💵 Druck Is In The Eye Of The Beholder

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Old Stanley's been hitting the headlines a lot lately. We love Druck. But why does the media always focus on the wrong quotes?

Why should you care what Druck has to say? It's not like he's worth $10 billion or anything. Ah wait, he is.

Well $9.88bn. I rounded up. He's #191 in the Bloomberg Billionaires Index.

And you don't get to be that wealthy unless you know everything, everywhere, all of the time, for a lot of years. Or so we're led to believe...

What Druck says goes, RIGHT?

Well.... That depends. On the soundbites and the source. See, it's all in the eye of the beholder. Everyone sees what they want to see, and hears what they want to hear...

Take his high conviction dollar short position, per a report in the FT a couple of weeks back.

But that wasn't exactly true. In his own words on May 9th...

Paper Hands Stan hasn't heard of these?

OK, dialling back the snark and sarcasm a little, it's relatively rare to hear from guys like Druck in their own words. So when he does an interview like this, it's well worth a listen/watch... 👇

You get to see how everyone cherry picks the bits that make the best story and/or fit their agenda. Most importantly, you get to hear how he actually thinks.

And that's where the value is. Newsflash - This ain't your favourite influencoooor.

My agenda is to be anti-agenda, so here are my cherry-picked agenda-free* snippets

So, NONE of this is high conviction. Almost like you can't believe everything you read... Who knew?

On gold and silver

Change his mind? What an absurb idea. Still, I'm sure he'll come on TV and tell everyone as soon as he does.

Or maybe he won't...

There are going to be unbelievable opportunities

Serious now. This is something a few of the old guard are saying and preparing for. Howard Marks' Oaktree is another one...

So, what's the most important thing about these unbelievable opportunities? 

Basically, when SHTF, nobody knows what's going to happen. These guys are preparing for the right opportunities. Keeping powder dry, no FOMO and ready to deploy...

One little nugget that nobody seems to have picked up on is what Druck said about the US 10 year, traditionally the safest of all safe havens.

While the media focuses HEAVILY on his forecasts and what he thinks of Nvidia & AI, he's casually dropping wisdom like this.

See, if the Fed drops the ball here (or a combo of the Fed & the US treasury) by easing policy too soon, inflation expectations can get baked into the cake.

Which could mean no rate cuts. Maybe even, more hikes... None of this is particularly a forecast. It's just not a fat pitch at 3.5% while inflation could still head higher again. Especially when you can sit in cash at around 5% for the time being.

Imagine the Fed ends up cutting rates or stops QT to deal with the regional banks, the economy picks up a bit.... And then 'something happens' that pushes energy prices higher...

Who wants to be locked in at 3.5% for 10 years if we re-run the '70's?

Again, not saying that's the likeliest outcome. But plenty of unlikely things happen all the time. That's the nature of probability.

In fact, Druck's dollar short is based on the same logic. That the Fed will bottle it.

It's not hard to envisage the central bank coming under huge pressure from government to ease as soon as the first negative jobs report prints. Especially if inflation is within the 3-4% range.

The 10 year's an unappealing bet either way. So he just... leaves it alone.

One more on the appeal of Nvidia 👇

He gets that it's crazy, but if the economy starts to roll and everyone thinks that AI is the next revolution, who's going to sell their Nvidia shares? Wouldn't people be tempted to sell other companies first? Maybe even buy more in the one 'guaranteed' growth sector...?

Not because they're cheap, but because AI is the next big thing...

It's a bet on continued irrationality. I'd still put it in the same basket as the 10 year trade though (could go either way).

We've written before about the appeal of these 'authority figures' before 👇

With someone like Druck, it's less about what he says/forecasts, and much more the way he thinks about things...

Especially the complete absence of fear of being wrong. Throughout the interview, being wrong is freely discussed as something inevitable.

TL;DR This interview is a great demonstration of strong opinions, weakly held, & probabilistic thinking. And right now, even those strong opinions are pretty low conviction...