Fed and Treasury power shift: one investor's influence

0:00It's not crazy to suggest that Druckenmiller might be the most influential financial mind in the American economy right now.

0:10One guy on Wall Street now controls the two most powerful people in financial markets. Not the president, not Congress, one billionaire investor you've probably never heard of. And what he does next could either protect your retirement or absolutely wreck it. So I'm going to show you what's really going on here, what you don't read about in mainstream media because they don't want to unsettle you now, do they?

0:38So here's the situation. Stanley Druckenmiller, one of the most successful investors in history, 30% returns for 3 decades straight, never had a losing year. His two protégés just took over the United States economy. Kevin Warsh, the new Fed chair, he worked for Druckenmiller for over a decade. Scott Bessent, who is the Treasury Secretary, he was hired by Druckenmiller 30 years ago. They worked together ever since. Both guys talked to Druckenmiller multiple times a day. I don't speak to my parents that often. And it means one investor's view of markets is going to shape all US economic policy and your portfolio.

1:24My name is Felix Prehn, former investment banker. There is Winston who sniffs out all the research and all the puppet string connections here. And I'm also the founder of the GOAT Academy where my mentors have taught over 20,000 students how to protect their wealth better. I'm also the co-founder of TradeVision.io where we keep regular people like you and me informed of what's actually moving your stocks. There's a free trial link down below if you want to check that out. And I used to be a regular investor like you and then I was lucky enough to land a job in banking and now I have this mission to spread financial education to the world by giving people access to my mentors.

2:06So for this video, Winston's gone really deep. He literally went through Druckenmiller's entire investment philosophy, looked at all his relationships particularly with Warsh and Bessent and looked at what this concentration of power actually means for your money. So we will be breaking down here 3 things for you today. Who the heck is Stanley Druckenmiller? What does he do? What does it matter? And what does protégés in power mean for rates, inflation and which stocks to own? And how this investment lesson can help you protect and grow your money potentially. So by the end you understand the biggest power shift in modern finance and exactly what to do about it.

2:49And maybe you're thinking why does this matter to me? Well, the Fed controls interest rates that affects your mortgage, your savings account, your 401k, your portfolio, what your stocks are worth. The Treasury Department controls government spending, taxes, and together these two institutions control basically the entire US economy. Normally, the Fed and the Treasury are supposed to be independent. They check on each other, balance of power and all that good stuff.

3:22But here's what just happened. The president nominated Kevin Warsh, Druckenmiller's guy, to run the Fed. And he appointed Scott Bessent, also Druckenmiller's guy, to run the Treasury. So these aren't just professional connections. We're talking about father and son dynamics here. Bessent worked with Druckenmiller for 30 plus years. They got rich together, shorting the British pound in 92. Warsh joined Druckenmiller's family office in 2011 and spent a decade learning the markets from Druckenmiller directly.

3:55And get this, Druckenmiller himself said he's really excited about the partnership between Warsh and Bessent. I quote here, having an accord between the Treasury Secretary and the Fed chair is ideal. Ideal for whom, I ask, and you can answer that yourself. Because of course without making any accusations, Druckenmiller undoubtedly has your family at heart and the well-being of society and puppies and all that stuff, right? That's obviously what he's in it for. That's why you join Wall Street, because you care about the little guy.

4:35So maybe some of you think, look, Trump's just appointing two really smart people. They happen to learn from the same guy who's one of the most successful investors out there. Surely that's good, right? There's a problem with that. It's a fair point, you thinking that, but Miller is a billionaire hedge fund manager. His interests are not your interests. What's good for him, high inflation that boosts asset prices, might destroy your savings account, your income, your pension.

5:00Second, the Fed is supposed to be independent for a reason because when one person's ideology and financial motivation controls both monetary policy, which is money printing and interest rates, and fiscal policy, which is how much we spend and how much we tax, there is no check on bad decisions. There's no balance. It's all gas pedal, no brakes.

5:25And third, and this is the big one, Druckenmiller has a very specific view on inflation, government debt, and interest rates. He's been calling for aggressive action to fight inflation. He's been comparing what we need to what Paul Volcker did in the 1980s. He raised interest rates to 20%. So if Warsh follows that playbook, your stocks could crash. If Bessent follows that playbook on the fiscal side, government spending cuts, higher taxes, the economy could slow down.

5:57And maybe, just maybe, they're not going to follow that playbook. Maybe they cut rates to help pump the president's popularity, sorry, I mean the economy. And then you might get high inflation and overvalued stocks, which isn't really ideal for most people either.

6:17So let me tell you a little bit about who our friend Stan really is because his track record is insane. From 1988, I was 8 years old, to 2010, for 22 years, he managed money for George Soros. Yes, that lovely chap who has only the well-being of the little man at heart. And also the Quantum Fund. And he ran his own fund called Duquesne Capital. I don't know how to pronounce it. You guys can tell me in the chat. And in that time he averaged a 30% annual return. Never had a single losing year, not one.

6:55Put that in perspective. If you gave the guy $10,000 in 1988, he would have given you back $1.5 million 22 years later just from the returns. You didn't put an additional cent in.

7:09And what's he most famous for? Winston's leaving the room at the mention of Soros. In 1992 he and Soros shorted the British pound. They bet billions that the UK couldn't maintain its currency peg and they were right. Bank of England collapsed. They made over $1 billion in profit. People called it the trade that broke the Bank of England. And I'm sure that was for the general well-being of the little guy in the UK, right?

7:40And he also profited from the dotcom crash a lot. The 2008 financial crisis was also good for him and lots of market cycles since. So the guy doesn't guess. He's very good at reading macroeconomic trends. Now he's retired from managing money but he runs his own money as a family office. Just his own wealth. He's got plenty of it but he's still one of the most influential voices on Wall Street. People listen when he talks. And his two protégés, the guys he trained, are now running the United States. Well, they got all the power now.

8:15And you might think, well, this guy must obviously be very smart. Of course he is. But it's not about whether Warsh and Bessent are qualified. They clearly are. The issue is concentration of power. One person's view, no matter how brilliant, shouldn't really control the Fed and the Treasury.

8:35And here's the other thing. No one's really talking about Druckenmiller's investment strategy is all about what? Flexibility. He's famous for changing his mind fast. He'd go from bullish to bearish overnight if the data shifts. He's a flipper. He's not a diamond handler or hodler as some of you might be. And that's what you need when you want to manage a hedge fund very well and know how to lose. But central banking and government policy, they usually need more stability, predictability, longer term thinking.

9:06So you got a situation here where the two guys trained by a hyper flexible hedge fund trader are now running institutions that need to be steady and reliable. And that worries me a little bit. Markets hate uncertainty.

9:22Now I know we're going to cover a lot here today. We're going to cover the actual sectors and a ton of other stuff. So I've put together a workbook for you. You can get that for free. Go to our free community, felix.org/resource, and download it. And I'm also going to do one better for you because I really want you to get value out of this. This is not a doom and gloom video about fear-mongering around the Fed and so on. It's not a political statement either. It's just about how do we profit from this? How do we protect ourselves?

9:49So I'm also going to run a live training session for you on Saturday. Link down below, felix.org/training. And what am I going to teach you? I'm going to teach you Wall Street's own rules for how they pick stocks in this kind of fluid world that we are now in in 2026. So you want to join me for that? Again, free of charge. Felix.org/training. Register. Be on time. We've got 5,000 people already signed up for that. We're going to close the door shortly on that. So sign up now and be early because it'll probably be oversubscribed and not everybody will get into the room. We've had that before.

10:27But let me dive a little deeper for you into Druckenmiller's philosophy, the investment lessons, and what Warsh and Bessent will actually do. So again, the workbook will help you a lot with actually absorbing all of that, but let's break that down. So Stan Druckenmiller started in finance in the 70s. Very smart guy, not some Ivy League chap. He worked his way up. By 88, George

10:51Soros, one of the richest investors in the world and one of the kindest, sweetest. Anyway, Soros hired him to run the Quantum Fund and that's when the legend started. Druckenmiller wasn't just good, he was just great. 30% average returns for decades, and Buffett by the way managed about 20% averages of his career. The S&P 500 has about 10%. So Druckenmiller basically tripled the market returns for 30 years straight, which is just insanity, or 22 years or whatever.

11:28So how does he do it? He's a global macro investor. That means he looks at the entire world, currencies, interest rates, government policy, commodity prices, and he finds the big trends before other people see it. He's not buying stocks because he likes a company. He's buying or shorting based on where he thinks everything is headed.

11:47And he's famous for essentially three things. One, he changes his mind really quickly. The data shifts, he shifts. No ego, no conviction, he just follows the trend. And I'm very much with him on that because I think people just fall in love with stocks and CEOs and it just gets in the way of things.

12:11And then he makes huge concentrated bets when he's confident. So he sees an opportunity, he doesn't nibble, he goes full all in. That's how he made a billion dollars in a single day on the pound sterling. And third, he's obsessed with risk management. So he makes these big bets, but he never blows up. He uses stop losses, he hedges his positions, protects his capital. That's his religion. So you got a guy who's aggressive and cautious at the same time, which sounds odd, but that's the genius part.

12:39Now, let's talk about Kevin, the new Fed chair, Walsh, and his relationship with Druckenmiller. Kevin Walsh was a Fed governor from 2006 to 2011, the youngest Fed governor in history at age 35. He was there during the 2008 financial crisis. He worked directly with Ben Bernanke and was the Fed's main liaison to Wall Street. Yeah, the Fed has a liaison to Wall Street.

13:05At first, Walsh supported all these crisis measures, the money printing, bailing out banks, all that stuff. But then he turned and he started warning that the Fed was printing too much money. It was risking inflation and he resigned in 2011. He was frustrated. He thought the Fed had gone too far with all the money printing and bailing out all the bankers.

13:27So he left. And when he left, Druckenmiller hired him to run his family office, his personal wealth. So maybe he wasn't frustrated. Maybe he just left for a better paycheck. I'm just saying, hypothesis. So this was real mentorship, not just working for the guy but managing his personal money. It was a decade long education in how markets work.

13:50So yes, Walsh spent 5 years at the Fed dealing with all that stuff, the academic side, and then he spends 10 years with Druckenmiller to see how actual trading works, how money moves, how investors make decisions in real time. And people close to them describe their relationship as father son. They talk constantly, apparently more than a dozen times a day with calls, texts, and all that stuff. One analyst said Walsh's time with Druckenmiller was like a curriculum, a complete education in global macro investing you can't get anywhere else.

14:23So what does Druckenmiller say about Walsh when Trump nominated him for the Fed? Druckenmiller literally went public with his endorsement and he said in an interview with the FT, the Financial Times, those lunatic loveys out of London, he said I could not think of a single other individual on the planet better equipped. Anyone on the planet, pretty strong endorsement.

14:48And then he said something really that caught my eye. Now markets initially labelled Walsh as a hawk. What's a hawk? A hawk is someone who's going to raise interest rates aggressively, fight inflation, right, destroy the economy in the process. But Druckenmiller said the branding of Kevin as someone who's always hawkish is not correct. I've seen him go both ways. Meaning Walsh isn't locked into one ideology. He's learned from Druckenmiller to go with the flow. He's flexible. He adapts, right? Just like Druckenmiller.

15:18And then Druckenmiller said, this is important. I'm really excited about the partnership between Walsh and Bessent, having an accord between the Treasury and the Fed. It's ideal. So coordination, two Druckenmiller protégés working together, which is what he wants because it gives them the ultimate influence, the ultimate power.

15:41Right, so what's Walsh going to do? What's the new Fed going to do? What does it mean for you? Well, here's my read on interest rates. Walsh said he's going to lower them, they should come down. Why? Because he says AI is going to drive up productivity and it's going to lower inflation as it'll be cheaper to make things thanks to AI. Right now, that's good for stocks at least in the short term.

16:07But he does not like that the Fed has printed so much money, right? They've been printing all this money. He thinks that Fed balance sheet should be smaller. Now, what happens when you shred money? It's bad for stocks. So, you got these weird signals. You're going to have lower interest rates, woo! And then you've got money shredding and you're like, oh no. So, which side of that is going to be bigger? Nobody knows. And that's the uncertainty.

16:32Now, a word on Scott Bessent and then we talk about the actual sectors and stocks and so on because Scott Bessent is the other half of this power deal, right? Bessent's background, finance for decades. Druckenmiller hired him to the Quantum Fund, which is where Druckenmiller worked for Soros. So you had Soros at the top, Druckenmiller running the day to day, and then Bessent learning from both. They worked together as I said in that pound trade in '92.

16:57And when Bessent left Druckenmiller he started his own hedge fund called Key Square Group, again with backing from Soros. That guy's got his fingers in everything, right? Made his own fortune, built his own track record, but he never lost the Druckenmiller connection. It never went away. They remained very close, that father son dynamic just like with Walsh.

17:15So what does that really mean? Bessent thinks like a trader. So, he's not going to spook the market, right? He wants to be a smooth operator. And all these guys are very wealthy. They have a lot of money on the market. They don't want the market to tank, right? And that's something to think about. If you're sitting on the sidelines, you're like, oh, this market's scary, I'm just going to wait it out. Well, you got billionaires running this, right, the whole lot of them.

17:38But Bessent's got a pretty shitty job. He manages $35 trillion of debt and got to figure out how to make that sustainable, which it of course isn't right now. What are they going to do? Well, in my humble opinion, they're going to keep the dollar weak. Interest rates will be good for that. It'll help American businesses, right?

17:58It will be good for what? Gold, silver, commodities, generally speaking, arguably for international stocks, but I'm a little bit fishy about stocks that are listed in tin pot hut economies. So I think the smartest thing we can do with our remaining time here is to learn what we can learn from Druckenmiller and that way you will be better positioned to make better decisions for this year and the coming years.

18:23So what are we thinking about? Well, you got to start with the big picture. You got to understand rates, currencies, and government policy. And then you got to ask yourself, well, which sectors actually benefit here. So my belief is interest rates are going to come down. Now, who benefits the most from lower interest rates? Well, non-profitable tech stocks, the lean bin of investing. Yeah. So ARK is probably going to make a comeback. Cathie Wood with her bets on anything that looks really, really insanely risky. That's the sort of stuff that typically does well.

18:54Now the second lesson, and of course gold and silver because we'd expect inflation. Second thing is change your mind. Like Druckenmiller doesn't marry his ideas. He dates them loosely and that's a good thing to do with money. Not with the better half of your life. I'm not suggesting that.

19:13But say in 1999 he was bullish on tech stocks. He rode the dotcom boom. He made a fortune. In early 2000s he saw signs of the bubble. He sold. He got out before the crash. Did he care about looking wrong? Did he care that he'd been super bullish just months earlier? Nope. The data changed. He changed. Most retail investors do the opposite. They buy a stock, it goes down, and they hold on because I believe in this stock or I don't want to admit that I was wrong, right? Which is ego. Ego destroys portfolios.

19:40Join me on Saturday and we're going to fix that for you, by the way. So, how do you apply this? You got to set rules for when you're wrong. Maybe it's stock dropping 10% or moving to a certain moving average line or we can go a little bit more complex than that but we have rules. Hope is just not part of the story. And that's one of the big things I see from the thousands of portfolios that I've reviewed and my mentors have reviewed. That's the mistake most people make.

20:09And when you're confident you make bigger bets. He's highly confident. He doesn't nibble. He really loads up. Right now, I actually see most investors make bigger bets when they're confident, but their confidence isn't based on anything real. It's just based on everyone else is doing it, which is hugely when it's a little bit too late, by the way. So, again, we're going to fix that. We're going to give you Wall Street's three rules if you.

20:34Join me on Saturday. Why am I not giving you these right now? Because it would make this into a 2-hour video, which would be silly. So the most important part of what makes Druckenmiller one of the greatest investors out there, not as famous as Buffett, I get it. But actually, he was a better investor for a period of time. Risk management, it's everything.

20:52Stop losses are the religion. And I use stop losses on everything. I don't own a single thing without a stop loss. There's an exception to that. If you just buy an index fund like the S&P and you want to hold that till death do its part, then you don't need a stop loss on that. But individual positions in my humble opinion should have them. And he never risks more than 2% per trade.

21:15That exact number again depends a little bit on where you are. So what does that mean? Well, say you have a position that's 10% of your portfolio that goes down 20%. You'd hit 2%, right? That would be when you are out. And we could debate whether that should be 1% or 2%, so it depends a little bit on how you're investing, what you're investing in.

21:35And then watch the data. Watch the money. I always say just follow the money. Don't make it too complicated. It's not about who's got the best technology or the smartest CEO or whether PayPal's going to rebound or any of that. No, the money follows into the stock, we follow, and we could see it. There are signs before the money pops in. There are 3 rules to that, I'll teach them to you.

22:01So that's really really important. Price action some people call it. I just call it money flow. And then we got to be patient and we got to wait for the right opportunities. I look every Sunday for something to invest in. And some weeks I find loads of things and some weeks I find nothing at all. Do I then force something? No, I don't. I do nothing at all. So you got to be patient, you got to wait for the fat beautiful pitch and then Winston and I swing reds if he had a power.

22:30So how do we position for this? Look, if Walch comes in and he cuts interest rates by a percentage point and he just slows down the money printing a little bit, he has to do a bit to keep the banks afloat, then in my humble opinion, the things that'll do really well are growth stocks, tech, AI, nonprofitable tech. Small cap stocks should really benefit from lower interest rates because they actually borrow from banks at market rates, and potentially crypto.

22:58Now, crypto is one of those things when it's done nothing for 2 years, everyone hates it and it's all over. It's never going to come back. Bitcoin's dead and CIA runs it. Probably does. Or maybe it was Epstein or whatever. But typically, it's in those moments that there is actually opportunity. Not telling you what to buy. I'm not a financial adviser in any way, shape, or form, but that's something to look at.

23:21Now, if they lower interest rates aggressively, there is a pretty good likelihood we're going to get higher inflation and a weaker dollar. Those 2 things will benefit gold and silver tremendously.

23:34Now, what's the second scenario? Look, if he really comes out as an inflation fighter and he's just like, we're going to shred money, and you will find that out by following his speeches. And again, you can just subscribe to Trade Vision, we ping you then to your phone notifications. Well, then we're going to need to get a little bit more defensive. Utilities and gold and that kind of thing.

23:58Cash, by the way, is not something I recommend to hold for long periods of time. And by cash, we generally mean bonds, not actually cash. So when Buffett says, "I've got $300 billion in cash," no, he doesn't. He has it all invested in bonds. They pay him 5%.

24:14So there was a barbell strategy one could look at. Again, this is not financial advice, not a recommendation, which is something to base your thinking off. Quality large caps, I'm a big fan of that. I nibbled fairly heavily on some Google for example this week. I think they're one of the Mag 7 best positioned. Again, doesn't mean you should do it, just was my opinion.

24:36Gold, energy stocks. I wouldn't short, it isn't for most people. It's just something if you're a real trader. Some high growth tech stocks, some defensiveness. And then by cash I mean some dry powder for opportunities because this is going to cause uncertainty. This is going to cause whiplash and whiplash is always beautiful when you can take advantage of those opportunities.

24:57So how do we take it from here? Well, look, we watch the first speech as a Fed chair. I will tell you about it if it's important. The first FOMC meeting means we'll get a transcript of exactly what was happening. And then as the inflation data responds, we want to see how does he react to that. Is he overly cautious or is he one of those who's like, "Ah, I'm chilled about it. I don't care. I'm going to cut rates anyway. See what happens." Which is what Trump wants them to do.

25:21And then we're going to be adjusting. So I have no firm opinions about any of my stocks that I will be holding them in 12 months time. I may be or I may not be. And I think if you're individually stock picking, you want to be in a place where you go with the flow. You go with the money flows. Again, I'll teach you those rules if you join me on Saturday.

25:43And really really also learn risk management, right? So if you are an active investor, you got to be a little bit active. Come and join me Saturday, felixtraining. I'll break it down for you. And if you got some value out of this, you got some insight on this that maybe you didn't from mainstream media, then share it. Share it with a friend. The more people we can reach, the bigger impact we can have, which is what this is all about.

26:07And Winston, come here. Winston, come on. Winston, come. And Winston will leave us with some real wisdom here. Sit down my darling. There he is. Winston, any final words on the Fed chair and Druckenmiller's strange influence?

26:28He says he's pretty relaxed about it. Why? He's got really good risk management. This guy, pretty good risk management. I thank you for watching. I wish you a beautiful year. All the best. If you're holding stocks in companies like Nvidia, Apple, bonds, or I mean even a savings account, or really just any investment right now, what I'm about to reveal could either protect your wealth or leave you.