Stanley Druckenmiller: Macroeconomic Analysis of the Market, Trade and Investing
Interview and Q&A on June 3, 2019, at the Economic Club of New York, with billionaire investor Stanley Druckenmiller, Chairman & CEO, Duquesne Family Office LLC. Topics covered include current macroeconomic factors and the impact of changes in interest rates, the US-China trade war, and more. Transcript (auto-generated, unedited)(pdf).
We’re getting ready for tonight’s evening program with iconic investor Stanley Druckenmiller, who some have called the greatest hedge fund manager of his time. Join the conversation using #ECNYDruck or tune in to Facebook for the live broadcast at 6pm EDT. pic.twitter.com/w10adNVz0Y
“It’s very clear to me that you need a hurdle rate for investment and that if you don’t have a hurdle rate for investment, bad things happen.” #ECNYDruck
On his economic ideology: “When I got in the business it became clear to me that macroeconomic statistics of precocity the economy, they’re really great at telling where you are and where you’ve been. The best economic predictor is the inside of the stock market.” #ECNYDruck
Federal Reserve Press Release 19 Jun 2019 (pdf): "Consistent with its statutory mandate, the Committee seeks to foster maximum
employment and price stability. In support of these goals, the Committee [FOMC] decided to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent."
Below are press conference exhibits: 1. unemployment rate; 2. change in real GDP.
Federal Open Market Committee (FOMC) meeting Jun 18-19, with Fed Chair Jerome Powell news conference set for Wednesday, June 19 at 2:30 p.m. EDT. S&P expects the Fed to signal at its June policy meeting that it intends to begin cutting rates. Federal funds futures trading had been pricing in two rate cuts before the end of the year, but only a 23% probability of a cut at this June meeting. Donald Trump and Larry Summers agree that rates are too high, inflation too low, yet the Fed is still facing the results of keeping interest rates too low for too long (Ben Bernanke and Janet Yellen's QE and ZIRP) the effects of which continue throughout the economy. Background: see previous FOMC press conferences (video) and federalreserve.gov and @federalreserve.
Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA. They have been getting away with this for years, along with China and others.
Transcript of ECB President Mario Draghi, Jun 18, 2019 (pdf), video below: "... in the absence of improvement such that the (31:26) sustained return of inflation to our aim is threatened, additional stimulus will be required."
Above video published June 18, 2019 by the ECB: Introductory speech Mario Draghi, President, European Central Bank, ECB Forum on Central Banking 2019--20 Years of European Economic and Monetary Union--Sintra, Portugal, 17-19 June 2019. The European banking system lags far behind its global peers in terms of profitability and valuation (Almost Daily Grant’s, May 28). Bloomberg reports Deutsche Bank A.G. (whose shares have fallen 84% in the last nine years to less than 21% of its year-end 2018 book value) is set for another round of layoffs.
Meanwhile, Facebook just announced it will disrupt the global central banking system using a "New Digital Wallet [Calibra, domain:calibra.com] for a New Digital Currency [Libra, domain: libra.org,]" based on blockchain technology:
Today we’re sharing plans for Calibra, a newly formed Facebook[NASDAQ: FB] subsidiary whose goal is to provide financial services that will let people access and participate in the Libra network. The first product Calibra will introduce is a digital wallet for Libra, a new global currency powered by blockchain technology. The wallet will be available in Messenger, WhatsApp and as a standalone app — and we expect to launch in 2020 ....
For many people around the world, even basic financial services are still out of reach: almost half of the adults in the world don’t have an active bank account and those numbers are worse in developing countries and even worse for women. The cost of that exclusion is high — approximately 70% of small businesses in developing countries lack access to credit and $25 billion is lost by migrants every year through remittance fees. This is the challenge we’re hoping to address with Calibra, a new digital wallet that you’ll be able to use to save, send and spend Libra. From the beginning, Calibra will let you send Libra to almost anyone with a smartphone, as easily and instantly as you might send a text message and at low to no cost.
Charles Evans, President of the Federal Reserve Bank of Chicago
Charles Evans, president of the Federal Reserve Bank of Chicago, says the fundamentals of the U.S. economy are still "quite strong," and he sees growth of between 1.75 percent to 2 percent in 2019. CNBC International TV video above published Mar 25, 2019.
Meet our #K9 officers at our Detroit Branch, Gajo and Vice. As you can see, they take their workouts seriously. (Gajo leaps, while Vice rests up.) Stay tuned for more action! #dogsofthefedpic.twitter.com/sDz4L6Z8n0
Tech Review (TR 2019-03-23)--Domain Mondo's weekly review of tech investing news: Features • 1)When Will Humans Get To Mars? 2)Amazon $AMZN Media Strategy, 3)Investing: The Week & Notes: 'Japanification’ of the Eurozone OR Eurification?4)ICYMI Tech News: Google, 5G, Facebook, Qualcomm, Tesla, AMD, FIS & Worldpay, Quitting Big Tech.
1)When Will Humans Get To Mars?
Sending astronauts to Mars is a daunting prospect that will not deter NASA and private companies from trying to put humans on the red planet. The Economist.com video above published Feb 28, 2019.
2) Amazon $AMZN Media Strategy
When Amazon pursued the rights to a “Lord of the Rings” series in 2017, the company knew it would have to overcome some major obstacles to lure the J.R.R. Tolkien estate to its video-streaming platform. Amazon was a relative newcomer in video, with no track record of shepherding a blockbuster series. HBO, meanwhile, could tout its long history of hits, most notably “Game of Thrones,” a similarly epic series based on fantasy novels with a rabid fan base. Netflix, with more than 100 million subscribers, pioneered the on-demand model with hits such as “House of Cards” and “Orange is the New Black.” Apple was also in on the negotiations to acquire the rights for the upcoming TV show, according to people familiar with the matter.
Amazon CEO Jeff Bezos, a big “Lord of the Rings” fan, was promising the Amazon Studios team a huge budget to nab the series, a prequel to Tolkien’s “The Fellowship of the Ring.” But money alone wasn’t going to separate Amazon from the pack — Amazon’s $250 million offer wasn’t even the highest bid for the show’s rights, according to a person familiar with the matter. The ultimate selling point, according to people with knowledge of the negotiations, related to Amazon’s original business from over two decades ago: books.
The Tolkien estate was convinced that in promoting the series, Amazon could sell truckloads of Tolkien’s fantasy novels, including “The Hobbit” and “The Silmarillion” as well as “The Lord of the Rings.” During meetings with the Tolkien estate and publisher HarperCollins, Amazon’s Sharon Tal Yguado, who was hired from Fox in 2017, demonstrated a near encyclopedic knowledge of Tolkien’s characters, stories and geography, said the people, who asked not to be named because the talks were private.
The “Lord of the Rings” series will start production in the next two years. The huge investment in a TV series has made Hollywood wonder just how much Bezos will spend on content. So far, Amazon has dabbled across the TV spectrum, with original content such as “Lord of the Rings,” a growing back catalog of movies and shows, as well as live sports from the National Football League and the Premier League. In February, 2019, Bezos was spotted chatting with NFL Commissioner Roger Goodell at the Super Bowl, a reminder that Amazon has several opportunities in the coming years to make a big splash in America’s most lucrative sport. Meanwhile, The New York Post reported that Amazon is nearing a $3.5 billion deal to acquire the YES network, the regional sports network in New York that carries Yankees games. CNBC.com video above published Mar 13, 2019.
Dow drops more than 450 points, S&P 500 posts worst day since January amid global growth worries--CNBC.com, Friday, March 22, 2019. Despite the decline on Friday, stocks are still up sharply for the year: S&P 500 is up 11.7%, the tech-heavy NASDAQ up 15.2%, and the Dow is up 9.2%.
Editor's note: the first four days of the week (graphic below) tell the tale of FOMC Fed Chair press conference Mar 20, 2:30pm, but on Friday the 3-month vs. 10-year Treasury spread inverted for the first time since 2007, a signal (provided the inversion remains for 10 days), indicating a recession sometime within the next 2 years, perhaps sooner, particularly when the inversion is followed by a second one.
"... manufacturing activity in Germany dropped to its lowest level in more than six years in March. In France, manufacturing and services slowed down to their lowest levels in three months and two months, respectively. For the euro zone as a whole, manufacturing fell to its lowest level since April 2013. These data sent the German 10-year bund yield briefly into negative territory, its lowest level since 2016 ..."--CNBC.com
The ‘Japanification’ of the Eurozone--the eurozone is beginning to resemble Japan with its low-growth and low-inflation environment, coupled with still very loose monetary policy, according to economists at ING--"An end to current unconventional monetary policy, i.e. the negative deposit rate and ample liquidity, is not in sight and the ECB is expected to do everything it can to avoid an unwarranted tightening of its monetary stance."
Eurification: "Why is Europe caught in a lost decade – 12 years of minimal growth? There are definitely parallels with Japan, but as many differences ... the core problem is the structure behind the Euro – ill-conceived but now a “must-preserve-at-all-costs” construct that represents the “key-success” of the European polity ... The failure of the Euro structure has magnified one massive difference between Eurofication and Japanificiation. While Japan fell into stagnation at full employment, Europe is substantially below – especially the further you get from Germany. Youth unemployment is massive across the EU and it looks permanent ... Eurofication is a stalled economy, stalled consumption and long-term massive structural unemployment"--Bill Blain. Editor's note: if they are plucky, the Brits will leave the Euromess April 12.
See also Eurozone’s push for unified fiscal discipline is doomed to fail says Dr. Juan Castaneda--cityam.com.
France’s Message for the G7--President Emmanuel Macron and his Finance Minister Bruno Le Maire are using France’s G7 presidency to push an agenda that includes minimum global taxes and higher levies on tech giants like Amazon and Facebook. Le Maire’s view is there’s little choice if Europe doesn’t want to be dependent on U.S. or Chinese giants--use competition law against global tech giants, enabling the creation of European competitors.
4)ICYMI Tech News:
EU vs Google: The EU fines Google €1.49B for “abusive practices in online advertising” and breaching EU antitrust rules--europa.eu.
Google debuts Stadia, a game streaming service for Chrome, Android, and TVs that lets users “instantly” play games, also coming in 2019 with 4K HDR support at 60FPS--youtube.com. Cutting through the 5G hype: survey shows telcos’ nuanced views--mckinsey.comOperators see a marginally positive business case, expect rollout at scale to take until 2022, and don’t think the increase in capital-expense-to-sales ratio will be as big as skeptics claim.
Facebook: Zuckerberg planning to change Facebook from an open connected platform to a private, encrypted network encompassing its Facebook platform, WhatsApp and Instagram.
Qualcomm: Misunderstood Legal Ramifications And 5G Tailwinds--seekingalpha.com.
Tesla--How Not To Run A Company--A Mess at the Top & Moody’s Gets Nervous, Decision-Making Chaos, Epic Strategy Flip-Flops--wolfstreet.com. AMD: Advanced Mass Delusions--seekingalpha.com
Personal Tech: Quitting the five tech giants, full series:Day 1: Amazon; Day 2: Facebook; Day 3: Google; Day 4: Microsoft; Day 5: Apple.
Editor's Note: I'm minimal Microsoft, zero Apple, zero Facebook, but use Google daily, and use Amazon almost daily. How about you?
And social media?
"Oldsters are on Facebook. Hipsters are on Twitter and vapidity rules on Instagram. As for Snapchat, it’s like Second Life, something overhyped that never broke through"--Bob Lefsetz.
FOMC Press Conference LIVE March 20, 2019, 2:30pm EDT
FOMC Press Conference LIVEMarch 20, 2019, at 2:30 pm EDT, with the Fed Chair, following FOMC Meeting associated with a Summary of Economic Projections. Summary: no rate-hikes in 2019, one rate-hike in 2020, and balance sheet normalization ends in September.
The Federal Open Market Committee (FOMC) consists of twelve members--the seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining eleven Reserve Bank presidents, who serve one-year terms on a rotating basis. The rotating seats are filled from the following four groups of Banks, one Bank president from each group: Boston, Philadelphia, and Richmond; Cleveland and Chicago; Atlanta, St. Louis, and Dallas; and Minneapolis, Kansas City, and San Francisco. Nonvoting Reserve Bank presidents attend the meetings of the Committee, participate in the discussions, and contribute to the Committee's assessment of the economy and policy options.
The FOMC holds eight regularly scheduled meetings per year. At these meetings, the Committee reviews economic and financial conditions, determines the appropriate stance of monetary policy, and assesses the risks to its long-run goals of price stability and sustainable economic growth.
Tech Review (TR 2019-03-16)--Domain Mondo's weekly review of tech investing news: Features • 1)Extracting Huawei From Telecom Networks Impossible? 2)China's Headwinds, 3)Investing: The Week & Investor Notes: the Real Recovery vs Life Support,4)ICYMI Tech News: Facebook, Google,Amazon, Apple, Turo, Boeing, GE. 1)Extracting Huawei From Telecom Networks Impossible?
Allies are under U.S. government pressure to shun China's Huawei, but Huawei's prevalence in existing telecom networks and dominance in 5G technology make that nearly impossible according to this video published Mar 11, 2019, by the Wall Street Journal (wsj.com).
2) China will face a lot of growth headwinds this year, analyst predicts
Le Xia, chief economist for Asia BBVA discusses the Chinese trade and economy outlook. CNBC International TV video above published Mar 4, 2019.
Effective Federal Funds Rate--Above: Jul 1954 - Feb 2019. Below: Feb, 2009 - Feb 2019.
Source: https://fred.stlouisfed.org/series/FEDFUNDS. Editor's note: "real recovery" (Fed Funds rate >.50%)started December 2016 after the election of Donald Trump (before then Janet Yellen kept rates too low, for too long, and was doing everything she could to "help" Hillary during election year 2016).The Eurozone (ECB) is still on "life support." The UK (Bank of England) left "life support" in 2018. Reads of the Week:
Store of value--A 2018 research paper from the Federal Reserve Bank of Chicago estimates that 60 percent of all U.S. bills and almost 80 percent of all $100 bills are now overseas. That's up from 15 to 30 percent around 1980, according to research from Federal Reserve Board economist Ruth Judson. She found that economic and political instability contribute to this demand--cnbc.com.
Consequences of “Leaving Interest Rates Very Low for a Long Time”--Bank of Canada Governor Poloz--A litany of problems, from too much debt to deflating housing bubbles in Vancouver and Toronto--wolfstreet.com.
Three Things You Should Know About the Great Recession--aier.org: it was preceded by monetary expansion, exacerbated by monetary contraction, and resulted in a radicalchange to the day-to-day conduct of monetary policy.
“Exceptional performance has to come from diverging from the crowd”--Howard Marks
Amazon: It Looks Like Day 2--seekingalpha.com. Amazon's massive opportunities in first-party eCommerce, Third-Party Services, AWS, and Advertising should warrant Amazon's full attention. It's time for the king of online to get back to its roots and drop its Whole Foods acquisition in the recycle bin--seekingalpha.com.
Apple has $245 billion in cash on hand, up from $237.1 billion reported at the end of FY2018. See also: Spotify'santitrust complaint against Apple with the European Commission claims App Store rules limit choice and stifle competition--musically.com. See also EU antitrust authority considering Apple probe.
Antitrust & Big Tech--US Senator Elizabeth Warren proposes breaking up Amazon, Google, and Facebook, as part of her 2020 Presidential campaign platform.
Disintermediation: HertzIs One Recession Away From Bankruptcy--While we can argue that Lyft and Uber might not be direct competitors, it is absolutely undeniable that every Turo (Domain: turo.com) transaction represents a transaction lost by traditional rental car companies--zerohedge.com.
Boeing 737 Max: Pilots, FAA knew there was a problem with the Boeing 737 Max 8, licensed commercial pilot says.
GE shares plummet after CEO Culp said the company was beginning to "embrace our reality."Remember when companies engaged in due diligencebefore they pursued multi billion deals?
Personal Tech: Microsoft Windows 10 Home edition users baffled by updates--zdnet.com. Editor's note: just get a Chromebook.
Bernie Sanders' 2016 Advisor On Trump's Economy And Modern Monetary Theory
CNBC video above published Mar 4, 2019: Modern Monetary Theory (MMT) is gaining traction in American politics, energizing the progressive left and roiling deficit hawks. Stephanie Kelton, who advised Bernie Sanders' 2016 presidential campaign, explains the basics.
2020 Election: She says Democrat presidential hopefuls are swinging for the fences with ambitious policy proposals while Trump appears to have changed his thinking on the deficit and debt since his 2016 run. On headwinds facing the economy, Kelton says she sees an "extraordinarily resilient" U.S. economy despite a "real" global slowdown and a small chance of additional rate hikes from the Fed.
Stephanie Kelton is a proponent of Modern Monetary Theory (MMT), the economic rational cited by rising political stars like Rep. Alexandria Ocasio-Cortez D-N.Y. She is currently a professor of public policy and economics at Stony Brook University. Previously, she served as chief economist for the Democrats on the U.S. Senate Budget Committee and was a senior economic advisor to Bernie Sanders ' 2016 presidential campaign.
Editor's note: key questions: what is your definition of "full employment"? What political system has the necessary discipline to apply the constraints required for an effective long-term MMT policy?
See also:
Paul Krugman Asked Me About Modern Monetary Theory. Here Are 4 Answers. Deficit levels, interest rates and the tradeoff between fiscal and monetary policy, by Stephanie Kelton, March 1, 2019--bloomberg.com
The left’s embrace of modern monetary theory is a recipe for disaster by Larry Summers--WashingtonPost.com.
Modern Monetary Nonsense, Mar 4, 2019, by Kenneth Rogoff: "... Contrary to widespread opinion, the US central bank is not an independent financial entity: the [U.S.] government owns it lock, stock, and barrel. Unfortunately, the Fed itself is responsible for a good deal of the confusion surrounding the use of its balance sheet. In the years following the 2008 financial crisis, the Fed engaged in massive “quantitative easing” (QE), whereby it bought up very long-term government debt in exchange for bank reserves, and tried to convince the American public that this magically stimulated the economy. QE, when it consists simply of buying government bonds, is smoke and mirrors ..."--project-syndicate.org.
Running on MMT (Wonkish)--Trying to get this debate beyond Calvinball by Paul Krugman--NYTimes.com.
"In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 2-1/4 to 2-1/2 percent."--FOMC Press Release, Dec 19, 2018 (pdf). Voting for the FOMC monetary policy action were: Jerome H. Powell, Chairman; John C. Williams, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Mary C. Daly; Loretta J. Mester; and Randal K. Quarles. See also Implementation Note issued December 19, 2018.
FOMC Meeting December 18-19. 2018: The Federal Reserve's highly-anticipated December Federal Open Market Committee (FOMC) meeting, Tuesday-Wednesday, December 18-19, 2018. Consensus of economists is that the Fed will raise interest rates by a quarter-point to a range of between 2.25% and 2.50% and that the Fed's closely-watched dot plot will indicate two rate hikes in 2019. Any indication of the Fed's plans for the future may have an even greater impact on markets and many analysts will closely follow the LIVE press conference of Federal Reserve Chairman Jerome Powell, at 2:30 p.m. EST, Dec 19, 2018. “Fed drift” is a known market anomaly, where the S&P 500 often generates most of its annual return in the 3 days around Federal Reserve meetings.
On Monday, DoubleLine Capital CEO Jeff Gundlach told CNBC-TV that the Federal Reserve should not hike its benchmark overnight lending rate in December. "I think they shouldn't raise them this week. The bond market is basically saying, 'Fed you've got no way you should be raising interest rates," saidGundlach.
The Federal Open Market Committee (FOMC) consists of twelve members--the seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining eleven Reserve Bank presidents, who serve one-year terms on a rotating basis. The rotating seats are filled from the following four groups of Banks, one Bank president from each group: Boston, Philadelphia, and Richmond; Cleveland and Chicago; Atlanta, St. Louis, and Dallas; and Minneapolis, Kansas City, and San Francisco. Nonvoting Reserve Bank presidents attend the meetings of the Committee, participate in the discussions, and contribute to the Committee's assessment of the economy and policy options.
The FOMC holds eight regularly scheduled meetings per year. At these meetings, the Committee reviews economic and financial conditions, determines the appropriate stance of monetary policy, and assesses the risks to its long-run goals of price stability and sustainable economic growth.
Federal Reserve Chairman Jerome Powell's Full Speech on the US Economy
Video above published Nov 28, 2018: Fed Chairman Jerome Powell spoke Nov 28, 2018, at the Economic Club of New York (domain: econclubny.org) on the state of the U.S. economy and the pace of interest rates.
Jerome H. Powell took office as Chairman of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body.
The stock market reacted very favorably to Chairman Powell's speech:
AT THE CLOSE: - Dow and S&P 500 post 2nd best day of the year - Nasdaq has best day since October 25 pic.twitter.com/6u5GhViqJl
The Federal Reserve (federalreserve.gov) FOMC started its two-day policy meeting on Tuesday, and as expected announced another increase in near-term interest rates of 25 basis points [0.25%] on Wednesday, as well as release a Summary of Economic Projections. A press conference by the Federal Reserve Chairman Jerome H. Powell scheduled for Wednesday afternoon at approximately 2:30 pm EDT, LIVE here embed above.
The Fed - Federal Open Market Committee (FOMC) | federalreserve.gov: 2018 Committee Members Jerome H. Powell, Board of Governors, Chairman; William C. Dudley, New York, Vice Chairman; Thomas I. Barkin, Richmond; Raphael W. Bostic, Atlanta; Lael Brainard, Board of Governors; Loretta J. Mester, Cleveland; Randal K. Quarles, Board of Governors; John C. Williams, San Francisco.
"In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1-1/2 to 1-3/4 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation."
The Fed is still a long way from normalizing interest rates says Charles Schwab:
FoxBusiness.com video above published Mar 16, 2018: Charles Schwab Corporation founder Charles Schwab discusses the Fed, President Trump’s tariffs plan and the impact on the U.S. labor force.
