Nassim Taleb, Stan Druckenmiller talk crisis on Bloomberg TV

Our future may be a bit more fragile than "Anti-fragile", if the latest warnings from Nassim Taleb and Stanley Druckenmiller prove correct. 

The pair recently sat down with Bloomberg TV to voice their concerns over America's social and economic strains. Taleb believes we are still loaded down with the unsafe systemic risks and toxic leaders of our recent past. Druckemiller sees a crisis "worse than 2008" ahead. 

We have their full interviews for you here, so let's jump right in. 

 

Nassim Taleb feels we are at a point where we have not learned or benefited from the mistakes of our recent financial crisis. This has made our society more susceptible to fragility and will deepen the effects of future crises.

Moral hazard has increased as bankers have paid themselves larger bonuses with our (taxpayers') money. Quantitative easing has lifted asset prices. Median incomes, and the average person's standard of living, have been dropping while the top tier of society ("the 1 percent of the 1 percent") has been absorbing the lion's share of recent economic growth.

As Taleb puts it, we are now paying for the bad debts and disastrous trades made by irresponsible, bailed-out parties in the last cycle. We have transferred private problems and failures into public problems by transforming private debt into public debt. 

In order to improve our situation and ensure future prosperity, we need to face our mistakes and make our regulations and tax codes less complex. Complex regulations are a boon to lawyers and big businesses who game the laws to their benefit. To quote Taleb, we need "sound, minimal regulations and more skin in the game (personal liability) for those who make mistakes.".  

 

Recently retired from running public money, star hedge fund manager, Stanley Druckenmiller has stepped back into the spotlight to warn of a looming entitlement spending crisis in the USA. 

"Every once in a while, the world of investing and what's going on in the country will intersect". 

Druckenmiller recounts his conversations with US officials about previous storms on the financial horizon. Based on his past experiences, he figured it was better to keep quiet and manage his investors' money than get caught up in public debates over politically sensitive issues, like the fallout from the 2000s housing bubble. 

He now feels he needs to speak out to warn citizens about a coming bust of America's demographic bubble. Druckenmiller notes that in 2030, the average population of the USA will be older than the average Floridian is now. "I don't know about the timing of when markets will respond to this, but I know it will happen based on the fundamentals.". 

Stan also offers his thoughts on the valuation of the equity markets, bonds, risk assets and zero rates, and competitive currency devaluations. "Every single major country is now running stimulative monetary policies, basically modeled after the Fed.". 

One great piece of investing advice from Stanley Druckenmiller (and a recurring theme in this interview): "You've got to think in an open minded fashion and look out into the future to judge companies [and stock prices]. Try and imagine the world 18-24 months from now and not the way it is today. Then think about where securities prices will be to reflect that view".

Related posts:

1. Victor Sperandeo exclusive interview: gold, inflation, and trading the QE wave. 

2. Nassim Taleb on Antifragile at Google.

3. Jim Rogers on Street Smarts and outsized returns.