Saturday, May 14, 2016

Betting the House - Druckenmiller
The first thing I heard when I got in the business, not from my mentor, 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. 
I think diversification and all the stuff they’re teaching at business school today is probably the most misguided concept everywhere. And if you look at all the great investors that are as different as Warren Buffett, Carl Icahn, Ken Langone, they tend to be very, very concentrated bets. They see something, they bet it, and they bet the ranch on it. And that’s kind of the way my philosophy evolved, which was if you see – only maybe one or two times a year do you see something that really, really excites you… The mistake I’d say 98% of money managers and individuals make is they feel like they got to be playing in a bunch of stuff. And if you really see it, put all your eggs in one basket and then watch the basket very carefully. 
-Stan Druckenmiller

Druckenmiller shared the story of he and Soros’ famous British pound short bet that “Broke the Bank of England.” Druckenmiller said that he had pitched his short idea to Soros and suggested that they put 100% of the fund in the trade.
Soros told Druckenmiller that was “ridiculous” and that they should put more even more on it. 
“That is the most ridiculous use of money management I ever heard,” Soros said to Druckenmiller. “What you described is an incredible one-way bet. We should have 200 percent of our net worth in this trade, not 100 percent. Do you know how often something like this comes around?”