Recently, legendary investor and philanthropist Stanley Druckenmiller made news when he said that investors should sell their stocks and buy gold. Lost in that message – with which I wholeheartedly agree – was another important point that Druckenmiller made in looking back at his career.

He noted that when he started Duquesne Capital Management in 1981, the risk-free rate of return was 15%. That was the era when the U.S. was facing run-away inflation, iconic Federal Reserve Chairman Paul Volcker had raised interest rates to the high teens, and Treasury bonds paid very high yields.

Investors could simply buy Treasuries and earn high nominal returns (though on an inflation-adjusted basis they were far less impressive).

But times have changed, of course, and for investors and taxpayers, they’re getting worse and more dangerous by the day…

Diminishing Returns Are Inevitable

Today, the risk-free return is zero (and in many places like Europe and Japan, below zero). Druckenmiller made his comments at the Sohn Investment Conference where hedge fund and other high profile managers hawk their best ideas to raise money for charity.

While he argued that the bull market has run out of steam, a point I’ve been making for a couple of years based on my belief that we entered a bear market in 2014 as the Fed ended its last bout of quantitative easing (QE) in October 2014, he pointed to a very important point: Investors are operating in an environment where the riskless rate of return is so low that it is increasingly difficult to generate positive returns on their capital.

The evidence of this lies in tatters all around us, as one famous hedge fund after another announces poor returns or, in many cases, large losses. For the most part, the so-called smart money got stupid right around the time that the Fed pulled the plug on its epic monetary experiment and terminated QE and started to talk about raising interest rates.