If there was one billionaire trader who would tell you that your past doesn’t determine your future, it would be Stanley Druckenmiller.
So what was his past?
Well, while in college he operated a hot dog stand…selling hot dogs obviously.
Its almost like the story of Bruce Kovner, who was once a taxi driver.
Stanley Druckenmiller Net Worth
For a guy that once used to sell hot dogs, Stanley Druckenmiller’s net worth is $4.4 Billion as of 19th December 2016 reported by Forbes.
- Stanley Druckenmiller was born in June 14, 1953
- Stanley Druckenmiller did not come from rich background. He grew up in the middle class suburbs of Philadelphia.
- His Parents divorced while he was still in elementary school and he had to live with his father.
- He completed college and got a degree in Economics. He was on his way to get a PHD in Economics but quit to take up a job as an oil analyst for Pittsburgh National Bank.
Here’s what Druckenmiller had to say about Dropping out of University and and Going to work in the bank:
I had enrolled in graduate school to study for an economics degree.
However, I found the program overly quantitative and theoretical, with little emphasis on real-life applications.
I was very disappointed and dropped out in the second semester. I took a job as a management trainee at the Pittsburgh National Bank, with the idea that the program would provide me with a broad overview that would help me to decide an area of focus.
I had been at the bank for several months when I received a call from the manager in the trust department. I hear you attended the University of Michigan, he said.
When I confirmed his statement, he said, Great. He asked whether I had an M.B.A. I told him that I did not. He said, That’s even better. Come on up; you’re hired
How Stanley Druckenmiller Got Started In Trading
Here are some of the brief highlights:
- Getting the job as an oil analyst for Pittsburgh National bank in 1977 was the probably the right step Stanley took and that was the actual start he needed to get into trading.
- He was pretty smart and within 1 year, he became the head of the bank’s equity research group.
- In 1981, he started his own firm called the Duquesne Capital Management.
- In 1988, Gorge Soros hired Stanley Drukenmiller.
- Drukenmiller and Soros famously shorted the British Pound in 1992 and were reported to have made $1 billion in profits on that trade.
- In 2000, Druckenmiller left Soros after suffering huge losses in technology stocks and started focusing on his own firm Duquesne Capital.
- Bloomberg news reported that in August 18th, 2010, Druckenmiller announced the closing of his hedge fund. Why? Well, he stated that he had been stressed trying to maintain one of the best trading records in the industry while managing huge amount of money (investor capital).
Here’s an interesting fact:
Duquesne Capital Management posts an average annual return of 30 percent without any money-losing year. His funds were down for about 5 percent when he announced his retirement in August. However, they had since erased the losses and closed with a small gain through successful bets that the market would rally in anticipation that the Federal Reserve would announce further “Quantitative Easing” to assist in reducing unemployment and avoid deflation.
Druckenmiller’s Trading Style/Trading Strategy
I cannot find anything on Druckenmiller’s trading strategy but here are a few points on his trading style I’ve read:
- top-down investor holding stocks or group of long stocks and short stocks.
- uses leverage to trades futures and currencies.
- if he sees a trade setup that excites him, he says you should “bet the ranch on it” or throw all your eggs in one basket and watch that basket carefully. It does not mean that he risks a lot. The entry point is critical to managing that risk here.
Here’s an interesting article written by Businessinsider about Druckenmiller on concentrated bets:
…if you find a trade that “excites you”, they tend to have better results.
“And if you look at what excites you and then you look down the road, your record on those particular transactions is far superior to everything else, but the mistake I’d say 98 per cent of money managers and individuals make is they feel like they have got to be playing with a bunch of of stuff. And if you really see it, put all your eggs in one basket and watch the basket very carefully.”
These sorts of trades don’t happen often though. They usually happen one or two times a year, Druckenmiller explained.
During Druckenmiller’s career, he had two mentors and one of them was famed fund manager George Soros.
Working for Soros cemented Druckenmiller’s investment philosophy of “if you see it, you got to go for it.”
Druckenmiller worked a portfolio manager for Soros’ Quantum Fund. He noted that Soros had been spending a majority of his time on philanthropy in addition to running his personal account.
According to Druckenmiller, about 90% of the trades Soros was making were actually his ideas. Soros was crushing Druckenmiller’s returns though.
“I’m a competitive person, frankly embarrassing, that in his personal account working about 10% of the time he continued to beat Duquesne and Quantum while I was managing the money,” Druckenmiller said. “And again it’s because he was taking my ideas and he just had more guts. He was betting more money with my ideas that I was.”
Druckenmiller shared the story of he and Soros’ famous British pound short bet that “Broke the Bank of England.” Druckenmiller said that he had pitched his short idea to Soros and suggested that they put 100% of the fund in the trade.
Soros told Druckenmiller that was “ridiculous” and that they should put more even more on it.
“That is the most ridiculous use of money management I ever heard,” Soros said to Druckenmiller. “What you described is an incredible one-way bet. We should have 200 per cent of our net worth in this trade, not 100 per cent. Do you know how often something like this comes around?”
Stanley Druckenmiller’s Quotes
About Diversification in investing:
I think diversification and all the stuff they’re teaching at business school today is probably the most misguided concept everywhere.
About his investment Philisophy:
The first thing I heard when I got in the business… was bulls make money, bears make money, and pigs get slaughtered. I’m here to tell you I was a pig.
And I strongly believe the only way to make long-term returns in our business that are superior is by being a pig.
And if you look at all the great investors that are as different as Warren Buffett, Carl Icahn, Ken Langone, they tend to be very, very concentrated bets.
They see something, they bet it, and they bet the ranch on it.
And that’s kind of the way my philosophy evolved, which was if you see – only maybe one or two times a year do you see something that really, really excites you…
The mistake I’d say 98% of money managers and individuals make is they feel like they got to be playing in a bunch of stuff.
And if you really see it, put all your eggs in one basket and then watch the basket very carefully.
I’ve always loved to play games, and face it: investing is one big game. You need to be decisive, open-minded, flexible and competitive.
About His Skill As An Economic Forecaster:
Part of my advantage is that my strength is economic forecasting, but that only works in free markets, when markets are smarter than people. That’s how I started. I watched the stock market, how equities reacted to change in levels of economic activity, and I could understand how price signals worked and how to forecast them.
I believe that good investors are successful not because of their IQ, but because they have an investing discipline. But, what is more disciplined than a machine? A well-researched machine can make many average investors redundant, leaving behind only the really good human investors with exceptional intuition and skill.
About Old People and Kids:
I love being around kids. I couldn’t figure out why all these 70-year-olds wanted to hang out with me when I was 27. Now I understand, and I’m trying to steal their energy from them like they stole from me at the time.
About Hillary Clinton and Social Networks:
I think old people like Hillary Clinton and I shouldn’t try and be cool with social networks, you know; maybe she should leave that stuff up to Chelsea.
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