Its Over

Originally posted by Bunn-Wackett: ↑

How the Nasdaq crushed the market wizard Stanley Druckenmiller

At a 2015 event where he gave a keynote speech, Druckenmiller was asked what he thought the biggest mistake of his career was and what he’d learned from it.

His remarks are highly illuminating:

“… in 1999 after Yahoo and America Online had already gone up like tenfold, I got the bright idea at Soros to short internet stocks. And I put 200 million in them in about February and by mid-March the 200 million short I had lost $600 million on, gotten completely beat up and was down like 15 percent on the year. And I was very proud of the fact that I never had a down year, and I thought well, I’m finished.So the next thing that happens is I can’t remember whether I went to Silicon Valley or I talked to some 22-year old with Asperger’s. But whoever it was, they convinced me about this new tech boom that was going to take place. So I went and hired a couple of gun slingers because we only knew about IBM and Hewlett-Packard. I needed Veritas and Verisign. … So, we hired this guy and we end up on the year – we had been down 15 and we ended up like 35 percent on the year. And the Nasdaq’s gone up 400 percent.So I’ll never forget it. January of 2000 I go into Soros’s office and I say I’m selling all the tech stocks, selling everything. This is crazy. [unintelligible] This is nuts. Just kind of as I explained earlier, we’re going to step aside, wait for the next fat pitch. I didn’t fire the two gun slingers. They didn’t have enough money to really hurt the fund, but they started making 3 percent a day and I’m out. It is driving me nuts. I mean their little account is like up 50 percent on the year.I think Quantum was up seven. It’s just sitting there. So like around March I could feel it coming. I just – I had to play. I couldn’t help myself. And three times during the same week I pick up a – don’t do it. Don’t do it. Anyway, I pick up the phone finally. I think I missed the top by an hour. I bought $6 billion worth of tech stocks and in six weeks I had left Soros and I had lost $3 billion in that one play. You asked me what I learned. I didn’t learn anything. I already knew that I wasn’t supposed to do that. I was just an emotional basket case and couldn’t help myself. So, maybe I learned not to do it again, but I already knew that.”

I don’t think many people would call Stanley Druckenmiller stupid. For years he had delivered remarkable investment performance and built up a personal fortune of over $4 billion. But the markets can make very smart people look stupid – and vice versa.

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This relates to what I was thinking about today.
I like to gamble. Like, actual gambling at a casino.
Roulette mainly. It's a very active mental exercise for me, calculating odds etc in real time, often playing several tables at once.

You can be lucky. You can be unlucky.
But more than anything else... you need to have your head together.
Emotions in check.

Too many people gamble when they're not in a good place mentally & emotionally. These are the people who lose their houses.

I've never lost anything I couldn't afford to lose, and these days I never lose more than I'm comfortable losing.
I lose that and the session's over.
No reckless chasing of losses.

Maybe useful for some folks, including traders.