Legendary investor Stanley Druckenmiller issued a dire warning on the state of the US economy, saying ‘more shoes to drop’ when it comes to traditional US banks.
Stanley Druckenmiller: ‘more shoes to drop’
Druckenmiller, also known as, “The Druck,” said in an an interview at the Bloomberg Invest New York conference, that the economy is adjusting to a more restrictive environment after more than a decade of low interest rates and practically free money.
According to the market veteran, Dogecoin (DOGE), which had a market cap of more than $80 billion during its 2021 rise, is a perfect example of traders’ irrational behaviour during an asset bubble.
“There’s a five hundred year history of asset bubbles, [it’s] well documented, and well, the US has some issues with [it] at the present time. Basically, it documents – and I had already known this about the last one hundred years but it’s going out five hundred years – every time you’ve had a significant asset bubble, economic trouble lay ahead. When you had 11 years of free money, people do stupid things. All you have to do is look [at how] someone paid $80 billion for Dogecoin, which was invented as a joke. I mean, that can only happen in the world of free money…”
With the credit cycle being in relative contraction, Druckenmiller says the pricy cost of capital is starting to show with bankruptcies and weakness in the US banking system. He predicted “more shoes to drop” and hinted at more corrections in high risk assets.
“But the fact that this was arguably the most disruptive economic period we’ve had since the late 1800s and there were no bankruptcies, apparently they’ve started in the last few weeks, tells me there’s a lot of stuff under the hood. When you go from this kind of environment, the biggest, broadest asset bubble ever, and then you jack rates up 500 basis points in a year, I think the probabilities would suggest that Silicon Valley Bank, Bed, Bath and Beyond, they’re probably the tip of the iceberg. Nothing’s guaranteed. I’ve been wrong a lot, I’ve been right a few times. But our central case is there’s more shoes to drop, particularly in addition to the asset markets economically.”
In April 2023, it was revealed that the veteran investor is confident in his position against the greenback due to US policy risks and uncertainty, which have increased following the collapse of Silicon Valley Bank.
During the SVB banking collapse in March, both Bitcoin and Litecoin increased about 50% that month as investors flocked to digitally scarce bearer assets, as opposed to other digital assets which could be deemed unregistered securities, per the latest SEC regulatory complaints.
In late September, 2022 during a CNBC Investor Summit Druckenmiller had said that if the general public loses trust in central bankers due to tightening policies, Bitcoin and cryptocurrencies could see a renaissance. The investor believes the Dollar has been “weaponised” against US adversaries on a global scale.
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