Stanley Druckenmiller Interview: Macroeconomic Insights from an Investment Legend

The market carries risks, and investment should be approached with caution. The views and logic of Stanley Druckenmiller only represent his personal experience and market perspectives. Investors should engage in independent thinking and risk assessment when making investment decisions.

Tangen:

Hello everyone, I am Nicolai Tangen, CEO of Norway's Southern Wealth Fund. Today, I am here to talk to Stanley Druckenmiller, a legendary figure in the investment world. Stanley, it's great to have you here.

Druckenmiller：

Nice to meet you.

Tangen:

So, what are the most important data that you have been paying attention to recently? What are they currently?

Druckenmiller：

Yes, interestingly, I am considered a macro investor, but I do macro analysis from the bottom up. So we mainly listen to the opinions of the companies, We don't see any substantial signs of economic weakness, except maybe the real estate market, but that also starts from a very high price level. So we don't see any signs of economic problems in the information from the bottom up.

I will also say, let me reveal now, that I am more like a market animal than an economist. We are looking at financial conditions, and they have been very loose. What I mean is that they are looser or looser than when the Fed actually started tightening. In the past four or five weeks, since the Fed cut interest rates, ironically, the dollar has risen, and obviously interest rates have also risen, but they are still far above normal levels. So what we are looking at is these data.

I want to say another thing that I am concerned about. Since the entire inflation event began in 2021, I have been obsessed with whether we are really in the 70s. About two years ago or a year and a half ago, I was very sure that inflation would go down, and I was right about that. But I was worried about the economy, and I was completely wrong about that . Recently, you can take my words as FYI, because I was right once and wrong once, and I have shifted from worrying about the economy itself to worrying more about future inflation. Why do I say this? If we go back to the 70s and there was an inflation event caused by OPEC. You had a recession and the inflation rate went down, I think from about 8% to 3%.

Tangen:

Then it went up again.

Druckenmiller：

Yes. What worries me, what bothers me, as you are absolutely correct, inflation has gone up again. Coincides with the timing of the bottom now. Yes, so my confidence a year and a half ago was that inflation would have a period of decline, and then we would see. And I am a little worried that the Fed will declare victory too soon . I did not have the same confidence in inflation going up as I did in 21. That was the money supply growing by 40%, and everything was happening. But I also do not have confidence that they have solved this problem and won the battle, they cut interest rates by 50 basis points, credit spreads tightened, gold hit new highs, and stocks soared. There is no substantial sign of weakness in the economy. Of course, there are places that just make me nervous, and the issue may rise again.

Tangen:

What will cause it to rise again? What factors could it be?

Druckenmiller：

The Federal Reserve is easing the financial environment. If Trump wins, the animal spirits of the business community may make a comeback and they are eager for easing. Trump may impose tariffs, which are marginally inflationary. Immigration has been a huge boon for this country, maybe not the way it was done, but it has certainly allowed us to grow without inflation in the last two or three years and a significant increase in the workforce. So the combination of animal spirits recovery is doing better than it is now, I'm just open to it.

Tangen:

Why does the central bank urgently need to cut interest rates?

Druckenmiller：

This? Honestly, I don't think Powell cut interest rates for so-called political reasons. I do think he's obsessed with soft landings, he's obsessed with his glorious deeds, and the mistakes he made in 2021. I think he's been pushed by other economists and the media, and to me, the Fed's job is to avoid big mistakes. Like the 70s, like the big financial crisis, like the big inflation we just experienced. But all these fine-tuning and worrying about soft landings, in my opinion, is not the Fed's job to maximize employment in the long run, not for the next three or four months. But I think the Fed's obsession with achieving what's called a soft landing, I would remind everyone that the reason why the economy is landing is because they let inflation soar from 2% to 9%. Yes, so there was no need for a landing in the past 20 years. But I think that's what they're obsessed with. I really, I don't know.

Tangen:

How big is the problem with forward guidance?

Druckenmiller：

This is a big problem. My friends treat their forward guidance as a signal rather than relying on data. This is a problem because once you do forward guidance, you eliminate your selectivity. I think, Nicolai, you and I are both in this industry and we know that when we are wrong we have to change our minds. The Fed has shown time and time again that if they change their minds, they lose credibility. So it leaves them helpless.

I make mistakes a lot. I think my track record is mainly because I change my mind when I'm wrong, not because I'm always right, which I certainly am not. Forward guidance seems to bind them and diminish their flexibility.

Tangen:

How big is the problem of budget deficit?

Druckenmiller：

As a practitioner, this is not something I can obsess over on a three- to six-month basis. As a US person, I am really obsessed because GDP cannot go up forever. For me, we will have a reckoning, but I don't know when it will happen. I would say that because of the reserve currency, we are allowed to engage in behavior that United Kingdom people cannot participate in. There is a new term I have been saying, trust. We do not have trust yet because we are the reserve currency. Although if you look at everything we have done, it is more radical than United Kingdom people.

That's what the old saying goes. How do you slowly go bankrupt and then suddenly go bankrupt, running a deficit in a full employment environment, basically 7% of GDP, which is a situation that cannot last forever. One reason we haven't paid for this is that during the epidemic, the entire private sector, 80% of individuals refinanced their mortgages. So the average mortgage rate is still below 4%, although it's at 8% on the margin, companies have deferred their debts, and these things will come due in 25 and 26 years. If we have any problems, it may be more like the end of 25, the beginning of 26, but you just don't know.

Tangen:

What gave them the confidence to suddenly change their minds about what price they were willing to lend money at?

Druckenmiller：

It could be because of a failed auction. It could also be because if the Fed is wrong about inflation and inflation goes up again because they eased financial conditions when the Financial Marekt was overheating. If they have to start raising rates again, which is why I think they should be very cautious about their selectivity now because they have passed forward guidance on a series of rate cuts, which could cause this to happen. My best guess would be a failed auction, but to be honest, it could be 6 months, it could be 6 years. I just don't know. So.

Tangen:

If interest rates start to rise, how high can they go?

Druckenmiller：

Well, that's a good question, Right now the 10-year Treasury yield is about 4.5%, and it could push GDP towards normalization. So assuming inflation goes up to 4% and real GDP growth is 2.5% or 3%, the 10-year Treasury yield could go up to 6% or 7%. I'm not predicting this, but if it does happen, if inflation goes up again and the economy doesn't slow down, I think the yield can go up to this level. Interestingly, that's what happened in the 70s, and the bond market didn't really react until we went from 3% to 12%, and then it reacted greatly. Again, I'm not predicting this, but as a practitioner, I'm very open to it. It's already on my radar.

Tangen:

You said you earned the most from the Fed's mistakes, so are you in the same situation now?

Druckenmiller：

I think the situation under discussion is happening, and I haven't seen any signs yet. I am open to this situation and if I am sure it will happen, I will increase my short selling efforts. My current bear position is about 25% of net asset value (NAV).

Tangen:

Stanly, let's turn to the stock market. The sectors that lead the market trend are very narrow. The US stock market is supported by a few stocks. How do you view this narrow market width?

Druckenmiller：

Tangen:

So, how do you think technology stocks will develop and which sectors do you think are promising?

Druckenmiller：

The AI boom is in full swing, and I think the private sector just sees it as an existential threat to their business, and if they don't spend money, because if they don't spend money, their competitors do, and their competitors are right, they're going to have a huge competitive problem. Of course, there are also hyperscale companies, and they're all going all out, and their demand continues. So you see, Tech stocks are expensive, and companies like Apple are selling for 25 or 30 times their earnings. Of course, it's not growing at 25 or 30%, but we don't have much exposure to the tech industry, We're not sure either, so I'm not really involved.

Tangen:

But you were involved in it early on. How did you discover these early trends? What did you see?

Druckenmiller：

To be honest, I got a really good analyst to share.

Tangen:

Many companies have many young analysts.

Druckenmiller：

Who was at the top of things, they started, and we noticed that about three or four years ago, those kids who went to Stanford and MIT, engineers switched from cryptocurrency to artificial intelligence. This was the first sign. Then my young partner started talking more and more about artificial intelligence. I asked them to tell me how to get involved. They mentioned a company called NVIDIA, which I thought was a gaming company that I hadn't studied for a long time.

I bought a considerable portion, and then about a month later, ChatGPT was born. It was all luck. I didn't know about ChatGPT, but the AI drumbeat here was loud enough, and the stock also fell, I think, from 400 to 150 or something. So that's how I got involved.

Once we invest in something like this, we start digging deeper. Then there's a chain of things. We know it affects electricity. We know it affects uranium. We cover the entire chain like this, which is a trend that is quite easy to spot, like cloud technology, you know, these things come in waves.

But the problem with AI is that I am currently struggling with it. The reason we are exposed is not because we are bulls or bears, but because we do not know how to participate. We started with picking and shoveling, which is Nvidia and to some extent Microsoft. But now we see that these modelers are spending a lot of capital. If AI is real, I think it is, they will give you the same answer. So we will have four or five companies that will spend a lot of capital, but I don't think this is a winner-takes-all model.

On the other hand, I think there are some applications that I haven't even thought of, no one has thought of. They will suddenly appear. I mean, who would have thought of Uber or Facebook in the early days of the Internet? So we were very bullish on AI before. But we are not bullish on it at the moment. We don't know where we should be and how to actively participate in it. It's like the Internet in 2000 and 2001. You can trust the Internet, have no exposure, and then get your exposure on a more timely basis. Or I may be completely wrong, which is not uncommon.

Tangen:

But you were also involved in anti-obesity drug manufacturers early on.

Druckenmiller：

Oh, that's what you think. I mean, I don't know what Norway is like, but in the US, if you go to Disneyland, everything goes. If you understand the mentality of the US people, if you tell them there is a way to lose weight without doing any work. I know this drug works early because we have been exposed to it. But when I knew that if you stop taking the drug, you will regain weight, then I knew it was a razor business because people will have to continue taking the drug.

Tangen:

You say it's easy. It's a bit. I mean, hey, you're not the only one who walks around Disney and sees these things, right? So, you actually take action on your intuition or all the data in front of you.

Druckenmiller：

Yes, but you know, it's not all smart. So I bought Nvidia at a very appropriate time, but I sold it at 800 or 900, just when the carnival really started.

I also sold Lilly at over 700, and of course, made a good profit. Yes, I look for big trends. I'm not like Buffett who holds for 20 years, but I look for trends that fit into that category for two to four years.

And, to be honest, we are now looking for AI applications that may not have been recognized yet. I think I have held Memorial Sloan Kettering for almost thirty years. Their application in cancer is remarkable.

Tangen:

By the way, Memorial Sloan Kettering is the world's leading cancer hospital. Yes. They receive a lot of funding, in part because you are on the board.

Druckenmiller：

They did receive a lot of funding, and I wouldn't say part of it was because I was on the board, but thank you.

Tangen:

When we last met, you mentioned the concept of buy first, analyze later. Let's talk about this topic.

Druckenmiller：

Yes, Soros used to call it investing first and then investigating. I think I just gave a classic example. I don't know much about NVIDIA. I only know about AI, and some people told me how to get involved. So we bought NVIDIA, and then we were doing more work, and then ChatGPT was born.

But my point has always been that markets are smart, they are fast, they are getting faster and faster, relying on all the communication and technology we have today. So if I hear a concept and I like it, if I wait and spend two to three months analyzing it, I may miss most of the action and then regret it psychologically.

It's hard to buy a stock. You are looking at 100 and it becomes 160. Even if it's going to 400, somehow your head is messed up and you are waiting for a pullback. So we will buy something, a meaningful position, but not seismic, and then really do the work. If I think we made a mistake, I will sell it. If I think we didn't make a mistake, we will add it if we have to.

Tangen:

I happen to work in the exact same way in my life. This really keeps your work and your thinking focused on your work. But do you always trust your own Pattern Recognition?

Druckenmiller：

Yes, I got promoted when I started this business. So before I really understood the specifics of analysis, I had been promoted to a leadership position, and I had to rely heavily on charts and intuition. But I found it not difficult. If you are dealing with a cyclical company, they are losing money or not profitable, and everyone in their industry is shutting down production capacity. It doesn't take a rocket scientist to imagine that in 18 to 24 months, if no one increases production capacity, they may no longer lose money. They may make a lot of money. I find it very important to never invest in the present, always try to imagine what you will see in 18 to 24 months, and then see if you feel that things will be different from now. Will the security price reflect this? I think this may be the biggest mistake investors make because they invest in the present instead of looking forward and seeing where the ball is going, not where the ball is.

Tangen:

Now, some people trust other people's intuition. Soros trusts your intuition, or do you have to show him analysis? Soros.

Druckenmiller：

I had a rough start. I went there. I had some remarkable success running public funds at Dreyfus and he told me I was his successor. But I don't think he was entirely sure when I got there. The first 6 months were very tough because it wasn't clear who was in charge. Frankly, we were all in bad trades. I flew to Pittsburgh because I still had Dukan. I ran both. When I got off the plane, I think we had a payphone and we didn't have a cell phone at the time. The head trader there told me he sold my bond position. So I probably had a higher opinion of myself and I should have. I was young at the time and I was always in charge. So I was very angry and basically expressed extreme displeasure. We'll talk when we get back to New York, he said. Implied that I wanted to resign. He said maybe there were too many cooks in the kitchen and he was going to Eastern Europe for four or five years without contact. Then he would find out if he had been getting in my way or if I really wasn't capable. It was the way he talked, the way we thought, just that he actually said it. Luckily, when he left, the Berlin Wall came down. I invested in Germany Mark, but I think it was lucky for both of us. I was on the best run like before or after, about four years. So he kept talking about results. So I think he trusted my gut feeling, just because of the way the record started.

Tangen:

Do you believe your colleague's analysis?

Druckenmiller：

I trust their analysis. Their analysis is much deeper and much better than mine. But I can see the development of intuition, and I may be as optimistic about the stock talent of my company as I have been for 45 years. So I think it is a person or service. Yes, but part brain, part analysis, and then part intuition. They are not as intuitive as I am because they do not need to. I am somewhat forced to be intuitive because I have never acquired their analytical skills.

Tangen:

You mentioned some examples where you sold flies. Do you usually sell them earlier?

Druckenmiller：

No. I mean, embarrassed, We bought NVIDIA early on, I think when it was around $37 billion in market cap and thought it would hold for a few years. But I don't think it's going to go up to $900 in a year, let alone over $2 trillion. I think it started out 100 billion or 150 billion, which is some crazy stuff. So, I wouldn't have sold it sooner if I had realized it earlier. I'm a technical trader, so I usually wait for the top, and NVIDIA really doesn't have a top.

Tangen:

Okay, I just want to know. What does it mean to reach the top?

Druckenmiller：

Top refers to the state where the speed of stock price increase changes and tends to level off for a period of time. In technical analysis, this may ultimately become a bull market flag pattern, where the stock price only temporarily consolidates and then continues to rise, or it may be a real top where the stock price peaks.

Tangen:

How do you know which one is which?

Druckenmiller：

You don't know. You have an opinion, you express it. Sometimes you are right, sometimes you are wrong. In the video, there is no top. But me, I have analyzed the semiconductor industry, not very good, but it has been a cyclical industry since the 1970s. I know NVIDIA has staying power, they have 4000 software engineers. So it's not just hardware. You know, they have a software called CUDA, they use it to make their GPUs. But I just think, once its market value exceeds $2 trillion, this is too much. Worst case scenario, it will have a big correction. I will have another chance. Of course, I didn't have another chance. Oh, you might.

Tangen:

Yes, I think you will.

Druckenmiller：

I don't know the price, assuming I would buy it back. I don't mind buying something back at a higher price than what I sold it for. I don't like it, but I'm completely willing to buy something back at a higher price than what I sold it for.

Tangen:

Some people can't bring themselves to do that.

Druckenmiller：

Oh, I can. One thing I'm really good at is not being emotional.

Tangen:

But you've never retreated here?

Druckenmiller：

Do not.

Tangen:

A stupid question. Why is this important?

Druckenmiller：

No, I think it's important because other people talk about it, my investors like it, and when I have investors, because, you know, they have this thing in our industry called risk-weighted return. I don't really like that, but I would say I had a significant decline in the year. So part of the decline was just a matter of luck.

Tangen:

So what does a pullback pair mean?

Druckenmiller：

I became anxious and restless.

Tangen:

Do you still feel uneasy, even with your own money?

Druckenmiller：

Yes. I am a competitive person, even with my own money. I wish I wasn't, but I am. It may be one of the reasons why my results are as good as theirs, but I wish I wasn't. This is a bit pathological, but it applies to me.

Tangen:

Who are you competing with?

Druckenmiller：

My competitiveness refers to seizing opportunities. If there is a good opportunity and I miss it, I will feel disappointed in myself. It's like if I get 20 points, I think I should get 50 points, and I feel disappointed in myself. If the opportunity is basically up 10 or 15, up 20, I am happy. What I mean is.

Tangen:

The advantage of being an ambassador is that you always have a good reason to hit your own head, right?

Druckenmiller：

Know where the good things are about our business, but it can be the bad things about our business. For some reason, I like to hit my head. I only measure from the top.

Tangen:

But what is the key reason for you to sell a stock?

Druckenmiller：

If the reason for buying a stock is no longer valid, I don't care what I paid for it. If I buy at 60, it drops to 50 because the market discovered the problem before me. I have no emotional attachment to it. Soros is the same. I really didn't learn it from him, but it was definitely reinforced.

After a period of time, you have enough confidence that you are not afraid to clear the table and start over. Because you are confident that you will succeed again, you will not sit there with uncertain positions. Just clear your positioning. If you have been doing this for decades and it has been effective, you will have the confidence to bear the loss. Once I go out, don't worry too much about it.

Tangen:

You said you had no feelings. What do you mean?

Druckenmiller：

I said I have no emotions? I have many emotions. Are you talking about taking on losses?

Tangen:

Yes.

Druckenmiller：

What I mean is that one of the reasons why I think the chart is effective is because a group of people bought at 60, it went down, they waited for three or four years, it went back to 60, and they could have been rising on other things. I just don't care what I paid for the stock. In my investment process, this is absolutely irrelevant.

Now this combination, on the one hand, is stubborn, but Tang Nahan can change your mind. This is beautiful.

Rare, I was told. Yes, I was told that my friends and other investors say I am completely ruthless, and yes, I was told that this is rare.

Tangen:

You think this is one of the keys to Geo's success.

Druckenmiller：

I think it, I think it's a big part of it. I think, again, keep an open mind, have humility, the only reason you can change your mind is if you're not arrogant about a position, which is important. I think I have some great mentors, one in Pittsburgh, and then Soros in terms of scale. I think I learned some lessons very early on. Don't be afraid to concentrate, that is. That is a big reason for my success.

Another big reason is, I think, self-taught willingness to enter other asset classes. If you want to concentrate, it's better to have five buckets instead of one.

So I grew up in the stock market, but sometimes the risk reward of the stock market is not so clear, when it is actually clear in the bond market or currency market. You ask about the reason for never hanging up. Part of the reason is that the most active actions in the bond and currency markets often occur in the bear market and stock market, so you can put stocks in a drawer for a while and only focus on these markets.

I think this is a huge reason for my success. It gives you discipline not to play in areas where you don't have much confidence, because if you have credit to play with, if you have commodities to play with, currency or bonds, you can usually find something that you think has a big risk reward. They also tend to be more liquid than the stock market. So for our previous conversation, when you are wrong, you can change your mind.

Tangen:

What did you learn about scale from Soros?

Druckenmiller：

I don't know if you know, do you know, baseball or your audience knows baseball?

Tangen:

I don't play it, but...

Druckenmiller：

When I went to Soros, I thought I was going to learn what would make the Deutschmark eventually go up, up. Modestly, I found that I did a better job at it than he did. In baseball terms, I have. I have a very high batting average. He has a higher batting average. So what you learn from Soros is that when you have faith, you should place big bets. I know your listeners have probably heard this before, but the best illustration is probably the pound sterling.

Tangen:

So what happened to you, let's go back. So you're in the office. What happened in the United Kingdom?

Druckenmiller：

So in my New York office, Scott Bessent, one of my partners in Europe, who deals mainly in the European region, he's in London, and he told me that the housing market in London is a big problem, and the United Kingdom economy is struggling because, like most Anglo-Saxon economies, it is very affected by factors such as housing. Just.

Tangen:

Describe it. So you're in the office, do you overlook Central Park?

Druckenmiller：

I'm not overlooking Central Park, but I'm close to it. I'm in the Soros office on the 32nd floor. But that's okay. It's not a corner office. It's not fancy.

Tangen:

The United Kingdom economy is declining.

Druckenmiller：

We think that the United Kingdom economy is going downhill. But I need to take you back to about 3 years ago when the Berlin Wall came down. It probably saved my job because I might have been fired after Soros went to Eastern Europe for 6 months, if the Berlin Wall hadn't come down, but the Germany mark dropped dramatically in two days because the theory in the market was that the Osmark, the East German currency, would pollute the Germany mark. I know Germany history, know that they are fascinated by inflation because of the Weimar Republic. Then it led to Hitler and so on. So I know that I am German and we are absolutely fascinated by inflation. I know that bringing all these East Germans into the labor supply will lead to economic prosperity. So we are very optimistic about the overall Germany economy, we are very sure. Then there is no way for the Bank of Germany to let inflation happen. So we are very confident that it will be accompanied by a tight Monetary Policy. So we have sold short the Italian lira and succeeded in this period. So when Scott called me, we were already on a trip to the German mark. We have been for several years. The United Kingdom economy is declining and the currencies are pegged to each other.

Tangen:

So it's an inversion, right?

Druckenmiller：

There was an inversion. So I called to ask how much it would cost me to sell short pounds to Germany marks for six months. The cost was 0.5%. At that time, Quantum Fund had about 7.50 billion dollars. I decided to invest first and then conduct research

So I decided to use the 1.50 billion of the fund, which is about 20-25% of the fund, to short the pound and long the German mark. I expect to lose 0.5% in six months due to the peg exchange rate system, and he believes that this peg exchange rate system will not break in six months.

But about five or six weeks later, I'm afraid to believe it was on September 15, when I read an editorial by the governor of the Bank of Germany in the Financial Times of the United Kingdom.

Now I am older, but I am very sure that he wrote an editorial in the Financial Times, using more appropriate language, but he basically said that the German mark and the pound should not be pegged anymore. So I decided to lead Dukan and Quantum Fund to 100% long the German mark and short the pound, because the cost is still 0.5%, which is unbelievable.

Now you hear old Soros. So he happens to be in New York, and he doesn't always do that. I walk into his office, and I explain to him why I'm going 100% long on the Germany mark. He has a pretty big personal account. That's how we keep each other out of it. He trades that, you know, 90%, 90%, 95% overlap. I tell him why I do that. He has this unpleasant, confused look on his face, and when I tell him about my paper, this economy is booming, they need higher interest rates, and another economy is falling apart, they need lower interest rates. These two currencies shouldn't be pegged. I'm thinking, doesn't he understand this? Because this gentleman understands almost everything. Then he says, look, it's a one-way bet. They rarely appear. Going 100% long is absurd. We should invest 200% of the fund in this transaction. So you have it.

Tangen:

So this means you borrow money from the bank and double it.

Druckenmiller：

On a fund of 7.50 billion dollars. He thought we should sell short pounds for 15 billion dollars and go long in Germany marks. Turns out we never got there. But it shows the way this guy thinks. I see it over and over again.

Tangen:

So, what happened when you broke it?

Druckenmiller：

Yes, unfortunately, we have a pretty strong reputation. When I started selling, I noticed that many other hedge funds started selling. By 1am to 1:30am, the forward market had exploded. They started at half a percentage point and ended up at 6 or 7 percentage points, basically no trading after 1am. Then the United Kingdom central bank intervened from 6am to 9am to try to stop the bleeding. Then the interest rate rose to 12%. I knew it was all over, but the forward market was no longer important. By noon the next day, everything was over.

Tangen:

He is sitting at your desk, looking at the screen.

Druckenmiller: Yeah, whatever the screen. We only did 7.50 billion. Ironically, without Soros, we might not have been able to do 7.50 billion, because I was more anxious to do 1.50 billion.

Tangen:

So how do you feel when you break it?

Druckenmiller：

There was a lot of adrenaline. That was exciting. I didn't feel sad because I thought the United Kingdom economy needed it. Years later, when they changed "Black Wednesday" to "White Wednesday", I felt relieved. Then after the United Kingdom withdrew, I took action because the price of United Kingdom government bonds fell by two points, which I thought was ridiculous. The United Kingdom needs to lower interest rates.

Tangen:

There is a hole, because something happened, the currency depreciated, which is beneficial for exports. Right? So the stock price went up.

Druckenmiller：

Yes, stocks went up. Treasury prices went up as well because they needed to lower interest rates, and they were artificially kept high. So I did a lot of other things around that theme, and that's how I trade. You have a theme, and then you look at the dominoes that fall because of the theme. But the point is, when you really believe in something, Soros' position may never be big enough. Especially in a liquid market. I learn from you, I like to play in a big twist.

Druckenmiller (continued):

He was completely happy to play from the 3rd to the 6th inning. If we go back to baseball terms, if it was a nine-inning game, he was completely happy to play from the 3rd to the 6th inning when there was more certainty, he could use greater leverage, and he had more courage than I did, especially when it came to positioning. I don't think it completely affected me, but it definitely helped me. It was a huge learning experience. I think the most important thing I learned from him is that it's not whether you're right or wrong, but how much money you make when you're right and how much money you lose when you're wrong. He's probably one of the best guys ever.

Tangen:

Stanly, many people have heard that you have shorted the pound, but not many people know that you have also shorted the Swedish krona.

Druckenmiller：

I don't remember very clearly, but this is another victim of the German mark. I assumed that there was some difference between the two economies, and I thought there was a pegged exchange rate that I thought was inappropriate. As a result, yes.

Tangen:

So you took that bag, you also took another bag, and I think you also participated in the Thai baht.

Druckenmiller：

Yes, Thai baht is easy. They,

Tangen:

But no one knows about this, right?

Druckenmiller：

No, I think Sebastian Mallaby wrote a book called "More Money Than God". There is a whole chapter about the Swedish krona.

Tangen:

That's not about the Swedish krona.

Druckenmiller：

No. Swedish Krona, no. I'd rather no one knew about this.

Tangen:

But. Well, we need to get it right for the history book.

Druckenmiller：

I'm happy to talk about it 25 years later.

Tangen:

Have you ever regretted the missed transactions?

Druckenmiller：

I often regret not making trades. I want to mention one of the biggest mistakes I have ever made. I predicted inflation early on and had a strong feeling about it. My partner Christian Broda and I wrote an article in the Wall Street Journal in the spring of 2021. At that time, there was a large short position for me, a two-year Treasury bond with a yield of 15 basis points. I thought it was a one-way bet with 15 basis points. I was fascinated by their previous position. Initially, I expected the bond yield to drop from 15 basis points to a lower level, so I squared most of my position when the yield dropped to 150 basis points, which seemed like a big victory at the time. However, later the bond yield rose to 500 basis points. I deeply regret not maintaining that position. There may still be 30, but I would rather forget my mistake.

Tangen:

Do you think machines can replace humans in investment?

Druckenmiller：

No, I don't think so. But I think they can serve as assistants, and the combination of humans and artificial intelligence can defeat any pure human. I am lucky to have known Garry Kasparov for a long time. I am the co-founder of the Garry Kasparov Chess Foundation, and for no particular reason, I can hardly play chess. Even my 9-year-old daughter can beat me. That's why Garry and I started.

But he may have been one of the first people to use a machine. Yes, training himself and working with it. I can see the same thing happening with money management . I don't think pure machines will make money, although they have a disciplined process and do math. But I think if you can find an intuitive investor who uses AI and other things to supplement, I think that may be the best investor in the world, not a machine.

Tangen:

Now, you took a vacation in 2000. What was the reason?

Druckenmiller：

This is a painful but very interesting story. It actually started in 1998. Well, no, it started in the spring of 1999. I sold short, I think it was 11 or 12 internet stocks, not leaders like Aoi or Yahoo. I believe the positioning was 200 million dollars, but I lost 600 million dollars in four weeks. So this is the first time I have had a big loss. I fell 16 or 7% in the spring of 1999.

Then I turned and realized that Greenspan had adopted loose Monetary Policy due to the Asian financial crisis, while the US economy was strong and internet technology was emerging, etc. I hired some young investment managers to buy stocks that I was not familiar with. These young managers had their own small investment accounts, and I would make large investments in the stocks they chose.

After a difficult period, our investment portfolio achieved a net return of 42% one year later, recovering from previous losses, mainly because we seized the upward trend of the NASDAQ market, especially in 1999.

Then in January 2000, I thought the market was crazy and decided to sell all my technology holdings. These holdings had grown to about $6 billion, a huge number for that period. I also told Soros why I decided to sell all my technology stocks.

I sold most of the technology stocks, leaving only some small positions. I really don't care about these small positions because Quantum Fund is too big, and this small investment won't affect performance too much. However, these small investments continue to perform well in the market, earning 4% to 5% returns every day

What I mean is, the market was still booming before March. I looked at this and was very angry with myself that I wasn't still in this trade. Then in early March, I couldn't take it anymore. I tell you, I'm not emotional. This is a real emotional, very foolish move.

I bought back all these things. I think I missed the top by about an hour, so I bought back all these tech stocks. Within a week, I knew I was dead, and Quantum Fund went from a 14% return to a 1% return.

I have been through the trauma of spring and I have recovered from it, but it has had a big impact on me. I have small children, you know, this is a repeat of last year. So I went to Soros and I told him two things. Hey, I am quitting all of this stuff.

I'm resigning. We can't tell anyone because I have to liquidate this portfolio. But Nasdaq, it's at the beginning of a 90% decline in volatility, and you can't exit. So when I exited, it took me a few weeks, Quantum Fund dropped 17%, Dukan dropped 17%. I was exhausted.

I have been running this high profile fund for twelve years. So I sold everything, everything is in Abu Dhabi, sent a letter to my investors saying I was going on vacation. I don't know if I will come back. You can take out all the money. But if you take out your money, if I decide to come back, I can't guarantee that I will allow you to come back. I think I have about 200 clients. One of them took their money. I remember who it was, but that will stay for now. So I closed everything. My wife and children and I went to Africa. The best thing I did was that in the summer, I refused to expose myself in any way to something that would tell me where the market was. So I was not allowed to watch TV. I was not allowed to see the prices of the Wall Street Journal, nothing. So I came back on Labor Day. I don't think my wife can handle me at school anymore after the kids go back home. It's a bit humorous, maybe not.

So I'm back, which is pretty remarkable because Standard & Poor has rallied to its highs. Nasdaq recouped about 85% of its decline, but the dollar went up, interest rates went up, and oil went up. If you look at history, these are the three kisses of death for the market. So I started calling all my clients, who were basically small traders, they were not fancy institutions, and their business was terrible. Then I called Ed Hyman, and I said.

Tangen:

He is a stock strategist.

Druckenmiller：

Yes, Hyman may be the number one institutional investor economist. I said it's strange, I haven't paid attention to the market, the rise of the US dollar, and so on for a while.

Two days later, Hayman released a regression analysis result in his daily message. The analysis pointed out that the impact of certain factors on the economy was: currency factors accounted for 50%, oil factors accounted for 25%, and interest rate factors accounted for 25%. Hayman predicted the earnings situation a year ago, predicting a 36% decline in earnings in the next year, while the consensus expectation on Wall Street was an 18% increase in earnings

So I combined these, listened to my clients, and actually, Greenspan had a direct weapon of tightening, which I thought was inappropriate. I started buying all these Treasuries, and the market didn't go my way, but all the information kept coming in, so I kept buying more. Now I have 350% exposure to Treasuries in this fund. Then I was lucky enough to encounter the Gore and Bush controversy, and the economy collapsed. I ended up making 40% in the fourth quarter. So I took a year off.

When he came back to manage the funds, he found himself losing 18%. I think at least I don't have to worry about this anymore. I finally accepted the fact of the loss, which was like the best year I have ever experienced. If I continued to manage the funds, I think I would be very nervous and unable to make that trade. That's because I took a four-month break, had a clear mind, and then just re-examined new evidence. So it was a very bad start and a very lucky ending.

Tangen:

Now, you don't take vacations often. You work very hard. When you wake up in the morning, it's 4:30 in the morning. What do you do? You have an office at home.

Druckenmiller：

Yes. I'll go to Bloomberg immediately.

Tangen:

Do you make a cup of coffee before going to Bloomberg at 4:00, or do you go directly? Yes.

Druckenmiller：

No, yes, I'll make a cup of coffee first. I'll go up. I haven't taken a shower yet. Check all the markets, read the Wall Street Journal, browse the Financial Times, browse the New York Times, check like all the overnight emails. When I say check, I mean browse them. For the important ones. Then maybe 5:15 or 5:30, take a shower, go to work, start over.

Tangen:

When do you go to bed?

Druckenmiller：

Usually around 9:30, see what's happening in the Japanese market?

Tangen:

Basically, you live according to Financial Marekt.

Druckenmiller：

Yes. My mother-in-law said a long time ago that she thought she was joking, but she was right. It's the only thing I'm really good at. I really enjoy it. It keeps me young. I deal with these analysts here, they are all talented young people, but I am forced to read newspapers and be forced to understand these waves, which keeps me excited. I love it.

Tangen:

Now, you are 71 years old, right? Yes. Will you continue until you, until you die, do you think?

Druckenmiller：

Yes. I hope not tonight.

Tangen:

No, I don't think so.

Druckenmiller：

Yes

Tangen: Finally, we have thousands of young people here. They want to become like you, make a lot of money on Financial Marekt, and succeed. What should they do? How should they enter? What should they consider?

Druckenmiller：

First of all, if they enter for money, they should go somewhere else. Yes, there are too many people like me who just love this game for the reasons I just explained. They will not be able to surpass those who are passionate about the game. Also, if you lose, it is not a fun game. I'm just telling you.

How do I deal with losses? So, if they are passionate about it, and if I am a young person, I won't go for an MBA. I will find a mentor. If they don't want me, I will keep pestering them until they finally accept me to work for them and learn what I can from them. If they still like this industry, continue to work hard to grow your knowledge base.

I would say that in our business, the skill set of analysts is completely different from that of portfolio managers. Occasionally, you will encounter overlap. But if they really like the analyst part, this is where all of us start, thinking that they must become a portfolio manager. I see it ruining the lives of those who are not suitable for pulling the trigger. So they should be open to this. I entered this industry because I wanted intellectual stimulation. And you will get a lot in both areas, but this is my advice to them. And be open-minded.

Tangen:

Stanly, this is a historic conversation.

Druckenmiller：

Thank you, Nicolai, I think I've said more than I should. Too much trouble. Thank you.