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3/ The Fed in 6 weeks bought more Treasuries than they did in 10 years under Bernanke & Yellen. Corporate borrowing which usually goes down in a recession and had already went up leading into the crisis went up $450B vs. down $500B during GFC
4/ We saw a massive increase in liquidity / stimulus which is the background & all of this stimulus has flown into financial markets / commods.
5/ Since 2018 M2 in the US has grown 25% more than nominal GDP. In China M2 to nominal GDP is where it was 3 years ago. China hasn't borrowed anything from their future & we've had a massive liquidity input & very little investment.
6/ It's primarily been transfer payments & Fed Stimulus. We've done a horrific job with the virus. It's possible & probable that all this stimulus will be in place when we unleash the biggest increase in pent up demand since the 1920s.
7/ Overriding theme is inflation relative to what policy makers think. Because of policy maker response I've found it's better to have a matrix. To play reflation he has a short treasury position (primarily at the long end) b.c Fed could drive him crazy
8/ He also has a large position in commodities. The longer the Fed tries to keep rates suppressed the more he wins on commods, the quicker they respond he will have a bigger problem with commods. He is also "very very" short dollar.
9/ "If we get 4-5% inflation in the US a few years out & bond yields rise that's very negative historically for growth stocks relative to other stocks. On the other hand the comparisons with 2000 are ridiculous.
10/ The reason they are ridiculous is we had a double whammy of raging mania of overvaluation but also earnings were ending as those companies that were growing rapidly then were building the Internet themselves and that was done so there was no way to generate earnings."
11/ The combination of valuation & challenged bond markets could certainly make growth stocks in a challenged environment the next 5 years relative to what they've been.
12/ On the cloud we are in the 3rd-4th inning. COVID-19 had us jump from the 1st to 3rd-4th & if anything every company is speeding up their transition.
13/ Within tech itself $AMZN / $MSFT have been big underperformers in the last 2-3 months. Market has rotated into 40x sales companies or radioactive reopening stocks.
If you look at $AMZN $MSFT $GOOGL they are not overvalued.
If you look at $AMZN $MSFT $GOOGL they are not overvalued.
14/ They are GARP names that are currently out of favor. If the Fed continues to push the envelope he's not worried about those stocks & thinks they will do well.
15/ He thinks Asia is the big winner coming out of COVID-19. "$INTC has thrown in the towel so Asia owns Foundry, Memory, they are ahead in Robotics. The next 5 years Asia looks a lot better relative to the US."
16/ At some point we need to pay back in terms of productivity, higher rates, lower dollar & all the transfer payments we've made.
17/ Druck has never recorded a down year. When asked about risk management? He said "a lot of it is luck. I've been deep in the hole 3-4 years & in every year Dec 31 was a coincidence he was up." If you looked at May 31-May 31 there would have been some down years.
18/ The fact that he can trade 5-6 asset classes does a few things. "It can point you in the right direction & if you believe something you can make big gains."
19/ Currencies & bonds trade 24 hours a day and are very liquid which allow you to change your mind. Which he has had to do many times.
20/ It also gives you discipline to not play around in an area that is dangerous. Equity only investors need to be in equities. But if you're a macro investor you don't need to be in equities at any given point in time.
21/ Druck has never lost money big in credit; the only time he bets in credit is every 8 years after there's a big debacle in credit & that's when he buys a bunch of it. If he was a credit investor he would've lost money during those periods.
22/ Very much of philosophy of put all your eggs in one basket & watch it closely. Every investor has 3-4 big winners per year. Usually you know what they are. When you get in trouble is when you're not focused on your portfolio.
23/ "If you put 50-70% of assets in one asset class you're very focused. I've never used VaR. Very unsophisticated I watch my PnL everyday & if it starts acting in a strange manner relative to what I'd expect in a matrix my antenna would go up
24/ I always use PnL I've found all risk models are great until chaos happens & then all correlations break down & it sucks you into false security. If you watch your PnL much better warning system than some of these mathematical models out there. "
25/ On $BTC is it the "mother of all asset bubbles or something genuine" he said maybe both.
It wouldn't do what it's doing without Central Bank behavior. He was skeptical 3-4 years ago when it first came out.
It wouldn't do what it's doing without Central Bank behavior. He was skeptical 3-4 years ago when it first came out.
26/ Now they've done an unbelievable marketing job. It's been around 13 years & younger millennials look at $BTC the way he looks at Gold. He has doubts whether $BTC itself would be anything other than a SOV
27/ He claims $BTC has problems as a currency because it uses a lot of energy & it's volatile. He thinks it's an asset class, he owns some of it, it's gone up a lot since he bought it. He doesn't believe in it. He doesn't not believe in it. He doesn't know.
28/ On capitalism- He's worried b.c we have not engaged in capitalism for some time. The Central Bank has bastardized the most important price in the world (cost of money). We have crony capitalism.
29/ "Even in the best days of capitalism always a stain in the US. We are a meritocracy by & large but a subsector of society is in a caste system. We have neighborhoods in our country where millions of kids don't have opportunity to pull up bootstraps & work hard.
30/ That's always been there & is something we need to address. Not sure events of last summer were a bad thing. In his view they were a good thing b.c people need to be woken up to fact that American Dream is a great thing but there are
31/ a significant amount of kids without access to the American dream like he had."
Druck is the GOAT & while he's not always right (and he'll be the first to admit that) he's always insightful & provides a unique lens through which he views the world
Druck is the GOAT & while he's not always right (and he'll be the first to admit that) he's always insightful & provides a unique lens through which he views the world
