's at a relative price.  So it's the one area where prices aren't subsidized.  And I'm arrogant enough to think I can time these things.  But I don't really know how to answer that question for public invest-- but let me just say that this idea that you've got go plowing into risk because rates are zero, that they will rue the day one day.  The music will stop.  And I would probably be invested right now thinking I'm smart enough to know that we're quite away from the music stopping.  I don't think Bernanke is about to end these policies for a while.  But let's just know what we're dealing with here."

On whether there needs to be more consolidation in the banking industry:

"I'd like to see them be more like utilities.  I could care less whether they make money, unless I happen to own equities in it.  But if we're talking about as a United States citizen--I have no problem with banks being utilities and going back to what banks used to do…"

On whether banks should just be making loans:

"Yeah."

On whether the most sophisticated bankers should work at hedge funds, not on sell-side trading desks:

"You said it, Stephanie, not me."

On what his future looks like:

"I'm probably going to disappear again at some point.  But in the meantime, I'm gonna do what I can to try and bring the awareness of this issue out because with respected economists, again, focusing on a little problem over here when you've got this big problem over here, I think the message needs to be out there."

On whether he'll start tweeting:

"No tweeting for me."

0
Your rating: None
 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 03/01/2013 - 11:33 | 3290108 derek_vineyard
derek_vineyard's picture

is he related to the 49ers 1st round qb draft pick bust?

Fri, 03/01/2013 - 11:35 | 3290122 The Juggernaut
The Juggernaut's picture

Has anyone noticed how Bloomberg TV change into a more CNBC feel?  They old better anchors either moved to radio (Tom Keene) or went somewhere else (Margaret Brennan... super hot).

Fri, 03/01/2013 - 11:39 | 3290129 BaBaBouy
BaBaBouy's picture

AND Not To Mention GOLD Selling On The Street (Wall) @ $50K ...

Fri, 03/01/2013 - 11:43 | 3290151 Joe Davola
Joe Davola's picture

If this dude's such an investing genius, shouldn't we give him half of the SS lockbox funds and have his 30%/year returns solve the problem?

Fri, 03/01/2013 - 11:49 | 3290164 TruthInSunshine
TruthInSunshine's picture

Krugman just tweeted the following:

 

@Dr.PaulKrugmanPh.D.-

Druckenmiller is a real piece of work in his ivory tower.

Those that can, do, & the others teach, Stanley!

Fri, 03/01/2013 - 11:55 | 3290203 WayBehind
WayBehind's picture

(which with unfunded liabilities are as high as $211 trillion) 

no worries, we have a magic printer so we can print those trillions very easily ... 

Fri, 03/01/2013 - 12:55 | 3290299 Bicycle Repairman
Bicycle Repairman's picture

No mention of MIC spending.  No mention of government pensions.  No mention of the education bubble.  No mention of the runaway sick care industry.  No mention of the loss of capitalism.

No mention of $trillions to bail out banks, including foreign banks, and, perhaps, you, Stanley.

LOL. 

This guy thinks if you starve granny, everything will be OK.  No need to change anything about the basic underpinnings of this economy or the political system.  He wants to save the kids?  He couldn't give a fuck about the kids.  The kids will keep paying, only the money will be directed to his constituencies.

Run for office, Stanley, so the people can "interact" with you.

Fri, 03/01/2013 - 13:05 | 3290668 Shocker
Shocker's picture

He is not the first, to come out in the last few months and say this.

All this talk of market correction, currency, Derivates... Whats coming who knows but something is not good

http://www.dailyjobcuts.com

.

Fri, 03/01/2013 - 14:54 | 3291120 Peter Pan
Peter Pan's picture

It's not so much about seniors stealing from future seniors as it is about government stealing from both groups as they have raided social security to run wars instead of investing those funds in productivity boosting investments.

It is also about governments failing to make asjustments to social security to cover changing demographic which has been caused by increasing longevity and lower fertility.

It is also about governments pursuing a one world agenda which in turn created severe trade imbalances which now have crystallised into humungous mountains of private and public debt.

So just remember it is really about government stealing from all generations.

Fri, 03/01/2013 - 15:30 | 3291253 Anusocracy
Anusocracy's picture

Drunkenswiller is totally disingenuous. Government is only about stealing, whether it's money, property, or lives.

SS recipients paid into an idiot government program, whereas useless taxeaters like government employees (with their pensions) and welfare recipients in and out of banking, did no such thing. 

 

Fri, 03/01/2013 - 16:40 | 3291496 redpill
redpill's picture

Interesting how hedge fund managers are always so willing to be prescient wisemen warning of future calamity only AFTER they've successfully extracted their own fortune from the ponzi economy.

"See ya muppets, thanks for the laughs, I'm going to disappear now.  Oh, by the way, you're all fucked!"

 

Fri, 03/01/2013 - 16:51 | 3291549 Texas Ginslinger
Texas Ginslinger's picture

Druckenmiller: "I See A Storm Coming"

We all do..

What else have you got for us..??

Fri, 03/01/2013 - 13:10 | 3290711 Bad Attitude
Bad Attitude's picture

"This guy thinks if you starve granny, everything will be OK."

No need to starve granny. The Obamacare death panels are supposed to finish off granny. If granny isn't working and paying taxes into the system, granny is a useless consumer of scarce medical services and should die.

Forward, Hope and Change, and all that crap.

Fri, 03/01/2013 - 14:51 | 3291115 TBT or not TBT
TBT or not TBT's picture

Useless eaters, socialist control freaks called them back in the 30's. Same instincts with this bunch. The state needs those resources old people have accumulated quite pointlessly along their working lives. They didn't build that.

Fri, 03/01/2013 - 13:19 | 3290762 smlbizman
smlbizman's picture

exactly...no mention of limos, vile vacations, wars,...what a bunch of cunts....always cutting mine, so they can keep  theirs....

Fri, 03/01/2013 - 16:42 | 3291506 Chump
Chump's picture

Sounds like you're a Republican/teabagger/obstructionist/homegrownterrorist or whatever the epithet du jour is.

http://www.weeklystandard.com/blogs/senator-obamas-golf-weekend-tiger-co...

And no doubt the HonorableTM Jeff Sessions enjoys the full spectrum of benefits and privileges that comes with serving (nay, sacrificing for) his country as well.

Fri, 03/01/2013 - 21:45 | 3292318 Nick Jihad
Nick Jihad's picture

The "starve granny" meme, again. Nevermind that the elderly are the wealthiest demographic in the USA. Do you ever think?

Sat, 03/02/2013 - 01:27 | 3292823 Spigot
Spigot's picture

"the elderly" is not a homogenous block of cheddar, ya know?

Drunkmayer is AGAIN trying to redirect the conversation AWAY from the real issue, which is that his ilk have created a systemicly risk prone system which is destined to implode. In fact it IS imploding and there is a significant concert of effort to pretend its someone elses fault.

Fri, 03/01/2013 - 15:29 | 3291249 nofluer
nofluer's picture

unfunded liabilities are as high as $211 trillion

MONETIZE, Bitchez!!! After the hammer drops on the USD, $211 TN is a cup of coffee and a doughnut... without frosting.

Starting about 20 years ago (+/-) I began planning for an old age without ANY SSI/SS/Medicare. As long as I can get around, I'm good. I eat. I can maybe pay the bills. I can afford the aspirin/Ibuprofen and Old Fart Vit-e-mins. When the medical needs exceed my ability to deal with, well... that's what belief in the afterlife is for.

In the Sweeeet Bye & Bye - we shall meet on that beautiful shore.

In the Sweeeeeet Bye & Bye, I won't have to pay taxes no more.

Fri, 03/01/2013 - 12:00 | 3290231 Temporalist
Temporalist's picture

Krugman is just jealous because his tower is mostly brick with ivy; still high enough to keep the stench of the masses his Keynesian bullshit is drowning from reaching his lofty perch.

Fri, 03/01/2013 - 12:11 | 3290296 Joe Davola
Joe Davola's picture

I C WUT HE DID THARE

Oh wait, no I don't - it's like some kind of inside joke wrapped in a jedi mind trick.

Fri, 03/01/2013 - 12:19 | 3290348 LawsofPhysics
LawsofPhysics's picture

Pot calling the kettle black?  Fuck'em both.

Fri, 03/01/2013 - 12:47 | 3290533 oddjob
oddjob's picture

.....and those that can't teach, teach gym.

  Woody Allen

Fri, 03/01/2013 - 13:03 | 3290654 Chump
Chump's picture

What the fuck does Krugman do, exactly?  Tweet and blog?  Stamp his feet and declare himself relevant?

Fri, 03/01/2013 - 15:14 | 3291198 Ruffcut
Ruffcut's picture

Krugman tries to stretch his little weener to put in his mouth where it belongs.

Fri, 03/01/2013 - 16:31 | 3291459 Chump
Chump's picture

Almost choked on a peanut thanks.

Fri, 03/01/2013 - 11:58 | 3290224 bjfish
bjfish's picture

There is no lockbox. We do not have a single dime put away to fund this $122 Trillion in unfunded liabilities.

What is most ironic is how its the young ppl (who overwhelmingly voted for Oblamer) who will bear the brunt of this. 

 

Fri, 03/01/2013 - 12:01 | 3290234 Dr. Richard Head
Dr. Richard Head's picture

I've said it before and will say it again, I will gladly relinquish and funds that have been stolen from me for SS and Medicare IF I can withdrawal myself from both socialist systems AND they no longer take out the FICA taxes from my paycheck and my employers' contribution can then go to me.  For the record, I am 35 and have been working since 15.

Shit in one hand....

Fri, 03/01/2013 - 12:05 | 3290248 DosZap
DosZap's picture

I've said it before and will say it again, I will gladly relinquish and funds that have been stolen from me for SS and Medicare IF I can withdrawal myself from both socialist systems AND they no longer take out the FICA taxes from my paycheck and my employers' contribution can then go to me.  For the record, I am 35 and have been working since 15.

Shit in one hand....

 

 

And guess what, IF Boomers at 35 had another 30+yrs to really hammer down and save/invest THEY would have also.

Fri, 03/01/2013 - 12:09 | 3290278 Dr. Richard Head
Dr. Richard Head's picture

One might ask, "Why didn't the boomers push for such a thing back when they were 35?"  My response would be is that the future looked rather rosey and American execptionalism was just accepted as a fact. 

Fri, 03/01/2013 - 12:30 | 3290420 GeezerGeek
GeezerGeek's picture

I'm a boomer (66) and collecting SS. Not exactly by choice, since every congressman and senator I ever had (note - do not limit that to any I'd voted for, but all of them) got repeated letters from me telling them that SS was a pyramid scheme and would fail once boomers began to retire. That's 40+ years of warning the bums, and a fat lot of good it did me.

For Druckenmiller to say "What I am against is current seniors to me stealing from future seniors" is pretty dumb, since other seniors already took from me when I was working. If he can't propose a way to return what was taken from me, he should simply keep quiet. Once on the socialist path, failure is inevitable. We're all going to suffer, I'm afraid. Except for the elites, who are exacly the ones who should suffer the most.

Fri, 03/01/2013 - 12:50 | 3290567 Dr. Richard Head
Dr. Richard Head's picture

I understand.  My turniong point in realizing that the politicians don't represent anyone but their funding backers was TARP.  Political activisim seems like a good idea, but then they spit in our faces.  I have to feel so defeated, but it is what it is.

Fri, 03/01/2013 - 13:21 | 3290779 HoofHearted
HoofHearted's picture

I'm with BOTH of you. The seniors did put money in. They should get it all back in one lump sum with interest for Govco using their money for so long. But Dick Head and I should also get to opt out. (I'm 38, working since 16, though I did do time in college and grad schools.) The Ponzi is beginning to collapse. This is the place where I don't send the chain letter in. It's where I say "no thanks" to winning the Irish lottery or taking a portion of some Nigerian prince's ill-gotten gain. Yet Uncle Sugar won't let me stop paying into this horible idea. It's about time that somebobdy dusted off "Atlas Shrugged." Druckenmiller will eventually just go Galt, if he can get his wife to see what a hell-hole NYC is. And e should all be considering the same...

Fri, 03/01/2013 - 16:03 | 3291355 FEDbuster
FEDbuster's picture

.gov keeps you in the Ponzi by force.  It is a Ponzi and always has been a Ponzi.  Just like Madoff investor, you have been fucked, but unlike Madoff they can keep "printing" to pay you even when there aren't enough inflows to balance the books.  The end game is hyperinflation, at which time everyone gets fucked hard.  When the "system" crashes, best to not be dependent upon the system.

Fri, 03/01/2013 - 13:38 | 3290844 Beam Me Up Scotty
Beam Me Up Scotty's picture

Dr. Head, I am 44 and I would give up my SS also if I could keep the rest going forward. I own a business so I get the double whammy too. I could stuff my future savings in a mattress and will have more to show for it than I will ever get from social security. Let's call it what it really is, another tax. 39% isn't high enough Obama? Add in state income, sales taxes, property taxes and other fees and everyone is easily working 7 out of every 10 days for the government. Gee I get to keep 3 days of my labor. How generous.

Fri, 03/01/2013 - 15:00 | 3291142 FreeNewEnergy
FreeNewEnergy's picture

Gotcha all beat. I'm 59 and would gladly give up what I paid in - never expecting to see a penny of it anyway - if they'd just scrap the system altogether. I am anywhere from 3 to 8 years - depending on my options - from collecting my "Golden Years" checks and I say Fuck it!

It's a horrible system that's completely unfunded, so kill it now. It's also why I own my business and haven't paid in for fifteen years - all legal, I know how to do my own taxes.

It would be nice to - at close to 60 years of age - think that the remaining 30 or so years I have left might be somewhat enjoyable, but I'm certain that's not going to be the case. I mean, I'll be fine. I've prepared. It just could be so much better with a realistic government.

Fri, 03/01/2013 - 16:38 | 3291488 EINSILVERGUY
EINSILVERGUY's picture

I'm 51 and been working since I was 13.  I would be willing to forgo the monies  put into SS if I could keep whats being taken out now so I could invest myself.  I have known since my mid 30's that SS would probably not be around. I've tried to save and invest accordingly with the expectation that I am ultimately responsible for myself. My parents were depression children any my grandfather lived through Weimar as a young man.  I have a 100,000 Reichsmark that was given to me by him when I was a child.

What pisses me off is not that I will have to account for myself, but that the FED is deliberately destroying my hard work at trying to accumulate wealth. The Fed and this govt is distorting the market and transferring wealth to looters and moochers so that I now can't maintain even a conservative investment strategy. 

If you are old you are getting SS but being screwed on managing a return on your net worth. 

If you are like me , you probably won't be able to see any of the money put in and will be screwed by the current policies, have to work longer and wait around for the eventual collapse.

If you are young you are screwed because the old and middle age can't retire, you have to pay the existing SS liability without any real chance of seeing it yourself, you either paid money for an overbought education ( God help you if you went for that Liberal Arts degree) and you will never be able to move out of mom and dads house.

This is why eventually we will have a thrown down in this country. The govt will pit groups against one another while it tamps down the screws and waits for the inevitable backlash

 

 

Fri, 03/01/2013 - 16:05 | 3291363 The_Dude
The_Dude's picture

If he can't propose a way to return what was taken from me, he should simply keep quiet.

 

What you should realize is everyone is going to take a cramdown and quit pretending you are the only one being shafted.  Then you should get angry as $%^&, realize you are old and retired and nothing to loose, get a dozen eggs, lob them at your $%^& politician and enjoy the time in the clink.  I have to stay here busy working to pay your SS so I can't do it.

Fri, 03/01/2013 - 13:27 | 3290806 smlbizman
smlbizman's picture

i really object to the thoughts of some of you. you act  like indivduals have any say or control that goes on.....if you beleive you have the power to make a few calls, cast a few votes and everything will be honky dory, knock urself out.....yeah the people hijacked the system, yeah the people said i want to pay for somebody elses shit.....put the blame and keep the blame were it belongs  and it is not with the people(pawns).

Fri, 03/01/2013 - 12:09 | 3290279 bjfish
bjfish's picture

Dr. Head, only one way to do that ... join the government workforce. City state and fed employees are opted out of SS. We have our own retirement system... one that actually has money in it.

We are turning into a bifurcated society ... gov't workers (w/full benefits) on one hand and a private sector that is being squeezed from all sides on the other.  A while back I figured "if you can't beat 'em, then join 'em", so now I teach college econ. I'll make more in retirement than most americans make when they are working. 

Fri, 03/01/2013 - 12:18 | 3290342 Joe Davola
Joe Davola's picture

Aren't many of those public pensions in the underfunded category?  Oh yeah, they do have the power of taxation to alleviate that.

Fri, 03/01/2013 - 12:27 | 3290392 DosZap
DosZap's picture

Aren't many of those public pensions in the underfunded category?  Oh yeah, they do have the power of taxation to alleviate that.

NOT when there are no WORKERS left.

And we are at best 24 mos away from total collapse,at the current rate.

Fri, 03/01/2013 - 14:07 | 3290950 NotApplicable
NotApplicable's picture

Underfunded? Well, that ALL depends on the price of AAPL.

Fri, 03/01/2013 - 12:24 | 3290375 Teamtc321
Teamtc321's picture

"A while back I figured "if you can't beat 'em, then join 'em", so now I teach college econ. I'll make more in retirement than most americans make when they are working."

 

Golf Clap!!! Bravo..........

You go there, econ guru.......

Fri, 03/01/2013 - 12:35 | 3290447 GeezerGeek
GeezerGeek's picture

That may be true, or you may find your pension funds were invested in a nationalized company and poof, there goes that money (cue South Park's "and...it's gone"). I seem to recall that at least one state government pension fund had Chrysler bonds that became confetti through the machinations of our current Dear Leader.

Fri, 03/01/2013 - 13:20 | 3290766 bjfish
bjfish's picture

We (teachers, police, fire & other gov't workers) will SELL ALL OF YOU INTO SLAVERY if thats what it takes to secure our pensions. Just watch.

(no sarc/)

Fri, 03/01/2013 - 13:24 | 3290793 HoofHearted
HoofHearted's picture

We are armed to the teeth, despite your Dear Leader trying to keep it from happening. Molon Labe, bitch. I'm not going in chains. I'll go in a blaze of fire instead. And I know I'm not the only one.

(Yes, I'm a prof at a private institution. But I also have useful skills and do things on the side to earn some actual cash or to make sure we have real food to eat.)

Fri, 03/01/2013 - 14:08 | 3290956 NotApplicable
NotApplicable's picture

Doesn't matter. Chains and fire both excite them.

Fri, 03/01/2013 - 18:19 | 3291842 moonshadow
moonshadow's picture

oh c'mon guys ease up on his down arrows- blowjobfish was pretty funny saying no sarc when it was sarc which made it extra sarcey um...savvy?

Fri, 03/01/2013 - 13:44 | 3290867 Beam Me Up Scotty
Beam Me Up Scotty's picture

I'll go Gault and live off of my garden. Good luck Mr Econ teacher. People will just start unplugging from your system.

Do NOT follow this link or you will be banned from the site!