Billionaire Warns of Looming Stock Market Crash
The Federal Reserve’s reckless monetary policies have created huge distortions in the global economy, leaving investors dangerously exposed to a stock market crash in 2016.
At least that’s the opinion of Stanley Druckenmiller. Speaking at the Sohn Investment Conference in New York on Wednesday, the billionaire investor blasted Fed Chair Janet Yellen and her predecessors. Low interest rates, he argued, have created enormous asset bubbles, setting the stage for a stock market crash. (Source: “A Very Bearish Stanley Druckenmiller Blows Up At The Fed; Reveals His Biggest “Currency” Position,” Zero Hedge, May 5, 2016.)
“Volatility in global equity markets over the past year, which often precedes a major trend change, suggests that their risk/reward is negative without substantially lower prices and/or structural reform. Don’t hold your breath for the latter.” (Source: Ibid.)
“I now feel the weight of the evidence has shifted the other way; higher valuations, three more years of unproductive corporate behavior, limits to further easing and excessive borrowing from the future suggest that the bull market is exhausting itself.” (Source: Ibid.)
Druckenmiller is not a household name, but he’s definitely a voice investors should listen to. During his time running Duquesne Capital, Druckenmiller generated a 30% compounded annual return for his investors. At the time of the fund’s closing in 2010, he oversaw over $12.0 billion in assets. (Source: “Stanley Druckenmiller,” Wikipedia, last accessed May 5, 2016.)
How can investors protect themselves from a stock market crash in 2016? As bankers experiment with “the absurd notion of negative interest rates,” Druckenmiller said he’s protecting his wealth by owning gold. Over the past few months, the Wall Street insider has been building up a huge position in precious metals.
“Some regard it as a metal, we regard it as a currency and it remains our largest currency allocation,” he concluded, without naming the metal.