Legendary hedge fund manager Stanley Druckenmiller goes for the gold

Stanley Druckenmiller generated gains of more than 30% annually on his Duquesne Capital hedge fund over a thirty year period.  He is estimated to be worth nearly $3 billion.  In 2010, Druckenmiller, like his mentor George Soros, closed his hedge fund and opened a family office.  In recent months, Druckenmiller has consistently warned of a possible stock market crash and economic breakdown.  In a speech before the Lost Tree Club in January, he said:

“[T]he point I was making earlier is there was a great enabler [to the 2007-2008 financial crisis], and that was the Federal Reserve pushing people out of the risk curve.  And what I just can’t understand for the life of me, we’ve done Dodd-Frank, we got 5000 people watching Jamie Dimon when he goes to the bathroom.  I mean all this stuff going on to supposedly prevent the next financial crisis.  And if you look at the real root cause behind the financial crisis, we’re doubling down.  Our monetary policy is so much more reckless and so much more aggressively pushing people in this room and everybody else out of the risk curve that we’re doubling down on the same policy that really put us there and enabled those bad actors to do what they do.  Now no matter what you want to say about them, if we had had five or six percent interest rates, it would have never happened because they couldn’t have gotten the money to do it.”

In other words, Druckenmiller believes that the Fed has inflated another financial bubble, and now, if his investment portfolio is an indicator, he believes it is about to burst. As you can see in the table below (with thanks to Zero Hedge), Druckenmiller is acting on his concerns with a major position in gold. In fact, Duquesne’s gold holdings far outweigh any other single investment in its portfolio.  Granted it owns paper gold rather than the real thing in the form of coins and bullion, but at the same time, the strong gold position tells us unambiguously where one of the most successful investors in modern history believes the financial markets are going and how one should go about hedging it.  Returning to our opening paragraph, I want to re-emphasize that Druckenmiller is now investing his own money for his own benefit and that of his family.

Later in his appearance Druckenmiller says, “This is crazy stuff we’re doing.  So I would say you have be on the alert to that ending badly.”