Druckenmiller: "When You Get This Kind Of Rigging, It Will End Badly"

Tyler Durden's picture

When even Home Depot's Ken Langone is questioning the reality of this rally (CEO of one of the best performing stocks since the Dow last traded here), you have to be a little concerned. However, it is Duquesne's Stanley Druckenmiller's point that with QE4EVA it is impossible to know when this will end but warns that "all the lobsters are in the pot" now as he notes that "if you print enough money, everything is subsidized - bonds, stocks, real estate." He dismisses the notion of any sell-off in bonds for the same reason as the Fed is buying $85 bn per month (75-80% all off Treasury issuance). The Fed has cancelled all market signals (whether these are to Congress or market participants) and just as we did in the 1970s, we will find out about all the mal-investments sooner or later. "This is a big, big gamble," he notes, "manipulating the most important price in all of free markets," that ends one of only two ways, a mal-investment bust (as we saw in 2007-8) or full debt monetization and "off we go into inflation."

 

 

"The Fed is printing a lot of money. They are forcing people into markets. You shouldn't be buying securities because you're forced to buy them by zero rates. you should buy them because you think they're great value. They're great value only relative to zero interest rates. they're not great value on an absolute basis."

"I don't know when it's going to end, but my guess is, it's going to end very badly; and it's going to end very badly because, again, when you get the biggest price in the world, interest rates, being manipulated you get a misallocation of resources and this is going to end in one of two ways - with a malinvestment bust which we got in '07-'08 (we didn't get inflation). We got a malinvestment bust because of the bubble that was created in housing. Or it could end with just monetizing the debt and off we go in inflation. So that's a very binary outcome. they're both bad."

 

"the thought that you can exit from wherever the balance sheet will be at that time, 4 trillion, wherever it is, in an orderly manner the chairman testified that will give the market plenty of warning, do you know what guys like me are going to do when they sell the first bond out of 4 trillion? and don't think that letting the bonds run off isn't selling. that debt has to be refinanced. if you do not -- if you just let all the bonds run off that is still 4 trillion in selling. and it's not till they actually sell the first one, it's till you get the whiff -- what do you think -- what do you think the markets are going to do when they figure out the exit. look what happened in qe-1 and qe-2 ended which is why i don't think this sever going to end."

 

"we know is that it's not a real market driven number? and we know the longer you keep it there, the greater the misallocation, and the greater the pain."

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Lohn Jocke's picture

Hey baby, If I were your central banker I would stimulate your private sector all day every day.

true brain's picture

Nobody, not even banksters, can force you to do anything. if you disagree with them, disconnect from the system. Convert all your worth into gold, land, physical assets. And watch.

MillionDollarBonus_'s picture

The four-year chart of the S&P just looks fantasitc. This is a text book bull market. I've drawn a trendline along the lows of the chart, and 1510 is solid support. When you draw a linear projection line through the four-year chart, you can see it's going to 2000 by year end. No doubt about it. My advice: just keep buying.

nope-1004's picture

How does your 12 year chart against gold look?  When Gold tops, sell "the bubble".  When S&P tops, go all in.  LOL.

 

tiger7905's picture

Great clip on Wealth Inequality in the US.

 

http://goldandsilverlinings.com/?p=2119

 

 

flacon's picture

@tiger: From that video clip: "We certainly don't have to go all the way to soCIALISm to find something that is fair for hard working Americans".

 

Phew, I was worried it was another one of those leftist propaganda pieces. I am glad that we don't have to go ALL THE WAY to soCIALISm.

Dr Paul Krugman's picture

So let me get this straight - since you all are investors, day traders, and what not, in the world of finance; know it alls and all - when we get a recovery, you are all scared of rates rising, and at that point you will all want to own dollars?  Cui bono?

If that is what you are worried about, well, there will be many more dollars in the market than before this "looming crisis", so if the dollar actually becomes the next great investment when the "party is over", then we will have printed that many more dollars and will all be rich.

Or maybe the firms that people invest in, the ones that issue equity, will be great investments because we will have recovered from a depression.  Maybe bonds will be great sources of revenue.  Maybe there is more to finance than doom and gloom!

fonzannoon's picture

" when we get a recovery"

You think we are worried about getting a recovery? You have been on here a lot. Are you totally dense? You must be if that is what you think "we" are worried about.

Dr Paul Krugman's picture

Bernanke has stated he will use proper monetary policy until there is a recovery per employment, therefore, we will get a recovery.

fonzannoon's picture

Bernanke said he did not "buy the premise" of a housing bubble in 2006. I could go on and on but I hope you get the point.

So your base case is what Bernanke says will absolutely happen? You won some big award or something for using your big brain and this is your iron clad point of fact?

For real?

Come on...you are yankin our crank. Or you are not the real PK. I thought you could do better than that.

edit - my total apologies. I did not realize you put "until" in italics. Anytime I see something in italics I know it to be completely true and I am powerless to argue otherwise.

damn italics!

Dr Paul Krugman's picture

No, I am saying that Bernanke is saying what I wanted him to say for quite sometime - that we need to continue current monetary policy until UE comes down.  Now he is saying it so I agree that we are on the right track.

fonzannoon's picture

So you agree with him because he agrees with you?

Brilliant.

redpill's picture

It's Drunkenmillertime!

Sort of tiring to listen to all these talking head types blab about the if instead of the when.  No shit it's going to end badly, anyone who has been paying attention understands that.  The question is WHEN and HOW.

Predicting a massive earthquake will eventually happen doesn't help anyone unless you know the location and timing.

Dr Paul Krugman's picture

Alright, I see the doomer brigade has shown up, and like cockroaches, are now swarming the place.  I have a headache from spending the last while trying to teach economics to hard headed, chest thumping, zombies; I think I'll go have a few sips of scotch, enjoy that my white colored walls aren't padded - like many of yours are - and begin my next article.

fonzannoon's picture

Enjoy your makers mark and white tuna.

francis_sawyer's picture

 "When You Get This Kind Of Rigging, It Will End Badly"

~~~

Translation: "I'm a jew & all the other 'market makers' are JEWS... Now that we've reached this point ~ it's BASICALLY "JEW vs. JEW"... [That status that francis_sawyer has correctly & properly identified as the point upon which 'ALL HILARITY ENSUES'... You may commence JUNKING the comment of f_s as we speak, but it will not change the reality]...

Please 'LIKE' my kinda of jewry [on Facebook]... 'JUNK' those evil episcopalians at will going forward...

I have zero in the way of investment advice... I used to [but it was all based on JOOBUX]... Now the tide has moved out & I'm trying my best to cover my gonads so that the public at large doesn't see my unsuntanned circumcised dick...

That's all...

Druckenmiller [the 'circumcised']...

 

tango's picture

Jesus Christ, how many times have I told you to take your meds on a regular basis?   Might want to call you doctor for a quick treatment.

PhilB's picture

I just get so excited when we get a celebrity drive-by shooting (mouth). Somebody has been debasing Nobel Lauraetes over the years. Did he say anything remotely of economic substance or was that another ad hominem rampage.

You can enjoy Paul Krugman sounding ridiculous yet again here:

http://www.charlierose.com/

 

 

 

 

living on the edge's picture

F_S

Druckenmiller may or may not be circumcised, that is not important. If you are suggesting he is jewish, well that would be negative.

redpill's picture

Break some windows first, have to keep the economy going!

Temporalist's picture

Druckenmiller says about QE it is the "biggest wealth transfer" calling it "trickle down monetary policy."  "Who gets rich from QE? People like me, people in the markets. You think it's doing anything for three year olds in Harlem?"

At 8:28

http://video.cnbc.com/gallery/?video=3000152087&play=1

gunsmoke011's picture

Hey PK, perhaps you missed these little factoids from an earlier post:

  • GDP Growth: Then +2.5%; Now +1.6%
  • Regular Gas Price: Then $2.75; Now $3.73
  • Americans Unemployed (in Labor Force): Then 6.7 million; Now 13.2 million
  • Americans On Food Stamps: Then 26.9 million; Now 47.69 million
  • Size of Fed's Balance Sheet: Then $0.89 trillion; Now $3.01 trillion
  • US Debt as a Percentage of GDP: Then ~38%; Now 74.2%
  • US Deficit (LTM): Then $97 billion; Now $975.6 billion
  • Total US Debt Oustanding: Then $9.008 trillion; Now $16.43 trillion
  • The point being - the average Joe isn't Feeling the Love in this "Recovery"! I might add, I hope you have your rent paid up on that cave in south America, because I have a feeling when this ends - the folks who are digging up grub worms for dinner are not going to be pleased - and you and your pals are going to have a lot of splainin to do. Maybe you and Ben can share a cave and write a book about what went wrong for future generations to learn from.

    Imminent Crucible's picture

    MDB: Bernanke has stated he will use proper monetary policy until there is a recovery per employment, therefore, we will get a recovery.

    I swear that I'm going to keep drinking shoe polish until my health improves, therefore my health will improve.

    What a moron.

    Bunga Bunga's picture

    You hate doomers on the Titanic, right?

    Kirk2NCC1701's picture

    Dear Dr. K,

    Since all things in an economy are based on matter and energy -- upon which sentient beings (like you) add 'value' -- you may want to write your next Meisterwerk along the lines of "Fundamental Monetary Units and Policy, based on Robust Energy and Matter in a Market Economy".  You'd dethrone Keynes himself.

    We in the Federation of Planets use Dilithium Crystals (energy) and Latinum (PM) for this purpose.  You may want to adapt this to be based "Gas" and "Platinum coins".

    Regards, JT Kirk.

    NB:  My remarks are not disrespectful, hurtful or abusive.  Some of the abusive bloggers, alas, only discredit the intellectual caliber of other bloggers and that of the site itself.  I use the Trekkie language and imagery as a vehicle for the tenor of my metaphor.  As such, it is meant to be thought-provoking, not emotion-provoking -- even if done in an ironic, tongue-in cheek or even exasperated manner.  As 'Captain Kirk' would do.  I therefore hope you will boldly go and explore, where no Keynesian has gone before.

    tango's picture

    Dr Krugman, thanks for attempting to "teach" us about the economy using your hero Ben Boy as an example.  It's almost gospel in the investment community - do exactly opposite of Ben Boy's pronouncement that are consistently wrong.  He mixes enumeration with innumeration - attempting the former and committing the latter.  Remmber, according to your hero - there was no housing problem, adjustable rate problem, credit problem, liquidity problem, derivative problem....need I go on?  As many are prone to do on this site, visit You Tube and type "Bernake wrong statements".  

    Cui Bono's picture

    You rang Herr Doctor?
    I assume by your "next article" you mean of clothing- doing piece work in the garment district as you have finally decided to become a productive member of society... ooh fuck it.. its not that much fun to pretend its you....CB

    hairball48's picture

    I know it's fight Club :) but that's a bit harsh on Drukenmiller.

    Nobody knows the answer to when and how.

    There are slopes around here where I know the snow on the mountain is going to slide...with virtual 100% certainty. However, I don't know, nobody knows what will trigger the slide....or when. 

    It's the same with the coming financial collapse. All of us here know the collapse is coming, but none of us know when.

    DaveyJones's picture

    continue a current criminal system to solve the many serious problems that system has created and continues to worsen

    tango's picture

    There's a philosophical name for this - the hamster argument - whereby the cause of the problem is introduced as the solution.  The cure for massive debt is...masssive debt.   The cure for printing money that allows nations to spend like lunatics is to print more money to allow...... The answer to massive over-regulation is more regulation.  The answer to finite resources is faster use of those resources.     We could go on forever. 

    Karl von Bahnhof's picture

    I am afraid you are real Krugman.

    Bunga Bunga's picture

    I am looking out of the window and see a whole ghost town being built for years, not in China, but here in the US. No renters or occupants, just boarded entry doors. I agree, that the outcome of central planning can be quite impressive for some time, but in the end the effort must bear some real fruits, otherwise people lose the belief like they did in the Soviet Union.

     

    eclectic syncretist's picture

    Dr. Krugman, please replace your avatar with a picture of a hairy asshole, as it would certainly be an improvement, as well as appropriate.

    What the fuck???!!!  CNBC reports Citigroup says the US will soon be energy independent????!!!  ROTFLMFAO!

    http://www.cnbc.com/id/100450133?__source=yahoo|related|story|text|&par=yahoo

     

    madcows's picture

    Wow.  I read that too fast.  I thought it said Hillary's Asshole, and I wasn't sure if that meant Her actual backside, Bill Clinton, or Janet Napolitano.

    NotApplicable's picture

    What? You don't think the rest of the world won't turn off the tap and leave us to our own devices?

    For all I know, it's part of the destabilization plan (I know, they don't really need one, but they do enjoy profiting from "controlled collapses." Just ask Larry Silverstein).

    jerry_theking_lawler's picture

    its like reglion....would you rather believe in God and live a good life and their not be one, or choose not to believe and live a bad life and their actaully is a God??

     

    Same with investment principles.....would you rather sell most of your assets and purchase Gold, land, supplies (which have real value)....or sell all assets and invest in the stock market. if things are OK in the world, you will still have your Gold, land, supplies that have some value but you may miss out on huge returns in the stock market. but if the world turns very badly, and you have stocks that may skyrocket in nominal terms, but wouldn't buy you a box or oreos, you may miss out on actually living.

    Mountainview's picture

    The Soviet-Union tried to create growth by central state intervention as well...

    Temporalist's picture

    LOL that is fucking classic.  Who wrote this post for you MDB?

    "proper monetary policy" too funny.

    "we will get a recover" great stuff.

    We'll eventually start mining asteroids too.

     

    Krugman's favorite song: "One Day My Prints Will Come"

    Dr Paul Krugman's picture

    The fact that the guy above, mentioned by you, has 20 red marks for simply stating that he thinks stocks will go higher shows how upset you doomers are that the world has not collapsed into rubble.  Why don't you all go do something productive with your lives instead of criticising me and others who come up with solutions to our problems.

    fonzannoon's picture

     You are a legend in your own mind. You come on here because it bothers you that people on here know you are a fraud. You create problems. You have no solutions. We know it, and you know it.

     

    Dr Paul Krugman's picture

    Yes, I am a legend in my own mind and that is why my blog is adding 20k new readers/month.  Yes, I am a fraud and that is how I won a Nobel.  Yes, I have no solutions and that is why my theories are taught all over the globe.

    fonzannoon's picture

    So you measure success in adding readers to your blog?

    Your theories are widely accepted as a joke. How many other sites do you go on and comment on? I am guessing none.

    Dr Paul Krugman's picture

    Isn't that how success is measured?  How many people read one's blog?  How should we measure success then?  How correct the blog has been?  If that is the case, considering that I have been writing that proper monetary policy would lower UE and help firms recover, then wouldn't I be a success - since UE has come down and markets have stabilized?

    My theories are widely accepted as a joke?  Go to any school in the world and ask an economics professor if I am a joke.  They will laugh, but only in your face.

    fonzannoon's picture

    LOL spare me the Liesman/Santelli labor force participation rate argument. 

    You think markets are stabilized? Really....You are preaching that garbage on here? Okay then....stop QE and let rates "normalize" and lets see how stabilized markets are.

    Your theories and by extension you are a joke because the punchline is take away QE and let's test your theories. You scared? I thought so.

    You may have a few clueless economics professors in your pocket but you spend your time here because we laugh in your face and have been proven right to do so time and again.

    I feel like the Bob's talking to this guy on the other side of the desk.

    http://www.youtube.com/watch?v=2SoWNMNKNeM

    Yen Cross's picture

      Enjoy Dr. Krugman< Perhaps you can share this with all the Keynesians on your blog. http://www.zerohedge.com/news/ultimate-krugman-take-down

    Eternal Complainer's picture

    Haha

    That was great!
    Need to attach this to him( as a reminder) every time he comes around here and posts.

    Lol haha

    Temporalist's picture

    You are correct in one thing.  Porn must be right because everyone is doing it (especially the SEC)!

    SofaPapa's picture

    "markets have stabilized".

     

    That statement right there is the nut of it.  A market that goes only one direction is not to my mind a stable market.  It is the explicit destruction of the measure of value.  How can you call a market stable in which no one really knows what anything is worth because the numbers in which they are measured have lost their meaning?  And just to be clear, this is not just the opinion of "our" side.  Apparently, Mr. Bernanke and you share it, too.  Why is QE continuing forever?  It is continuing forever because you see the economy being weak and so it needs more stimulus.  Therefore, you are admitting that the economy is weak.  Yet at the same time, you are cheering the moon shot that equity prices have become.  If prices are going through the roof at the same time that you admit the economy is weak, then those prices do not reflect growth; they reflect dollar debasement.  Explain this to me, please?