Submitted by Taps Coogan on the 28th of December 2019 to The Sounding Line.

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Legendary investor Stanley Druckenmiller, arguably the most successful hedge fund manager alive today, recently sat down with Bloomberg to share his outlook on the global economy and markets. He describes what is likely to be his most bullish outlook in recent memory, noting that while the combination of unduly stimulative monetary policy, large fiscal stimulus, and the easing of trade tensions may be setting up a 2007-like bubble, there are no signs of it popping anytime soon.

Some excerpts from Stanley Druckenmiller:

“You have very low unemployment here. You have fiscal stimulus in Japan. You have fiscal stimulus and a lot of confidence coming to Britain. We’re running a $1 trillion deficit at full employment. Apparently, we’re going to have some kind of ‘green’ stimulus in Europe and we have negative real rates everywhere and negative absolute rates in a lot of places. So, with the kind of unprecedented monetary stimulus relative to the circumstances, it’s hard to have anything other than a constructive view on markets, risk, and the economy on an intermediate term. So that’s what I have.”

“I have always believed that expansions usually end with tight monetary policy or credit problems and I think what we are doing is definitely borrowing from the future and will definitely end badly, as the 2007 period did, but… that could be years (from now). I’m 66, so I could be dead by the time it happens. So, the intermediate term, technicals are good. Breadth is at an all time high. The economy is good. If anything, our biggest problem going in, once the Fed shifted away from their QT and tightening program, our biggest problem was …worries over global trade and I’m not saying everything is all peaches and roses now, but on a rate of change basis, if anything there is a de-escalation not an escalation there. So for now, ‘all systems go.'”

“Franky, when I look at what’s going on in Europe, and then when I look at what’s going on in Britain, I was always sort of a Brexiteer, because they did perfectly fine for 500 years without that union of countries down there that seem to all hate each other and can’t make a decision on anything. So, I actually think (Brexit) is going to be very good for the British economy. I separate myself from most on that… I would expect investment to fly into that country and… I think they’ll do very well there…”

“First of all, there are 14 recognized measures of inflation. 12 of them are above 2%. (The Fed’s) preferred measure, Core PCE, is at 1.7%. The risks they are taking with regard to mis-allocation of resources, bubbles, all that stuff, because something is at 1.7% as opposed to 2%, and now they’re talking about a makeup period? …Monetary policy is supposed to look forward not backward. So why are we looking backward? …I’d like to remind everyone, because now they’ve turned it into a mandate. There is no mandate for 2%. The mandate states very clearly “price stability and full employment.” …I don’t know how 1.7% is not like the greatest success ever, if we are talking about price stability. So this thing about it being the greatest challenge of our time to get (inflation) from 1.7% to 2%, when we don’t even know if it is 1% or 3% because the measurements are so random, I just find it astonishing… You know when the last technological revolution was? It was the late 1800s and we had 2% deflation and 8% real growth for ten years… There is nothing pernicious about deflation if it is driven from the supply side.”

There is much more to the interview, so enjoy it above.

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