I’ve met Stan Druckenmiller a couple times starting about 15 years ago at a Robin Hood Charity Event that he spoke at. He’s made billions of dollars investing money for George Soros and his own clients in the hedge fund he ran for 20 years. I ran across his name over the weekend, as most of you probably did too, in must-read articles like Stan Druckenmiller: Get Out of the Stock Market! after his appearance at the Sohn Conference.
Druck, as they call him, was wildly bullish on gold, bearish on financial engineering and the Corporate Debt Bubble and the Fed’s endless easy money policies and, most headline-making of all, the stock market.
My own analysis and writings reflect much of what Stan Druckenmiller is talking about with gold, stocks, the Fed, corporate debt/financial engineering. The question is one of timing though. Many of the reasons behind his/my analysis have been true for the last five years…another five years of Fed-enabled corporate debt/financial engineering games isn’t out of question, is it?
I am writing up a new report about the short-term and long-term outlook for gold which is obviously related to all of these same topics that Druckenmiller is highlighting. Long-story short for now though, is that while I question the timing of a stock market crash, all signs do point towards a higher price for gold both near-term and a 5-10x increase in the value of gold in my lifetime. Negative interest rates, more QE and a race to devalue every major currency in the global currency wars is quite bullish for gold and the timing of all those things are actually impacting the gold market right now.
I found this comment from @LunaticTrader to be very insightful on this same topic: “Instead of ‘risk-free return’ bonds now offer ‘return-free risk’. I wouldn’t know why anybody would want to touch bonds with the proverbial 10 foot pole when interest rates are zero (if not negative). But I don’t see that as a reason to get out of stocks, on the contrary. The value of know-how remains, even if we may pay with seashells, bitcoins or gold 10 years down the road…”
He continues: “Let’s also not forget Zimbabwe in 1997. After years of money printing (~QE) their currency and bond market started going down the drain. But this is how their stock market did. Stocks retained at least some value ( and many of those companies still exist) , while cash and bonds became worthless.”
The point that Lunie, as I like to call him, is making is that some of the same pressures that are likely to cause currencies to crash can actually be a tailwind for stock markets. And that is exactly the point I’ve underscoring for the last five years as I’ve outlined how the market was set up to go into another bubble even as the current trajectory of our financial system, economy and political system is unsustainable for the long-term.
I’m not exactly a screaming stock market bull right now, as I was back in 2010-2012, but I’m not exactly ready to call a top either.
Gold is a different story though. Whether it’s Trump, Clinton or anybody else in the White House, these trillions of dollars of economic movement and debt and financial engineering from governments and corporations and wars and starvation and natural disasters and the risk of our Internet/electrical/defense networks failing, and so on…the fiat currencies vs precious metals vs alt-currencies fundamentals fundamentals can’t be undone now.
I’ll finish by reminding you that we learned in 2008’s financial crisis that paper promises from banks aren’t worth the paper they’re written on when the crap hits the fan. So if you’re using GLD or SLV or other paper promise precious metal ETFs as hedge against economic/financial crises, then it sort of defeats the purpose of using precious metals as a hedge against Black Swans or other crises.
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The Fitbit call options we own are mostly lottery tickets, since the guidance from this quarter’s earnings report was full of extra spending, the next catalyst will probably be the next earnings report. I do think the stock has some limited downside margin of safety in that they have $600MM in cash (about $3 per share) and the guidance for the year is still over $1 per share in earnings. The CEO https://www.crunchbase.com/per… has built this company from the ground up and I think he’s doing a pretty great job of building for the long-term, including the higher spend over the next 90 days. I’m holding my $FIT position steady after all and if it gets closer to $10, I’ll probably start to build my $FIT position up into a larger-size position.