Druckenmiller is riding the 'raging mania' in stocks but expects to sell before year's end

Published Tue, May 11 20219:15 AM EDTUpdated Tue, May 11 202111:15 AM EDT

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

Stanley Druckenmiller said Tuesday he believes a bubble has developed across a range of assets, although he remains long the equity market. "I have no doubt, none whatsoever, that we are in a raging mania in all assets. I also have no doubt that I don't have a clue when that's going to end," the billionaire investor said on CNBC's "Squawk Box." The CEO of the Duquesne Family Office told CNBC on Sept. 9 that he felt the market was "in an absolute raging mania." The S & P 500 has advanced around 23% from the close on that day to Monday's close of 4,188.43. "We are still long the stock market," Druckenmiller said Tuesday. "We're not as long, nearly as long, as we were four or five months ago. We're still playing the game. We've shifted a lot of our relative bets into commodities, into interest rates, into the dollar." Druckenmiller estimated that repositioning occurred from August to October as the recovery from the coronavirus pandemic took further hold. "I will be surprised if we're not out of the stock market by the end of the year, just because these bubbles can't last that long," Druckenmiller said. "But I really have an open mind and right now, treacherously, we're still playing the game to some extent." "Hopefully losses, if I'm wrong and the stock market comes down before I think it's going to, our other asset categories will benefit enough because to some extent they would be the cause of this stock market bubble popping," Druckenmiller said. Druckenmiller's appearance came after an opinion piece he co-authored for The Wall Street Journal titled "The Fed Is Playing With Fire" was published Monday night. He also was critical of the central bank during his CNBC interview Tuesday, believing the Fed's highly accommodative monetary policy that was enacted last year in response to the Covid crisis is no longer appropriate given the state of the recovery. In a May 2020 event for the Economic Club of New York, Druckenmiller said he felt the stock market was overvalued. "The risk-reward for equity is maybe as bad as I've seen it in my career," Druckemiller said then, according to the organization's Twitter account . "Last year, I didn't think we could have a 'V' recovery. We clearly are," Druckenmiller said Tuesday. "But, as you just heard by my performance, despite not being in the market in April and May and being dead wrong, I adjusted because the risk-reward changed." He said his family office was up 42% in 2020 and has advanced 17% year to date. "I think I've made those numbers because of the Fed, not in spite of them," he said, adding: "I mean, a monkey could make money in this market." Despite his current outlook, Druckenmiller stressed the uncertainty inherent in future projections. For example, he said it was clear to him in 1999 during the dot-com boom that equity valuations for tech stocks had become out of hand and the market was a bubble waiting to pop. The Nasdaq soared over 500% from 1995 until the bubble burst in March 2000. "I knew we were in a raging mania in '99 and it kept going on, and if you had shorted the tech stocks, say, in mid-99, you were out of business by the end of the year," Druckenmiller said.

Stanley Druckenmiller

Katie Kramer | CNBC

Stanley Druckenmiller said Tuesday he believes a bubble has developed across a range of assets, although he remains long the equity market.

"I have no doubt, none whatsoever, that we are in a raging mania in all assets. I also have no doubt that I don't have a clue when that's going to end," the billionaire investor said on CNBC's "Squawk Box."

The CEO of the Duquesne Family Office told CNBC on Sept. 9 that he felt the market was "in an absolute raging mania." The S&P 500 has advanced around 23% from the close on that day to Monday's close of 4,188.43.

"We are still long the stock market," Druckenmiller said Tuesday. "We're not as long, nearly as long, as we were four or five months ago. We're still playing the game. We've shifted a lot of our relative bets into commodities, into interest rates, into the dollar."