Stanley Druckenmiller’s Big Mistake

Michael Steinhardt once said “Nothing gives a better feeling to a manager than making money for his or her investors when almost everyone else is losing.” I’d imagine that there are few worse feelings for a money manager than not keeping up when everyone around you is winning.

The tech bubble is the modern day poster child for managers who couldn’t keep up. From 1995-1999, the NASDAQ Composite gained 441%, or 40% compounded annually.

Stanley Druckenmiller is the owner of one of the most remarkable track records of all time. He is one of the few investors to clearly see and navigate the macro landscape. But during the late 90s, like so many others, he was infected with the fear of missing out.

In early 1999, Druckenmiller shorted $200 million worth of tech stocks in George Soros’s Quantum Fund. He went short an inning too early, and was forced to cover a few months later after a $600 million loss. Through May, the fund was down 18%. Meanwhile, the NASDAQ Composite was up 15% and the S&P 500 was up 10%.

Druckenmiller once said, “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.” So, practicing what he preaches, he went on a buying spree, and collected $6 billion of tech stocks over the next few months.

One of the high-flying stocks he bought was *VeriSign, which went on a spectacular run. From January 1999 through February, the stock gained 1575%, doubling every 72 days, on average. He first bought the stock at $50, then going for the jugular, doubled up at $240. The very next day, the stock peaked at $251…

…And we know how that movie ended.

When asked about his experience, Druckenmiller said “I bought $6 billion worth of tech stocks, and in six weeks 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 basketcase and I couldn’t help myself. So maybe I learned not to do it again, but I already knew that.”

I wrote about Druckenmiller’s big mistake in more detail, along with 15 others, myself included, in my book Big Mistakes: The Best Investors and their Worst Investments, which comes out in a few weeks. I hope you like it!

*Because lol, Berkshire Hathaway is now the biggest shareholder in VeriSign, at 10.5% of the company.

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

The Compound Media, Inc., an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.