Billionaire investor Stan Druckenmiller said an aging population will present a “massive, massive problem” for the U.S. in 15 years.
“The young people are not going to be talking about cutting back,” Druckenmiller said Wednesday night in New York at an event hosted by Addepar, a technology company that provides software to financial advisers, fund managers and family offices. “There will be nothing to cut back.”
Druckenmiller, 61, has argued for several years that the mushrooming costs of Social Security, Medicare and Medicaid will bankrupt the nation’s youth and eventually result in a crisis worse than the financial meltdown of 2008. The government will have to reduce payments to the elderly, he said at the event.
A former chief strategist for George Soros, Druckenmiller shut his hedge fund firm Duquesne Capital Management in 2010 and now manages his own fortune, estimated at $4.4 billion, according to the Bloomberg Billionaires Index. From its inception in 1986, Duquesne produced average annual returns of 30 percent, one of the best track records in the industry.
“We’re going to go from five workers of working age supporting every elderly person to two and a half because of demographics,” said Druckenmiller. “We’re just using more and more of society’s resources to fend for the old people.”
The investor said President Barack Obama’s proposals to tax the rich to pay for more social services for the poor would be futile. “That’s not where the money is,” he said, instead pointing to spending on entitlements.
Commenting on the markets, Druckenmiller criticized companies for borrowing money to pursue corporate buybacks.
“I think it’s nuts,” he said. “If you’re running a business for the long term, the last thing you should be doing is borrowing money to buy back stock.”
He also said that interest rates could “arguably” stay near zero for 10 years. He said last month in a Bloomberg Television interview that he was afraid the Federal Reserve wouldn’t raise interest rates this year.
Druckenmiller said he shies away from established money managers, particularly those who oversee more than $10 billion. Assets exceeding that amount tend to become “a problem” for the managers, he said.
“I say that because I know it was for me,” Druckenmiller said.
Druckenmiller has been a major investor and public backer of PointState Capital, co-founded in 2011 by a group of former Duquesne employees including Zach Schreiber, 42. At the annual Ira Sohn Investment Conference in 2014, Druckenmiller told the audience that PointState in 2013 had beaten him “handily.” Schreiber and his colleagues had returned 30 percent that year. Last year they made about $2 billion in profits, with about half of that coming from a wager that oil would tumble.
Druckenmiller said yesterday that he looks for “almost a sick compulsion to win and compete.” Citing his own experience, he said that passion fades when managers have other interests, including children.
“Go young,” he advised the audience, saying that the best money managers are between 35 and 45 years old.
(An earlier version of this story corrected Druckenmiller’s statement about the optimal age range for managers.)Source: Bloomberg.com
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