Letter #300: Stan Druckenmiller and Jeff Feig (2009)
Duquesne Capital Founder and Fortress Investment Group Co-CIO of Macro Fund & Co-President of Liquid Markets | FXLM Fireside Chat
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Stan Druckenmiller was the Founder of Duquesne Capital, where he generated 30% returns for 30 years with no down years and only 3 down quarters despite multiple crises, including the Savings & Loans Crisis, Black Monday, Black Wednesday, the Asian Financial Crisis, the Dot-com Bubble burst, and the Great Recession. When he first started managing capital, he had $900k in AUM, and when he shut down in 2010, he was managing $12bn.
Jeff Feig was most recently at Fortress Investment Group, where he was Co-CIO of the Fortress Macro Fund and Co-President of Liquid Markets. He started his career at Citibank as a Management Associate before rising to Global Head of Foreign Exchange.
Today’s letter is the transcript of a fireside chat Stan did with Jeff for the Citi Foreign Exchange and Local Markets team (FXLM) in 2009, a year before he retired. While he is active on the media circuit today, he never spoke publicly while actively managing money. In this conversation, he reflected on his career up until that point, including how he learned to trade, how he pieces together the technical and the fundamental, starting his own fund, breaking the Bank of England, the worst memory of his life, position sizing, trading through the dotcom bubble, what makes a good trader, why you should take more risk when you’re doing well, quantitative risk management models, hiring, general thoughts on the market, and his philanthropy with the Harlem Children’s Zone.
I hope you enjoy this conversation as much as I do! This is a particularly interesting conversation for many reasons, not just because it was a talk while he was still actively managing outside capital, or that it was near the end of his run, but because his audience was a group of traders (at a firm he partnered with too). As such, he is more precise in his answers, including specific details and numbers with regards to his trading process, frameworks for position sizing, and the setups and aftermaths of specific trades.
[Transcript and any errors are mine.]
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George Soros Compilation - 880 pages
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Transcript
Jeff Feig: Hi, everyone. Thanks for being with us today. It is a really unique privilege to be hosting one of the world's greatest investors and having the opportunity to gain his insights on risk and trading. Our guest began his career in markets at Pittsburgh National Bank, of all places, and he began in equity research. In 1981 he left the bank and started Duquesne Capital, based in Pittsburgh. And after a few years, he left and started his own firm called Duquesne Capital. A few years into running Duquesne, he was hired by Dreyfus, and he only went there on the condition that he could continue to run could continue to run Duquesne. And then in 1988 he went to work for Soros, working with George Soros and running his Quantum Macro Fund. While Stan was there, the fund grew to $20bn in assets. And throughout his time, both at Soros and at Dreyfus, he continued to run Duquesne Management. Here's some facts on Duquesne: Duquesne has never had a losing year, and it was founded in 1981. His assets, while not disclosed, is something greater than $10bn. His annual returns, while not disclosed, exceeds 25% per annum, which, by the way, in the same period, makes him a more successful investor than Warren Buffett. His total staff is less than 100 people, including the back office, and that's what he uses to generate those returns. And for us, he is probably the most professional and valued client we have, because his firm operates the way he does, always in the most professional manner. He's also an important member of the New York community. He is a very active Chair of the Harlem Children's Zone, he's on the boards of the Environmental Defense Fund, of Memorial Sloan Kettering, and of the Children's Scholarship Fund. For me, and I say this with complete sincerity, it has been an utter privilege to have the ability to talk to him, most weeks for the last few years, and I hope you will find that's true today as well. Please join me in welcoming Stan Druckenmiller.
Stan Druckenmiller: Can I get a peek at the questions?
Jeff Feig: When I asked Stan if he would come do this, he said, So let me understand this: All I have to do is listen to your questions, and be honest with the answers? And I said, That's all you have to do. He said, Fine, I'll do it. So let's start with, You were Director of Investments at a bank of tender age of 28. How did you learn to trade? At a bank as the Head of Research?
Stan Druckenmiller: Well, I started at--I'll give you a little background. I started at the bank at 23. I dropped out of graduate school because I wanted to get a PhD in economics--it took me about a semester and a half to figure that wasn't going to work. And I got a job in construction. And then the only job I could get was at Pittsburgh National. And I started in the training program. In a bank, you're a teller, you go through the credit department, and everybody wants to go to the credit department. And I thought I was pretty smart. There were 12 of us. I had a pretty high opinion of myself, and I went in after we went through the training program, and the guy at credit said, You couldn't sell snowmobiles in Alaska if there was no other transportation vehicle there. So we have no use for you anywhere in the bank. But there's a guy up on the 30th floor whose personality is worse than yours, who runs the trust department. He's a great investor--you should call him up and see if he'll hire you. So I called the guy up and he said, Where'd you go to school? And I said, I met University of Michigan. And before I get out--he said, I went to Michigan. You're hired. So I went up there, and I started as an analyst in the banking industry and the chemical industry. And I was doing that about year and a half, I think I was 25--this guy was really quirky, okay? And he got in a fight with the top management of the bank, and--no, that was later, I'm sorry. So there were about eight guys in research, and I'd been there about a year and a half, and he promoted me to be Director of Research, which is a little crazy, because everybody else had an MBA, they had more experience. And I'd like to say it was something to do with me, but I think it was just this guy wanted to show them how powerful he was, that he could make them all report to this 25 year old. So they all hated me, and it was sort of working out, because this guy protected me, and then he got in a fight with the guy up above him. So he's gone to Eastern Airlines, and I'm there at, I guess, 26 now. And there's the charitable guy, there's the pension guy, and there's the individual guy, and then there's me, Director of Research, all vying for power. And this guy that ran the thing was a lawyer, and he didn't understand anything about investments, but he'd sit on the investment decisions. They hadn't made a decision about who was going to be Director of Investments. So the Shah of Iran had just been overthrown. I was 26. Had more courage than brains. Didn't know about diversification. I said, Well, this is pretty easy. Let's put 70% of our money in oil stocks, and let's put 30% in defense. These guys all said, Well, that's nuts. You got to do diversification. Blah, blah, blah. I said, No, that's what we should do. And so the lawyer's listening to this, and he doesn't know anything. And so my stock selection list went up 300% in two years; the S&P was flat. Bonds went down the tubes, which I hated. Now, if you asked me that question anytime in the next 10 years after I was more experienced, I probably wouldn't have given that answer. But that's how I became Director of Research. And this guy that mentored me, even though he was quirky, he was an investment genius. And he was very trading oriented, and actually very chart oriented, which was good for me, because when you get promoted at the age of 26, you never really learned fundamental analysis--and charts are kind of quicker and easier if you want to see what's going on. So, actually, Jeff, I learned from this guy, because he knew about things like, if all the news is great and the stocks not acting well, get out--which is a pretty simple thing that for some reason, most analysts don't know. He taught me more what makes stocks go up and down than analysis itself, which is--it's 90% of the function, but I'd say about 10% of the people, it's what they focus on.
Jeff Feig: So if we were just to jump over to the technical versus fundamentals, when you're making an investment decision or a trading decision, how do you piece the two together? How much time do you spend looking at charts today?
Stan Druckenmiller: Okay, so every night, at about 4:30, I get 272 charts. They cover just about every group in the stock market, every commodity, every currency cross I'm interested, in every fixed income market around the world. And they're basically daily, weekly, and monthly. Daily supposed to predict 8-20 days, weekly 8-20 weeks, and monthly 8-20 months. When I make an investment decision, it's usually--sometimes, believe it or not: The idea comes from the charts, but I will never invest just on a chart. But if I really like a fundamental thesis and the chart stinks, I won't do it. My old boss used to say, in terms of stocks, I apologize to women in the audience: There's 6,000 girls out there--if 20-30 of them look great, I don't need to bother with the rest. And you can always find, at least in terms of equities, 20 or 30 great fundamental stories that the chart looks good. But I always assume that the market may know something, and I've always had a great deal of respect for the market. So I'd say 75-80% of my ideas come from fundamental, and then they're verified by the chart. But I've also found ideas from the charts, and then discovered the fundamentals. The charts we use, because I took a shortcut to my career, as you can hear, charts were a great tool for me early on, because I didn't learn a lot of the fundamentals in time. But I was introduced to all the top chart systems throughout 20 years, and we ended up buying a system, and bring it internally. And because it used second derivative rate of change, these things will often bottom a year to a year and a half before the fundamentals, so they'll give you time to study the thesis. So that's why sometimes the charts actually generate the initial idea and then go and try and find a story.
Jeff Feig: Before we get back to your career, I just want to, on the charting thing, ask you about one trade. You and I had lunch in March of last year--must have been a week or two after Bear Stearns failed, and--
Stan Druckenmiller: You're talking '08?
Jeff Feig: '08.
Stan Druckenmiller: That was a bad week for me. But go ahead.
Jeff Feig: No wonder you weren't eating much. And we were talking about commodities, and you said, Look, I'm as bearish as can be on the economy. I don't get what's going on with commodities, but my charts are telling me they're going up. So I'm long. Every chart I--now, all the rest of us, who were really bearish on the economy, were short commodities. How did you reconcile the fact that you were really bearish on the economy, but you went long commodities because the charts told you to do that?
Stan Druckenmiller: My recollection is I just saw so much liquidity that was going to be provided worldwide that I was willing to go with the charts. I do remember the reason we did fine in '08 was around May or June, those charts started to look quite dodgy, and we got out. But I believe at that time, it was pretty obvious to me that Bernanke and company, everybody were just going to put pedal the metal after Bear Stern. So I was willing to believe the charts in terms of commodities.
Jeff Feig: Back to--so, at some point you made a decision to leave the bank and start your own fund.
Stan Druckenmiller: Yeah.
Jeff Feig: What drove that?
Stan Druckenmiller: How about running $6bn with the best record I knew and getting paid $43,000/year? I mean, you guys are complaining about what they're doing to you? Okay. Most people reporting to me were making more money, which I thought was a little weird. My mentor had left, and what really happened is, I came up to New York to a dinner, and I gave this presentation on gold. And there was a guy at the dinner, and he came up to me after and he said, You don't sound like you're from a bank. I said, Well, I guess that's a compliment. Thank you. Apologies. And he said, Well, why aren't you out on your own? I said, Well, I'm 27 years old, and frankly, I don't have any money. And he said, Well, how about if I pay you $10,000/month to talk to you? You don't have to write any reports--nothing. I'll just pay $10,000/month to talk to you. So I was 28--oh, and I came up and I interviewed with JP Morgan because I was frustrated, and I thought I was great in the interview, and I didn't get the job. I must not be able to sell. So he told me he'd pay me $10,000/month to talk to me, a couple people that knew me through the bank gave me $900,000 to manage, times 1% with no performance fee, was $9,000. $129,000--that's more than I was making. I figured worst case I could come to New York and work for a bank if I fell on my face. That's how it started.
Jeff Feig: Now, after working on your own for a while, at some point, you switched strategy, right? You went from being, I guess, stock picking fund, or only fund, to what today we would recognize as a macro fund?
Stan Druckenmiller: Actually, no. Because my background was economics, not business--and it's true, my first venue into at Pittsburgh National analytically was stocks, because I was the banking analyst, and because of this guy I told you, the quirky guy, the mentor--he was a top down, real good investor, I learned about liquidity, and I was very strong in bonds. I didn't tell you in the meeting of the lawyer, I kept telling everybody bonds weren't going to go down the tubes, which they did. But when I started Duquesne, it was '81. And I had a great first year or two, because I put 50% of the capital in 30 year bonds, which was quite radical at the time, because they were yielding 14 and Henry Kaufman said they were going to 25--and he was a guru, and it was a little terrifying. But, so you're right. I'd say it was more about when I started running money for Dreyfus, I started to get really more involved in currencies and bonds. By the time I had gone to Soros, he didn't know this--he thought I was an S&P guy trader, but I thought I knew a lot about bonds and currencies. And it was actually bonds that launched my record at Duquesne, not stocks.
Jeff Feig: So you went to Soros, and obviously there's a legendary trade happened there that--basically your trade when you broke the Bank of England, or so they say. Can you tell us a bit about that?
Stan Druckenmiller: Okay. That was just one of these anomalies in history. Because Britain and and Germany were, I'd say, loosely economically linked, and the Deutsche Mark and the Pound were at a fixed rate--I think it was 1.78. And the loose economic link was fine until Germany decided to reunite with East Germany. And this created huge demand, and basically the strongest economy in the world while that was happening. At the same time, the US banking crisis, Savings & Loan thing, was in full bloom. And the UK, for whatever reason, even though we're on other sides of the ocean, so forth--they were more correlating with our economy than with the European economy, and particularly that time, the German economy. So they were going into a housing recession while Germany was first taking off from the reunification. So you had one economy tanking, the other economy going like this [Stan gestures upward], one requiring lower rates. The Bundesbank was going crazy [Stan gestures upward], threatening politicians and everything, just raising rates continually, and they had a very strong currency, so the pound was getting dragged up with it. So I watched this for a while, and I was really screwed, because I didn't have a chart. It was just a fixed exchange rate, so I couldn't cheat the way I usually do--is look at look at my momentum curves. But in August of that year, I looked and the six month forwards were 0.5%. Well, I figured it was a little bit of a long shot that I would win, but if I did win, it would be 20%--it was 0.5%. So we were managing $6bn at the time. So I did $1.5bn and just decided to sort of watch it. So then, two weeks before the Pound happened, I got a call from a consultant in Washington that the Germans weren't pleased at all with the Italians. And we did some Lira, and that worked out. And then I was just going along, and the forwards were starting to move a little, but it was nothing dramatic at all. And it was simple as I opened up the newspaper one morning, and this guy, Schlesinger, who's head of the Bundesbank at the time, has written an article basically announcing that it's just totally inappropriate for the Pound--if you read it how one learns to read central bank--it's just totally inappropriate for these bozos to be linked to the great Deutsche Mark. So I read it again because I couldn't believe my own eyes--this was in the Financial Times. So I decided to do $5bn to basically, with $1.5bn, take the fund, fully invest it, short the pound. So the arrangement I had with George, which was not the arrangement the first six months I had there, where there was no declared leader, it was kind of a mess. But by that time, I was running the fund, and he had his personal account, which, by the way, was larger than most funds at the time. So, when I was doing something significant, I used to just make him aware, and a lot of times he'd piggyback in his personal account on what I was doing. So I went into him, and I said, George, I just want you to know I'm going to do $5bn worth of the pound. I don't think I had told him about the $1.5bn. I've been monitoring this for a while. I went through the thesis, and the whole economic pitch I gave you. And he goes, That's ridiculous. And I said, Excuse me? George, this is like a layup. He says, Exactly the point. Why are you only doing $5bn? So he says, This is a one way bet. It's not the way you manage risk. You should do $15bn, because the forwards are still, like 0.5-0.75%.
Jeff Feig: That whole diversification lesson you learned is out the window now.
Stan Druckenmiller: Diversification is overrated--very overrated. We can talk about it later. But anyway, so, I decided he was right, and that this was kind of a once in a lifetime thing. And it was the same day. It was like two or three in the afternoon. So I called Citi and a few other banks, and we started. And like went to bed. Had given--those of you who know my Trader then, he's still my Trader, the infamous Steve [Oaken (ph)].
Jeff Feig: We got a guy back there who does a great imitation. If you want to see it later.
Stan Druckenmiller: I'd love to see it. And if you call on him, my condolences. But anyway, I get a call about one in the morning that this thing is a mess, the forwards have completely blown out. We're not going to get where you want to be. I said, Well, how much have we done? He said, like $5bn or $6bn. I said, Okay, well, where are the forwards? And I said, All right, I'm going back to sleep. I'll get up at like 3:30, and I'll talk to you. So got up, and the British had raised their rates--I can't remember where they came from, but they had raised them hugely to like 12%. So at that point, even though the forwards were out, I knew they were finished. Because their economy couldn't even handle whatever it was at the time, I think it was 8% or 9%, 7%, something like that. But if they're in a recession at 7%, 12% is going to do wonders for them. And I knew they didn't have the political will. So even with the forwards blown out, we started to add even more, because the forwards, I think, were 5% or 6% or 7% now, and I knew that the valuation had to be 15% or 20%, but we only got, like, 200-300mn more on, and all hell broke loose. And then Norman Lamont came out and they went to 15%, but it was a joke. And then, like, four hours later, it was history.
Jeff Feig: Now, you've got this big move. Now, you bet on it. You broke them. Did you take profit at that point?
Stan Druckenmiller: It's very interesting, because we made 62% net that year, and we were only up 16% on September the 14th. But I think we only made about 20% in the Pound. The answer is, no. It didn't go to where it should. And we waited and waited and waited. And then when it got to where I thought it could go, like 16% or 20%, we just started slowly bleeding it out. But we actually made more money on the concentric circles than we made in the Pound. I don't know whether I've ever disclosed this, but the British gilts were down two points that morning--not two ticks, two points--because it's a well known theory in academia that if your currencies go down, your bonds are going to go down. It's a great theory--everyone believes that. The only problem is there's absolutely no basis for it if you look at history. In fact, if you looked at history, you'd say the opposite, except you'd be incorrect, because you'd be saying, Eating ice cream causes hot weather. But generally, when a currency is very weak, your bond market will go with it, because it suggests the economy is weak. So the gilts were down two points. People are selling like crazy. And we loaded up on gilts. And they went up, I think, 33 points--not ticks, points--in the next year. We bought French MATIF bonds, we bought British equities, we bought all the things that I thought the blowing up of ERM would affect. And so we took our profits on the Pound, I think, like 6-8 weeks later. And more importantly, the other stuff fed us for about a year. But you ask a great question, because--and this is not something I did, but this is a great trading lesson. I wasn't there, but [Oaken (ph)] will tell you the story, because he was. And this is a great investor--his name is George Soros. And when Plaza happened in '85, he was loaded to the brink with Yen--like, already too big. And all the little traders there--we didn't have this when I was running Quantum, but they had their little $25-50mn capital pools. They were allowed to piggyback, so they were all long Yen, because, frankly, George was long Yen. So the next morning, after Plaza, the Yen opened up 800 ticks. And George Soros is an interesting guy, but I worked for him for 12 years, and I never heard him swear, and I never saw much emotional change. Takes--that lasted me for about four minutes, if you were with me on a desk. But apparently, all these other guys started taking profits, and he had an absolute heart attack. Stop it. Transfer all that stuff to me. They're idiots! And the thing went another 40%--another 4,000 ticks. So the easy thing emotionally was to take a profit. And in fact, George was adding, and taking that too, because you can't just make yourself feel good by taking a profit when something goes your way. You have to remember your original game plan, your original thesis, and why you thought it would go from, if it's A to B, wherever B is.
Jeff Feig: So, kind of on that theme, but going the other way. People describe you as very disciplined. At the same time, I've seen you run positions that have gone against you in a long way--I think about the Yen in the 2005 period, or the Real last year.
Stan Druckenmiller: Or the Indonesian Rupiah. My worst memory of my life. In '96. But let's leave that one out, because it won't teach the lesson you're trying to teach here.
Jeff Feig: Actually, I think we'd like to hear about it.
Stan Druckenmiller: About the Rupiah? Oh boy. We had a bigger hit in the Thai Baht than we had in in the British Pound, but by then, certain entities within our firm that were above me had learned to stay quiet when we had a success. But unlike the British Pound, the Thai Baht was not my idea. There was a guy that worked with us named Rodney Jones, and he had worked for the Bank of New Zealand, and he was out in Asia. And Rodney had showed me this chart of Thailand, and loans to GDP had gone from some nominal amount to 150%, he thought the whole thing could blow up. Put it on in February. Big position, no forward cost at the time, and it blew up in July. And so we made a lot of money, and we had a little bit of, well, not a little, but we had a fair amount of Malaysian Ringgit. So we had taken profits on the Thai Baht and the Malaysian Ringgit, and I became convinced by someone at the firm--I've conveniently forgotten who--that the washout was over now, and that Indonesia was different. They didn't have the fundamental problems that Thailand and Malaysia had. Turns out, they had worse. But I don't quite know what was going on, because I think Suharto was funneling money out--because the macro numbers were fine. But this thing was unbelievable. I mean, it just kept going and going and going. And I couldn't get out. And to some extent, I was so big, relative to the size of the market, I froze. But I lost well over $1bn in it. And the worst year I ever had--basically flat on the year.
Jeff Feig: How do you size your trades? How many positions do you carry at once, and how do you size any one trade?
Stan Druckenmiller: Well, I think diversification is really overrated. And I'm--no, I really do. I'm from the school of: if you've really got a great thesis, and you've analyzed the risk reward, put all your eggs in a couple baskets, or in one basket, and then watch the basket very closely. But when I was at Soros, a lot of my positions, by the time we got over $10bn, particularly back then, I always sized them relative to the market, not to the capital of the fund. So I would never get bigger--I would never get so big in something that I thought I couldn't get out where it would cost the fund maybe 1-2% in execution cost alone to get out. So that was always a rule, no matter how good, no matter how good the idea--and the pound thing is easy, because I could have gotten out at a fixed exchange rate. So that governed that. Now, back when I was younger and not as wealthy, and probably had a lot more courage--it's a lethal triple. I used to take my fund--I'd put 150-200% of it in a currency. I'd put 300% in 10 year bond equivalent. Equities I rarely would get more than 100% net long, or rarely more than 50% net short. But our gross leverage very rarely would run more than 4:1. But if I really, really believed something, I'd have no problem putting 100% of the fund in it. Again, with the liquidity constraint I mentioned earlier--and I will say that, unlike my competitors, and who knows who has the right model, I learned very, very, very early on, because I think we were the biggest at the time--at least for me, it's very difficult to run a hedge fund with more than $10bn effectively. And being from the equity school and having learned currencies and bonds, I felt I had a lot of weapons. So the funds that, to me--over $15bn or $20bn and still raising money--I don't understand that. And we have tried religiously to keep our assets around the $10bn level, because my belief is, if we let our assets blow up to $40-50bn, and immodestly, we certainly could have any time in the last three or four years, based on the record, I would just have horrible performance, and the assets would leave anyway. So our philosophy has been to grow it organically, and then when you get to $10bn, start squeezing clients out and manage our own money to try and keep it there. Because in the long run, a) I've got an ego problem, so I like performing--after a while, it's not about the money you make, it's how you feel about yourself. So I guess I've given a very long answer your question.
Jeff Feig: So let's get back to--so with Indonesia, it just kept going against you and you couldn't explain why, and lost enough money that you were like, I'm done with this. What about something like Brazil in '08? Where, when you saw it go from 1.80 to 2.40--
Stan Druckenmiller: Okay, so Brazil in '08--I think somebody gave you the wrong information, because I had a problem with Brazil in '08. But it's instructive. I bought Brazil, I think above 2.50, and had held it for quite a while. And so as you know Brazil, I had quite a carry. And Arminio Fraga had been a partner of mine for six or seven years at Soros, so I felt I knew Brazil--probably knew just enough to be dangerous. But I thought I knew Brazil pretty well. And I'd owned it for a few years. And frankly, at the low, which was just through 1.60--and it's the first time the Japanese started buying it. The whole way, they had no interest from 3.10 to 1.60, but at 1.60 they discovered the Real. I did take a bunch off, because I just thought, This is going to be very tough for Brazil to exist with this exchange rate. And then at 1.70, 1.80, the chart turned dramatically. So I think I had been 3bn, which was really, really stretching the limits of what I would call liquidity, but I liked it so much, and it kind of grown there organically, so I already violated the discipline rule I told you about. But I guess I had about 1bn left when it went through 1.80. But since I had had 3bn, I convinced myself it was okay, because it was only go to like 2.05. And so it's at 2.40--it took a couple weeks. And I thought, This is tough. And so I barfed at least 200-300mn right at the low. The good news is: some of you must know Anuj Malhotra--he bought it from me internally. I had my own guy buy the low from me inside Duquesne. But it stayed there for a while, and I still liked Brazil, and I ended up adding between 2.40 and 2.20, and basically held a lot of it through about 1.80 or 1.90, and still have quite a bit. I think what you may be thinking of at the time is: I started buying Brazilian rates at 13 or 14. And they violated every chart limit you could possibly think of. They went to 19. And this is really, really rare for me--I don't know when I've ever done it in the past--and I just kept adding because I was, This is the stupidest thing I've ever seen. It's trading with risk, but I think US two years were 40 bps, or--we kept lowering our rates. And that was one of those rare cases where I ignored the charts I told you that I never ignored. Because I just thought it was just so fundamentally ridiculous. And we held them all the way from 18 or 19--these were the January of '02s down to 10. We held that trade for years.
Jeff Feig: So is it really, when you've got--
Stan Druckenmiller: That's like a 1 in 100 for me to violate to that extent.
Jeff Feig: When you're violating, you're violating the charts. It's the charts that'll signal to you to get out?
Stan Druckenmiller: Yeah, I have never used a stop loss in my career. I don't use a--like a number. I know that's a disciplined system and I know it works, but I have like conditions: if it starts not acting well relative to news or other things I'm watching, I'll get out. So I probably do have a stop loss in my head, but it's like--another golden rule I have is: January 1 has always been a great resetting of risk for myself. And for those of you who gamble, you probably know that 95% of the people that go to Vegas lose money, but the odds are 33:32--so 95% of the people shouldn't lose money. It's because people who get down want to go home and tell their spouse that they made money, so they start betting big when they're on losing streaks. And then when they get up, they want to tell their spouse they made money, so they like--they're playing very small when they're doing well, and they're playing bigger and bigger when they're doing poorly. So we have always believed January 1 is sort of when the house starts. And if I'm up--I think this is the reason, so far, we haven't had a down year--I'm sure we will have one at some point--but when I'm up, I'll play much more aggressively. I see a lot of managers to get up 20%, Oh, I want to book my year, I made my high watermark, let's go to the beach. I'm the opposite. And frankly, I learned a lot of that from George. If you're up 20 or 30%, you're playing the house money--that's when you try and get up 60% or 70%. And you're usually hot at the time. Any of you who have managed money, the most important thing is to monitor yourself. I don't know why streaks happen, but they happen. They happen in baseball, they happen in putting, they happen in money management. And one of my jobs is to know whether I'm hot or cold. But I will say, just like the Brazil thing, if I'm down 8% or 9% on the year, I'm playing very differently than I'm up 15% or 20%. But if there's a great opportunity, I'm not going to go, Oh, I'm down on the year, I'm going to put my head in the sand. I'll play it. It's just more of a--it's an intuitive, general feel.
Jeff Feig: Another time you turned it around was '98, where you looked like you were gonna miss the tech bubble, and you were short going into the Fall, right?
Stan Druckenmiller: I think you're thinking of '99, but what--this is a horrible period, and I try to black this one--you're bringing back all these nightmares. But '99 was the first time in my career, and I started in 1981, that I felt my fund was really in trouble, and I was in trouble psychologically. And it really started in March of '99. I had shorted $200mn worth of what I would call low quality Internet stocks. Now, mind you, this was not early on. AOL was up 8x. Yahoo was up--these things had already gone way to the sky. So I shorted $200mn worth of Internet stocks. I would have done more, but I have my liquidity rule, and I lost about $800mn in 13 days. They gapped open. Like a $100 stock would open $130. You try and buy a little it'd be $170. So I took my $800mn loss, I just said, Get me out. The discipline thing you're talking about. Indonesia taught me something. So I had some currency trade not working, and in May, we were down 18%. And I'd never had a down year, and I'd had big drawdowns, but always from like up 40% to up 20% or something. So the summer wore on, and I was watching this thing, and my charts on the technology stocks looked incredible. And it finally dawned on me that Greenspan was responding to the Asian crisis, but it wasn't appropriate for the United States. So we were running a world monetary policy, but rates required much higher for here, and the charts were just screaming at me to buy tech.
Jeff Feig: I think someone said the quote you said at the time was, The Fed was throwing a party, and I was missing it.
Stan Druckenmiller: Well, if that's what I said, that's what I said. It sounds familiar. So I loaded up on tech stocks, and I think we ended up 42% net on the year, and we are still down 8% in early November. So we made about $5bn in November and December--all in tech stocks. Now I might as well keep going, because the next part is a real nightmare. And this is a lesson in money management. So in January, we still own these tech stocks, and we're now up 13%. But a lot of my technical indicators were horrendous. I mean, I think there were 13 new highs and 242 new lows on a year over year basis. But the market was going up. It was all like 10 or 15 tech stocks. So I sold everything, and was flat. And up 13%. I went into George and told him why I did it. He said, That's great. Well, I had these two internal managers that I had hired to buy the go-go tech stocks, the ones I didn't know how to pronounce: VeriSign, Veritas--I only knew old stuff like IBM and Hewlett-Packard, who had helped me gun the fund in '99. My God they were making 6% or 7% a day while I was sitting out. And I just couldn't stand it. And completely lost my cool and my discipline. And after being out for a few weeks--they'd made another 30% or something. I jumped back into the tech market. And to be fair, my momentum charts were bullish, but they were bullish for an equity chart. But I had seen commodity charts do this and just fall out of the sky, because, again, my stuff is rate of change and second derivative. Anyway, I bought these tech stocks all back, and about a month and a half later, I was down 18% again. It was like the nightmare of the year before. And the worst thing is, I knew when they were down--when I was down 1%, I knew I was toast, and I just started liquidating. Told George that I couldn't take it anymore, I was leaving. And told him I was going to sell everything and we could have a press conference in about three weeks, but I want to get out of my stuff first. And went on sabbatical. Sent a letter out to my Duquesne investors that said, My head's a little screwed up. I'm going to take a break. You can leave the fund, and that's fine. By the way, if you leave it, you won't necessarily get back in if you want to come back in, but no charge if you stay in. We lost one account. And by Labor Day--that was May--by Labor Day, because I had nothing else to do, because my kids were going back to school, I came back. And I've had a lot of luck in my life, but this was maybe one of the luckiest things ever, because I came back in late August, right around Labor Day. And oil was screaming upward, interest rates were screaming upward. You'd had this huge rally back in the S&P and the tech stocks that I had sold. And everything I had ever looked at told me we were going to go into recession. And plus, the NASDAQ had been down 30% or 35%. And I had the analysts that I rehired call some companies. They all said business stunk. And everybody on Wall Street was 18% earnings, and--Ed Hyman had this simple little model: 50% dollar--I can't remember what the--anyway, it spit out, Earnings are going to be down 36% in the next 12 months, and Wall Street strategists had them up 18%. Okay, so I'm not a rocket scientist, but up 18% down 36%, and this thing had fit like a glove for--and it fit with everything I believe. So Fed Funds were 6.5%. 2-years were 6.04%. We were down at Duquesne--we weren't down 18%, we were down 9%, but I'd thrown in, I'm finally have a down year--that's it, it's over. Man, this looked like red meat in front of anybody who hadn't had a steak in about 10 years. And I was fresh. The four months off had really helped. So I literally put 300% 10 year equivalent of the fund in 2-year notes. And we made, like--we made a lot of money. In the next few months. And ended up, I don't remember, 15% or 20% net, something like that. But that was like a miracle.
Jeff Feig: So what is it you think that makes a good trader? I mean, I know you got a lot of friends who are pretty legendary traders, all with different styles. You've had a lot of people work for you, people that you've worked for. What is the common denominator?
Stan Druckenmiller: Well, I'd say first of all, they're extremely competitive. They want--they have an unbelievable will to win. And that just--if you look at anybody with a great investment record, for whatever reason, the people without passion can't compete with them, because they have passion, and they're willing to just work--work harder. And you're in the wrong arena if you think you can compete with those maniacs if you don't have that passion. Number two: they may have very, very different styles, but they're all disciplined. And I just told you about four times I wasn't disciplined. But that's over about 30 years. It doesn't even matter what your system is, but as long as you follow it, there are a lot of ways to make money. And with regards to that, you really, really have to fight your emotions. Because I have wanted to sell every bottom so bad. And a lot of times I'm buying there. I'm always doing--it never feels great when you're at a turn. The other thing I have found is that contrarian investing is way overrated. People tend to--it's intellectually cool to not be with the crowd, but the crowd makes money 80% of the time. And they kill themselves at the turns and end up losing as much as the turns as they make during the 80% of the time. But I have found contrarian thinking, just to be contrarian, can be a death trap, particularly in bonds and currencies, because economic fundamentals are what they are. It can be a rough ride if it's very crowded. But I think the main thing, Jeff, is you have to be disciplined. You have to be unemotional. And to me, the really great ones--you have to really be able to play. You have to have courage. You have to play big when the opportunity is there--make hay while the sun shines, whatever the term is.
Jeff Feig: One more question before we take some Q&A. We've brought all our foreign exchange and local market traders from the Americas, and a few from Asia and Europe here today to talk about, over the next two days, how to grow your risk. How to grow your risk, how to take more, how to get bigger. You seem to have no problem driving it, although you had the help from a mentor to push yourself to get bigger, to take more risk. Are there any other--besides having someone push you--what helps you be confident enough to step it up to the level?
Stan Druckenmiller: I think you just have to follow whatever your style or whatever your system is, you just have to follow a disciplined pattern, and you have to teach yourself that you're good. I mean, I can remember in '87 and '88--in '87 I caught the crash, and I was on a couple magazine covers, thought I was really smart, but I was convinced we were going into a depression. And '88, the stock market kept going. I can remember getting up two nights a week, throwing up, and thinking: Oh, my God, I went to Bowdoin, I never got a degree. I can't be a plumber. What am I going to do this? This might be random. I might have just gotten lucky for six years, because we were a bull market, playing a trend. And I had made 42% a year, compounded, and I was thinking that way. So it's not easy. But I think if you follow a disciplined system, you just have to watch your own results, and you have to believe in yourself. And success breeds success. And again, one of the things with me is, I know when I'm hot and I know when I'm cold, and you have to learn to play big when you're on a streak. A lot of times when I'm cold, I'll just start trading really small. And the whole purpose of the trading is to find out when I've got it again. And every once in a while, you'll think you'll got it, and you hit eight in a row, and then you bet big, and Ooh, I missed. And that's tough. That's probably the toughest thing you could ever do. That's the old whipsaw term. But you just have to dust yourself off. But I would say the way to get big is follow discipline, watch yourself, and then just grow organically. What I would never do--ever--is if you swing and you miss, is put on a big trade just to get even--I got to get out of the trap. That is a death--that's a death sentence. Don't bet big unless a) you love your thesis, and b) you're hot. Now, if you really, really love your thesis, and you've had a lot of successes in the past--that's what I'm talking about, for example, when I put that Treasury bet on when I came back in 2000--that's fine. But don't ever bet big just because you think this is the way to get out of a mistake you've made.
Jeff Feig: So when you're losing--I think this is key--get small, keep trading. Was 2000 the only time where you said, That's it, I really got to get my head out of this, I'm going to square everything up and go away?
Stan Druckenmiller: Jeff, I was exhausted. It had more to do with all sorts of psychological factors, which you have to know when you're a trader. But I had been running the most public hedge fund for 12 years with a guy who had a need for publicity because his philanthropy and his status were enhanced. I don't think he was doing it at the time because of his ego--it enhanced his position in philanthropy. Well, I'm a private person, as you know if you try and find anything out on Duquesne, and I was just tired and exhausted. And '99--I think money managed a little bit like a boxer and body blows--you get these body blows. And '99 took a lot out of me. And do it 2000, and my kids were nine or 10, I just--so yeah, that's the only time I did it. But let me tell you, there have been 10 times when I wanted to do it. And at those times, I just trade small, suck it up, and try and remember all the successes I've had in the past, and this will end at some point. I'm really not that stupid, which, at the time you feel like you are.
Jeff Feig: All right. Why don't we take a few questions? Anyone want to kick off? Pete?
Audience Member: I've got a question. My view is--and I know it's very common to press when you're on a hot stream, to do more. I'd have to say, kind of anecdotally, when I've seen people have a really good stream of success, not early, but after a mature string of success, is when they're at their worst. They get sloppy, they get overconfident. So I would kind of disagree, and I just want to ask you specifically, Why do you think that when someone's doing well that it's a time to take more risk?
Stan Druckenmiller: Well, I believe in streaks. And I don't know whether you do disagree, because what you're talking about is someone who loses their discipline. And you cannot allow--you make a good point. You cannot allow yourself, when you're doing well, to start thinking you're God, and lose your discipline. But I do believe that life, and trading, runs in streaks. And if you're still disciplined with what you're doing, when you're up 20% with clients' money, you have the right, if you really like an idea, to bet more than when you're down 10%. And I'm not saying, Oh, I'm up 20%, let's go shoot for the moon. What I am saying, Everything else equal, if you're playing with house money, and if you're doing well, and you're trading well, you should definitely take bigger positions than otherwise. But no, I'm not saying, I'm up 20% and I've hit eight in a row, let's get reckless. So I'm not sure we do disagree. I may not have articulated my position well. But if you look at the best part of my record at Soros, I literally didn't make a mistake for five years. Literally not one. And then for two years, I stunk. And if I had gone, in any of those five years, from basically '89 to '95, well, I've done too well, I need to take a break, I probably would have lost half my net worth that I have now. So, different strokes for different folks.
Jeff Feig: Tom?
Audience Member: Yeah, when we used to work for you, we sort of had a saying that the risk management system was you. I think it might be interesting if could you talk a little bit about how you thought about the allocation process of the money in the fund, and how you thought about it before and after LTCM--because I'll never forget LTCM. I walked in the morning--
Stan Druckenmiller: I don't remember when you walked in, but this is a terrific question, because I have never had a--well I did, but I didn't pay attention to it, and it's what Tom's alluding to--I have never had a fancy quantitative risk management control system overseeing me. And by the way, neither did George Soros in the 25 years he ran the fund before I did. And between us, there's one down year since 1969.
Jeff Feig: So there's no VAR at Duquesne.
Stan Druckenmiller: Well there was, because the banks came in and made us put it in after '98. But I believe that every once in a while, usually about every 10 years, you have a financial crisis. And all these systems that are based on historic trends and what happens when A does this and B does this, spit out a formula. And they work 95% of the time. But when you really, really need risk management, they break down. Because by definition of a financial crisis, which I'm sure everybody here knows, because we had a recent one, correlations just go wacko. The stuff that has correlated for years breaks down. And you start seeing changes that make no sense whatsoever. And my risk management system is, and I believe this is true with George although we never talked about it: If I own, let's say, in today's world, the last 10 years at least, if you own stocks and you're short bonds, that most of those 10 years has been the same bet. And if you're long the Euro, that's probably a long risk bet. And you just kind of get a feel in your head of where your matrix is. And I can go in the gym and watch CNBC at 11 o'clock, and I have probably, if you include the whole firm, hundreds of positions on, and all I see on that stupid little ticker is what the S&P is doing, and I can probably tell you our PnL within $2mn. Just because my head knows what my Pound or my Euro position will be doing, and my gold position, based on that. And so I sort of have this internal thing where I'm watching everything. But the reason I love the human side as opposed to the quantitative side is there's nothing like my PnL--and you will pick up, Oh, C is not acting the way it was with A the last eight years, and there's something funny. And then you'll start seeing more funniness going on. And I have always thought that if my PnL acts--if things went well that day, and I'm losing money, and I examine what went on, and if that continues, something is really starting to go haywire in the system. So my risk management system has always been what I've described, that knowledge, and then my gut, and watching my daily PnL. And if the daily PnL starts acting in a way it shouldn't, instead of going to some quantitative VAR or beta model, go, Oh, I'm okay, the model says I'm okay. To me, these models are not only okay, they can get you in huge trouble by causing you a false sense of security when things start going awry, because the model will tell you you're okay, and you will see things happen you've never seen before, whereas if you are a intuitive human trader, you should be able to use your instinct to just start cutting when things aren't acting right.
Jeff Feig: You ever--if you're thinking about the correlations, if you're long a lot of S&Ps, will you say, Well, I'm bullish the Euro, bearish the Dollar, but I'm not going to take that big a position in that because they're correlated?
Stan Druckenmiller: Yeah. And that gets back to this question. If I've got a strong opinion, and I'm doing well, and we're up 20%, and this is what happened in the early 90s, and I've got eight positions, and they're all in the same direction--it's an 8x Texas hedge--I have no issue with it. But if I'm down 6% or 7%, I might just take my favorite of those positions and press that alone. But yeah, I am constantly weighing that. And one of the reasons I plowed into those Brazilian bonds is they had traded with risk since I'd owned them. It was crazy. A couple times they moved 200bps because you had something going on here--I mean, it had nothing to do with the Brazilian economy. And about a month before--the big signal they turned was the S&P kept crashing into the financial crisis, and they stopped correlating. And they were 18 or 19, and that's when I knew they were golden, because I had watched them trade with risk for two years, and my antenna, the intuitive part I'm talking about, I said, Oh, they're not trading with risk, and this is a really cool thing, because I'm long them. And I actually--that's when I bought more of them.
Jeff Feig: All right, one more. Scott?
Audience Member: Hi. Could you comment on whether these same skills of discipline that you for making your own trading decisions you apply to hiring people to manage money for you? Or is there a different process...
Stan Druckenmiller: I am the worst hirer in the world. My mother-in-law says I'm an idiot savant. She's probably right. So far, I've been able to compound money above a random level, but I just took that to someone else in my firm. So if I was hiring a money manager, the first thing I'd look for is, if all I heard was they never made a mistake, and they're telling me about all their wins, that's a big red flag. The great money managers I've met, they generally don't tell you about a lot of their wins. They tell you about a lot of their losses. And there's an immodesty about them. But yeah, I would definitely look for discipline. The first thing I do when I look at the records, I go right to the bear market periods and see how they did in those and look at the quality of the record. Because I--hiring money managers, I'm okay, actually, it's analysts that I have a problem with. But yeah, I would look at all the things I'm talking about. But I think you can learn a ton from the record just by looking how they did in certain years, and when you see an outlier, you ask them. Because there are always be one or two inconsistencies in there. Like I was flat in '96. Pretty easy year. Why? Turns out, was the Indonesian Rupiah. And I think you need to delve in what the reasons were in those unusual period, or are they just a bull market creature where they rode a trend?
Jeff Feig: What are your thoughts on the markets today, going forward? Any big views? How are we going to make money next year?
Stan Druckenmiller: Well, I've had, I believe, maybe the worst year I've ever had relative the opportunity. We're up about 10%, somewhere in that area. And I think the opportunities have been tremendous this year. By hindsight, of course. I made the decision--we had a very good '07 and a good '08 when the government got involved, to the extent that they did, and look at all the factors, that my skill set was not as valuable as it had been in the past because I was dealing with a set of variables that I just--I didn't want to bet big. And Jeff, I still think this is one of the most unanalyzable periods I've ever dealt with, because I tend to look at history and historical--I try to find similar instances. And I was on a roll until September of '08, because it looked like the '30s, but worse to me, because we came in with more leverage, and then we started running a monetary and a fiscal policy--exact opposite of what we did in the '30s as well. Now, so that's my big qualifier, or hedge, since I run a hedge fund. And I'll start out by saying this is more uncertainty that I would usually have, and no one knows. And if you meet anybody who really thinks they know what's going to happen next year, stay away from them, because they're an idiot. But having said that, here's how I see where we are. First of all, usually in a big time financial crisis, and we've seen this in a lot of emerging markets, usually something really productive comes out of it, and you usually get very positive structural reform. Now, I am no fan of George Bush, for those of--43--for those of you have known me for quite a while. But I do think it was kind of bad luck, at least for for structural reform, that this thing blew up on the smaller government side of the equation's watch. And I blame that guy for a lot of things, but I don't blame him for the financial crisis. To me, the seeds of this started 20 years ago when Greenspan took over for Volcker and then he decided he didn't want any recessions. So we've just been--we've gone from 140% of GDP to 380% on debt. And it went parabolic, and he ignored it. So the problem I see is, we had this big mess, and instead of getting healthy response to it, which would be demanded in an EM country, and an EM country would come out of it, usually much better, and a lot of times rise from the ashes, which is why, I think, if you look, probably the countries that weathered this the best were obviously Latin America and Asia. Asia went through the Asian Financial Crisis, and the Latin American countries were on their deathbed in the early 80s. And they made the right response to it eventually. And the seeds of that, and the benefits of that went for a long time. And I think the last really horrendous thing I saw in my career was this whole 70s thing, in the end of it, and Carter was sort of the epitome of it. And out of Carter, we got Volcker, and we got Reagan, and we basically got a 20 year bull market out of some guys that were really to take some serious, serious pain for two or three years. So my problem with where we are today is, we went into this thing, we have this thing, and not only have we not gotten structural reform, we've done everything wrong. And it's all kicked the can down the road. And we got into this thing through, to me, a reckless monetary policy, and not willing to take the pain, and not willing to take a recession. And ironically, I call it the curse of the reserve currency, which is--you know this thing, the curse of oil, that the country with oil under the ground can--
Jeff Feig: Dutch Disease.
Stan Druckenmiller: Yeah. The problem with it being a reserve currency is we're allowed to get away with non reform and behavior, and you keep doing it and doing it and doing it. And normally, the markets would give you a signal, and they would save you from yourself before it was too late. I am deeply afraid that all this stuff we're doing--it's the wrong answer. I mean, capping bankers' pay, this our response and all this other stuff--why don't we just get--knock down--instead of dealing with the real issue, which is leverage, too loose of monetary policy--it's all this populist nonsense out there. So I am convinced that this crisis we just had is going to be followed by a bigger crisis, because we didn't do what we needed to do in response to this crisis. And now is where it gets unanswerable and unanalyzable, which is our response to it, which is how we got into it, which is more liquidity, let's not have any pain, 10% unemployment, buying $20-25bn in either treasuries or mortgages a week, makes everybody feel good, causes another asset bubble, but it's going to cause hell down the road. And in this one, I think the Fed, and the Treasury, were big enough to arrest it. At the next one, I think there's a good chance that they'll be the problem. I think we're going to have a sovereign crisis due to everything we're doing now. And normally, it would be arrested because the bond market would give you a signal. But with China trying to hold their own currency down, so they're buying treasuries, Korea, everybody knows who's intervening every night, Brazil will be intervening, and we're intervening. I mean, we're buying $20 -25 billion. Isn't it nice that we don't want to target asset prices at the Fed on the way up, but for some reason, we're buying them. Isn't that targeting? But anyway. So this liquidity that they're putting in there, you can't go, Oh, the economy stinks so I hate the stock market. It doesn't work. This thing--if you have the money supply growing a lot faster than industrial production, the stock market is generally going to go up. That's just the way it works. That's where the money goes. But at some point, we're going to get a signal. When that signal is, I don't know. It could be in three months, or it could be in three years. So basically, I'm pretty useless, other than telling you, I would not be shocked at all if we take out the 680 in the S&P again on the downside, but that could be in three or four years. If you put a gun to my head, I'd say, given where liquidity is now, if January earnings are strong, and I suspect they will be, and the markets are hot enough, these guys will end QE at the end of March is what they're saying. If we get weak again, I'm not sure I believe them, but if they end QE, I would be willing to entertain the fact, since all my long term theses tend to happen before I think they're going to happen, that it would be very unlikely that risk would be up year to year in 2010. That sometime in the first quarter, before the end of March, we'll start backtracking. When the big crisis comes, I don't know. I--personally, we're playing a low gross, because I can't figure it out. We are tilted toward long risk. We're in the liquidity thing. My favorite currency is gold. Again, very popular. Not a contrarian bet. But my thesis there is quite simple. That just like we had an anomaly in '92 with Germany and Britain, we have an anomaly now. And the anomaly is, if you look at the world balance sheet, it's okay in total. But it's obviously ridiculously imbalanced. So our structurally impaired balance sheet is somebody else's decent balance sheet. So Debt:GDP in China is 120, 130, here it's 370. And you could go on. So basically, because we're the reserve currency, and because no one else wants their currency to go up, we are running more monetary policy, and since we have a structurally impaired balance sheet, for the world as a whole, that monetary policy is way too loose. It's appropriate for us, possibly--I don't think it is, but you could certainly argue it is. It's definitely not appropriate for the world. And everybody hates their own currency, and that's why I like gold. And then we're also long a bunch of commodity currencies, basically for the same reason. But I would put gold at the top, if I was from Mars, of my currency regime, followed by selective commodity currencies, and I would put the Pound and the Dollar at the bottom of this, because they have structural problems. Bonds are incredibly interesting because they are the stupidest price. They are ridiculous. But again, like discipline requires, I'm not just a value guy. I need charts, I need catalysts. And I think they're a one way bet, except carry, but the carry is big. But I am salivating to short the bond market in major size. That could happen tomorrow morning. It could happen in four months. It could happen in a year. I don't quite know. So in '81, what launched my career was we had 18% short term rates, we had about 14% or 15% inflation, and the long bond was yielding 14%. And we had a crazy guy running the Fed named Paul Volcker who was going to do anything to smash inflation. And all the bond guys were bearish, and it cost--they got 400bps of carry by being short bonds. And interestingly, the only bond bulls were equity guys: Michael Steinhart, Roy Neuberger, George Soros, myself--although nobody had ever heard of me. And we could see that this guy, Volcker, was going to win. Now, it's a very interesting situation. It costs you 400bps not to own the bonds, but to be short the bonds. We got, in my opinion, a crazy guy running the Fed. He's hell bent on inflating. The bond guys are all bullish, because they're getting 400 carry, they can't believe what a party they're having. The equity guys are all going, This is a disaster. When I go and I meet CEOs, every one of them thinks we're gonna have inflation. I don't know whether they're right or not. So to me, it's almost the mirror of 30 years ago. When was George Soros one down year? 1981. He lost 22%. Why? He was long bonds. He was just six months early. I don't want to be six months early and trash myself, but I'm salivating. But I don't know the timing of it.
Jeff Feig: And last question. In your personal life, one thing that is well known is you're a big Steelers fan. You're on the boards of a bunch of charities, but I know that your real focus is with the Harlem Children's Zone. Why did you pick that one?
Stan Druckenmiller: Well, I hit the lottery with this guy Canada. But basically, it's a pretty simple story. When I went to work for George, he had just retired from money management, and he wanted to give away $500mn/year. I had no money, so I never thought about philanthropy. But when I started making money, I had a personal mentor, and it seemed like the right thing to do. But living in New York, first of all, I'm kind of parochial, because I came from Pittsburgh, so I wasn't really into the arts and I thought giving to the Philharmonic and the MoMA was, I don't know, they seemed to have plenty of money and plenty of supporters. And I had a good friend I just met, named Paul Jones. And we had a lot of discussions about poverty in the area, so I joined the Robin Hood board. And we had a board meeting up at the site at this place called Rheedlen Center for Children and Families. And I went up this sort of like dilapidated stairs, up into this little room, and I meet this guy, Geoff Canada, and within like, an hour and a half, the hair was standing on the back of my neck. This is, like, one of the greatest, most dynamic leaders I've ever met. What's he doing in this little room? And then five or six years later, I was on the Rheedland board--it was Geoff, not me, that thought up the concept of the Harlem Children's Zone, presented to a board--I mean, this is like discovering Bill Gates in a garage, as far as I'm concerned. He's had a massive impact with 100 square blocks up there. And now, as you guys probably know, Obama's trying to use our model to do it in 20 cities, and it's--outside of my family, it's been the joy of my life. But I just got lucky. And I don't know why I was destined to meet this guy, but I did.
Jeff Feig: Well, I just want to take one minute, and I want to introduce Anil Prasad--he's my boss, he runs FXLM.
Anil Prasad: I think you guys should know me by now, at least this time of the year. Though we are a top bank, guys. Thank you very much. Thank you for your comments. Thank you for coming. And Jeff, thank you for hosting it. We have a surprise for you, Stan.
Stan Druckenmiller: Oh God.
Anil Prasad: Since you're a man that likes to follow these markets and likes tumultuous times. Is Geoff Canada somewhere here?
Stan Druckenmiller: Oh, there he is. I didn't mean any of that stuff I said about him.
Anil Prasad: So Stan, we thought we'd want to do something for you, coming here and spending the time with us. And then we realized that we are a government owned bank with limited--
Stan Druckenmiller: Screwed!
Anil Prasad: With limited resources. And no one wants to pay us. But anyway, we asked the senior managers of the bank to put a donation together for the Harlem Children's Zone. And they did. And we raised $140,000.
Stan Druckenmiller: Thank you. Thank you so much.
Anil Prasad: We are very proud to present you.
Jeff Feig: So that is from most of senior managers in the markets area.
Stan Druckenmiller: Well, I know what the government's doing to you, so I know $140,000 is not what it used to be. It's a lot more. So thank you very much. Deeply appreciated.
Jeff Feig: Thanks a lot, Stan. And I would just ask so we can talk about what happens next. Anyone who's in the FXLM part of our meeting, if you could stay for a couple minutes, and we'll just tell you where we're going. Everyone else, thanks for taking the time to come. Thank you.
Stan Druckenmiller: Thanks, Jeff.
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Wrap-up
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Thank you for posting this! One note, I'm almost certain he said "Greenspan was responding to the Asian crisis" instead of "aging crisis".
Love Stan!