With Kevin Warsh nominated as the next chair of the Federal Reserve (Fed), billionaire investor Stanley Druckenmiller, known as "Warsh's mentor," is back in the spotlight. On the 1st (local time), Bloomberg News ran a story saying to "watch the Druckenmiller effect," and major foreign outlets have since published a series of articles focusing on him.
Druckenmiller, a graduate of Bowdoin College, entered finance in 1977 when he joined Pittsburgh National Bank. He later worked with noted investor George Soros and founded the hedge fund "Duquesne Capital Management" in 1981. He built a reputation by posting an average annual return of 30% without a single losing year over three decades. He now runs his own investment firm, Duquesne Family Office.
His ties with Warsh began in 2011, when Warsh resigned from the Fed Board of Governors and joined Druckenmiller's firm as a partner. The two have worked together for more than a decade and maintained a close relationship. The Financial Times (FT) described their relationship as "going far beyond simple workplace respect, with people likening it to that of a parent and a devoted child." Druckenmiller is also said to have played an important role in rallying Wall Street support as Warsh was nominated to be the next Fed chair.
While running Soros's Quantum Fund in the early 1990s, he hired current U.S. Treasury Secretary Scott Bessent and worked with him. The two are regarded as key figures who pressured the Bank of England in 1992 by shorting the British pound, delivering massive revenue to Soros's firm. Druckenmiller is known to be in frequent contact to this day not only with Warsh but also with Bessent. America's fiscal and economic chiefs are all part of the "Druckenmiller camp."
In an earlier interview with the FT, Druckenmiller said of Warsh, "It's not right to view him as always a hardliner," adding, "I've seen him take both sides." In fact, while Warsh was on the Fed Board from 2006 to 2011, he was known for a hawkish tilt, but after joining Druckenmiller's firm in 2011, he shifted to favoring rate cuts. As Druckenmiller stresses flexibility in investing, Warsh is expected to take a flexible stance in monetary policy as well.
A conservative, Druckenmiller has consistently been critical of the federal government's fiscal deficits. He is said to admire former Fed Chair Paul Volcker, who raised the benchmark rate to 20% to combat "stagflation" after the oil shock of the 1970s. For that reason, Wall Street is confident that the Warsh nominee will uphold the independence of the Central Bank despite pressure from President Trump to cut the benchmark rate, the Wall Street Journal (WSJ) reported.
Some say Druckenmiller's influence may be smaller than expected. While Fed officials regularly communicate with investors and bankers to gauge market trends, they take particular care to prevent future policy direction from leaking. Citing people close to Druckenmiller, the WSJ reported, "He has been extremely careful about communications to avoid situations that could appear improper since Bessent became Treasury secretary."
Moreover, although Druckenmiller is a Republican supporter, he has been critical of U.S. President Donald Trump. The FT said, "Druckenmiller is currently thought to prefer rate hikes, which could make President Trump somewhat uncomfortable," adding, "If Warsh becomes Fed chair, no one can be sure how much he will rely on Druckenmiller's advice."
Meanwhile, like Warsh, Druckenmiller also has deep ties with Coupang. Since 2021, he has been known as an early investor in Coupang, buying and selling up to more than 10 million shares of Coupang Inc., the U.S. parent company of Coupang. As of the end of last year, he holds 4.63 million shares (0.3% equity) of Coupang Inc. through Duquesne Family Office.