Stanley Druckenmiller's only high conviction trade is against the US dollar

"I've been doing this for 45 years. I've studied a lot of economic history, but I've never had a situation where you've had free money for 11 years, a very broad asset bubble followed by jacking up rates 500 basis points in 12 months," he says. 

"For someone like me who likes to look at history and come up with potential scenarios, this is a particularly difficult period." 

Druckenmiller is famous for his top-down approach on a range of five to six asset classes - of which he combines long and short positions at various times.  

"That tends to keep me out of trouble in terms of playing in an area where I shouldn't be playing at a particular time," he says. 

"And I think it's one of the most important things to do - is not to play when you don't see a fat pitch." 

Right now, he doesn't see a "fat pitch" in fixed income. That said, he is invested in Japanese Government Bonds. 

"I don't know whether I'm going to get paid or not, but I think the risk/reward is ridiculous. It reminds me a little of two years ago," he says. 

Druckenmiller also believes the US is likely to sink into a recession later this year. 

"Again, this is so complicated. I'm not willing to place a big bet and even if I believe in a hard landing, which I do, what do you do with two-year treasuries at sub-4% with Fed funds at 5.25%? I'd better be right about my hard landing if I want to own fixed income," he says. 

Similarly, long-term fixed income instruments aren't looking particularly attractive, he argues. 

"If I believe we're [going to see a] hard landing, I'm supposed to own bonds, but they're not exactly a screaming bargain, [with] 10-Year Treasuries at 3.5% in the US, particularly with a Fed that has certainly shown some metal in the last year," Druckenmiller says.

He adds that he was "unnerved" by the Fed's response to the Silicon Valley banking crisis. 

"In four days they printed enough money - they basically wiped out the entire reduction of the balance sheet they had done for five or six months," Druckenmiller says.

"If I'm trying to look ahead and anticipate, I don't have a lot of faith in these guys, should we get into a hard landing that they're going to hold the line and not do something maybe worse than Arthur Burns*." 

When he was managing other investors' money, and reporting annual performance figures, Druckenmiller's Duquesne Capital delivered returns of more than 30% per annum for 30 years.

For context, the market's average return over the long term is generally considered to be around 8-9%. Most hedge funds target returns in this ballpark. 

*Arthur Burns was a former chairman of the Federal Reserve between January 31, 1970, and March 8, 1978. He's infamously referred to as the "worst" Fed chair in history, after pursuing a "stop-go" interest rate policy to tackle inflation (which failed) during the 1970s.