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General Category => General Discussion => Topic started by: Liberty on November 14, 2018, 03:37:42 AM

Title: Stanley Druckenmiller interview (2018)
Post by: Liberty on November 14, 2018, 03:37:42 AM
https://www.realvision.com/stanley-druckenmiller-interview

It used to be behind a pay Wall, but they released it.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: thowed on November 14, 2018, 04:05:24 AM
Awesome - many thanks for sharing this - I find he often has something to interesting to say, but I didn't feel strongly enough to pay for it.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: alpha on November 14, 2018, 05:15:48 AM
Thanks, I wanted to watch this when it was first released but didn't want to hand over my CC# to that site  :)
Title: Re: Stanley Druckenmiller interview (2018)
Post by: VersaillesinNY on November 14, 2018, 01:31:58 PM
Many thanks Liberty!
Title: Re: Stanley Druckenmiller interview (2018)
Post by: tede02 on November 14, 2018, 02:38:39 PM
This was excellent. It's always interesting hearing from guys like Druckenmiller. The way he's been successful is so different from a traditional value investing approach.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: DocSnowball on November 15, 2018, 10:56:29 AM
Thanks for sharing! This has made me think very carefully about studying the balance sheet for debt, liquidity and adequate access to capital (matching the life stage of the company) for any investments I make in this rising rate environment
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Liberty on November 15, 2018, 10:59:58 AM
Like Malone, it's clear how important Druckenmiller's mariage is to him. Good lesson to remember there, for the young guys & gals watching this and just starting out in life.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: DocSnowball on November 15, 2018, 11:51:56 AM
Like Malone, it's clear how important Druckenmiller's mariage is to him. Good lesson to remember there, for the young guys & gals watching this and just starting out in life.

The best financial planning advice I received was in six words..."One small house One hot spouse". Throw in investing in your children as the best form of long term compounding and one is all set!
Title: Re: Stanley Druckenmiller interview (2018)
Post by: SHDL on November 15, 2018, 01:53:23 PM
Liberty, thanks.  This was by far the best interview of him I've ever seen.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: nickenumbers on November 15, 2018, 02:24:36 PM
It was a good interview.  I like how he identified that it is a shame to have all these talented young minds bypassing medicine, in favor of financial markets and computer science.

He is a smart dude.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Nell-e on November 15, 2018, 05:03:18 PM
At the 17 minute 30 sec mark, does anyone know what Druckenmiller is talking about when he says "When you take away price action vs news from someone who's used price action vs news [for 35 years as their major tool, it's tough]'  ?

Can anyone further clarify the 'price action vs news tool' ?



 
Title: Re: Stanley Druckenmiller interview (2018)
Post by: sleepydragon on November 15, 2018, 05:07:29 PM
At the 17 minute 30 sec mark, does anyone know what Druckenmiller is talking about when he says "When you take away price action vs news from someone who's used price action vs news [for 35 years as their major tool, it's tough]'  ?

Can anyone further clarify the 'price action vs news tool' ?

I think he is talking about algos/quant who uses news and prices as signals to trade quickly
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Viking on November 15, 2018, 09:31:01 PM
Liberty, i owe you a beer somewhere some day :-)  Thank you for posting the link.

A number of things have been rattling around in my head this year.  Most importantly, i have been trying to reconcile the end of QE (and reversal in US) and much higher interest rates (from the Fed) with what happens to the stock market.

Druckenmiller says the Fed will continue raising rates until there is a major event (a big stock market correction or worse). The Fed really has no choice.

I have been trying to raise cash; it has been a slow process because the market has been weak (especially financials). Perhaps i need to accelerate the process a little. Capital preservation is the key to successful investing. The markets are flashing yellow right now (looking at things with a 10 time frame). Will the light turn red next month when the Fed raises rates or not until 2019 or even 2020? Does it matter? Does one really need to be so precise?
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Liberty on November 16, 2018, 07:17:23 AM
Liberty, i owe you a beer somewhere some day :-)  Thank you for posting the link.

Come to the CSU AGM in Toronto next spring ;)
Title: Re: Stanley Druckenmiller interview (2018)
Post by: opihiman2 on November 18, 2018, 12:11:54 PM
Really good interview.  One of the bests, and an absolute legend.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Jurgis on November 29, 2018, 02:15:21 PM
Great interview. Definitely worth watching.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: muscleman on November 29, 2018, 05:45:31 PM
At the 17 minute 30 sec mark, does anyone know what Druckenmiller is talking about when he says "When you take away price action vs news from someone who's used price action vs news [for 35 years as their major tool, it's tough]'  ?

Can anyone further clarify the 'price action vs news tool' ?

He means if good news and price goes up, it is bullish. If good news and price goes down, it is bearish.
If bad news and prices goes down, it is bearish. If bad news and prices goes up, it is bullish.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: stahleyp on November 30, 2018, 09:53:04 AM
Good interview but I found it odd how he compared Buffett and Berkshire "losing 40% from 1998-2008 and you can't run a hedge fund like that". I believe it was around 40 min mark.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: VersaillesinNY on December 18, 2018, 05:10:31 AM
https://www.bloomberg.com/news/videos/2018-12-18/druckenmiller-on-economy-stocks-bonds-trump-fed-full-interview-video
Title: Re: Stanley Druckenmiller interview (2018)
Post by: alpha on December 18, 2018, 06:00:48 AM
https://www.bloomberg.com/news/videos/2018-12-18/druckenmiller-on-economy-stocks-bonds-trump-fed-full-interview-video

Seems like Buffet was betting on higher rates with his recent purchases while Druckenmiller says he's short financials.... Druckenmillers total 180 on his view on rate hikes is a bit strange, he literally went from one extreme to the other, can't help but wonder if he is just trying to move the market for his own benefit.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Cardboard on December 18, 2018, 07:35:12 AM
Feels good to see that Stanley agrees with me. Hiking now is nuts with all the negative signals out there. He is totally right on risk/reward and cost of being wrong.

Tightening of monetary conditions via unwinding of QE does matter.

Cardboard
Title: Re: Stanley Druckenmiller interview (2018)
Post by: nickenumbers on December 18, 2018, 08:52:37 AM
I am about 50% of the way thru the interview and it is a very good one!

He is a smart, logical, experienced and interesting guy. 

I smiled a bit when he threw some shade [criticized] on Ray Dalio's Beautiful Deleveraging concept.  Druckenmiller was like "I don't know what the hell Dalio was talking about."  <-- Not exactly, but pretty much.  I wonder what 2 Economists' fighting looks like??  Thoughts??


I don't know enough about Druckenmiller's present holdings to know if he is hoping to profit from his opinion, and is out beating the bushes in favor of his positions.  I don't know him like that.  But, I do think he is very interesting to listen to.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: cherzeca on December 18, 2018, 09:04:08 AM
druck seems to receive a whole lot more signals than I do. [sigh]
Title: Re: Stanley Druckenmiller interview (2018)
Post by: mwtorock on December 18, 2018, 10:54:53 AM
He surely did not like Ray Dalio.  :P
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Dalal.Holdings on December 18, 2018, 11:49:20 AM
Lol...supposedly according to this video, Stan has never had a down year and has compounded at over 30% for 120 quarters (30 years)...yet for some reason after such a record he's not richer than Buffett. "Best performance in history". Is this a joke? I distinctly remember this guy jumping in with both feet at the peak of the 2000 tech bubble...

I guess they didn't look too closely at Stan's real track record:

https://dealbook.nytimes.com/2010/08/18/reviewing-the-druckenmiller-decades/

Quote
2000: At the peak of the technology boom in 1999 and 2000, Mr. Druckenmiller makes a big bet on Internet stocks. He was a huge buyer of VeriSign, which fell by about 50 percent in a month. The bursting of the dot-com bubble in March 2000 crushes Quantum’s portfolio, prompting Mr. Druckenmiller to quit his post managing the Quantum Fund after a dozen years. At the time, he said: “We thought it was the eighth inning, and it was the ninth. I overplayed my hand.”

Oh, I guess he quit working for Soros, so we can just ignore his investment results while at Quantum and just look at his performance via the funds where he performed well (survivorship bias). It'd be like saying "well, I lost everything in my core portfolio last year, but my IRA was up 10%, so I beat the market!".

Here's a WSJ article on him from 2000:
https://www.wsj.com/articles/SB95894419575853588

Quote
Stan admitted to me that he didn't quite understand the entire story and was uncomfortable with valuations," says Richard Eakle, an outside money manager who took part in Soros internal conferences this year. "But everyone was intimidated by Stan. It was a group of yes-men at the meetings."

More:

https://theirrelevantinvestor.com/2018/05/16/druckenmillers-big-mistake/

Quote
In early 1999, Druckenmiller shorted $200 million worth of tech stocks in George Soros’s Quantum Fund. He went short an inning too early, and was forced to cover a few months later after a $600 million loss. Through May, the fund was down 18%. Meanwhile, the NASDAQ Composite was up 15% and the S&P 500 was up 10%.

I prefer Buffett/Munger view on pontificating on the markets vs. Druckenmiller's: don't waste your time trying to play the market over short time periods.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Liberty on December 18, 2018, 01:27:10 PM
Another hour-long interview with Druckenmiller:

https://www.bloomberg.com/news/videos/2018-12-18/druckenmiller-on-economy-stocks-bonds-trump-fed-full-interview-video
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Viking on December 18, 2018, 07:50:48 PM
Great second interview. So. Much to learn from these cagy old veterens; great to hear him talk for a full hour and explain his change in thinking. The internet really is an amazing thing. And free :-)

“What are the qualities or characteristics that a money manager should have today”
1.) intellectually curious
2.) really open minded
3.) courage
      a.) bet big / concentrate
      b.) fight your own emotions

He said this with 2 minutes left in the video. Great advice for anyone who wants to be successful at investing. 

And it will be very interesting to see what the Fed does tomorrow especially what they say about the path of future rate increases. If they increase rates tomorrow and stay hawkish (dot plots telegraphs 3 more increases in 2019) get ready for a shit storm in stocks. If the Fed gets more dovish then perhaps we get a short term relief rally. Very murky right now.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Cigarbutt on December 18, 2018, 08:28:41 PM
Great second interview. So. Much to learn from these cagy old veterens; great to hear him talk for a full hour and explain his change in thinking. The internet really is an amazing thing. And free :-)

“What are the qualities or characteristics that a money manager should have today”
1.) intellectually curious
2.) really open minded
3.) courage
      a.) bet big / concentrate
      b.) fight your own emotions

He said this with 2 minutes left in the video. Great advice for anyone who wants to be successful at investing. 

And it will be very interesting to see what the Fed does tomorrow especially what they say about the path of future rate increases. If they increase rates tomorrow and stay hawkish (dot plots telegraphs 3 more increases in 2019) get ready for a shit storm in stocks. If the Fed gets more dovish then perhaps we get a short term relief rally. Very murky right now.
The stock market needs a fix in order to finish the year with a Santa Claus rally.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: savant on December 20, 2018, 12:53:40 PM
Another hour-long interview with Druckenmiller:

https://www.bloomberg.com/news/videos/2018-12-18/druckenmiller-on-economy-stocks-bonds-trump-fed-full-interview-video
Can anyone explain what he means in the 41.53 mark onwards when he is asked if it is time to short credit:
"Its easy t short credit if you are long treasuries becauseif rates are going up I don't want to be short credit because they are an interest rate instrument and if I make money in treasuries its because the economy fell apart and they'll be a lot of good credit shorts. So 5-6% absolute nominal yields for stuff that would be 8 or 9 in an environment like this the risk-reward is just terrible in an environment like this, for credit"


Thanks!
Title: Re: Stanley Druckenmiller interview (2018)
Post by: SHDL on December 20, 2018, 01:32:14 PM
Another hour-long interview with Druckenmiller:

https://www.bloomberg.com/news/videos/2018-12-18/druckenmiller-on-economy-stocks-bonds-trump-fed-full-interview-video
Can anyone explain what he means in the 41.53 mark onwards when he is asked if it is time to short credit:
"Its easy t short credit if you are long treasuries becauseif rates are going up I don't want to be short credit because they are an interest rate instrument and if I make money in treasuries its because the economy fell apart and they'll be a lot of good credit shorts. So 5-6% absolute nominal yields for stuff that would be 8 or 9 in an environment like this the risk-reward is just terrible in an environment like this, for credit"


Thanks!

I can’t read his mind (obviously) but here’s my interpretation:

First, he thinks (at least a certain segment of) corporate bonds are overpriced and he is therefore shorting them.  Second, he is hedging against the risk of an interest rate decline (which would make the bond prices go up) by going long treasuries at the same time.  Third, he thinks this is a good bet in part because it is one that makes money precisely if/when the economy/market goes to hell.

I’m quite certain about the first two points.  He’s not as explicit about the third point, but at least that’s how I would think about this trade.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Spekulatius on December 20, 2018, 06:20:27 PM
I am guessing that Druckenmiller is betting on increasing spreads. he may do this directly buy going long treasuriesnwnd shoring corporate bonds or indirectly by shorting financials.

FWIW, increasing interest rates are rarely a problem by itself. What is far worse are increasing credit spreads. Credit spreads were at record low and I think this is because of QE. There is quite a bit of trash credit out there (private equity) or companies that leveraged up with buyouts that will probably have issue when spreads start to rise to normal level and junk bonds are again in the vicinity of 8% interest rates rather than 5-6%. HYG (junk bond ETF) is already looking sickly.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Spekulatius on February 07, 2019, 04:09:03 AM
Besides the bravado around macro, Druckenmiller basically pitched cloud plays and specifically mentioned NOW. I put it on my watch list around. $165 and it now trades at ~$220. Not bad at all. It would have been better if I had bought it myself. ::)
Title: Re: Stanley Druckenmiller interview (2018)
Post by: thelads on February 07, 2019, 05:46:48 AM
Hi Spekulatius,

On the spread side, there are very liquid derivative instruments he is probably using just to have DV01. Beyond that, I suspect he has a bunch of analysts looking for corp. bonds that were priced in 2016 through mid 2018 that went into the ECB and other non-fundamental buyers, to see if there is anything that jumps out. As he finds names that look fishy, he can just short them outright...Just a suspicion...
Title: Re: Stanley Druckenmiller interview (2018)
Post by: meiroy on February 08, 2019, 10:07:52 PM
I've recently been going through an existential crisis, following countless failures to prove that I am Not A Robot; it seems I am unable to identify crosswalks and cars.  Could it be, that in this simulation I am but a failed AI?

Obviously, this has led me to ponder existential macro issues.  It seems to me that the reason there are so few brilliant guys like Druckenmiller and Soros is that they have a genetic capability to see the systemic whole.   We are under the failed belief that people can simply spend time and effort earning their economics PHD and that would give them a clue (e.g. people working at the Fed), but surely this is not sufficient.  Great methamiticians and artisit have a certain genetic component that allows them to be so, and surely it's the same when it comes to perceiving reality, or rather, perceiving that we cannot perceive it and seeing what we can.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Jurgis on February 08, 2019, 10:37:53 PM
I've recently been going through an existential crisis, following countless failures to prove that I am Not A Robot; it seems I am unable to identify crosswalks and cars.  Could it be, that in this simulation I am but a failed AI?

Obviously, this has led me to ponder existential macro issues.  It seems to me that the reason there are so few brilliant guys like Druckenmiller and Soros is that they have a genetic capability to see the systemic whole.   We are under the failed belief that people can simply spend time and effort earning their economics PHD and that would give them a clue (e.g. people working at the Fed), but surely this is not sufficient.  Great methamiticians and artisit have a certain genetic component that allows them to be so, and surely it's the same when it comes to perceiving reality, or rather, perceiving that we cannot perceive it and seeing what we can.

It's not genetic component. It's good drugs.



Where's ScottHall when we need him.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: tede02 on February 09, 2019, 05:49:52 AM
I've recently been going through an existential crisis, following countless failures to prove that I am Not A Robot; it seems I am unable to identify crosswalks and cars.  Could it be, that in this simulation I am but a failed AI?

Obviously, this has led me to ponder existential macro issues.  It seems to me that the reason there are so few brilliant guys like Druckenmiller and Soros is that they have a genetic capability to see the systemic whole.   We are under the failed belief that people can simply spend time and effort earning their economics PHD and that would give them a clue (e.g. people working at the Fed), but surely this is not sufficient.  Great methamiticians and artisit have a certain genetic component that allows them to be so, and surely it's the same when it comes to perceiving reality, or rather, perceiving that we cannot perceive it and seeing what we can.

I'd have to agree. These guys are so rare. But they somehow have a knack for putting the puzzle together despite having the same information as everyone else. It's kind of amazing. In an ironic twist, what seems to mislead people (including myself) is some of these legends make their approach sound so simple. Buffett is the textbook example. His approach is simple, but not necessarily easily executed. It requires a lot of work, superior judgement and mastering all the psychological traps. It's really tough to put it all together. I sense he's been telling everyone to index in recent years because he's observed, despite all the wisdom he's delivered over the decades, few people really have what it takes to out-perform the market over time. 
Title: Re: Stanley Druckenmiller interview (2018)
Post by: tede02 on February 09, 2019, 06:16:46 AM
Great second interview. So. Much to learn from these cagy old veterens; great to hear him talk for a full hour and explain his change in thinking. The internet really is an amazing thing. And free :-)

“What are the qualities or characteristics that a money manager should have today”
1.) intellectually curious
2.) really open minded
3.) courage
      a.) bet big / concentrate
      b.) fight your own emotions

He said this with 2 minutes left in the video. Great advice for anyone who wants to be successful at investing. 

And it will be very interesting to see what the Fed does tomorrow especially what they say about the path of future rate increases. If they increase rates tomorrow and stay hawkish (dot plots telegraphs 3 more increases in 2019) get ready for a shit storm in stocks. If the Fed gets more dovish then perhaps we get a short term relief rally. Very murky right now.

I really enjoyed both videos. Watched each multiple times. Over the last two years my mind has really opened up to investment approaches outside of value investing. It started by reading Ed Thorp's autobiography.

Druckenmiller's approach is so different from bottoms-up fundamental analysis. It's incredibly intriguing to hear someone, who reportedly delivered 30% for multiple decades without a negative year, discuss their approach. The concerns regarding central bank tightening were striking. I worry that a lot of people who are piling into index strategies are doing so not realizing the surge in asset prices has largely been driven by zero interest rate policy and QE. What is going to happen as those policies reverse? Indexing may be good long term but it wouldn't surprise me in the least as the money flows peak into those strategies, the trend flips.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: nickenumbers on February 09, 2019, 08:37:54 AM

I'd have to agree. These guys are so rare. But they somehow have a knack for putting the puzzle together despite having the same information as everyone else. It's kind of amazing. In an ironic twist, what seems to mislead people (including myself) is some of these legends make their approach sound so simple. Buffett is the textbook example. His approach is simple, but not necessarily easily executed. It requires a lot of work, superior judgement and mastering all the psychological traps. It's really tough to put it all together. I sense he's been telling everyone to index in recent years because he's observed, despite all the wisdom he's delivered over the decades, few people really have what it takes to out-perform the market over time.

Right on!  I don't have to salt your cooking.

I have heard Charlie Munger correct WEB a couple of time in the annual meetings where WEB makes the whole concept of investing sound simple and WEB ties it up with a pretty little bow.  Munger will chime in "but not everyone can do it."  It is WEB forgetting his genius and assumption of shared understanding, and Mungers recognition and reprisal to WEB that not everyone is a genius, or even rarer a RATIONAL GENIUS like WEB.  [The 2 are also different.]
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Cardboard on February 09, 2019, 09:04:04 AM
Regarding Buffett, has any of you calculated or has in hand the rate of return of his disclosed stock investments within Berkshire since around 1998 vs the S&P 500?

I don't think there is any outperformance at all.

The reason why Berkshire has done so well on per share book value growth over the last 20 years is the structure of the company or built-in leverage via float and acquisitions using stock trading above book value.

In terms of stock picking ability, I don't think that there is so much alpha to speak of.

This is not to minimize what he has achieved via his company but, if he was a regular hedge fund manager, I can't see how he would have achieved such wealth at the size he got into in the last 20 years?

Cardboard
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Liberty on September 03, 2019, 04:40:08 PM
Sorry if this has been posted before, but I hadn't seen it.

Paul Tudor Jones interviewing Stanley Druckenmiller (in 2017):

https://vimeo.com/351446016
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Liberty on December 18, 2019, 12:16:01 PM
https://www.cnbc.com/2019/12/18/stanley-druckenmiller-says-he-couldnt-have-been-more-wrong-this-year.html
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Liberty on December 18, 2019, 12:18:42 PM
Video of the 50-min interview here:

https://www.bloomberg.com/news/videos/2019-12-18/druckenmiller-on-2020-outlook-monetary-policy-u-s-election-video
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Viking on December 18, 2019, 09:29:35 PM
Thanks for posting link to 50 minute interview. Very interesting to get his views one year later. He sounded pretty bullish about stocks in the near term: monetary easing, decent economy, some improvement on trade front. My concern is i am hearing this from lots of people...
Title: Re: Stanley Druckenmiller interview (2018)
Post by: muscleman on December 19, 2019, 12:41:18 PM
Thanks for posting link to 50 minute interview. Very interesting to get his views one year later. He sounded pretty bullish about stocks in the near term: monetary easing, decent economy, some improvement on trade front. My concern is i am hearing this from lots of people...

It is more important to focus on data than anecdotal.
I am bullish because I like what I see here.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: cherzeca on December 19, 2019, 05:21:39 PM
Thanks for posting link to 50 minute interview. Very interesting to get his views one year later. He sounded pretty bullish about stocks in the near term: monetary easing, decent economy, some improvement on trade front. My concern is i am hearing this from lots of people...

It is more important to focus on data than anecdotal.
I am bullish because I like what I see here.

how are outflows calculated? 

if I sell equity there is no outflow because someone bought my equity.  then I could take my cash and put it into bond market, which is an outflow, but how does anyone know what I did with my cash on the second step of the chain? 

I think this is a bogus stat, but correct me if I am wrong
Title: Re: Stanley Druckenmiller interview (2018)
Post by: cherzeca on December 19, 2019, 05:23:47 PM
as for druck, cant argue with success.

but he does sound like someone who is chasing the crowd, and shoot, I can do that too...
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Cardboard on December 19, 2019, 06:29:42 PM
Lost all respect.

The guy is all about rear view mirror. Looks awfully old for 66. Is bitter.

If you don`t compete anymore then wtf are you doing giving interviews on Bloomberg about stock market, currencies and bond predictions?
Title: Re: Stanley Druckenmiller interview (2018)
Post by: TwoCitiesCapital on December 19, 2019, 06:37:19 PM
Thanks for posting link to 50 minute interview. Very interesting to get his views one year later. He sounded pretty bullish about stocks in the near term: monetary easing, decent economy, some improvement on trade front. My concern is i am hearing this from lots of people...

It is more important to focus on data than anecdotal.
I am bullish because I like what I see here.

how are outflows calculated? 

if I sell equity there is no outflow because someone bought my equity.  then I could take my cash and put it into bond market, which is an outflow, but how does anyone know what I did with my cash on the second step of the chain? 

I think this is a bogus stat, but correct me if I am wrong

My guess is they look at the net creation/destruction of fund shares.

If a mutual fund experiences more withdrawals then deposits, assets are sold and the share count is reduced. If that cash doesn't flow into another equity mutual fund increasing the share count, then you've ended up with a pretty clear net reduction in equities via a net reduced share count of equity mutual funds.

Not a perfect system for measurement as it overlooks individual security contributions, but probably a reasonably good measure
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Spekulatius on December 19, 2019, 06:40:57 PM
How can a market go up when money flows out? This does t make any. sense. Sure there are buybacks, mergers and equity swap for debt, but those are long term trends. It would posit that Markets can go up, if money flows in.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Cigarbutt on December 19, 2019, 07:19:02 PM
^The following table could be helpful:
https://www.marketwatch.com/story/buybacks-are-the-dominant-source-of-stock-market-demand-and-they-are-fading-fast-goldman-sachs-2019-11-06
Title: Re: Stanley Druckenmiller interview (2018)
Post by: cherzeca on December 19, 2019, 08:00:30 PM
Thanks for posting link to 50 minute interview. Very interesting to get his views one year later. He sounded pretty bullish about stocks in the near term: monetary easing, decent economy, some improvement on trade front. My concern is i am hearing this from lots of people...

It is more important to focus on data than anecdotal.
I am bullish because I like what I see here.

how are outflows calculated? 

if I sell equity there is no outflow because someone bought my equity.  then I could take my cash and put it into bond market, which is an outflow, but how does anyone know what I did with my cash on the second step of the chain? 

I think this is a bogus stat, but correct me if I am wrong

My guess is they look at the net creation/destruction of fund shares.

If a mutual fund experiences more withdrawals then deposits, assets are sold and the share count is reduced. If that cash doesn't flow into another equity mutual fund increasing the share count, then you've ended up with a pretty clear net reduction in equities via a net reduced share count of equity mutual funds.

Not a perfect system for measurement as it overlooks individual security contributions, but probably a reasonably good measure

to take it a step further, I take my equity redemption and invest in a bond fund....oooh, that is a net equity reduction, net bond addition....except it isn't since on the either side of my equity sale is an equity buy, and on the other side of my bond buy is a bond sale

I suppose as you suggest there are metrics as to mutual fund/etf size that an be tracked but fund flows seems a slippery data point to follow...especially when compared to good old pricing data...and pricing data would indicate that equities are attractive.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: muscleman on December 19, 2019, 09:27:50 PM
How can a market go up when money flows out? This does t make any. sense. Sure there are buybacks, mergers and equity swap for debt, but those are long term trends. It would posit that Markets can go up, if money flows in.

The data is for tracking RETAIL investor flows, and in general they are the worse investor of all classes.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Spekulatius on December 20, 2019, 03:46:16 AM
How can a market go up when money flows out? This does t make any. sense. Sure there are buybacks, mergers and equity swap for debt, but those are long term trends. It would posit that Markets can go up, if money flows in.

The data is for tracking RETAIL investor flows, and in general they are the worse investor of all classes.

So, basically this chart means that retail investors made a big mistake, nothing else. What conclusions can we draw from this? It’s not clear to me that anything is relevant for investment decisions.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Liberty on December 20, 2019, 07:14:34 AM
^The following table could be helpful:
https://www.marketwatch.com/story/buybacks-are-the-dominant-source-of-stock-market-demand-and-they-are-fading-fast-goldman-sachs-2019-11-06

Buybacks are not a cause, they're a symptom. Symptom of lots of cash on the balance sheet that can't be reinvested at good returns right now, so returned to shareholders. If it didn't come out as buybacks, it would either be higher dividends (which also tend to increase valuations as they rise), or more investments which would probably lead to higher growth, which also has an impact on valuations (unless the ROIC is under WACC or generally destroys value).
Title: Re: Stanley Druckenmiller interview (2018)
Post by: RuleNumberOne on December 20, 2019, 09:32:21 AM
European Union GDP has risen a total of 2% in the last 6 years - that is not an average of 2% per year, but a cumulative 2% since 2013.

This is why interest rates are set to negative. The German and Austrian savers who were still gorging on Italian debt this year won't get paid. Neither will the French banks who own hundreds of billions of Euros of Italian debt.

You don't have to look farther than the European bank stock prices. Just like Italy's GDP growth has stayed in the -0.1% to 0.1% range every quarter for 2 years, European bank stock prices have stayed in single digits since the financial crisis ended.

When is the crash? They have been able to cover it up for nearly 10 years now. The FT stopped reporting anything financial and focuses on US politics instead.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Cigarbutt on December 20, 2019, 10:21:39 AM
^The following table could be helpful:
https://www.marketwatch.com/story/buybacks-are-the-dominant-source-of-stock-market-demand-and-they-are-fading-fast-goldman-sachs-2019-11-06
Buybacks are not a cause, they're a symptom. Symptom of lots of cash on the balance sheet that can't be reinvested at good returns right now, so returned to shareholders. If it didn't come out as buybacks, it would either be higher dividends (which also tend to increase valuations as they rise), or more investments which would probably lead to higher growth, which also has an impact on valuations (unless the ROIC is under WACC or generally destroys value).
My first reflex was to say that the post was only factual (basic data) in nature and that I did not necessarily agree with the interpretation or the conclusion but, of course, you're correct in the sense that I wonder about the symptom-disease conundrum that may exist.
i hope to become a holder of a basket of long-term compounders (if i can find them) and the potential bias may have something to do with the fact that the underlying framework for stocks is a supply and demand function and there have been several opportunities where estimating who was on the other end of the trade was critically important.

Despite the above, the 'demand' table is interesting in several respects. In the past, share buyback activity has been significantly pro-cyclical which goes against a contrarian bias and is possibly a cyclical trend that will continue. Also, retail investors are typically trend-followers and I don't understand why (apart from net positive ETF funds flows) why there has been a net negative outflow of funds during an episode where momentum was clearly a fundamental factor. I think i understand why pension funds and other institutions have decreased their direct stock exposure overall because of a growing attraction to various alternative assets (private equity, real assets etc) but the trend is significant nonetheless.

Another interesting feature that does not stand out is the fact that the absolute value of stock exposure may increase even with equity withdrawal as long as price appreciation remains larger than the withdrawal rate. I remember also studying this phenomenon (the reverse phenomenon) when markets go down when some people tend to think that there are more sellers than buyers which does not really matter from the angle of a single one-to-one transaction.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: TwoCitiesCapital on December 20, 2019, 02:12:18 PM
Thanks for posting link to 50 minute interview. Very interesting to get his views one year later. He sounded pretty bullish about stocks in the near term: monetary easing, decent economy, some improvement on trade front. My concern is i am hearing this from lots of people...

It is more important to focus on data than anecdotal.
I am bullish because I like what I see here.

how are outflows calculated? 

if I sell equity there is no outflow because someone bought my equity.  then I could take my cash and put it into bond market, which is an outflow, but how does anyone know what I did with my cash on the second step of the chain? 

I think this is a bogus stat, but correct me if I am wrong

My guess is they look at the net creation/destruction of fund shares.

If a mutual fund experiences more withdrawals then deposits, assets are sold and the share count is reduced. If that cash doesn't flow into another equity mutual fund increasing the share count, then you've ended up with a pretty clear net reduction in equities via a net reduced share count of equity mutual funds.

Not a perfect system for measurement as it overlooks individual security contributions, but probably a reasonably good measure

to take it a step further, I take my equity redemption and invest in a bond fund....oooh, that is a net equity reduction, net bond addition....except it isn't since on the either side of my equity sale is an equity buy, and on the other side of my bond buy is a bond sale

I suppose as you suggest there are metrics as to mutual fund/etf size that an be tracked but fund flows seems a slippery data point to follow...especially when compared to good old pricing data...and pricing data would indicate that equities are attractive.

Right. But if you redeem, it's not necessarily a buy. If there is an inflow into the equity fund offsetting your redemption, net shares are unchanged. If you redeem and there isn't an offsetting inflow the mutual fund has to sell assets to find your withdrawal and that mutual fund share is destroyed. A clear net outflow.

This can be measured across the system, but not sure if this is how they're doing it.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Munger_Disciple on December 20, 2019, 05:18:21 PM

Right. But if you redeem, it's not necessarily a buy. If there is an inflow into the equity fund offsetting your redemption, net shares are unchanged. If you redeem and there isn't an offsetting inflow the mutual fund has to sell assets to find your withdrawal and that mutual fund share is destroyed. A clear net outflow.

This can be measured across the system, but not sure if this is how they're doing it.

If you redeem a mutual fund shares and there is no offsetting inflow and no cash buffer at the fund, the mutual fund sells the underlying portfolio stock to raise cash to satisfy the redemption. So there is no net outflow out of equities because (as others pointed out) for every seller there is a buyer unless a company bought back shares and retired them.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: TwoCitiesCapital on December 20, 2019, 07:45:55 PM

Right. But if you redeem, it's not necessarily a buy. If there is an inflow into the equity fund offsetting your redemption, net shares are unchanged. If you redeem and there isn't an offsetting inflow the mutual fund has to sell assets to find your withdrawal and that mutual fund share is destroyed. A clear net outflow.

This can be measured across the system, but not sure if this is how they're doing it.

If you redeem a mutual fund shares and there is no offsetting inflow and no cash buffer at the fund, the mutual fund sells the underlying portfolio stock to raise cash to satisfy the redemption. So there is no net outflow out of equities because (as others pointed out) for every seller there is a buyer unless a company bought back shares and retired them.

We're agreed that every buy has a sell and vice versa. But I don't think that means you can't have net inflows and outflows.


Consider buying $1000 of stock. 3 years later you need the money and are forced to sell all your shares for $900.  What's the impact? Is that an inflow? And outflow? Net neutral?

I'd argue that it's an outflow of value/money and could be measured by the value of the sale. I.e. mutual funds selling shares to meet redemptions and reducing share count.

Maybe you can also use $ volume traded and market capitalization changes to further hone in on the activity, but just because every sale is met with a but doesn't mean you don't have periods of inordinate demand or supply. That's why the price has to fluctuate to meet it.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Munger_Disciple on December 20, 2019, 09:14:07 PM
Quote
Consider buying $1000 of stock. 3 years later you need the money and are forced to sell all your shares for $900.  What's the impact? Is that an inflow? And outflow? Net neutral?

Seems neutral to me. In your example when you buy stock for $1000 you sent $1000 to someone else. Your inflow to the market is balanced by the outflow to counter-party. The same thing in reverse happens when you sell for $900. I don't see why supply/demand for a certain stock affects the net inflows or outflows. In private markets (for example) such as real estate, you could have a freeze in the market (similar to very wide blown out bid/ask spreads in public markets) with very few transactions taking place as we had in 2007-2011. Even in that scenario, outflows = inflows = approximately $0.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Gregmal on December 21, 2019, 07:13:55 AM
Maybe its over simplifying it, but my understanding of outflows has always related to ETF and funds and is as simple as the net of new investor money vs existing investor money. You have $1M of new shares issued but $5M worth of existing investors requesting redemptions... thats $4M net outflow. This wouldn't be something that applied to individual securities IMO.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: muscleman on December 21, 2019, 07:22:17 AM
Maybe its over simplifying it, but my understanding of outflows has always related to ETF and funds and is as simple as the net of new investor money vs existing investor money. You have $1M of new shares issued but $5M worth of existing investors requesting redemptions... thats $4M net outflow. This wouldn't be something that applied to individual securities IMO.
Yep. That's what my understanding is. Stock pickers are not the less sophisticated investors. The least sophisticated investors usually have no knowledge of the markets, but wants to make money anyway in market rallies, so they invest in MF and ETFs. Now that the stock selection process is removed from them, the only decision they can make is timing, which is even harder than stock selection. The stock market is a zero sum up game (excluding dividends and fees.), so there has to be someone losing, and it is therefore important to watch what the less sophisticated group does because usually they are the suckers.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: TwoCitiesCapital on December 21, 2019, 09:48:36 AM
Quote
Consider buying $1000 of stock. 3 years later you need the money and are forced to sell all your shares for $900.  What's the impact? Is that an inflow? And outflow? Net neutral?

Seems neutral to me. In your example when you buy stock for $1000 you sent $1000 to someone else. Your inflow to the market is balanced by the outflow to counter-party. The same thing in reverse happens when you sell for $900. I don't see why supply/demand for a certain stock affects the net inflows or outflows. In private markets (for example) such as real estate, you could have a freeze in the market (similar to very wide blown out bid/ask spreads in public markets) with very few transactions taking place as we had in 2007-2011. Even in that scenario, outflows = inflows = approximately $0.

Maybe we need an extreme example to illustrate.

There's a single share of stock outstanding that was purchased for $1. That individual now wants to sell.

I buy it from that individual for $1 million. Now the market capitalization of that company has shot through the roof from $1 to $1 million dollars - but it's not a net inflow to equities because my $1 million flowed to an individual who now took it "out"?

How do we explain the massive gap in market capitalization from the before scenario to the after scenario if flows were '"neutral"?

The flows are positive because I was willing to pay X percentage more for the share than the prior buyer.

So as long as the combination of volumes of shares  multiplied by average prices is rising you've got net inlows. If that same product is contracting, either due to falling prices OR falling average volumes, you've got net outflows.

 
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Munger_Disciple on December 21, 2019, 10:04:48 AM

Maybe we need an extreme example to illustrate.

There's a single share of stock outstanding that was purchased for $1. That individual now wants to sell.

I buy it from that individual for $1 million. Now the market capitalization of that company has shot through the roof from $1 to $1 million dollars - but it's not a net inflow to equities because my $1 million flowed to an individual who now took it "out"?

How do we explain the massive gap in market capitalization from the before scenario to the after scenario if flows were '"neutral"?

The flows are positive because I was willing to pay X percentage more for the share than the prior buyer.

So as long as the combination of volumes of shares  multiplied by average prices is rising you've got net inlows. If that same product is contracting, either due to falling prices OR falling average volumes, you've got net outflows.

 

We shall agree to disagree. I don't think your extreme example makes any difference. All that happened is that you transferred $1M to someone else so the net inflows are zero.

Just as a thought experiment, let us say that in your "extreme" example, you sold your stock for $1 to someone else the day after you bought for $1M. So now we are supposed to think there are massive outflows the next day after having massive inflows the previous day? I don't think so.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: CorpRaider on December 21, 2019, 11:04:21 AM
I've heard/read Jack Bogle make this argument a number of times ("no cash on the sidelines"), and I get the semantics but to me he was just being cute. I think its kind of like a currency exchange rate...business equity (or other assets) for dolla dolla bills and the rate changes with the flows (all else being equal).
Title: Re: Stanley Druckenmiller interview (2018)
Post by: RuleNumberOne on December 21, 2019, 11:05:02 AM
TwoCities and MungerDisciple,

Sentiment is a bigger driver, not just inflows/outflows. We can see this if we use 100 shares of a company instead of 1 share.

If the stock was trading at $5/share on Monday and a speculator pays $15 for one share on Tuesday, we get a net inflow of $10 ($15 - $5), but the market cap jumps by $1000 (100 shares x $10).

Consider the stock HEI (Heico). From 2018's peak price of $93 in September 2018, it jumped to $147 nine months later and is down back to $116. That performance was driven by "sentiments", not buybacks. Heico jumped by 60% from the 2018 peak to the 2019 peak, big multiple expansion, no buybacks. On the other hand, we can find less "storied" stocks with multiple contraction but huge buybacks during the same 2018-2019 period - such as CSCO.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: RuleNumberOne on December 21, 2019, 11:33:01 AM
The focus on buybacks increasing EPS misses the debt used to fund those buybacks.

https://www.bloomberg.com/news/articles/2019-12-19/this-funny-thing-happened-on-the-way-to-the-stock-market-record

"With balance sheets getting too big to fail, the Fed came to the rescue in each recession with interest-rate cuts to reduce the carrying cost of all that debt and to prop up the value of rate-sensitive stocks, bonds, and other assets. It worked like a ratchet. Rates fell in each successive cycle because the bigger balance sheets grew, the lower interest rates needed to be, Levy says.

True, households in the U.S. have paid down some of their debt since the 2007-09 financial crisis. But the nonfinancial corporate sector has gotten even deeper into hock. “Corporate America’s fragile debt pile has emerged as a key vulnerability,” Oxford Economics Ltd. senior economist Lydia Boussour wrote on Oct. 31. Half of investment-grade corporate bonds are in the lowest tier by credit rating, vs. 37% in 2011. And 80% of leveraged loans are covenant-lite, vs. 30% during the financial crisis, she wrote.

Lagarde has a bigger problem than does Fed Chair Jerome Powell. She’s up against ratios of private nonfinancial-sector debt to gross domestic product above that of the U.S. The ratios in Australia, Canada, China, and South Korea are, in fact, higher than the ratio was in the U.S. at its 2009 peak, according to the Bank for International Settlements. That’s why Levy predicts the next crisis will begin abroad. “It may not be as bad for the United States as in 2008-2009; it is likely to be worse for most of the rest of the world,” he wrote."
Title: Re: Stanley Druckenmiller interview (2018)
Post by: Munger_Disciple on December 21, 2019, 03:19:25 PM
I've heard/read Jack Bogle make this argument a number of times ("no cash on the sidelines"), and I get the semantics but to me he was just being cute. I think its kind of like a currency exchange rate...business equity (or other assets) for dolla dolla bills and the rate changes with the flows (all else being equal).

Perhaps you are confusing supply/demand for an asset with net outflows and inflows? If there is a huge demand for business equity then the price people are willing to pay goes up. But it is still a zero sum transaction (ignoring trading fees) because for every buyer there is a seller. Same dynamic exists for currency trades. The exceptions are when a company issues additional shares or buys back existing shares. Bogle was right.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: TwoCitiesCapital on December 21, 2019, 07:26:42 PM

Maybe we need an extreme example to illustrate.

There's a single share of stock outstanding that was purchased for $1. That individual now wants to sell.

I buy it from that individual for $1 million. Now the market capitalization of that company has shot through the roof from $1 to $1 million dollars - but it's not a net inflow to equities because my $1 million flowed to an individual who now took it "out"?

How do we explain the massive gap in market capitalization from the before scenario to the after scenario if flows were '"neutral"?

The flows are positive because I was willing to pay X percentage more for the share than the prior buyer.

So as long as the combination of volumes of shares  multiplied by average prices is rising you've got net inlows. If that same product is contracting, either due to falling prices OR falling average volumes, you've got net outflows.

 

We shall agree to disagree. I don't think your extreme example makes any difference. All that happened is that you transferred $1M to someone else so the net inflows are zero.

Just as a thought experiment, let us say that in your "extreme" example, you sold your stock for $1 to someone else the day after you bought for $1M. So now we are supposed to think there are massive outflows the next day after having massive inflows the previous day? I don't think so.

Yes. Which is how you end up in the same place you started - it would take a net "out flow" of $1 million to get you back to the same place truly neutralize.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: muscleman on December 22, 2019, 05:23:43 PM
What you guys just discussed is  the total inflow/outflow of money to the whole stock market, which is quite different from the net inflow/outflow to the mutual fund + ETFs.
Title: Re: Stanley Druckenmiller interview (2018)
Post by: TwoCitiesCapital on December 23, 2019, 11:55:59 AM
What you guys just discussed is  the total inflow/outflow of money to the whole stock market, which is quite different from the net inflow/outflow to the mutual fund + ETFs.

Yes, but they can be approximated as ETFs and Mutual funds make up a MASSIVE portion of the market. No one is saying it's an exact science down to the penny.