The probabilities are aggressively pointing to a hard landing, according to famed investor Stanley Druckenmiller.
At the Sohn Conference on Friday, he noted that inflation has never come down from above 5% without Fed funds rising above CPI -- which is 8% now.
In the bigger picture, he outlines how he looks at the economy.
"What we've done historically is we do the macro by a compilation of listening to companies and a bottom-up analysis of industries that lead the economy," he said citing home builders, trucking and retail as examples.
"That's worked beautifully historically. The other industry I've found quite prescient for the economy is the bond market," he said.
He lamented that for several years QE has skewed the pricing signal but that with QE ending, it's returning. Today the US 10-year yield rose to the highest since 2018.
He said they've done well so far this year in part due to short bonds and long oil. Now though, he said he's largely taking a break and "waiting for a fat pitch."
He anticipates that he will be going back to a short equities if he gets an opportunity.
The currency market is incredibly interesting to me... I will be surprised if sometime in the next six months I'm not short the dollar," he said.
Druckenmiller explained that early tightening boosted the dollar but that there's nothing exceptional about the US economy.
On energy, he said the trade could last awhile.
- On crypto he said he doesn't want to bet one way or another
- He said he would be surprised if blockchain technology isn't a major disruptor
- He develops conviction 3-4 times a year and acts aggressively on that
- Sees the biggest risk in stale equity longs and shorts
- He argues that stepping away from the market can be very useful to clear the head
- If the market were to rally 15-20%, he would get short
- Says he's in no hurry to make another big move
- Says he's 'very nervous' on oil trades because it's not a unique thesis anymore
- So far we don't see demand destruction in energy
