Stan Druckenmiller: U.S. exceptionalism at risk? / 26th anniversary of Amazon's IPO / My history with AMZN / Amazon Overhauls Delivery Network / Pickleball in Central Park
1) Legendary investor Stan Druckenmiller, founder of the Duquesne Family Office, gave two speeches recently at the USC Marshall School of Business and the Sohn Investment Conference.
In them, he laid out his concerns about the future of the United States and the stock market.
Here's a transcript of his remarks and a copy of his slides at USC on May 1. Excerpt:
The fiscal recklessness of the last decade has been like watching a horror movie unfold... here in the U.S., the only thing that Hillary Clinton, Biden and Trump can agree on is that entitlements should not be touched. And waiting only makes the problem worse as interest payments keep building... This is a nightmare for future economic growth, investment and productivity, and, of course you, the future taxpayer.
It is time that we let go of the false pretense that cutting entitlements is a choice. It is not. Either we cut them today or we will have to cut them much more tomorrow.
As if the irresponsible fiscal behavior wasn't enough, around 15 years ago the Fed simultaneously decided to start courting with asset bubbles... This Fed policy has enabled risky behavior from investors, banks and the government... it has driven unprecedented bubbles in both breadth and magnitude.
The tech frenzy, the crypto craze, SPACs, the search for yield by investors and also by regional banks (!). While it has truly been an "everything bubble", nothing symbolized it more than Doge Coin, which started as a joke and reached a market cap of 80bn.
This is the last of his seven slides:
He continues:
As I have repeatedly said, central banks should be in the business of balancing rather than fueling asset prices or risky behavior... It is hard to overstate the myopic absurdity of the current policy and the predicament we find ourselves in.
He concludes:
To conclude, I greatly admire your generation's focus on the long‐term implications of climate change and your willingness to take action. I urge you to also take action against the bipartisan myopic abuse of our "seed corn" at the expense of future investment and growth. American exceptionalism and innovation have been on display my entire career.
We led the PC revolution, we led the development of the internet, the move to mobile and cloud, and blockchain and are leading in Generative AI. Indeed, the cover story of the Economist two weeks ago, Riding High, documented the astonishing success of American capitalism over the last 30 years.
Further delay in addressing the fiscal gap threatens a future of us not "riding high" but rather sinking into malaise, decay, and the end of the American Dream. It will embolden autocracies in places like China and Russia. And tragically risks a lack of wealth to make sufficient investments to address existential crises like climate change; and a lack of growth to afford programs for the least well‐off among us.
Here's the 62-minute video of the interview Druckenmiller did at the Sohn Investment Conference on May 9. There isn't a transcript, but the main takeaway was that his advice to investors was to prepare for a significant market pullback – he said he's market neutral, 30% long and 30% short – and wait for the incredible buying opportunities that will be available at the bottom.
I'm going to have to chew on this to see if it affects my moderately bullish outlook for stocks over the rest of this year, driven by a more-resilient-than-expected economy (likely a brief and mild recession), two Fed rate cuts later this year, and an early end to the war in Ukraine...
2) On this day 26 years ago, Amazon (AMZN) went public at $18 ($0.075, adjusted for four stock splits totaling 240:1), which means the stock is up 1,480 times since then.
Bloomberg TV host Jon Erlichman has a nice Twitter thread on Amazon's early days. Excerpt:
I think every investor is well served to study the history of the all-time greatest entrepreneurs and companies – think Warren Buffett and Berkshire Hathaway (BRK-B), Steve Jobs and Apple (AAPL), Sam Walton and Walmart (WMT), Howard Schultz and Starbucks (SBUX), Bill Gates and Microsoft (MSFT), etc. – so I've compiled all of Jeff Bezos' annual shareholders letters into one file, which you can download here.
As for my history with the stock, to my credit, though it took me a couple of years, I bought AMZN in 1999 when I realized that it was an amazing company. This is what I wrote to my friend Chris Stavrou in October of that year:
Amazon has made tremendous strides toward becoming a broad-based e-commerce company and positioning itself to go after the $5 trillion global retail market. I've always felt that the greatest potential for Amazon is less as a retailer than as a BRAND. I'm a believer.
I made a little bit of money and then, seeing the coming collapse of the Internet bubble, made another smart move and sold the stock, avoiding a massive 92% decline in the stock from December 1999 to April 2001.
And then I made the second-worst mistake of my investing career (the worst was buying and then selling Apple at a split-adjusted $0.35 in 2000): I never bought back into AMZN!
3) Amazon continues to be an amazing company with a bright future, which is why we recommended it when we launched our two flagships newsletters, Empire Investment Report in 2019 and Empire Stock Investor, in 2020.
It's still an active recommendation. This article in today's Wall Street Journal highlights how Amazon continues to innovate and outpace its competitors in a critical area, delivery time: Amazon Overhauls Delivery Network to Dispatch Packages Faster, More Cheaply. Excerpt:
Amazon.com has upended its vast logistics network to reduce how far packages travel across the U.S. in an effort to get products to customers faster and improve profitability.
The company's overhaul has cut delivery times, transformed inventory management and altered the search results customers see on its flagship e-commerce website, according to executives, analysts and sellers who list their items on Amazon. The move also appears to be improving the company's bottom line.
The changes that have been rolled out in recent months represent one of the biggest shifts to Amazon's system of shipping goods around the world.
4) For years, beautiful Wollman Rink in the south part of Central Park was an amusement park in the summer. Then last summer it was a roller disco, and this summer it's been converted into 14 pickleball courts.
My tennis doubles partner Daniel invited me to join him, his son Griffin, and his friend David (see pic below) to play from noon to 2 on Friday and, despite the beastly 88-degree heat, we had a blast! We were all evenly matched and split four tight games.
It's only the second time I've played, but the basic skills are similar to tennis, so I didn't embarrass myself.
I still don't think it's a sport and I definitely prefer tennis, but, like golf, it's a pleasant way to spend time with friends.
Courts are open 7 a.m. to 9 p.m. daily and cost $80 an hour off-peak and $120 an hour peak, with nice cabanas (with food and beverage service available) an extra $30 an hour – not bad split 4 ways. You can rent a paddle for $6, and they provide balls. Click here for more information.
