Stanley Druckenmiller Explains how he makes 30% return every year!

almost one in every four children in the united states of america lives in a state of poverty that's an outrage one way to think about it

of the top 35 industrial countries in the world we have the second highest poverty rate stan druckenmiller is here for 30 years he maintained one of the best investment track records on wall

street he recently orchestrated a campaign at colleges across the country to educate and mobilize action on entitlement reform and other government spending he says that without a major

overhaul soon today's young people will be robbed of the future benefits and standard of living they deserve i am pleased to have stan drucamilla at this table welcome thanks charlie good to see

you it's good to see you can i just start with understanding you you know this remarkable record uh with duquesne and and with quantum fund and george soros and the

relationship you did you you where are you in your life you mean what am i doing yeah i'm still managing money very actively for family or for

family and the family foundation right so i go to work about six and i come home at six so i'm doing that 12 hours a day i'm still in love with markets the only thing that's changed

is i'm not competing anymore so i'm not managing other people's money but i love markets and i love the intellectual challenge as much as i ever have is that what you love about marcus

the intellectual challenge yes also i'm i like talking i i like no not so much being rich as i like to win i have a disease it's a competitive disease that

i it gives me a thrill to win but but does it give you a thrill also to win and to be better than someone else which is winning well i don't know whether you're better than someone else but gives me a thrill

to have better results than someone else yes um and and where did you get that that where does the competitive spirit come from do you know

you can't remember when you didn't have it i don't know i remember being a brat when i was little we used to play board games at our house constantly and uh i really did not like to lose when i

play board games and uh just something i was born with it's a it's somewhat of a curse but it also has its advantages in terms of pushing you to perform yeah and pushing

and therefore and with success uh widening your opportunities to do a range of things yes yes but but beyond that what is it about markets that's magical for people who

love the idea of what they not only represent but the challenge they offer yes so i'd say there's two things

number one i love trying to put a puzzle together visualize the future and particularly if you have a different view than other people and if you do

that right the security prices in the future will reflect that and there's there's a great satisfaction to having solved that puzzle and the nice thing is you get your grades in the

paper every day there's no subjectivity in the money management business it's right there and if you're screwing up yeah those numbers every day yeah and i i love the objectivity of that i always have george

soros and and the relationship the two of you had i mean because you were there you were the guy when the great decision

based on the devaluation of the pound happened yes right you bet right yes and you bet a lot yes and you made a billion dollars plus

on one day something like that yes or something like that you know precisely okay true so who has the the who has

abused a polite term who has the there's a bigger nerve you were george oh i'd say george ice water george has more ice

water than i do um i'd say if if you looked at our records are they're very comparable when he ran quantum and iran quantum they're they're almost within

decimal points and i'd say george made more spectacular vets and my record was a little more the bets were more consistent but the results were pretty much the same but do

you agree with them in terms of that you know if you see an opportunity just go all in oh yeah if there's one thing i learned from george and what made me a better money manager because

of george it's exactly that it's not whether you're right or wrong it's how much money you make when you write and how much you lose when you're wrong yeah so and how confident you are that

you're right yes but up until that point i had a very good record but it was only after i was with george that i learned

how much you should really press a bet when your confidence level is extremely high i did find where before i was there don't get me wrong but but

it was amazing to watch that man when we had something we really believed in um to to see the way he would he would size risk and reward yeah and you cherish the fact that the

relationship is one in which as i ask you when you sat down you know we're friends uh we have different lives but he once said you know you're not only

a great money manager but you're also a partner no i'm i have very fond feelings with george's best 12 years of my life my three children were born

i learned a lot it was an exciting time and you know we're we're still in touch we're on different political sciences that's exactly where i was going there's been a build up to that it doesn't matter in terms of our

friendship at all totally different places aren't you yes but the respect is there so i mean maybe washington could learn something because we couldn't be

different politically but i think the mutual respect is there so so define how you're different politically i think george um

in traditional terms he would consider be considered more on the left right and i would be considered more on the right particularly on the non-social issues on the economic issues he's much

more pro-regulation he thinks markets go wild i love free markets i'm anti-regulation yeah and are you beyond being on the right more libertarian

yeah i think that's probably fair yes i'm certainly not on the right on social issues and i'm certainly anti-crony capitalism

so i have some strange views um in terms of being on the right that normal corporations may not particularly particularly like a lot of views that normal corporation may not like lots of

them don't you i mean sure i'm sure everybody does and that's why we want to go through this but i mean i what was surprising me actually i think that to understand what you're arguing for is is not necessarily

predictable from where you come through from politically oh no that's absolutely true in fact i think one of the problems

of getting this message through which is so obvious to me it's as obvious as the pound was and then some in terms of predictability it has a longer time frame

is that it has been associated with austerity and the right wing and i don't look at it that way at all when i heard it i think

in many ways the left wing should be more excited or as excited as the right wing and that's actually what we found out on the road with the students the kids at berkeley loved it the kids at brown loved it

so it's the same conclusion but it's a different messaging okay uh i mean i think i wanted to set this up so that we can have you then explain to me what it is that you're on the road talking about and what this and

and what is the central idea and why you're so passionate about it uh but i wanted to understand where you come from politically from the right maybe more libertarian but and and at the same time the enormous respect you i'm an

independent who would be considered center on social issues and probably you know somewhere very much opposed to the present administration well i voted for him the first time

first time uh but i've been opposed to just about everything he's done since i voted for him yes what was your problem with health care

my problem with health care we talked about obamacare yes i believed it was a once in a generation opportunity to separate this thing from the corporation

and make the consumer of health care actually have choice and have skin in the game i think one of the big problems with health care system is

we go to the doctor we have no incentive to shop we have no incentive to see what the costs are and as long as your corporation is paying the bills and you

don't see that bill that's the way it's going to remain i guess there's no therefore intelligence at the choice at the decision point

right there there's none whatsoever or self-interest right we we have taken away the market which you could use

very much so to solve this problem we've completely taken out of the equation i guess my problem with obamacare the more i s the more i understand now is

it's all dishonest and by that i mean so we're taking young healthy people and making them buy plans with stuff in them

they don't need to subsidize people with preconditions and older people and unless you do that the system will not work and i'm okay if you want to tax stan druckenmiller and you want to tell him we're taxing

you to support people with pre-existing conditions and sick people i'm not okay with messing up all this marketing and making me have

maternity and all kinds of stuff in there is some kind of hidden scheme to make that subsidization if we as a society want to choose to to

implement universal health care the way they want let's at least be honest about it and let's just put a tax on all of us and say we choose to do this let's not do something you're going to pay that kind

of tax uh would i be willing to pay for it i'd feel a lot better paying for it as a tax than mucking up the whole incentives within the health care system would i be willing to pay for it yes i

think i would so you're going around to college campuses and you have a central theory which i referred to in the introduction which is that is that you are you believe that it's terribly unfair what

we are doing to young people today that we're burdening them with circumstances that we didn't have so that they can take care of us

yes that's very simplified so you expand so the way our entitlement system works is it's not pay as you go it was set up a long time ago so current

workers pay for current seniors right and because of the senior lobby versus young people because young people don't vote and they don't give money to

parties they have other things on their mind and are not organized the seniors in our society have been taking an increasing share for the better part of 40 years

from money allotted to youth and investment and this this is somewhat alarming has been somewhat alarming but now is

extremely alarming because the baby boom which took place from 1947 to 1967 and that was 65 years ago

means the number of seniors is about to explode so the share of the pie that has gone to the elderly is now about to be distributed to a lot

more people specifically charlie we are creating 8 000 new seniors on the entitlement payrolls every day now that's because of the demographics and we're only producing

two thousand young adult workers to support them that number goes to eleven thousand by two thousand and twenty nine so you have a combination of too much pie

going to one sector and now that sector growing dramatically relative to the sector that's going to support them which should set up a big

fiscal problem sometime in the next 20 to 40 years i guess what's different about not in the next 10 or 15.

i don't think in the next 10 or 15 but i don't know but let me tell you why i don't care if it's in the next 10 or 15 because every day we wait is

money that the next generation has to pay whether it's 10 or 15 or whether it's 20 or whether it's 30 or whether it's 40.

every day you wait and and these obligations and these promises and these debts accumulate means that the next generation will pay that

bill as opposed to seniors today so there's a there's a terrible unfairness about about what we're looking at today and as you probably know

one of the problems is we are allocating more and more resources toward transfer payments to senior and away from things like head start nih

grants investments in education so you're also having the seed corn eating problem okay so okay there are lots of things that come out of all this number one i hear you you know and and and i think

other people recognize the the problem we face you know and and but you're raising you're basically saying to young people uh you got to do something you got to get organized you have to take it in your responsibility otherwise you're

going to face a crushing burden uh yes they're going to and you will have to pay more and they won't you'll get you'll have to pay more and you won't get out as much

because people who are older are getting out what they were promised yes one of the things i thought one of the things i bristle at is that i've read in some of these things that

i'm anti-entitlement yeah well i'm going to get at that that's what i'm doing i'm not anti-entitlement i want youth today to enjoy the benefits of the social security net

and the and that retirees today enjoy and if we continue to share the pie the way we're doing it there's going to be nothing left in for the youth of today so it's not that i'm anti-entitlement

it's that i'm for sustainability of entitlement because those who stand up to say look just it we just got to let the baby boom generation get through the system

and then we can figure all this out well that's where my day job comes in and that's where that is total nonsense because what happens is

that's the rat through the python theory once the rat goes through the python you're fine by the time the 20 or 30 years are up when the baby booms are over the debt is

so high that the interest payments alone start to become bigger than the entitlements were during the 20 to 30 years are you at all encouraged over the fact that the debt is going down and

that none whatsoever you see that is temporary you see that is small you see that that's tiny potatoes that's just um a short-term cyclical phenomena that has

nothing to do with entitlements nothing this we are right on the front end of a demographic surge that is going to cause investment spending to go crazy let me

just put in perspective for you so the next 10 years okay and this is with the administration's optimistic budget

the growth the growth not the spending the growth in social security medicare and medicaid is going to be 780 billion dollars the growth in spending on children is

going to be 20 billion dollars okay that's what you're looking at now i don't know what kind of society you want but this is just transfer payments to the elderly who as i mentioned earlier have already been increasing their share

of the pie for the last 40 years i think it's unfair most of all and secondly it will set up an unsustainable situation down the road we can't afford it so

here's the alternative argument too when you look at this as you've heard before take larry summers somebody who's i'm sure intellect you have some respect for uh argues that all the talk about entitlement

reform you know and someone understands down the road the fears that you're that you are pointing to says what we need to do is create growth in

the economy and that the growth in the economy will take care of all the problems that stan is worried about okay so a it won't take

care of all the problems i'm talking about b i'm very sympathetic simplifying it a little bit i'm very sympathetic to what larry is saying who i consider a friend so

let me just throw i hate to get too numbery here okay but let me just so 40 years ago and this is an argument larry would be very sympathetic to 40 years ago

we spent 32 percent of federal outlays on investment government investment that would include things like infrastructure education r d science exploration and we

spent about 30 on transfer payments to the elderly we now spend 68 on transfer payments but investments are down to 15 percent

so i think to larry's point what did we get out of the investment well we got the internet we got gps we got the human genome so that's where you agreement that out

of i totally agree and if you look at the sequester that the investments are worthwhile and important and crucial to our future yes but we are cutting the

investments so we can continue to let transfer payments to the elderly grow at a very rapid rate we cannot do both or or we're cutting the investments because

we do not have a realistic look at where uh of taxes which you're prepared to have a realistic look at yes in other words you're not coming here as

a as a representative sort of a view often expressed by the 30 members of congress although you had some reservations obviously about the health fund defunding the health care even though you expressed reservations about

it your point was that you did not as i understand where you are you you didn't you thought they were silly maybe to use your own words to try to attach defunding to medicare to the debt

ceiling on the other hand you'd be prepared to attach something else to raising the debt ceiling in order to have some sanity uh to address the problem you're talking

about am i right or wrong an interpretation i was 100 against tying obamacare to a government is defunding obamacare yeah i was 100 together right that argument

was decided and as much as i didn't like the conclusion i have never been for defunding obamacare once it was voted for and certainly linking it to government

to the government shutdown was insane are there circumstances in which you would think a government shutdown you know is is satisfactory if in fact and for example say we'll shut down the

government uh rather than raise the debt ceiling if i thought there was a big enough carrot and to me that would be entitlement serious entitlement reform

right at the end of the road i would be willing to flirt with a government shutdown there was no big carrot at the end of the road both parties agreed the one

thing we weren't going to do is cut growth in payments to seniors we weren't even talking about entitlements we were talking about other things well basically we're talking about obamacare

the president said that he the president said whether you believe him or not that they're certainly prepared that's what the budget process is about right now is that you prepare to look at

some changes in entitlement reform in contrast to changing the tax structure and the spending the president says a lot of things

the first thing that set me on my media tour and the college tour was the president when the budget battle started way back

in the beginning of last year stated i saw it on television it was like yesterday the one thing we are not going to do is balance this on the back of seniors right that was his initial position

and by the way i haven't heard a lot different from how do you want to balance it on the back of scene okay so this is where my role as a philanthropist and my day job intersect right all right

so we cut head start up in harlem right we're cutting nih grants where i am at sloan kettering right but we're not even touching this other stuff so this is what this is

so then that brings us to this point how would you touch the other stuff okay so that's the point yes now i'm going to give you an answer but

the first thing i think that's also a larry's point to a degree but when talking about i'm going to give you an answer but the first thing i want to say is the first thing i've been trying to do is identify the problem right i don't

have a monopoly on the truth so i have my own opinions and i have some suggestions but i really think the answer to your question needs to be fought out in the political arena if

you're asking me for what my suggestions would be the first thing we'd have to do is the really low hanging fruit you can means test to a greater extent medicare you can

certainly means test social security we haven't even done that okay so people like you who don't need medicare would not get medicare correct i would look at it philosophically

this was an insurance safety net we paid into 40 or 50 years we bought fire insurance the fire didn't happen let's give the let's give the insurance to the people that need it okay but that's not

a whole lot of money okay i guess where i also differ even from the republicans is i would not exempt people over 55.

when i look at the share of the pie that the current seniors have gotten the last 40 years the chain weighted cpi that wouldn't even go far enough i would freeze the thing

freeze it in terms of social security now i will say 30 or 40 of the people really need social security and this is where the means testing come in they should be provided for i do not want to see

seniors in positive in poverty i also don't want to say you don't see things without medical care you don't want to see seniors with it with all the things that they thought they had a social contract to receive

yes and they're receiving it okay then you get into the elephant in the room which is a health care system and here it gets very complicated but let me let me just say that

the first thing you've got to do is put incentives at the consumption level and it's already happening to some extent through more co-payments used as you know and that should start to push down the

costs the second thing is i think the extent that we have malpractice in this country is causing a lot of tests to be done that don't need to be done

cya policies by hospitals so forth but then you get into some very controversial issues like the end of life if you have a terminally ill patient who

has a zero percent chance of living more than two months right okay and it's going to cost a million dollars to keep them alive for two months how much

should that family pay versus society i give you a horrible story when i talked to university of north carolina a crying mother came up to me because her 93 year old mother had

just been put into a hospice and she was getting thousands of dollars which she didn't want for the mother and the hospice but her seven-year-old daughter couldn't get the money for an operation

she needed and the woman was literally crying the juxtaposition of the ninety-year-old mother who had probably two or three months to live getting thousands of

thousands of dollars but there was no funding there for the seven-year-old and this is why i say stan druckenmiller can't make this decision but it's a conversation that we have to

have and we're not having it we're just saying okay as long as we can keep them alive let's keep coming in order to understand where you are uh and this is why some of this is surprising uh you we obviously have

capital gains tax and we have ordinary income you basically want to see the capital gains tax rise to the rate of the ordinary income i think there's a different way to grow the economy and i

also want to know what your conservative friends think of this okay so first of all let's go back to the healthy conservatives let's go back to larry summers i think

taking the capital gains rate and and the dividend rates to ordinary income while you simultaneously lower corporate tax rates to zero would make the economy grow dramatically and

revenues to the government would actually and then put you where larry is would actually increase the goal but he likes to do it through inve spending i like to do it through tax reform in

that regard but so you take you ordinary in capital gains would go to the level of ordinary income you reduce the corporate income tax to zero yes you would assume that there wouldn't be double taxation as some people like to

argue you would pay tax on corporate profits because you'd be a shareholder right yes corporations have presented as like living things to people they're not okay corporations are

owned by shareholders right if you tax the shareholder you're taxing the ultimate benefit ordinary income rates yes and they're clipping coupons they're not

hiring people they're not engaging capital spending and the corporations are doing that yeah and you take their rate to zero and by the way all this money they talk about overseas yeah if the corporations take that money

and they buy back stock and they issue dividends that money comes back at a 40 rate they're not even bringing it back at a 35 percent rate do you think this has a chance in hell

of being politically viable first question second question is the reason you're sitting at this table going all these campuses is you want to create some kind of political

action that might result in it having a chance in hell the second question i want to shine a light

on on this issue and i am desperately hoping the young people will start a movement do i want to start the movement i don't think i'm capable

do i think i can articulate the facts and i have have i seen them respond that somebody out there could start a movement yes in my opinion they were instrumental in getting gay marriage passed

they're moving the needle on the environment this thing's very similar in the environment on both of those issues you were on their side yes on the gay rights and on the environment still am okay well i

mean i'm i'm trying to lay out a sec set of facts and hoping that when they look at those facts they will start to put political pressure and consider this issue as

important as they do the environment and the gay rights and do you think you'll find more receptivity in the republican party of the democratic party in the youth yes

i have i know what i'll see which is enthusiasm on both sides i have when jeff cannon and i have gone not only have we spoken for an hour they ask questions for a half an hour and there

are 40 hands left when we lead and it doesn't matter whether we're at berkeley at brown or usc or north carolina or right or left they're all there now just explain who jeff kennedy is

first of all you went both into about in college uh secondly uh he runs jeff canada runs the harlem children's own i i have been chairman of the harlem

children's own since its founding and that and they do what good question um there's a hundred square blocks up in harlem they take children

basically from birth all the way to through college through a bunch of what i would call social antibiotics at them education baby college pre-k try and get them through college so we

can break the cycle of energy intergenerational poverty up there and as you know charlie i'm sorry didn't you intergenerational poverty and as you know there's a bunch of pilot

programs some inspired by the president to try and copy that model around the country that's what jeff canada does he runs that and and you have been his big supporter from

since the two of you i i was on the i was on his pre-board with his pre-organization which was the breedland and when he founded the harlem

children's zone i i became the chairman and have been at his side throughout you don't have to do much but going understanding what you're doing in terms of washington i mean in terms of of young people and campuses and also

looking to create a movement that has some other has the kind of legs that that same-sex marriage did and had the same kind of legs that's with some success in the environmental world

uh when you go to washington and and carry your message what kind of response do you get there well uh whatever whoever whether it's a finance committee whether it's

uh i went to washington rand paul believe it or not in 1990 in 1994 yeah and argued to raise the retirement

age in 2011 because that's when i knew the demographics i had very little success i haven't even gone to washington this time because it's my view until the young people

show them that they're concerned on this issue the people in washington will not give a damn about this yeah do you think that we i mean the government is dysfunctional

obviously in terms of being able to do some things to address problems as it ought to be uh do you think we can overcome that and is this in a sense where people are saying look they can be dysfunctional in washington

if they want to but we're going to create something whether this kind of issue for you or other people in which we're going to affect elections and we're going to

affect uh the public mind i know we will overcome it but i don't know what the timeline on that is we have these phases in america where crazy things happen happen

economically and politically and what what's going on in washington now will not be sustained i don't know when it ends we all pray it ends sometime soon maybe in the next five or

ten years i happen i have great hope that maybe the right president could bring them together i don't know what's going to end it but it will end and the united states will be fine in

this regard okay so we started this back talking about george u and then george soros and he's on the left and and you're somewhere on the right but on social issues are in

the center what does george say about your ideas haven't talked to him about it why not i haven't gotten around to it both his sons came to me and they really liked it

no come on you're smart in this why are you going to talk to him about it uh i probably i probably will in the next this is pretty new for me charlie i didn't even know i was going to do this yeah

it'll probably happen in the next month or two i don't know how he'll think about it um i have been [Music] very pleasantly surprised by the reception i've gotten from the

intellectual left on this issue when i got to sit down with them and explain my explain my case to them right the the stuff that's been written about

objecting to what i'm saying i'm not saying so i don't want to speak for george but there will be a time in the next few months while i will certainly sit down with him and

see what he thinks about it thank you for coming thank you back in a moment stay with us