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Stanley dren Miller is one of the most renowned investors in the world famous for his sharp insights and unmatched track record in the hedge fund industry he made his name managing billions for George Soros at Quantum fund and together they orchestrated one of the most legendary trades in history shorting the British pound in 1992 this trade alone netted $1.5 billion in profits and established drucken Miller as a Visionary in global macroeconomic trends dren Miller's approach focuses on what he calls top-down investing where he analyzes global economic factors and uses them to make big bets across multiple asset classes his firm Duane Capital which he founded in 1981 consistently delivered incredible returns an average of 30% annually until he closed it in 2010 citing the mental strain of maintaining such a high standard throughout his career dren Miller has issued numerous warnings about economic bubbles debt and inflation further showcasing his deep understanding of Economics he believes that intuition decisiveness and flexibility are key to investment success and his results speak for themselves this is a man who doesn't just talk about the markets he's lived them predicted them and profited immensely from them his Mastery over economics and markets is unparalleled and if you want to understand how to navigate the complexities of global Finance there's no one better to listen to in 2021 I think the FED did a great job when we were facing a black hole in Co in 2020 uh they took some very aggressive actions one of those actions was forward guidance where they to try and settle markets guided ahead to basically a zero interest rate policy I think it's for was frankly for 3 years um we were all fooled by Co I was too when when it first happened we're wondering you know are we sinking into a black hole but it was pretty obvious I'd say a month or two after vaccine confirmation which was the fall of 20 that we weren't going into black hole unemployment which I think had been around 14% started to drop precipitously the economy came back back um we wrote the article in the spring of 21 because at this point we felt we were like booming and it was it was everywhere in the economy and the companies we talked to and unemployment rate everywhere and the FED wasn't adjusting so they were buying I think 120 billion a month at Securities it might have been down to 95 a month by that time period and rates were still zero and I think had they had a clean late they would have never been buying bonds to that degree with what was going on in the economy but they were trapped in my opinion by forward guidance it's pretty incredible from from the point we wrote the article when it was so obvious that we even wrote about it um it was 13 months from when inflation went through 2% to when they finally raised rates they also bought two trillion in bonds during that period um so I guess the reason I analogize that today and it it's quite different I had a lot of confidence than that they were wrong on inflation the money supply was growing at 40% as I said the economy was booming this one's much more nuanced however um just look at the asymmetry here back then you go 13 months with inflation through the target goes up to 8 and a half% and you still go another the three months and your keeping rates at zero and you're buying bonds like crazy and then you um when you finally move you move 25 basis points and your rationale is we need to see the whites of inflation's eyes and you're saying this when it's three or four or 5% okay today um we're still quite a bit above Target depending on which measure you use somewhere between 2 and a half and three and a quarter uh the economy they've come up with this I guess theory that monetary policy is restrictive because of real inflation rates but I don't really go by Theory I'm a market animal frankly we' found over the years that markets are better predictors than uh professors and when I look at look at the landscape equities at a record high gold at a record high GDP above Trend credit tight um Bank earnings and forecast look good um we don't see any restriction whatsoever crypto going crazy you name it so all of a sudden the crowd that said they wanted to uh see the whites of inflation's eyes and they wanted to be data dependent as opposed to forward-looking are now cutting 50 basis points not a quarter which is what they started of and we're not even to Target yet and this is all on the theory that monetary policy is restrictive so what I would say is this I don't have the conviction I had in 21 that we wrote that article that the FED is going to be wrong but on a risk reward basis I just doesn't I don't think it makes any sense at all to to lay out the cards they've laid out and commit themselves through forward guidance once again and what I what I was trying to say when I was saying um it reminds me of 21 is I just hope if the data don't go with them and they they certainly haven't since they sorted this narrative they adjust this time and they're not trapped by the forward Guidance the way they were in 21 listen does this mean that you thought 50 basis points was an absolute mistake and do you think that there is a risk of an inflationary spike in the way we saw in the 1970s yeah do you have the chart we talked about earlier let's see if we can pull that up there's certainly one that investors have been looking at and while you so even if we don't have the chart so in the 1970s inflation came down from a remarkably similar level to where it was in 21 I think 21 peaked at 9 I think it was 8 back in the 70s they came down to three the Fed was easing because they they had the 75 recession so the FED started easing and inflation went right back up to I think it peaked at a 12% when vulker came in and smashed it I'm not predicting that but when you're easing into a melt up in financial markets and we have the fiscal policy we have going forward it's certainly a risk and I just I think it's a mistake not to be taking that risk into account I don't really understand the rush of 50 basis points and I think the markets have priced in a 97% cut uh at the next meeting that's all through fed guidance it's funny my my friend Jim Grant who's one of my favorite writers said they're not really data dependent they're for more guidance dependent and that's what they're showing again and look he might be right and I hope he is right but it's a big risk because if in fact they're wrong and inflation takes off because monetary policy is in fact not restrictive and we have fiscal expansion going on and they have to tighten again I think it could be a it could be a nightmare for markets and maybe even for the independence of the fed you can't you can't make multiple mistakes that that that would have been but I'm not predicting it I'm just saying why did they go 50 and why do they need this forward guidance I think a shadow fed and this kind of talk is a horrible idea and irresponsible however I think where Trump to be elected the institution will hold um I think a bigger threat to the FED would would be major major mistakes by the FED I think the fed is obsessed with soft Landings and fine tuning to me that's not the real job the real job is to avoid the kind of problems we had with a great financial crisis which in my opinion were because the Fed was too easy going into them created a housing bubble and then obviously after Co not the initial actions but sticking with it for a year and a half or two years buying bonds uh with the money supply exploding to me um they've got to stop the fine-tuning and start looking at the bigger picture and committing yourselves now and then if they stick to for a GU and inflation starts going up again that could lead to a hard Landing not a soft Landing well it's an evolving situation I if you would ask me this 12 days ago I would have said I don't have a clue it's in a total cost up I still don't have have conviction who's going to win on the election but as I said earlier I like market indicators for the economy and for financial restrictiveness I also like them for elections I remember how right the market was on Ronald Reagan in 1980 despite what the pundants were saying and I must say in the last 12 days the market and the inside of the market um is very convinced Trump is going to win you can see it in the bank stocks you can see it in crypto you can even see it in djt his social media company but throughout the whole I would say the industries that are deregulated if if we had deregulations we'll benefit from Trump or outperform the others so if you put a gun to my head and thank God there's not one in my head so this really doesn't matter I would say that um I I would have to guess Trump is the favor to win the election now but who knows what these polls even mean no when even responds to them anymore but um that's what we're looking at I think the Delta between let's say four outcomes blue sweep red sweep uh Trump with a with a blue branch of Congress uh Harris with a red branch of Congress um first of all I think the blue sleep sweep is extremely unlikely even if Paris wins the presidency uh looking at state-by-state polls it it looks like the Republicans are going to win the Senate um where you get a blue sweep I think just the math of taxes um business confidence lack of an animal spirits um no change in the regulation front in investors Minds you could get a you you would have a rough time for ities I would think for 3 to 6 months I think this would probably translate in the economy because Equity ownership is 25% of financial assets at an all-time high that was 15% just not that long ago so that's a blue sweep but the good news or the bad news depending on how you view life is I think it's highly unlikely so that Playbook is probably going to be irrelevant so what about a red sweep a red sweep which I think is probably more likely than a trump presidency with a um with a blue Congress because personally I think anybody that votes for Trump is probably not going to switch their change their ballot um for a democrat in Congress a red sweep I think you get animal spirits in the business Community you get deregulation um and there might be some sort of um up lift relative to where they were in in terms of the business community so I think the economy could be potentially stronger for 3 to 6 months um my fear would be because of those reasons and because I think Bon yields already don't reflect a proper economic Outlook you would probably get a bad response in the fixed income markets which could then snuff out the equity rally but any of you we have a Duan family office where we're worried about bonds we're not playing it through the stock market we're playing it through the bond market if if you want to go after the cause rather than the symptoms there still look like there's stocks and things to do I also think under a red sweep the FED for the reasons I just elicited and maybe because of past relationships would be much more hawkish than they would be under Harris Administration so I think that would all will be in our Playbook and the responses to it under a Harris Administration with the Republican Congress probably not a lot of change from the landscape we currently have in terms of trying to figure out what's going to happen which concerns me more I haven't I like um Brett Stevens's line in the New York Times I haven't decided who I'm going to vote against um I can't see my voting self voting for either one of them so it really doesn't matter who concerns you are and I certainly will never would never support either one of them I just think um they're actually unified on some things like industrial policy both of them think apparently the government should have a major role in allocating Capital which I find frankly chali bizarre when I think back 10 or 15 years I'm I'm a I'm a reader of Tom fredman and quite a quite a good writer and he was constantly pointing out how the Chinese model was potentially superior to the US model talking about how nice their airports were and their roads and how they could Target certain industries well my long capitalist suspicions have been confirmed and China's been as we all know a disaster with that model but somehow both parties Republican and Democrats have adopted industrial policy kind of throwing free market Reagan capitalism to the side so the policies in terms of that I find equally bad I find her policies much worse in terms of anti- bigness anti- Business and Regulation but frankly I I grew up in America with a certain model of a President George Washington Thomas Jefferson um Reagan was one in my lifetime where there was a certain dignity and behavior in the office and I don't judge anyone who wants to vote for for Trump but for me um it's just a red line so I'll probably write in someone when I go to the polls I don't like tariffs I'm a I just said I'm a free market capitalist the only thing I'll say about Trump is is a bit of a blow hard so I don't know whether he's negotiating um with with uh our foreign adversaries and frankly with our foreign Partners um I don't think it'll be the end of the world but I I am not in favor of tariffs I don't like them at all you know it's interesting by the way uh the Biden Administration kept all his tariffs so it's not like I'm a fan of their tariff policy either in my world the less taxes the better but we live in a world that I hope still in includes compromise and if there's some sort of agreement for spending cuts I could definitely tolerate tax increases of balance them I will say one thing I don't I don't really like the media narrative which Compares fiscal irresponsibility with tax cuts and fiscal irresponsibility with spending and again you're right I'm a fiscal Hawk I'm a lot worri about more worried about this and the effect four or five years out and whether we have a soft landing and our economy grows at 1.2 or two this is big stuff we're talking about but tax cuts are accompanied by an addition to the Capital stock spending is a shrinking in the Capital stock replaced by government spending so of the two um the two sends tax cuts are leas but personally if I was in government you can't just do tax cuts if you don't get the spending cuts and it was Trump to me that took entitlements off the table in 2016 and that's where the money is so I give him an F on fiscal responsibility also I've made so many mistakes in my investment career one of them was I sold all my Nvidia um probably in somewhere between 8950 I think it's 1,300 on that stock now you owe none today I ow none and I I own nonetheless 400 points it was a big mistake uh in terms of AI and by the way when I when I saw you at that conference which was 18 months ago I fully expected to own it for years but I think it was 300 in change and um as I also said at a media interview I'm not Warren Buffett so I thought I thought I was going but what changed is it tripled in a year and I I thought the valuation was rich we we are big term long-term Believers in Ai and there's still many ways we're playing AI particularly the infrastructure that's been built out to support the power needed uh and yes I think Nvidia is a wonderful company and where the price to come down we get involved again but right now I'm licking my wounds from a bad sale there I don't know what very short means um we shorted bonds the day the FED cut 50 cuz we thought it was a mistake um we still have that position it's not so much um I have a view on where it's going to go short term what I what I do believe if if pal ends up being wrong here and inflation re accelerates next year bonds could go up a lot a lot of basis points hundreds whereas if he's right you might lose 25 or 30 basis points short the Golden Rule I've always had is is the 10 years should trade around where nominal GDP is which is 5 a half% so the risk reward to me is being short bonds
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