Legendary billionaire investor Stanley Druckenmiller told Sohn Investment Conference attendees to sell their equity holdings Wednesday.
“The conference wants a specific recommendation from me. I guess ‘Get out of the stock market’ isn’t clear enough,” said Druckenmiller from the conference stage in New York. Gold “remains our largest currency allocation.”
The billionaire investor expressed skepticism about the current investment environment due to Federal Reserve’s easy monetary policy and a slowing Chinese economy.
“The Fed has borrowed from future consumption more than ever before. It is the least data dependent Fed in history. This is is the longest deviation from historical norms in terms of Fed dovishness than I have ever seen in my career,” Druckenmiller said. “This kind of myopia causes reckless behavior.”
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He believes US corporations have not used debt in productive investments, but instead relied on financial engineering with over USD 2 trillion in acquisitions and stock buybacks in the last year.
This is finally showing up on the books of companies as operating cash flow growth in US companies has gone negative year-over-year, while net debt as gone up, according to the investor.
Druckenmiller was negative on China’s economy going forward and believes recent attempts at further stimulus in the Asian country will not work and “aggravated the over-capacity in the economy.”
“Higher valuations, limits to further easing..the bull market is exhausting itself,” he said.
Druckenmiller is chairman and chief executive officer of the Duquesne Family Office.
His hedge fund track record is unparalleled, generating annualized returns of 30 percent during his investment career. The Duquesne fund never had a down year, according one of his investors Ken Langone.