| | | | Monday, October 21st
Stanley Druckenmiller has made a major bet against America. Or at least, against American bonds. If you don’t know the Druckster, he’s one of the most successful macro investors of all time. (Yes, better even than Warren Buffet.) This weekend, Druckenmiler dropped a major bombshell:
His firm — Duquesne Capital — is using 20% of its portfolio to short U.S. bonds. Now, what does it mean to short U.S. bonds? Well, it means that while most investors are thinking bond yield will come down (and thus, become more expensive), Druckemiller believes rates will rise (and thus, become cheaper).
Druckenmiller has been vocal about his views of the economy. He believes that we are on the verge of total chaos, and has said that inflation will likely return to levels seen in the 1970s.
So, in the context of his world view, this latest bet of his makes sense. Now, there are some unknowns here: We don’t know which bonds he’s shorting. Is he shorting the 2-yr or the 10-yr? Depending on which one it is, well, that’s a very different investment theory and timeline.
What do I think about this? Well, I do believe the Fed cut way too soon. I think the data bears out that we are not going to return to 25 inflation any time soon. Not only have the PPI and Core PCE readings been hot, but I believe it was Bostic who for all intents and purposes admitted that inflation wasn’t coming down to previous Fed target rates.
And when you combine that with the soaring Treasury debt, it does look like the fiscal state of America is in peril. Yes, we have the biggest guns, but no country in history has been able to print money willy-nilly and survive. There will be a moment of truth. The two questions are:
How big will it be? And when will it happen.
I’m not a doomer. America won’t fall into the dark ages. But rough times could certainly hit in the next few years. Oddly enough, while our dollar becomes devalued, the only way to outpace destruction may be to invest in stocks. I think that’s some of the reason why stocks continue to soar despite the unrelenting anecdotal stories about the economy.
So, oddly enough, stocks — instead of bonds — may be a safe haven as America’s fiscal dominance ends. And how do we play that?
Of course, the Druckenmillers of the world play by very different rules than the rest of us. And us small-time retail investors can’t really make massive short bets like they can. It would be folly to bet against the U.S. Treasury Department of U.S. bonds.
Instead, we can simply play the markets as everyone rushes in to outpace inflation. And as that happens, who will likely benefit the most? The tech stocks of course, who basically run the market like a tech mafia.
Now, which tech titan will do the best? Well, tomorrow, I’m hosting a free event called “Clash of the Titans: Which Tech Stock Will Gain the Most The Last Two Months of 2024.”
While I can’t promise future returns or against losses…
I’ll reveal which tech company I think could work the best as a “safe haven” asset in the coming months.
Click here to register. | | | | |
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