Courtesy of Benzinga.
The Federal Reserve has made an error it keeping interest rates low, according to billionaire investor Stanley F. Druckenmiller.
“I can’t figure out how this is going to end but I know it’s going to end badly,” Druckenmiller said.
Druckenmiller, former Chairman and President of Duquesne Capital, made the comments in a January speech at the Lost Tree country club in Palm Beach, Florida. A copy of the speech was posted March 30 in a blog posting by Cove Street Capital.
Druckenmiller blamed low rates for causing a housing bubble, which he said resulted in the 2008 financial crisis.
The current economic picture is analogous to 2008, according to Druckenmiller.
“There are signs,” Druckenmiller said, pointing to a high proportion of initial public offerings stemming from unprofitable companies.
Druckenmiller also pointed to “weird things in the credit market,” which he said include corporations issuing a relatively large amount of debt, given low interest rates.
“I know you’re all frustrated by low rates,” Druckenmiller told his audience.
“We’ve had speculation. We’ve had money building up for four to six years and I think it could end badly.”
Unlike other recent warnings about low interest rates, Druckenmiller didn’t predict that inflation would result.
“Earnings don’t move the overall market. It’s the Federal Reserve board. It’s liquidity that moves markets,” Druckenmiller said.
Posted-In: Stanley F. DruckenmillerAnalyst Color Federal Reserve Analyst Ratings
