Soros Fund Chief Sounds Bullish Call, Sees Large-Caps Fueling Rally
NEW YORK -(Dow Jones)- Large-capitalization stocks will lead U.S.
equities on a substantial rally out of their recent lows, according to
Stanley Druckenmiller, chief investment officer for Soros Fund
Management.
"Unlike the consensus, which seems to want to buy small-cap value
stocks," Druckenmiller told CNBC in an interview Wednesday, "I do
believe a rally will be led by large caps, the ones that are so-called
'overvalued.'"
He also said Russia's impact on financial markets here is "over and
done with."
Druckenmiller, George Soros' longtime lieutenant, presented a bearish
view toward commodity prices and toward those countries whose economies
are heavily reliant on commodity exports.
He said he sees "no hope for commodity country stock markets."
Asked if the problems in those countries and emerging markets would
continue to lend to support for the dollar as a safe haven, he said he
expected money to continue flowing to the U.S. amid the chaos elsewhere.
As for exchange-rate regimes that fix countries' currencies to the
dollar, Druckenmiller said they were using a "silly system."
Notably, George Soros himself advocated the introduction of a
currency-board system to peg the Russian ruble to the dollar in a letter
published in the Financial Times earlier this month.
Druckenmiller also said that the Soros Group lost $2 billion from its
investments in Russia over the past year, while its loss from the high
there was "in excess of $2 billion."
"It doesn't take a rocket scientist to figure out that (the losses)
probably haven't helped our performance," he said.
The fund remains up on the year by about 19%, he said, but
nevertheless the Russian losses "turned what could have been a very good
year into a mediocre year."
Druckenmiller also predicted a Russian political shakeup, saying that
"Yeltsin is clearly out," the victim of what Druckenmiller termed a
"soft coup."
As for long-term economic outlook on Russia, Druckenmiller forecast
double-digit declines in gross domestic product and a general economic
downturn for "a long period to come."
In the U.S., Druckenmiller indicated that the Federal Reserve would
eventually move toward easing interest rates, in part to counteract the
effects of the problems overseas, and to deal with "very, very high"
real interest rates.
Druckenmiller said the U.S. stock market sentiment has reached an
"incredible bottom," and because of this bearishness, forecast that on a
near-term basis stocks were much more likely to have a "meltup than a
meltdown."
Druckenmiller said the world is breaking down into "haves and
have-nots," explaining that the U.S. and Western Europe will remain
strong because of their status as importers of commodities, and because
they have cash readily available. The U.S. stock market remains
Druckenmiller's favorite.
Regarding Hong Kong and Asia, Druckenmiller remained pessimistic.
"When they wake up on Monday morning, they're still going to be in a
depression, which is what's going on in Asia."
Returning to his own business, Druckenmiller called the hedge fund
market oversaturated and predicted a "meaningful shakeup" within the
next few years, "maybe as soon as the next few weeks." |
