Iconic hedge fund manager Stanley Druckenmiller, the founder of Duquesne Capital Management, skewered the Federal Reserve at the CNBC Delivering Alpha conference.
He says today’s Federal Reserve policy is as “baffling” as he’s ever seen.
Druckenmiller said that the current Fed policy “makes no sense from a risk/reward perspective” and that it will “end badly.”
He doesn’t see it being like 2008 or 2009, though, because it’s “not systemic”.
Druckenmiller explained that it’s textbook to use monetary policy after a financial crisis to repair balance sheets.
However, Druckenmiller pointed out that the labour market has “largely healed”, industrial production is at a new high and that retail sales have normalized.
He also compared the U.S. CPI to Japan’s Core CPI. He said there’s “no similarity whatsoever” to Japan’s deflation and that it’s time to move on from that argument.
“If you landed from Mars and saw the five charts I just showed, would you understand the Fed’s actions?” he asked.
Druckenmiller said that he really “hopes he’s wrong”, but thinks the Fed’s policy will have bad effects.
“I made a living analysing the future, not the past. The Fed’s monetary experiment will be more disruptive down the road than anticipated,” Druckenmiller said.
He continued: “Every ounce of intuition in my body is that the potential costs have crossed the potential benefits in Fed policies.”
“I don’t know what’s in the Fed’s forecasting record that allows them to make such a bet.”