On Wednesday, Stanley Druckenmiller, former comrade-in-arms of Soros, billionaire investor, and Chairman and CEO of Duquesne Family Office, discussed with the media about his regret over selling Nvidia's stock, the mistake of the Federal Reserve's 50 basis point rate cut in September, shorting U.S. Treasury bonds to guard against a resurgence of inflation, and more.

Selling Nvidia was a major mistake

Druckenmiller stated that selling Nvidia was "a major mistake" on his part. He would buy the stock again if its price falls. "I'm licking the wounds from that terrible sale."

Druckenmiller mentioned that he currently does not hold any Nvidia shares, having sold them in the range of approximately $800 to $950, whereas the stock is now trading around $1300 (Note from Wall Street See: Nvidia split its shares 10-for-1 in June, and closed at $135.72 on Wednesday). After his sale, he missed out on the subsequent $400 increase.

Advertisement

Druckenmiller said that he has long believed in artificial intelligence (AI), but the reason he sold Nvidia at the time was due to the stock's price tripling in a year:

"Eighteen months ago, I fully expected to hold onto Nvidia for several years, but the price was around $300. What changed was that it tripled in a year. Although Nvidia is a major beneficiary of the AI boom, the decision to take profits was made at the time due to the stock's significant increase. Druckenmiller sold out of caution regarding valuation, 'I'm not Buffett, I adjust my positions based on market dynamics.'"

Despite reducing his holdings, Druckenmiller remains interested in artificial intelligence and its infrastructure, stating: "We are long-term, loyal believers in artificial intelligence."

Following Druckenmiller's statement, Nvidia's stock rose, with intraday gains expanding to as much as 3.8%.The Federal Reserve's 50 Basis Point Rate Cut in September Was Mistaken

Druckenmiller believes that the Federal Reserve's decision to cut rates by 50 basis points in September was a mistake, comparing it to the policy errors made by the Federal Reserve in 2021:

Druckenmiller points out that the Federal Reserve was trapped by forward guidance in 2021 and warns that the same issue could reoccur.

Looking back, he explained that inflation had exceeded its target for 13 months, yet the Federal Reserve kept interest rates at zero and aggressively purchased bonds.

He emphasized that the Federal Reserve's inability to respond quickly enough to inflationary pressures was a significant mistake, and he hopes they will not make the same mistake now.

When discussing the broader macroeconomic environment, Druckenmiller highlighted the disconnect between the Federal Reserve's belief that monetary policy is restrictive and actual market conditions. He questioned the Federal Reserve's claim that the financial environment does not reflect the restrictive nature they claim:

I am a creature of the market. Frankly, over the years, we have found that the market is better at predicting than professors.

Despite the Federal Reserve's claim that monetary policy is tight and restrictive, the market tells a different story: the stock market is at an all-time high, gold is at an all-time high, GDP is above trend levels, credit is tight, and bank earnings and forecasts look good.Druckenmiller believes that the market needs to reduce expectations regarding the pace and magnitude of the Federal Reserve's easing.

Druckenmiller revealed that they shorted bonds when the Federal Reserve decided to cut interest rates by 50 basis points at the FOMC monetary policy meeting on September 17-18. He believes that there are still risks in the bond market. Druckenmiller remains vigilant about the long-term effects of fiscal and monetary policies, saying that if inflation rises again, it could have a serious impact on market stability. Therefore, he hedges his portfolio bets through the bond market rather than the stock market.