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Billionaire Flunks "Bidenomics"

Posted May 31, 2024

Matt Insley

By Matt Insley

Billionaire Flunks "Bidenomics"

Billionaire investor Stanley Druckenmiller, who manages the Duquesne Family Office, doesn’t have the name recognition of, say, Warren Buffett. 

He’s also not an attention-seeker. But he didn’t hold back during a CNBC interview earlier this month…

“Bidenomics, if I were a professor, I'd give him an F,” Druckenmiller says. And he’d assign a failing grade not only to Biden but to the Treasury and Fed as well. 

“They've spent and spent and spent, and my new fear now is that spending and the [resulting] interest rates on the debt that's been created are going to crowd out some of the innovation that otherwise would have taken place.

“We've got a 7% budget deficit at full employment,” he adds. “It's just unheard of.” 

Like I said, Druckenmiller also has a bone to pick with Fed Chair Jerome Powell for getting the market hot and bothered in late 2023 after insinuating rate cuts were imminent. 

“They set financial conditions on fire again,” Druckenmiller complains. 

“Just say nothing and do what the Fed chair used to do,” he says. “When you need to raise rates, raise them; when you need to cut them, cut them.”

Nevertheless, because of Powell’s “Fed speak,” the market was euphoric as economist after economist predicted as many as six rate cuts this year.

However, instead of rate cuts… 

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Your Rundown for Friday, May 31, 2024...

A Bold Wager 

In early May, FOMC members voted unanimously to hold its benchmark short-term borrowing rate in a range of 5.25-5.5% — where it’s been paused since July 2023. 

“Various participants mentioned a willingness to tighten policy further,” the Fed minutes emphasize, “should risks to inflation materialize in a way that such an action became appropriate.”

Again, Powell’s telegraphing a message to Wall Street. This time: Cool your jets

But even before the Fed minutes were released, former Trump economic adviser Peter Navarro — currently serving a fourth-month prison sentence for contempt of Congress — spoke candidly about Powell (whom he dubs “Mnuchin’s folly.”)

“Powell raised rates too fast under Trump and choked off growth,” Navarro observed. “To keep his job, Powell then raised rates too slowly to contain inflation under Biden.” 

Speaking of Trump, Druckenmiller must be convinced someone other than Biden will be the election-day victor. 

[This just in: Trump was convicted yesterday on 34 felony counts; he vows to appeal the verdict. Sentencing in July. Of course, we’ll have more as matters come into focus.]

Druckenmiller’s been doing some portfolio fine-turning… 

Through his Duquesne Family Office, Druckenmiller cut some Big Tech names — most notably, the biggest tech name this year: Nvidia. 

At the same time, “Druckenmiller invested a 15% chunk of his portfolio in call options on the iShares Russell 2000 ETF (IWM) in the first quarter,” MarketWatch notes. 

“On its face, the Russell 2000 bet would indicate that his firm smells opportunity for struggling small caps, which investors have struggled to love or even like in recent years. 

“Small-cap stocks are [more] sensitive to rate hikes,” says MarketWatch, “as those companies often need to borrow money at times, more so than their larger compatriots.” 

What would be the game-changer for small-cap stocks then? 

Lower interest rates.

Again, according to Peter Navarro, Powell’s days are numbered. To his way of thinking, it doesn’t matter who sits in the Oval Office next. Powell’s done. 

So… rate cuts ahead?

If you want to take a cue from one of the world’s most acclaimed investors, IWM could very well see impressive returns based on lower interest rates. 

Just remember, Druckenmill has billions of dollars to lose and still stay solvent. Proceed with caution through this minefield of an election year. 

Market Rundown for Friday, May 31, 2024

The S&P 500 is up 0.10% to 5,240. 

Oil is up 0.15% to $78.05 for a barrel of WTI. 

Gold is up 0.40% to $2,375.80 per ounce. 

And Bitcoin is down 1.25%, just under $68K. 

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