Stan Druckenmiller: Inside the mind of a legendary investor
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Hi everybody, i'm nicola and the CEO over the norwegian, someone wealthy and today i'm here with stand driller a proper legend in the investment world. Stand up. What a pleasure to .

be here how to see in the car.

Now what are the most important data you are looking .

at these days currently? Yeah are interesting ly enough. I known as a macro o industry, but I do a macro from the bottom up. So we're listening primarily to companies and we're not seeing any material signs of weakness other than maybe in the housing market, but that's from a very elevated Price level.

So we're not seeing bottom up and information indicating to us that there's that there is an economic problem many time in the next three to six months. I would also say i'm revealing now that i'm more walking animal than an economist that we look at financial conditions, they've been very, very loose. I mean, there is loser, loser than they were when the fed actually started tightening.

They've tightened considerably in the last four, five weeks. Ever sense of ironically, ever since the fed cut because the dollar has railed and obviously, interest rates have grown up, but they're they're still quite above Normal. So that's that's pretty much the data we're looking at.

I say the other thing i'm focused on, i've been obsessed with whether we were in the seventies um real since twenty twenty one when this whole inflationary epo started and I i'd say two years ago or a year and a half O I was very confident that inflation was going to come down, which I was right on. But I was worried about the economy, which I was completely wrong on um more recently. You can take this with the grand assault since I had one right and one wrong there.

Um i've switched to being more worried about inflation going forward in the economy itself. Why do I say that if we go back to the seventies, there was an episode with OPEC that set off and inflation. You had a recession, and inflation came down, I think, from about eight to three .

and back up.

yes. And what's bothered me and what I have wanted to see, you're exactly and went back up again, went back up again and the number of months um we corporate to the bottom being right about now 要 so this is my confidence here， a year and a half o which we're going to have that period where we came down again and then we'd see and i'm a little worried that the fed has declare Victory too early.

I don't have conviction like I had in twenty one, that inflation was going to go up. That's when the money supply was growing forty percent and all of what sort of things are happening. But I also don't have conviction that they've snuff this thing out in one the battle and to cut fifty basis points with credit spreads tight, gold a new high, equity warring, no sign of weakness, material weakness in economy course are some spots um that this makes me nervous that this thing could turn up again. What would make .

IT turn up again? What would be the factors?

I think what I just said, they are easing in the financial conditions. Let's say, um trump wins. If trump wins, you could have animal spirits from the business community who are dying for deregulation. You could have terrify return on the margin. Influential immigration has been a great bond of this country, maybe not the way that was done, but it's certainly enabled us to have growth without inflation in labor, literally the last two or three years. So the communities of animal spirits recovery doing Better than that is i'm just open minded to IT again, why is so urgent .

for the national bank to cut given this?

Honestly, I don't take the nefarious view that people is doing IT for quote, for political reasons. I do think he's obsessed with the soft landing, and I think he's obsessed with his legacy. And having made the mistake he made in twenty one and he's being egged on by other economists in the press, to me the feet job is to avoid the big, big mistakes like the seventies, like the great financial crisis, like the big inflation we just had, but all this fine tuning and wearing about a soft landing that that is not the job of the fed, of my opinion, is some maximized employment for the long term, not for the next three months, for the next four months.

But I think the feds obsession with nAiling this so called soft landing, I would remind everybody that the reason were having a landing because they look, they let inflation go from two to nine percent so there was no need for a landing for twenty years. But um I think that will serve us words. I don't really I don't know .

what how much of a problem is the forward guidance.

It's a huge problem. My friends room, granted therefore a guidance dependent, not data dependent. Um it's a problem because once you do forward guides, you eliminate your optionality.

yes. And I think nick lai and I being in this business, we know we have to change our mind when we're wrong. This fed has shown over over again that they think if they change their mind, they're losing credibility.

So IT makes them have their hands stand behind their back. I'm wrong all the time. I think my record is mainly because when i'm wrong, I changed for mind, not that i'm always right, and I am certainly not former guiding seems to tie them in their positions where in eliminate flexibility, they need .

how big a problem is. The budget deficit .

as a practitioner is something I can be obsessed with on a three to six months basis. As an american, it's something i'm really obsessed with because that to GDP can go up, can go up forever. And to me, we have a reckoning, but I don't know I don't know how the time when that's going to take place.

I will say that because the reserve currency, we've been permitted to engage in behavior that say the britz couldn't behaved in, there's a new term. I have getting less trust. We haven't been less trust because we are the reserve currency even though if you look at everything we're doing, it's much more radical than the brits were doing.

Um what's at all saying how do you go bankrupt slowly and then suddenly um running deficits with full employment basically at seven percent of GDP is a recipe that can last forever. One of the reasons we haven't paid for IT is in covent, the entire private sector, eighty percent of individuals refinanced mortgage of the average mortgage rate is still under four percent even though at the margin and you got to eight percent, corporations turned out their debt. That stuff rules over in twenty five and twenty six.

If you're onna have a problem. It's probably more like late twenty five, early twenty six. But you just don't know so.

And and what is that? They can create this kind of trust moment where people suddenly change their minds in times of the Price they want to have to lend on money.

too. IT could be a failed auction. IT could be if the fed is wrong about inflation.

And IT turns back up again because they are easing financial conditions into a melt um if they were to have to start increasing interest rates again which is why I think they should be so cautious about their optionality um now that they've four were guided to a series of cuts that could cause IT um my best guess would be a failed doctor。 But honestly, IT could be six months. IT could be six years. I I just don't know.

So if rates still to go up, how high can they go?

Well, that's a great question because right now the ten year, I guess it's around four and a half um IT can go to Normal GDP. So let's say inflation went to four, four and a half and real growth was two and three ten years old, six or seven. I'm not predicting ting that, but that would be consistent if things if inflation did turn back up again and the economy wasn't weakening, I think you could get there. Interesting that what happened to seventy, the bond market didn't really respond until we went back up from like three to twelve and then I had responded in space again. I'm not predicting this, but i'm as a practice i'm very open minded to and and I got a python, my radar.

What you say you make the most money from from fed mistakes. So is this the way your opposition? Now .

i'm short pants. I'm not i'm not like mega short. I I actually had good timing for once I shorted them literally the day the fed cut has been kind of an easy ride since then.

I sort of been much bigger now that they move so much. A milo worried about um if anything, being too big. But yeah no, that's a way on position. If I thought what we are talking about was happening and I don't see a sign of IT yet, i'm just open minor to IT, I would be much of bigger. I like twenty five percent in A V short ten year equivalent.

Stand moving onto the stock marked a the leadership is very narrow sled by not so many stocks. Just how do you read this narrow leadership?

It's never been great, but the leadership not as nar as IT was last April. So you're starting get some broader out that financials are doing Better. It's not great.

We've never had a bar market start without the leadership narrowing, and it's narrowing enough that you're starting get toward a necessary condition being satisfied. But it's early, but it's it's a it's a yellow light. It's not a red light. I read IT.

So how do you think the tech sector will develop? What kind of signs .

are you are seeing there? The AI bone is going united. I like that. I think the private sector just sees that as an extension al threat to their business if they don't spend money on IT.

Because if they don't spend money on IT and their competitors do and their competitors are right, they're going to have a big, big competitive problem. And of course, the hyper scales there are land and their the man is just continuing. So look, you got you ve got very rich Prices in the tech sector.

Stuff like apple selling twenty five or thirty times earnings is certain that growing and twenty five or thirty percent. but. I don't we're we don't have that much exposure to the tech sector. We're not short. So not really involved .

because but you were very early into IT. Yeah what um how do you spot these early trends? What is that, that you look at?

Honestly, I got Young, really good to analysts here.

Yeah, a little people have a lot of Young .

allies who who are on top of things. And they started. We noticed about three or four years ago that the kids had got a stanford M.

I, T, the engineers were shifting from crypto to AI. That was the first sign. Then my, my Young partners started talking more and more about ai.

I asked him how to play IT. They mentioned the company called in video, which I thought was a gaming happy. I hadn't done work on a long time um I bought a pretty good chunk of IT and then like a month later, ChatGPT happened.

I was just total luck. I had no idea ChatGPT. The AI drumm around here was big enough and the stock was down I think from four hundred, one hundred and fifty or something.

So that's how I got started in IT. And then once you get started, you once we invest in something like that, then we really start to dig deeper. And then there was a whole chain of things we knew that would affect power or we knew that affect uranium.

We just went through the whole chain. And who was a pretty easy train to spot, not unlike the cloud, was, you know, these things come in waves. But I I the question with A I now that i'm restful within the reason our exposure is really neither long nor short is how to play IT because we started with picks and shovels, which is in video and to some extent um microsoft.

But now we're seeing just massive amounts of capital being spent by these mobiles. And if A I is for real and I think IT is, they're all going to give you the same answers. So we're gona have four, five companies will spend masses amount of capital, but I don't see IT as a winner take all model. On the other hand, I think there are applications um that I haven't thought of and nobody thought of that gonna spring up.

I mean, who would have thought of uber or facebook when the internet started? So we're very bullish on AI, but we're not bullishly currently on exactly where we're supposed to be and how to play IT aggressively, not unlike the internet in two thousand and two thousand and one, you could have believed in the internet not been exposed and then got your exposure on a more timely basis. Or I could just be wrong, which is going to be that on neutral.

but you will also early into the entire obesity drug producers.

oh, that I was, you think I mean, I don't know what it's photo norway, but in america, a disc world, everything. And if you know the american psychic, you you tell amErica and they ve got a way to lose weight without to any work. And I I knew the drug worked early on just because we were exposed to a blaze. And then when I heard, if you get off to drug, you gain the weight back then, I knew I was sort of a razor blade business because people would have to say on the drug.

would you say, see, but i'm in, hey, it's only you the only one who who is walking around the disneyland are looking at this kind of things, right? So but you you actually you actually act on your intuition or your old data that's in front of you.

I do, but it's it's not all brilliant. I I bought in video very well, but I sold at eight or nine hundred right when the party was really getting going and I sold my lilly in the high seven hundred ds grand and had a had a nice profit. But yeah, I look for for big trends are not a buffer guy that holds for twenty years, but I look for two to four years stuff and both fit into that category. And Frankly, we're looking now for A I applications that might not have been recognized that I think i'm on the board of song. Kettling ing have been from a thirty years in the applications in cancer .

are unreal and just foo this. The more is long cattery ing is leading .

cancer hospital in .

the world and they have a lot of money in the endorse, partly because you are on the board, the investment well.

they have a lot of money in their dog, and I wouldn't say partly because .

i'm on the board, but thank you. Now when we lost you, mention the concept of by forest. Analyze later.

Tell me about that. yeah. So I was used to call the and then investigate. I think I just gave a classic example I didn't know that much about in video.

I just knew that I and I had some people here to tell me how to play IT. So we bought in video and then we we were in the process of doing a lot more working than chat ch GPT to happen. But i've always had the view that markets are smart, their fast and are getting much more so with with all the communication, the technology we have today.

And that if I hear a concept and I like IT, if I wait and spend two or three months analyzing, I may must be part of the move and then psychologically be paralyzed. It's hard to buy a stock looking out of a hundred, one hundred and sixty. Even it's going to four hundred.

Somehow your your head has screwed up in your way for the pull back. So we will we will buy something, a meaningful position but not or shaking and then really do the work. And if I think we made a mistake, i'll sell in. And if I don't think we made mistake, we will add to IT if .

if we have to. Yeah no, I I, I have to do have worked exactly same way uh, in my life. And IT really focuses in your your work and your efforts on your thinking. But have you always believed in your .

own pattern recognition? Yes, I am. When I started in the business, I got promoted too early. So before I had really learned the nuts and both of the analysis, to the extent that I should have. I was promoted to to a to a leadership position and I had to rely a lot on shorts and I had to rely a lot of an intuition.

But I found um it's not that hard if if you if you're dealing with a cycle company and they're losing money or they're not profitable and everybody and their industry is shutting capacity down doesn't take a rocket scientist to try and vision eighteen to twenty four months out. If nobodies at in capacity, they may not be losing money anymore. They might be making a lot of money.

I have found its very important never to invest in the present. Always try and envision the situation as you see that in nineteen to twenty four months and then see if you feel things will be differently than they are now with security Prices reflect that. I think that's probably the biggest mistake investors make as they invest in the present rather than for looking and looking where the pucks going instead where the puck is.

Yeah now um few people believe in all the people's get feel. Did source believe in you'll get feel or did you have to show him analysis?

I think, um sorry and I had a rocky start. I I am I went there. I had had some as significant success running public funds to drive us.

And he told me I was a successful but I don't really think his mind was completely made up when I got there in the first six months for quite rocky because IT wasn't clear who was in charge, Frankly, both trading badly. And I I was flying to pitch burg because I still had ducaine. I was running both.

And when I got off the airplane, I think we had payphones back then. We didn't have cell phones. And the head trader there told me he had told out, sold out my bond position.

So I probably had a higher opinion on myself at the time that I shoot. I I was Young and I had always been in charge, so I was quite upset and basically express extreme this pleasure. And he said, will talk about IT when you come back to new york, implied that I I wanted to quit.

And he said that maybe there were too many cooks in the kitchen, and he was going to eastern europe for four, five years to be out of touch. And then he'd find out whether he had been in my hair or if I really wasn't in component. That's that sort of the way he talks away, we think, except he actually says IT and luckily for me, while while he was gone on the berlin well came down this in the doyle mark.

But I think IT was lucky for both of us side when I like the best one i've had before or sent for like four years. So he kept seeing the results. So I think he trusted my intuition only because the record started that way.

Do you trust the intentional your college now?

I've trust their analysis there. There's so much deeper and Better analysis than I was um but I can see the intuition developing the i'm i'm probably as bullish on the talent, the equity talent in my firm as i've been in forty five years. So I guess that that's a nana TM. yes. But partly partly brain, partly analytics and then partly in tuition, they're not as intuitive of I am because they will have to be I was sort of forced to be in to IT because I I never acquire their logical skills.

You mention some examples. So where you had sold a bit early, do you to generally sell IT early?

No, I mean, embarrassingly, I didn't interview on and video, I think was like three, seven or something. And I said this is one we're pRobing on for a few years, but I didn't think I was going to go to one hundred and a year and to over a two trillion dollar cab. I think I had started like a hundred billion or one hundred fifty billion IT was something crazy. So no, I don't necessarily solely on a technical so I usually weight for tops um in which he had no top. I just saw that um what does that .

just want explain what does that mean to have a top?

A topper is something the weather change of its going up changes in intense to flat out for quite some time. The trick is in the technical world that can end up being a bull flag. Where is just consolation, forbidden and intended? New leg or IT could be a top where that was that was IT.

And how do you know wishes.

bitch, you don't you have an opinion and now you press and sometimes you're right and sometimes you're wrong within video, um there was no top but I just i've vanni zed, so many conductors industry not particularly well, but since two thousand nine hundred and seventy and it's a cyclical industry and I knew and video had saying power and was at four thousand software engineer, so wasn't just hardware and they have a CUDA, this thing called cool software, that they do that to make their GPU.

But I just thought once IT went through two trillion, this is just too much. And worst case will have a big correction. I will get another chance in the course. I didn't get another chance. You may. Yes.

I make you think you will.

I don't know from this Price. I assume my will. I, I would bought a back. I don't mind buying something back than I. I don't like IT, but i'm perfectly willing to buy something back higher than I sold.

Some people can't get themselves to IT.

Oh, I can. I'm the one thing i'm strong on as i'm not emotional .

like but um you never had a done here.

No.

a stupid question. Why is that important?

Um no good reason. I think it's it's important because other people talk about IT and my investors loved that when I had investors because you know they have this stuff in our industries called risk wait return. I'm not bigger that but I will say.

It's it's a stressful job and there's less stress if you don't have big drawdown. I have had to never drawdown in, in years. So part of the down years just look .

like what what does a drawdown dua.

I get a anxious upset.

You still get even though is .

only your money yes? Yeah and just i'm a very competitive person, even if it's just smile on money. I I wish I wasn't, but I am and probably one of the reasons my results as good as there.

But I prefer myself not to be. It's a bit of a sickness. But I works forming .

who who do you compete against?

I compete against what I would call the opportunity set. And if there was a great opportunity set that year and I missed IT, i'm disappointed myself like you find up twenty and I think I shall been up fifty. I'm disappointed myself if the opportunity said was going to be up ten or fifty, twenty.

I'm I know the good thing about being an investor or is always a good reason to hit yourself in a head, right?

I don't know that's a good thing about our business, but it's probable the bad thing about our business for some reason that I like to hit myself in the head. I only this measure from the top.

But but the. You um of cricket selling your losers. What's the key to that?

If the reason I bought a stock is no longer the case, I don't care what I paid for IT. And if I bought IT sixty and is fifty because the markets discovered the problem before me, I have, I have no emotion whatsoever. Sorry was the same way I didn't really learned that from him, but I was certainly reinforced like after a while neckline.

You also develop enough confidence that you're not afraid to clean the slate and start over because you have the confidence that you'll be successful again and you're not going to sit there in a lazy position that you're not that sure about anymore. Um just clean house. And if you've been doing up for decades and it's worked, you can have the confidence to take a loss and not worry about IT too much. Once i'm out, i'm out.

you said you don't have feelings. What what do you mean by that?

Did I say I don't have feelings? I have a lot of feelings. You mean about .

taking losses? Yeah, just do.

What I mean by that is I think one of the reasons charge work we have, the reason there's support and there's there's resistance is a resistance is a bunch of people that bought at sixty and they went down and they're been waiting for three or four years for IT to get back to sixty while they could have been in something else that was going up the whole time. I just don't care what I paid for a stock. It's absolutely irrelevant in terms of my investment process going forward.

Now this a combination being on one hand stub burn, but they on a hand being able to change your mind. He's pretty rare.

I'm told IT is yes, I told by my friends other investors said I entirely on emotional and like, yes, I am told as well .

is that to keep your success .

you think one of them I I think I think it's I think it's a big part of that. I think again um being being open minded and having humility the only reason you can change your mind as if you're not argan about a position has mattered. I think I had some great mentor's, the one in pitzer g and then soros in terms of sizing.

And I think I learned some lessons very early on, uh, concentration, not to be afraid of concentration though. That's a big reason for my success. And probably the other big reason, what sort of sort taught is being willing to go into other asset categories.

And if you're going to concentrate, it's Better to have five buckets to plan than to plan on one. So I was brought up in the equity market, but sometimes the rise award in the equity market is not that clear when IT actually is clear in the bond market of the currency markets. And it's a quince you asked about never hanging a down here.

Part of IT is the most action in bonds and currencies tends to happen in bear markets and equity markets. So you can put the put the equities in the door for and just concentrate in those markets. I think that's been a huge part of my successes is IT gives you the discipline not to play in areas that you don't have a lot of conviction.

And because if you got credit to play and if you got commodities to play in currencies or bonds, you can usually find something that you think there's a great risk word in. It's also they tend to be more liquid than equity markets. So to our earlier conversation, you can change your mind when you're wrong.

What do you learn about sizing from source?

I don't know whether you know about, do you know, baseball at all?

Would you list about based place?

But when I went to sorrow, I thought I would learn what would make the daish mark up in the angle up and modestly, I found I was Better at that than him. Um in baseball terms, I have I had a very high banning average. He had a much higher slugging percentage. So what I learned from sorrow is when you have conviction, you should bet really big. I know your lives are play hearted before, but I but probably the best illustration is a pound.

Yeah so what happens? So let's go back. So you are in the office. What's happening to U. K.

So i'm in the office in new york and Scott and um who was a partner mine in the european mainly trade the european area. He's on london and he tells me the london housing markets are big trouble and the british economy is in trouble because like most angle sex and economies at the time, it's very much driven by housing and so forth .

just painted out a bit. So you're office, so you like overlooking central park. I'm not overlook .

at central park, but i'm nearly I am in the sorrow soft on thirty second four. But IT okay, it's not a corner off, not del y and the U.

K, and the U. K. Economy is going and down the toilet.

We think the U. K. Economy is going down. But I need to take you back about three years when the berlin wall came, comes down IT proudly. Ly saved me my job, because I probably would been fired at sorrow six months after he went to eastern europe, had the berlin will not come down.

But the dose mark went down for two days dramatically, because the theory in the market was the osr k, which was the east german currency was going to pollute the dish. Mark, I knew german history and knew they were obsessed with inflation because the I, my republic, and then that had to hit her, and so for so on. So I knew the germans were absolutely obsessed inflation.

I knew that all bringing all these east germans into the labour supply was going to cause a boom in the economy. So we were very bullish, ed, on the overall german economy. And we were very convinced that there is no way the bonus bank would lend inflation.

And so we very convinced that we would be accompanied by type monetary policy. So we had shared the italian laurs successfully during that period. So when then when Scott called me, we are already sort of on this doy smart journey we've been for a few years and the british economy is going down and the currencies are linked.

So this was a peg right there was a pig. So um I called and ask how much IT would cost me to sort the pound versus the doy mark for six months there was a half a percent. I think the fund was around seven and half billion at the time.

Quantum fun and I decided to do an invest and then investigate position. So I did a billion and a half, or like twenty, twenty five percent of fund, short the pound on the dice mark, figuring i'd probably lose a half percent because the peg in a world break within six months. But I wanted the position on fast forward, probably about five or six weeks, the day I believe was ten or fifteen not thought I would remember. I read .

the financial .

times and the head of the bonus bank. Now i'm showing mage for a pretty sure, as team mayer has written in editorial, al, in the financial times, basically.

In more proper language but he's basic saying that the dice mark in the pound should no longer be late like so I decide to take the cam and the quantum fund one hundred percent long a dose mark short the pound because it's still a have present unbelieved blame so now you're going to hear vented soros so he happens to be in new york at the time, which he wasn't always I go into his office and I explained him why i'm going to one hundred percent and he had rather large personal account. That's how we kept each other out of each other's here. He traded that, and, you know, was nine, nineteen ninety five over lab told him I was doing this, and he had this unpleasant puzzle.

Look on his face when i'm telling him, myths, is that this one economy is bombing and they need higher rates to other economy is falling apart. They need lower rates. These two currencies shouldn't be linked. And i'm thinking, what does he not understand about this? Because this guy pretty much understood everything. And he says, look, this is, this is a one way, but they come along very, very rarely ridiculous doing one hundred percent, we should put two hundred percent of the fund in this trade so there you .

have a um so that means you borrow money in the bank and .

dog up yeah on a seven and half billion dollar fund he thought we should have fifteen billion dollars short the pound among the daish mark um IT turns out we never got there but IT shows the way the man thinks I saw IT over and over .

again because was you betraying the thing .

happened yeah unfortunately we had a we had a pretty stronger reputation. And when I started selling at that night, I know a lot of other hedge funds start selling at the gossip community in the currency Marks in by midnight to one o'clock, the ford had blown out. That had started at the day at a half percent.

They were like six or seven percent. And the basic wasn't trading after one in the morning. Then the british rail straight, I think, from six to nine to try and stop the bleeding. And then they went to twelve, I knew was over. But the ford, so much that matter, and I was IT, was done by noon the next day.

And he was sitting at your desk looking at the roof Green.

yes, or whatever the screen at the time, which we only got seven and a half billion done, ironically, probably you know what to do. I was in a bigger hurry.

So what did you feel?

He broke. There was a lot of a germon. I didn't IT was exciting. I didn't feel bad because I thought the british economy needed.

And I was gratified years later, when they changed from black wednesday to White wednesday um then I went in the action after IT broke because the guilt were down two points, which I thought was ridiculous. British need lower rates through some syrian academia that if you have a way, currency, your answer, trades have to go up. So I bite guilt. I bite british stocks. There is a whole.

because what happened was that the currency appreciated, and he was good for exports.

right? So ent up. And the guilt went up because they needed lower rates and know they'd been held artificially high. So there was all kinds of other stuff I did around IT, which is come the way I trade.

You get a theme, and then you look at the concentrate circles, or the or the dominant OS that fall because of the theme. And but the point was with sorrows, if he really believes something, the position could never be big enough, particularly of its liquid market. And I learned from him, i'd like to play the turn, maybe my ego in, in, in a big turn, in something he was perfectly happy to play from the third of the six ending.

If we go back to baseball terms of it's a nine naming game, he was perfectly happy to pay the third of six scene when there was more certainty on much greater leverage. He had more courage than I did in terms of sizing positions. I don't think IT totally rub off on me, but I certainly helped in IT.

IT was a huge learning experience. I think the major thing I learned with him is, is not whether are right, wrong and how much you make when you're right and how much you lose when you're wrong. That's what he was probably to say, but he has ever been .

at stand. Um many people have heard about the pound, but not many people know that you also did the fish. Ana.

yes. Um my memories a little less clear on that one as to the reason, but I was just another another victim of the dolce mark. I assume there was some kind of divergence between the two economies and and there was a peg that I thought IT was an appropriate and I turned out.

yeah so you took so you took that back to but you took and not back to which I thought you also involved .

with the tie bot ah the time but was used they .

they but but nobody knows about this right no.

I think subhani wrote a book called more money than was a whole chapter on the type but that was not on the swish coroner. No, no. I prefer nobody knew any other stuff.

But i'm happy to talk .

about twenty five years later.

Any trace you regret not making?

Oh, is there's trades. I regret not making a console. I'd saying one of the biggest mistakes I made, IT, was having predicted the inflation really early and feeling so strongly about that, I wrote a peace in the wall sty journal with my partner, Christian brother, in the spring of twenty one.

I had a massive ve short for me in two years. Sort of like we just talked about with the pound, there was a one way bet. There were fifteen basis points.

And I was so measure ized by where they'd win, where they'd been. I took most of off like a hundred and fifty basis points that seemed like a great win from fifty, the best point, one hundred and fifty. But I should know they went to five hundred. I regret deeply not holding that position. There's probably thirty others, but I prefer to forget my mistakes.

Do you think machines can take the place of humans when he comes to investing?

No, I don't, but I think they can work um as a copilot and the combination can beat anything a mere human could be. I'm lucky enough to no garry cash off for a long time. I'm co founder of the cases chest foundation for no good reason.

I, I, I can hardly play us. My nine year old daughter was beating me that. So I started with gary, but he was probably the one of the first guys to use machines to train himself and work with them. I could see the same thing happening with money management. So I don't think the pure machines not make money because they have a discipline process and there's math um but I think if you can find an intuitive investor whose using A I and other things to supplement, I think that would probably be the top of the western the world, not a machine.

Now you took sebastian in two thousand yeah what was the reason .

behind that it's it's a painful but really fun story is really IT really starts in nineteen and ninety eight um when well no IT starts in the spring of one thousand and ninety nine I shorted um I think IT was eleven or twelve internet stocks not the leaders like A O I or yahoo but the also rounds and I I believe the position was like two hundred million dollars and in like four weeks I had lost like six hundred million dollars.

So I was the first time i'd ever had a big draw down. I was down like sixteen or seven percent in the spring of ninety nine. Um I then pivoted and realized that Greenspan easing because of the age and financial crisis while our economy was strong and we had the internet all this bind that I went out hard, a couple of Young managers to buy tech talks that I didn't know how to spell.

They had their own little accounts and like I would on top of their positions and we ended up the year, I think, something like forty two net or something after being in the depot because, you know, I wrote this crazy asic wave in ninety nine. So then in january, I just said this is ridiculous and I sold out all my tech holdings like I can't murder was like they had grown to like six billion dollars, which was IT was enormous for that period of time. And I ask so when I told so us why I had sold them out.

And next thing that happens, the two little satellites inside, they don't sell out. Their gamblers are really care because quantum m huge and they're is slow thing. They're not going affect to performance so much.

But nichola, they're making like four to five percent of day. I mean, the market is still roaring going in a march. And i'm i'm watching this and i'm getting really annoyed with myself self that i'm not i'm not still in this trade.

And then around early march. I can't take IT anymore, and I told you earlier, i'm not emotional. This was, this was a real emotional, really dum move. I buy everything back. I think I missed the top by about an hour.

So I back, I buy back all these tech stocks, and within a week, I know, and dead and quantum goes from my up fourteen percent to up one percent in a week. And I go in. And I now i've already been through the trauma of the spring before I recovered from IT.

But IT IT had a big effect on me, the stress I had Young kids, you know and it's like a repeat of the year before. So I go on the sorrow and I tell them two things. A i'm getting out of all this stuff.

B i'm quitting. Um we can't tell him but because I I got ta liquidate this portfolio. But the nash is in the beginning wave of a down ninety percent move and you can get out by the time I get out takes a few weeks.

The fund is down like seventeen percent and ducaine is down seventeen percent. And i'm just exhausted. I've been running this high profile fun for twelve years and so I sell everything out, everything of ducaine, send my investor's letter and say i'm going honest soba tico.

I don't know whether i'm coming back or not. You can take all your money out, but if you take your money out, if I decide to come back, I can't care until let you back in. I taken to have like two hundred clients.

One of them pulled their money. I remember who was, but remain for now. So I I shut everything down.

I go to africa with my wife and kids, and the best thing I did is during the summer. I refuse to expose myself in any way to something that would tell me where the markets were. So i'm not allowed to watch T.

V. I'm not allowed to see the wall street journal Prices. nothing. So I come back in labor day.

I think my wife couldn't have handled me being around once a kids go back to school sort of humor maybe not um so I come back and is remarkable because the S M P. Has rarely back almost to the high, the nash s retraced, about eighty five percent of decline. But the dollar is up, interest trade are are up, and oil is up.

Three, death knows for markets, if you look at history. So I then start calling all my clients who are basically small businessmen and are fancy institutions, and all their businesses are terrible. So then I call a hymen.

and I say.

yeah, he's ably was the number one institutional guy, whatever that rating in social investor, economist. And I say, this is very odd. I had, i've been out of touch dollars of love go and two days later, in his daily missive, he has regression analysis and IT says it's fifty percent, I think, currency, twenty five percent oil and twenty five percent interest rates.

And IT looks one year forward. And IT predicts earnings and it's predicting that earnings are going to line thirty six percent to next year and the wall street consensus are going to go up eighteen percent. So communist of that, listening to my clients, the fact the Greens fans got a tightening directive barm, which I think is an appropriate, I start buying all these treasury ies, and the market doesn't go my way, but all the information keeps comes.

So I keep buying more and more and more and more. So now I have three hundred and fifty percent ten year equivalent in the fund. And then I get lucky what the gore bush fiasco, economy falls apart.

I end up making forty percent in the fourth quarter. So I had, i'd written the year off. I when I came back and down eighteen, I am soon OK least I got, don't have to worry about the same anymore. And finally going to have a down here. And it's like the best court I ever had into this day. If I had stayed many, many money, I think I have been tired and notes and there's no way I would make that trade IT was the fact I was arraid for four months, had a clean slate, had a clear head and just looked at the new evidence. So IT was a very, very horrible beginning and a very lucky ending.

Now you don't take four more often. Often you were very hard when you wake up in the morning.

four.

four in the morning. Yeah, what do you do?

I you have an office.

you have an an office at home.

right? Yeah, immediately the little .

burn o'clock, you you make a cup coffee before you go to bloom berry straight.

No, yes, I make a cup of coffee. I go. I don't sorry that check all the markets, read the journal, skim the financial times in the new york times, check like all the emails overnight.

When I said check, I mean skin them for the important ones. Then it's probably five fifteen or five thirty. Take a shower, go to work, start all over .

again when you go to bed.

usually around a thirty quarter and nine since I see japan, what's .

happening OK. So you you basically you basically live according .

to financial markets. Yes, my mother in law said a long time ago, he thought he was joking, but she's correct. It's the only thing i'm really good at.

I really enjoy IT keeps me Young. I'm dealing with really Young people. Here is animals. But also I forced to read the newspaper and forced to learn about these waves and keeps me stimulator.

I love that you are seventy one, right? yes. And you will continue until you, until you die. You think, yes.

hopefully well, bit tonight.

I think the last thing, we have ten thousands of Young people here now they want to be like you make little money, be successful in financial markets. What do they be doing? How should they enter? What what should they think about?

First of all, if they're going in IT for the money, they should go elsewhere. Yes, there's too many people in the business like me that just love the game in the passion for reasons I just articulate and they're not couldn't be able to out work. The people, they are passionate in the game and it's not a fun game if you're losing the horrible light told you and how I respond to draw.

So but if they have a passion for IT, if I was a Young person, I would not get an MBA. I go find a mentor and if they didn't want me, I would just relent. Lessin bugged the hill l out of them, which a couple of i've done with me until we've finally accepted me to go and work for them.

Learn what I could from them um if they still like to business, just keep just keep trying to grow your knowledge base. I would say an analyst skills set in our business is completely different, more than a portfolio. Ter school said once in a while you'll get an overlap.

But I would be careful if they really love the the analyst part, which is where we all start of thinking they have to become a portfolio manager. I've seen IT rule in people's lives who weren't built for trigger point, so they should be open minded. I got in the business because I wanted intellectual stimulation, and you're going to get plenty and either one. But that would be that would be my advice to them and be open minded.

Stand has been .

an epic conversation. thank.