Druckenmiller Dunks On Bidenomics

“If I were a professor, I'd give them an F.” May 08, 2024 [WEBSITE]( | [UNSUBSCRIBE]( Druckenmiller Dunks On Bidenomics SEAN RING Dear Reader, Famed former hedge fund manager and family office owner Stanley Druckenmiller opened a Manhattan-sized can of Whoop-Ass on the notion of “Bidenomics” yesterday in a wide-ranging CNBC interview. It was good of CNBC, however unintentional, to let Druckenmiller mouth off without cutting him off. But then again, he is one of the world’s wealthiest men. He also doesn’t court attention, which is what I like about him. The Meat and Taters Longtime CNBC co-host Joe Kernan said to Druckenmiller, “Let me ask you how this plays into to -- it's another, I think, issue of being, you know, things are going well, and then we totally overspent fiscally as well in Bidenomics.” That opened the floodgates for Druckenmiller: If I were a professor, I'd give them an F. Basically, they misdiagnosed COVID and thought it was -- we were going into a depression. The Fed did, too. I worried about it, too, in the early days. The Fed eventually pivoted, better late than never. Treasury -- Treasury is still acting like we're in a depression. It's interesting because I've studied the Great Depression and you had a private sector crippled with debt, with basically no new ideas. So, interventionist policies were called for and were effective. The private sector could not be more different today than it was in the Great Depression. Their balance sheets are fine. They're healthy. And have you ever seen more innovative ideas that the private sector could take advantage of? Now, you got Blockchain, you got AI, you've got the whole thing. All the government needed to do was get out of their way and let them innovate. Instead, they've spent and spent and spent, and my new fear now is that spending and the -- 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 percent budget deficit at full employment. It's just unheard of... [Download This New Survival Guide Today!]( There is a “Crisis Survival Guide” that is available to all Rude Awakening readers today. This short 54-page document has everything you need to know to protect yourself and your family in times of crisis. Things like what foods to stock up on now, staying safe during periods of rioting and looting and more. Inside it breaks down all of the coming threats you face and how to prepare. [>> To see how to download your copy, click here now](. [Click Here To Learn More]( Before We Begin… I know Druckenmiller is a multibillionaire, but I want to present an alternative to the “effective” policies of the Great Depression. Murray Rothbard has a different view, to say the least. Here’s the opening of Chapter 7 of Rothbard’s masterpiece, America’s Great Depression: If government wishes to alleviate, rather than aggravate, a depression, its only valid course is laissez-faire – to leave the economy alone. Only if there is no interference, direct or threatened, with prices, wage rates, and business liquidation will the necessary adjustment proceed with smooth dispatch. Any propping up of shaky positions postpones liquidation and aggravates unsound conditions. Propping up wage rates creates mass unemployment, and bolstering prices perpetuates and creates unsold surpluses. Moreover, a drastic cut in the government budget – both in taxes and expenditures – will itself speed adjustment by changing social choice toward more saving and investment relative to consumption. For government spending, whatever the label attached to it, is solely consumption; any cut in the budget therefore raises the investment-consumption ratio in the economy and allows more rapid validation of originally wasteful and loss-yielding projects. Hence, the proper injunction to government in a depression is to cut the budget and leave the economy strictly alone. Currently fashionable economic thought considers such a dictum hopelessly outdated; instead, it has more substantial backing now in economic law than it did during the 19th century. Laissez-faire was, roughly, the traditional policy in American depressions before 1929. The laissez-faire precedent was set in America's first great depression, 1819, when the federal government's only act was to ease terms of payment for its own land debtors. President Van Buren also set a staunch laissez-faire course, in the Panic of 1837. Subsequent federal governments followed a similar path, the chief sinners being state governments, which periodically permitted insolvent banks to continue in operation without paying their obligations. In the 1920–1921 depression, government intervened to a greater extent, but wage rates were permitted to fall, and government expenditures and taxes were reduced. And this depression was over in one year – in what Dr. Benjamin M. Anderson has called "our last natural recovery to full employment." Let’s get to the rest of Druckenmiller’s calm, cool, and collected rant. “I’d Give Them an F.” Me, too, Stan. Me, too. The incompetence of Joke Biden’s Treasury is staggering. You’d think that Janet Yellen, a former Fed Chairman, would have a clue. Instead, when interest rates were on the floor, Yellen issued short-term paper. She should’ve locked in those idiotically low rates with long-term bonds and enjoyed Powell’s hiking cycle. Now, she’s stuck trying to finance the enormous deficit at normal rates. Stupid. Why are we running a 7% budget deficit when we’ve got full employment? Goodies for all those registered voters. That’s why. The Private Sector Productivity is improving now, just as when email went mainstream in the 1990s. Automation and AI have made it easier for solopreneurs to run fully-fledged businesses, and blockchain has created an entirely new industry. Not everything is perfect, but it’s for businesses to iterate along the path of success. It’s not for the government to dictate. The Fear of Crowding Out First, let’s define “crowding out.” Crowding out happens when increased government spending or borrowing reduces or "crowds out" private spending and investment. It occurs when expansionary fiscal policies, such as increased government spending (as we have now) or tax cuts, lead to higher interest rates. Those higher interest rates - like we have now - make it more expensive for private businesses and consumers to borrow and invest, reducing their spending. This "crowds out" private investment. Crowding out is more likely to occur when the economy is already at or near full employment - where we are right now - as government spending has limited capacity to increase overall economic activity. It has adverse long-term effects by reducing capital accumulation and economic development. For a practical example, if you can buy a “risk-free” US Treasury bond yielding 8%, you certainly would. Most stock market investors don’t make that in a year, so putting your savings in a UST bond that yields 8% is a no-brainer. Now, you’re not investing in the stock or corporate bond markets. That’s the crowding out Druckenmiller fears. When so many decently yielding government bonds are on offer, liquidity drains from the private sector. Since Yellen and her treasury made such a catastrophic mistake issuing short-term instead of long-term bonds, this is the problem we’ll have going forward. Wrap Up It was a pleasure to see Stan Druckenmiller tell it like it is. There were no histrionics, just facts. We need more powerful men like him to stand up to The Establishment. If they do, we may yet get out of this mess. All the best, Sean Ring Editor, Rude Awakening X (formerly Twitter): [@seaniechaos]( Rate this email Like Dislike Thanks for rating this content! Looks like something went wrong. Please try to rate again. In Case You Missed It… RALLY SEAN RING It's crucial to seize the opportunities in this market. The Rude has been consistently bullish since the end of last year, and this trend is projected to persist in the near future. Now is not the time to be on the sidelines; instead, actively participate and reap profits. We start from political premises. There are two huge reasons this market will continue climbing the “wall of worry.” One of the key factors driving the market’s upward trajectory is the election year in the four-year cycle. Politicians, including Joke Biden, incentivize the electorate to secure their votes. As H.L. Mencken once astutely observed, this political dynamic turns every election into an “advance auction sale of stolen goods.” What Mencken implies correctly is that the stolen goods are yours. The second reason is that however stupid Jay Powell may feel cutting rates in this economy, he’ll do it. And he’ll do it not out of duty to Joe Biden, as Arthur Burns did with Nixon. But he’ll do it because he doesn’t want to work for Donald Trump ever again. (And since Trump said he would fire Powell if he gets re-elected, Powell has even more incentive to put his thumb on the electoral scale.) As I near my 50th birthday, I’m too old to be outraged by these political machinations. Someone once said, “Trading is the act of becoming inhuman.” That, combined with writing about this stuff daily, has anesthetized me. So, with a clear head, we can take stock of where the market currently stands to see where it may be going. I’m not saying the market will go straight up for the rest of the year, but I’m sure it will be higher in November than now. Let’s get into the reasons why. I thank Patrick Dunuwila, CMT, Editor of The Chart Report, for organizing the below charts. The 10-Year Yield and The Dollar The first chart is The Chart Report’s Chart of the Day: Steve Strazza makes a great point here. Despite the ten-year yield and the dollar rallying this year, the stock market (and precious metals) also have. While this occasionally happens, it’s not the usual case. This is where the Fed comes in. If Powell cuts rates, the dollar will fall, and perhaps the 10-year yield. (The Fed only controls short-term rates and prays for long-term rates to follow.) A falling 10-year yield and USD will goose all asset classes, especially stocks and metals. Momentum is Bullish We’ve just had the best 3-day gain of 2024. This isn’t characteristic of bear markets. Also, notice that squiggly line above the price chart. It’s the rate of change. From StockCharts.com’s Chart School: The Rate-of-Change (ROC) indicator, also known as Momentum, is a pure momentum oscillator that measures the percent change in price from one period to the next. The ROC calculation compares the current price with the price “n” periods ago. The plot forms an oscillator that fluctuates above and below the zero line as the rate of change moves from positive to negative. The current momentum is the best since this rally started. Reclaiming the All-time High We haven’t reclaimed the ATH, but that’s when we can get excited. Above 5,255, and we’re off to 6,000. Of course, we can break down. But the probability of that happening is low. Why? See below. The 50-day and 200-day Moving Averages The price relative to its 50-day moving average tells us if we’re in an intermediate-term bull or bear market. Above the 50 DMA, we’re bullish. Below it, we’re bearish. We just got bullish again. The 200-day moving average has just broken out to an all-time high. Like the 50-day moving average, the 200-day moving average relative to price tells us whether we’re in a long-term bull or bear market. We’re miles above the 200-day moving average. [What a Trump Win Means for the U.S. Dollar]( Donald Trump has vowed to reverse Biden’s plan to replace the U.S. dollar… but it may be too late. Even a Trump win can’t save us from the “death order” that Biden signed. In fact, it could accelerate his plans. [See how to protect yourself here](. Remember — even a Trump win won’t save us… [Click Here To Learn More]( And now, for some metals charts of my own. Gold When an asset ascends too rapidly, it needs to take a breather. If you notice the chart below, gold almost went straight up from the end of February to the third week of April. It broke too far away from its 50-day moving average. So, it took a breather. This pause will probably take us to the 50-day moving average, and then we’ll start our ascent again. Above the best close of 2,420 is good. Above the intraday high of 2,448.80 is better. Silver We also had a big up candle yesterday in silver. Again, above 29.00 is good. But it's better when silver gets above 29.91 (and maybe even off to the races). Crypto I find this baffling. Is crypto draining back into the yellow metal? Could that be? Because as I look at this chart, I’m not optimistic. It looks like lower highs and lower lows. And Bitcoin has fallen under its 50-day moving average. Its 200-day moving average may act like support later. It’s possible. But this is, by far, the most bearish chart in today’s newsletter. Proceed with caution. Wrap Up The SPX is looking great, as does gold and silver. We had a great day yesterday in those asset classes. I still loathe bonds in this inflationary environment, though they’d benefit from a rate cut, if only temporarily. The central banks are already in gold. Are the coiners draining into the yellow metal? Surely not. It’s too fanciful. Nevertheless, gold and silver are having their days. Bitcoin wishes it stayed in bed. All the best, Sean Ring Editor, Rude Awakening Twitter: [@seaniechaos]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your Rude Awakening e-mail subscription and associated external offers sent from Rude Awakening, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. 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