Friday, September 4, 2015

Druckenmiller Loves Gold, Hates Fed

Hedge fund master Stanley Druckenmiller has had one of the strongest performances in stock market history, generating a return of about 30 percent over a 30-year period. That is in line with another legendary investor, Peter Lynch, who produced an annual return of 29 percent.

Interestingly, Druckenmiller and Lynch both quit because of the toll it took on them to maintain those type of returns. Sorry. If we want to live longer, we'll just have to settle for a piddly 20 percent annual return or so.

For some time Druckenmiller has blasted the Federal Reserve for keeping interest rates near zero, saying it has changed the behavior of companies, which instead of using cash to build the businesses, they are using it for leveraged buyouts, mergers and stock repurchase schemes.

Interpreting this as a negative, Druckenmiller has taken a huge stake in SPDR Gold Shares (GLD), investing $323,626,000, which comes to 2.8 million shares. That's more than double any of his other holdings at this time.

when asked about why he put such a large portion of his investment portfolio in GLD, Druckenmiller said when he sees something that gets him excited, he's willing to take that step.

Talking a lot about risk/reward ratio over the years, he obviously sees something in gold that has a lot of potential at this time. I agree with him.

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