Druckenmiller - Notes: Interview at DealBook Conference 2015

Everybody is managing for the short-term now (government, business, Fed, money managers)
'08-09 was bad situation partly because Fed was late in recognizing situation in '06
ZIRP and QE for six years: investors moved out on the risk curve, emerging market governments
acted without market restraints (Brazil, Turkey). Corporations buying back stock at record prices
Pulling demand forward today. Not a permanent boost. Borrowing from the future. There has
been such a misallocation of resources, "chickens will come home to roost"
It's unnecessary. Causing irrational behavior
On buybacks: corporations are just like the rest of us. Bought back record amounts of stock in
2007. Now borrowed $2trn to do $2.2trn in buybacks over the last four years
In a bubble of "short-term behavior." Government, business, Fed and money managers
Not in cash. "Playing around like everybody else"
Working under the assumption that we may have started a primary bear market in July, mainly
because about 80-90% of stocks had been going down for a year which tends to precede a bear
market. Nifty Fifty when he started in the business, now the "Nifty Ten"
Hanging out in the Nifty Ten, short value stocks. Short the Euro
One of his greatest assets: being open-minded, can change mind very quickly
On Euro: May 2014, US and European monetary policy flipped: Draghi decided on QE and
lowered rate. Bernanke decided on tapering. Never seen a currency move of the intensity of the
last 11 months. Currency moves tend to last 2-3 years but take a timeout in the middle
We are in a timeout like that in the Euro. Draghi pretty much pre-announced step two, could be
another cut in the deposit rate or more QE or both. Even more "heavy breathing" at the Fed
Today: mini version of what happened in May 2014. Currency moves of 2-3 years and it's only
been 1.5 years, policies are "sort of flipping," traders have exited. "Working under the
assumption that leg two has started"
"Open-minded" to the idea that bear market in equities has started. Was positioned that way
but covered well. Didn't play rally well, got out of the way.
Now neutral. Long high beta, high growth. Short value companies that need cyclical growth
Could turn very bearish, can't see himself getting very bullish. On the sidelines in equities
Looked at Amazon and IBM. Last 19 quarters, Amazon missed nine times. They don't give a
damn. IBM has missed three quarters since 2006. They really care about quarterly earnings
IBM: 14 quarters in a row of declining sales. R&D has shrunk as a percentage of sales. From 6.2%
to 5.9%. At Amazon it has gone from 5% to 10%
Amazon: Bezos is serial-monopolist. AWS is exploding. Amazon was 22% of US retail sales
growth. Can pursue share now, increase margins in the future