“I’ve Been Far Too Cautious”: Druckenmiller Admits He’s “Humbled” By Fed-Enabled V-Shaped Market Recovery

Stanley Druckenmiller took to CNBC Monday morning to admit that he “underestimated” the power of the Federal Reserve and that he had been “humbled” by the market’s V-shaped recovery.

Of course, what he meant is the Federal Reserve’s “power” to completely and totally rig markets, but, nonetheless, the longtime hedge fund manager offered up a mea culpa of sorts – seemingly surrendering any concerns he had about monetary policy as unwarranted. 

“Well I’ve been humbled many times in my career, and I’m sure I’ll be many times in the future. And the last three weeks certainly fits that category,” he said.

Druckenmiller continued:

“I had long-term concerns for the last few years that because of easy money, too much debt was being built up in the corporate sector. When Covid hit, I was pretty much of the view that there was a good chance that the credit bubble had finally burst and the unwinding of that leverage would take years.”

“The risk-reward for equity is maybe as bad as I’ve seen it in my career,” Druckemiller said back in May. 

The Fed promptly made a fool of Druckenmiller, as stocks rallied more than 11% since those comments. The Fed also seemed to demoralize Druckenmiller, who admitted Monday morning he had been “far too cautious” about things.

“I would say since that time, a couple things have happened technically. I would also say I underestimated how many red lines, and how far, the Fed would go.

I’ve been far too cautious. I was up 2% the day of the bottom and I’ve made all of 3% during the [market’s] 40% rally,”

“What is clearly happening is the excitement of reopening is allowing a lot of these companies that have been casualties of Covid to come back and come back in force. With a combination of the Fed money and, in particular, a vaccine where the news has been very, very good,” Druckenmiller concluded.

While the market has rallied over the last 2 weeks due to vaccine hopes and businesses re-opening, they’re also being helped along by massive tailwinds like 0% rates, unlimited QE and the Fed buying corporate junk bonds.