Druckenmiller, Warsh – Interesting segues at the Sohn conference

Every year the hedge fund and money management elite gather at New York’s Lincoln Center for the Sohn Conference where they elaborate on their view of the markets and the economy.  They also provide insights as to what they are touting these days – a chance to talk their book to a room full of fellow traders.

This year, amidst the otherwise boring touts, a couple interesting tidbits surfaced that I thought worth passing along:

1.  I did not know that Kevin Warsh, the youngest to ever take a seat at the Federal Reserve’s governors table, was the front runner to take over for Janet Yellen, but according to Forexlive’s Adam Button that is apparently the case.  Warsh is currently an advisor to the Trump administration.  Forexlive reports that Warsh took centerstage last Friday “with a savage assessment of the Fed.”  He believes the Fed should “engage in a fundamental rethink of strategy and how it thinks about the world.”  He says the so-called dot plot that nearly everyone on Wall Street uses to diagnose future Fed direction on rates has been wrong for nine years.  He also says the Fed can fix itself without the help of Congress and that there is considerable waste in its $2.5 billion budget.  All of that might fit in nicely with the mindset at the White House these days.
2. Warsh also said that “he believes the market is dangerous when measures of risk appear to be so low,” as reported at Bloomberg. He is probably referring to the VIX, i.e. the Volatility Index which is just as subject to speculative pressure as anything else listed and traded on the commodity exchange.  One wonders if it can be viewed as a reliable indicator given those speculative pressures, but that might be precisely why so many believe it to be reliable.  The Wall Street Journal published a front page article on the VIX this morning citing the measure at the lowest level since just before the 2007-2008 financial crisis.  Some see that new low as a major positive while others see it as a contrary indicator.
3. Stanley Druckenmiller in introducing Warsh at the conference said he sold his gold on election night then bought a bunch of it back after it corrected.

MK