🌍 Fed at zero for half a decade — get paid to be long equities

“The growth stocks have just been hammered because we're all expecting big interest rate increases to control this future inflation.”

“the markets are now acting to establish inflation expectations that the Fed just seems to not want to do anything about”

“he described our current monetary fiscal policy as being the most radical he had ever seen. And this guy's been watching markets for decades. ... And he said that when interest rates revert to the norm, the historical norm, interest expense on our debt will be 30% of the government budget.”

“And so Druckenmiller is making the case that the Fed and the Fed policy is acting as if we're in an emergency.”

“when we normalize, there's no reason that the 10 year shouldn't be back at the level it was in January 20 ... for every 1% move in the 10 year, you've got a 10 to a 20% drawdown in growth multiples”

“And so what happens is shares and technology companies go down”

“When you lever up rates, and all of a sudden, they're not zero, but they're two, three, four, five, six percent. This is sort of what brought the tech bubble to a halt in 2000, which is that you had six percent real rates.”

“all of a sudden, you know, real rates go to like six or seven percent. And then all of a sudden, you're not going to look at a company trading at 50 times earnings and say, you know, you're going to question that.”

“The markets go up 8% a year. So the do no harm solution is that things inflate naturally by 8%, especially if those things are public stocks... and then when you layer on top of it, as David said, all this free money that's just like rocket fuel, jet fuel.”

“Gridlock is great for the markets... especially given the amount of stimulus that's taken place... you've got this pumping by the Fed and the Treasury, all the stimulus money for COVID.”

“The amount of money being flooded into the economy now allows you to make a $100 decision in a second... I'm super bullish on the economy. I'm super bullish on tech.”

“There's this extraordinary velocity of capital right now... in part because the Fed has dropped interest rates to zero. So there's all these trillions of dollars moving markets... There's never been a better time to get your business funded or to take your company public... money is moving at a faster pace than we've ever seen and decisions are happening at a faster pace than we've ever seen... I don't think it stops going into 2021.”

“My personal view is rates are going to stay basically at zero for the next half decade... probably a full decade... the capital markets are in an expansive mood and an expansive mode... the real earnest capital allocation strategy left for most CEOs is to buy things, invest in things, try more things... In general, I'm kind of constructive and bullish. And I don't think this idea that there's a permanent unemployment class sticks around.”

“Jerome Powell gave this landmark speech and he basically said we are going to keep rates at zero for the next half decade... you're basically going to get paid to be long equities because your risk-free rate is zero and will soon be negative... you cannot fight the Fed... all of these opportunities, in my opinion, are generally buying opportunities. And I'm generally bullish. I'm more bullish now than I was before.”