Delivering Alpha 2021
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Delivering Alpha 2021

Druckenmiller: Fed policy 'fraught with unappreciated risk'

Druckenmiller: Fed policy 'baffling'

Stan Druckenmiller, the retired founder of hedge fund firm Duquesne Capital Management, says the Federal Reserve is putting the economy at risk by continuing its aggressive market intervention.

"I am fearful that today our obsession with what will happen to markets and the economy in the near term is causing us to misjudge the accumulation of much greater long term risks to our economy," Druckenmiller said Wednesday at the Delivering Alpha conference presented by CNBC and Institutional Investor.

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"I hope we can all agree that once-in-a-century emergency measures are no longer necessary five years into an economic recovery," Druckenmiller said. "There is a heated debate as to what a 'neutral' funds rate would be. We should be debating why we haven't moved more meaningfully toward the neutral funds rate if for no other reason so the Fed will have additional weapons available if the outlook darkens again," Druckenmiller said.

Should the Fed comment on the stock market?

Druckenmiller, in a presentation titled "The unfavorable risk-return of the Fed's current policy," cited several factors in proving economic recovery, including accelerating household net worth, soaring production and strong retail sales.

"To economists and Fed officials who continually cite that we are better off than we would have been without ZIRP (zero interest-rate policy) for long I ask why is that the relevant policy time horizon? Five years after the crisis and with growing signs of economic normalization, it seems to be time to let go of myopic goals," Druckenmiller added.

Druckenmiller founded Duquesne in 1981 and ran it until he closed the firm at the end of 2010 after what is widely seen as one of the most successful investing runs in hedge fund history.

He was uncertain about when the markets would react. "We're not looking at an '08 or '09 in our future anytime soon," Druckenmiller said of value bubbles today. "You don't have to move until they raise rates," he added later.

From 1988 to 2000, he was a managing director at Soros Fund Management, where he served as lead portfolio manager of the Quantum Fund and chief investment officer of Soros (1989-2000), and had overall responsibility for funds with a peak asset value of $22 billion. Druckenmiller is now chairman and CEO of the Duquesne Family Office.

—By CNBC's Lawrence Delevingne

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