Investment tycoon Drunkenmiller: My advantage isn't IQ, but decisiveness in pulling the trigger. I sold NVIDIA and "regretted it to the bone."

Facing the current market environment, Drukenmiller pointed out that the U.S. economy is already strong and will become even stronger with extensive stimulus policies, and the Federal Reserve is likely to hold rates steady or even cut them. Based on this macro backdrop and expectations of “huge upheavals and changes” over the next 3 to 4 years, he has constructed an investment matrix with both long and short positions intertwined.

On February 28, Morgan Stanley released a series of interview videos titled Hard Lessons. In this interview, Iliana Bouzali, Global Head of Derivatives Distribution and Structuring, had an in-depth conversation with legendary macro investor Stan Drukenmiller. As founder of Duquesne Capital Management, Drukenmiller achieved an astonishing average annual return of about 30% from 1981 to 2010, with no losing years. According to previous articles on Wallstreetcn, Treasury Secretary Bessent and Fed Chair candidate Waller are both disciples of Drukenmiller.

In the foreign exchange and commodities markets, he straightforwardly said: “We are bearish on the dollar.” He believes the dollar’s purchasing power is at a historical high, and foreign investors are heavily overweight in dollars. As trade balances and positions adjust, “the dollar will fall on its own.”

At the same time, he is heavily long copper and gold. His long position in copper is based on extremely tight supply chains over the next eight years and huge incremental demand driven by AI data centers; holding gold is mainly due to geopolitical considerations.

In the bond market, Drukenmiller has chosen to short U.S. Treasuries. His logic is very clear:

“If I’m right about the economic outlook—that it’s a growth story with disinflation—I can break even, avoid losses, and continue holding other risk assets; but if I’m wrong and strong growth triggers inflation—especially if the Fed cuts rates during a boom causing inflation to spike—that’s not surprising—we could make a lot of money.”

Investment philosophy: contrarian investing is overestimated, the advantage lies in “pulling the trigger”

Reflecting on decades of investing, Drukenmiller has reconsidered popular market investment doctrines. He believes that with the influx of quant and smart money, the effectiveness of traditional “technical analysis” is now only about 20% of what it was back then, and strategies based on reacting to price and news—like “good news must lead to a rally”—have become ineffective because everyone has learned them.

Regarding contrarian investing, his view is very sharp:

“I think contrarian investing is overestimated. Soros once said that the crowd is right 80% of the time. You just can’t get caught in the other 20%, because that would wipe you out… But I do like investing when I have extreme conviction and others don’t believe it—that gives me stronger confidence. As long as the logic is sound, I don’t care if a trade is crowded.”

When discussing his irreplicable success, he candidly attributes it to an indescribable intuition and execution:

“My advantage isn’t IQ, but pulling the trigger (decisiveness).” Drukenmiller said, “My mother-in-law calls me a ‘moron genius’. I was never in the top 10% of my class. Many think I’m smarter than I am, but I only have a very narrow form of intelligence that allows me to love and excel at this game (investing).”

He especially emphasized the most important lesson from mentor George Soros: “It’s not about being right or wrong, but about how much you make when right and how much you lose when wrong.” Interestingly, this legendary figure suffered from “impostor syndrome” for the first 15 years of his career, only believing his performance was not just luck after a long time.

“I can’t stand success,” early selling of Nvidia

Once, Drukenmiller’s portfolio was heavily driven by AI, but over the past six months, he has significantly adjusted his positions. Regarding the most prominent AI star stock, Nvidia, he shared a dramatic and somewhat regretful trading experience.

In mid-2022, noticing Stanford’s top talents shifting from cryptocurrencies to AI, Drukenmiller bought Nvidia on the strong recommendation of a young partner. Two weeks later, the launch of ChatGPT made him “truly understand the huge significance of this,” and he immediately doubled his position. Later, at Morgan Stanley’s macro call, a tech analyst’s view prompted him to double Nvidia again.

“I have to admit, three months ago I didn’t even know how to spell Nvidia.” Drukenmiller said.

As Nvidia’s stock soared from $150 to $390, he publicly stated he wouldn’t sell in the next two or three years. But when the stock hit $800, he broke his promise.

“I can’t stand success,” Drukenmiller joked. “It went from $150 to $800. I was a long-term investor, but I didn’t know how to handle it, so I sold. Then five weeks later, it hit $1,400, and I was kicking myself.”

He humorously summarized his current trading mindset:

“I’ve been retreating—I always retreat. I’m ‘Mr. Taco,’ just not T, but D-A-C-O (Druck Always Chickens Out).”

Seeking overlooked corners: heavy positions in generics and biotech

As AI trading becomes “disturbingly frenetic” and begins to show signs of the 1999 internet bubble, Drukenmiller has turned his focus to more value-oriented sectors.

He highlighted Israel’s Teva (TEVA). When he bought it, the company’s P/E was only 6x, in a high-growth phase transitioning from low-margin generics to biosimilars and innovative drugs. But the market has severely mispriced it: “Value investors dislike this growth strategy and sell the stock, while growth investors haven’t realized this shift.” After building a position at $16, the stock has risen to $32, with its valuation re-rated.

Additionally, he has heavily entered the biotech sector. He notes that biotech has been at the bottom for four years, and as a 30-year board member of Sloan Kettering Cancer Center, he knows well that:

“The best application of AI is in biotech, including drug discovery, diagnostics, and monitoring.”

Below is a transcript excerpt:

Drukenmiller: I think contrarian investing is overestimated. But I do like those moments when I have extreme conviction and others don’t believe it—that makes me more confident.

Narrator: Welcome to Morgan Stanley’s Hard Lessons, where iconic investors reveal the key moments that shaped their success. Today’s guest is legendary macro investor Stan Drukenmiller, interviewed by Iliana Bouzali, Morgan Stanley’s Global Head of Derivatives Distribution and Structuring. Drukenmiller managed Duquesne Capital from 1981 to 2010, achieving about 30% annualized returns with no losing years. He now leads the Duquesne family office managing his own capital and is also a philanthropist dedicated to education, medical research, and anti-poverty efforts.

Bouzali: Stan, thank you for joining us.

Drukenmiller: I’m glad to be here. I value Morgan Stanley very much, so this is the least I can do.

Bouzali: It’s an honor to have you. Over the past year or so, I’ve been fortunate to learn about some of your stock trades, and I feel you sometimes entered positions early. I’m curious if you could walk us through one or two examples of how these ideas formed.

Drukenmiller: I’ll pick an example that might surprise you—it’s not glamorous and has nothing to do with AI, but I think it illustrates our process at Duquesne well. From mid-summer to fall last year, AI started to overheat and become unsettling—somewhat similar to 1999-2000—and so we looked elsewhere. The team brought up Teva Pharmaceuticals. If you don’t know the background, it looks like an unremarkable Israeli generic drug company with a P/E of only 6. We met with management and found they were undergoing a major transformation. Richard Francis joined, who had executed similar strategies at Sandoz. He impressed us with his ability to harvest operational efficiencies. More importantly, he was embracing biosimilars and some truly innovative drugs, transforming the company from a generic drug maker into a growth company—hence the low P/E. Surprisingly, the investor base at the time was value-oriented and not optimistic about this shift. So, the stock stayed at a 6x P/E while incredible changes were happening inside the company, but almost no one believed it. Growth investors didn’t want it because they hadn’t seen the transformation, and value investors were selling it because it was executing a growth strategy. That was about six or seven months ago, with the stock at $16. Today, it’s $32, with little change besides proof of biosimilar viability and the launch of a non-generic drug. The valuation has re-rated to about 11.5 or 12 times earnings. The situation is very different now, but it encapsulates what we focus on. If you only look at today, you won’t make money. You have to look ahead, think about what could change, and how investors will view certain things in the future. The trade has progressed faster than I expected, but it’s a recent example.

Bouzali: Fascinating. I say “fascinating” because many people—perhaps outsiders, but definitely many—when they think of Stan Drukenmiller, they think of a super macro investor. But I see you involved in, and not just involved but truly engaged in, more niche areas of the market, especially in stocks like healthcare or biotech. My question is: do you need to be an expert—like an analyst who understands the entire drug development pipeline—to do well?

Drukenmiller: Thank God, the answer is an emphatic “no.” But I do need an expert at Duquesne—someone I trust to judge their insights—and I need to have a sense of how the market will accept the changes they describe. We have indeed heavily entered biotech. I can sense a potential leadership shift just because of the fear around AI. I’ve been on the Sloan Kettering Cancer Center board for 30 years, so I know that the best external application of AI is in biotech—drug discovery, diagnostics, monitoring, etc. Biotech had been depressed for about four years. I grew up with technical analysis; you can see momentum changing. That’s the logic behind investing in biotech. But honestly, when analysts start talking about gene sequencing, gene editing, and proteins, Stan doesn’t understand everything. But I can feel their enthusiasm. We have an excellent biotech team, which is very important because I trust them. When they’re truly passionate, that’s as important to me as the actual facts, because I’m not smart enough to understand many of the technical details.

Bouzali: So you’re filtering not just data but also the people working for you.

Drukenmiller: Yes. My advantage isn’t IQ but the ability to pull the trigger (be decisive). I admit, that’s a kind of wisdom, but my mother-in-law calls me a “moron genius.” I was never in the top 10% of my class. Many think I’m smarter than I am, but I only have a very narrow kind of intelligence that allows me to love and excel at this game.

Bouzali: I know many want to understand your mental model. You’ve talked about your thinking process. I have a very honest, fundamental question: how much of this can be taught, and how much is innate?

Drukenmiller: Listen, I was given a gift—a gift to grow capital—I don’t know why. Part of it is innate; you either have the skills needed for this industry or you don’t. That said, when I started in Pittsburgh, I had a great mentor. I’ve found that great investors often have extraordinary mentors, which is common. So, for me, having this innate skill or talent is necessary, but having a mentor is almost equally necessary. I’m sure some people out there don’t agree, but for me, it’s a combination. I was lucky to have two mentors. One taught me all this stuff we’re talking about now. Then there’s Soros. Interestingly, when I first went there, I thought I’d learn what makes the yen move in the market. Honestly, I found I knew a lot more about that than he did. What I learned from him was position management. The key isn’t being right or wrong, but how much you make when right and how much you lose when wrong. That’s an invaluable lesson. So, you can have some talent, but without mentors and people to teach you, you can’t maximize your potential like with them.

Bouzali: Should we talk about the markets now?

Drukenmiller: Do we have to?

Bouzali: With you, it seems inevitable.

Drukenmiller: Alright.

Bouzali: So, when it comes to markets, I see you don’t so much predict as you seem to view them as some kind of self-revealing system. Let’s suppose you don’t have a hedge fund, you just arrived from Mars, and you need to build an investment portfolio from scratch. At this point, how would you anchor it? What would you buy first?

Drukenmiller: That’s a tough question. Before I answer, a few basic principles. In my view, the U.S. economy is already very strong and will get even stronger because we’re seeing the “Big and Beautiful Act,” with lots of stimulus. I guess the Fed definitely won’t raise rates and is likely to cut them. That’s the background. But if we’re undervalued, such a backdrop would be fantastic. We’re not undervalued; we’re at the high end of historical valuation ranges. What excites me about building a hedge fund portfolio now is that the only certainty I have is that huge upheavals and changes will happen in the future. So, I’m really excited about the opportunities over the next three or four years. Macro has been dormant for 10 or 15 years, but I think that’s changing. If you know me, I tend to change my mind every three weeks. But given the current environment, we might build a more diversified stock portfolio. Because over the past three years until last fall, our portfolio was largely driven by AI. We still have some AI positions, but they’re no longer the main engine. We still hold large positions in Japan and Korea, some related to AI, some not. We’re bearish on the dollar, mainly because purchasing power parity is at a historical high, and foreign holdings of dollars are severely overweight. I don’t know if this is a “sell US assets” trade, but more like, due to trade balances and position adjustments, they’re net not buying US assets, so the dollar will fall on its own. That’s the most likely path. We hold copper, not because it’s a genius trade but because it’s a consensus trade. There’s no new meaningful supply over the next eight years, and demand from AI and data centers will grow significantly. We’re long copper, but not heavily—just rolling near-month contracts. We also hold some gold, mainly as a geopolitical trade, not a currency trade. And because we’re long all these risk assets, we’re short bonds. I don’t necessarily expect to profit from shorting bonds, but if my economic view is correct—that it’s disinflationary growth—I can break even, not lose anything, and hold my other assets. If I’m wrong and strong growth causes inflation—especially if the Fed cuts rates during a boom, causing inflation to rise—that’s not unusual, considering commodity trends. So I’m open-minded about that. But we’ve built a matrix where bonds help in both scenarios.

Bouzali: Over the past decade, the stock market has changed dramatically, with new forms of capital—multi-strategy hedge funds, retail investors, quant traders, ETFs. Compared to ten years ago, how has this changed your sense of the time horizon you need to hedge? Are you more comfortable with trading weekly, monthly, or yearly? Or maybe it’s not prescribed—you tell us how you think about it.

Drukenmiller: Most of my trades are thought out over 18 months to three years; I believe they need that long to evolve. Not every trade, some are a year, some five years. But I admit, I’ve done a three-year trade that I exited after five days and reversed. But if you ask me how I conceptualize it, all the noise about how market systems change doesn’t really alter what I just said. The volatility it causes is more useful for entry points if it contradicts my beliefs within a specific timeframe. So, I think much of it is noise. It makes my life annoying because I prefer markets to move smoothly and directionally, but it also creates opportunities—you have to capitalize on volatility, not be victimized by it, aside from mental stress—I will definitely have that. But you can’t let yourself be a victim of volatility; you can use it, just mentally it’s tough.

Bouzali: But you said you prefer trending markets, which makes sense. Sometimes I wonder if you’re more suited to go against the trend—that idea correct? Or are you more aligned with consensus? How do you see it?

Drukenmiller: I think contrarian investing is overestimated. Soros often said that 80% of the time, the crowd is right. You just can’t get caught in the other 20%, because that would wipe you out. Gaining some intellectual satisfaction from contrarian investing is possible. But as a concept, I think it’s overhyped. However, when I have extreme conviction and others don’t believe it—that’s when I really like it, because it makes me more confident. I don’t care if a trade is crowded; if I believe the theme is right and the trend favors me, I’m fine. I care about the entry point, but for the investment itself, I don’t really mind—it doesn’t bother me.

Bouzali: In December 2022, we had an investor Zoom call discussing macro, interest rates, the dollar, and comparisons between the US and the rest of the world. After a while, I asked you: what do you think about interest rates? I’ll almost quote you verbatim. You said you don’t care about interest rates; the only thing that matters is AI and Nvidia.

Drukenmiller: I don’t remember, but that’s fine.

Bouzali: What was going on then? How did you see it?

Drukenmiller: Nvidia’s story is very interesting; it perfectly exemplifies what we discussed earlier—that I rely on others. In my firm, a few young stars with strong networks started talking seriously about AI around early 2022. Then I began noticing Stanford kids shifting from crypto to more AI. One of our key points in venture capital is where young people are heading. Back in ’08-’09, we bought Palantir because it was a cool company where all the young people wanted to work. So, my partner brought in people from the AI scene in Palo Alto to explain AI. Most of it I didn’t understand, but I knew it was huge.

Bouzali: Why did you think it was huge? It might just be a fad, and you don’t feel that way about other fads.

Drukenmiller: Because I trust my partner completely, and I believed I caught its huge potential. Turns out, I didn’t fully grasp its magnitude because I didn’t know about large language models at the time, but I knew all the other traditional things happening in AI. So I asked my partner what to buy. He said Nvidia—that’s how to participate in AI. Based on what I heard, I bought a small Nvidia position—enough to either get hurt or make some money. About two weeks later, ChatGPT launched, which we hadn’t discussed. Even I, seeing it do those basic things, understood its huge potential. So I doubled my position. Then, Morgan Stanley’s macro calls, where all macro folks—including me (luckily I hadn’t spoken)—shared their views on the world—these views might be worth fifty cents and a cup of coffee—then an analyst from the tech sector said: “You guys only see the trees, but there’s something much bigger, even for macro, that’s more important.” He then detailed everything I’d heard about AI three or four weeks earlier. But this time, I had experienced ChatGPT firsthand. So I doubled my position again. Honestly, three months ago I probably couldn’t even spell Nvidia. When the stock took off, I knew from years of experience that when huge, huge changes happen, investors can’t keep up. Interestingly, the person in the room who understood AI ten times better than anyone else—probably fifty times better than me—sold Nvidia shortly after. But I knew this stock would at least go up for two or three years, and a lot. About five months later, I said in a public interview I couldn’t imagine selling Nvidia in the next two or three years because it had risen from $150 to $390. That person couldn’t believe I still held it. My point then was that I would hold it, and that such developments wouldn’t stop rising for at least three years. Then it hit $800, and I broke everything I said in that interview. I couldn’t stand success—I held from $150 to $800, originally as a long-term investment, but I couldn’t take it anymore and sold. Then five weeks later, it hit $1,400, and I was miserable. But surprisingly, I knew so little about Nvidia that I couldn’t even tell you its earnings.

Bouzali: That’s a testament to confidence. Because you are Stan Drukenmiller, you can honestly share your views on these things. I think it’s very inspiring for fund managers growing in the industry, who often feel they need to stay intellectually sharp all the time. What I learned from this is that filtering information and managing teams, rather than obsessively staring at spreadsheets, is truly unique and helpful. You mentioned you broke your own words and sold at $800. Would you have done that 20 years ago? Does that suggest your current trading approach is more mature than before?

Drukenmiller: Probably not. I’m not used to making six times on a stock in two years, and I’m not Warren Buffett. I think even when I was in good shape 20 years ago, I would have messed up.

Bouzali: Over the past 20-30 years, what are some things you’ve had to abandon or had to let go of?

Drukenmiller: I wouldn’t abandon anything because those scars are still with me—they help me get through tough times. But I’d say, due to some situations I wouldn’t want to repeat, I was promoted too early. I became an analyst at 23, and by around 26, I was some kind of chief portfolio manager. I never went to business school, so I never learned all the fundamentals of analysis. So I relied heavily on technical analysis—my mentor was very passionate about it, and at that time, no one used it. I learned all its complex details. I can tell you clearly that today’s technical analysis is only about 20% as effective as it was then because no one used it back then. But when everyone uses it, it’s no longer effective because you don’t have a unique basis for action. It’s a bit sad because it’s simple and lazy—you don’t need to work hard, just look at charts instead of digging into 10-Q reports. But technical analysis is indeed a problem. Also, over 20-30 years, the relationship between price and news flow has been very important to me. If there’s major good news and the stock doesn’t react, then 90% of the time, the good news has already been priced in, and the situation is not good. Unfortunately, around 2000, many smart people entered our industry. I think I was the only one from Bowden College who entered finance because we went through a decade of bear markets. As a result, every smart person learned what I just described, and it no longer works. That was a major change. I haven’t abandoned these methods, but I no longer rely on them as I used to.

Bouzali: They’re basically overused. So, have other signals gained importance in your view?

Drukenmiller: Not really. There’s no magic bullet. I’ve benefited from 40 years of scars and success, and I can recognize many patterns because there’s not much I haven’t seen in this industry. The biggest disappointment in my career is that I feel I’m wiser and have more trading tools than when I was 30 or 40, but I was a better fund manager then because I had more courage to take bigger bets. I’m trying to regain some of that courage, just because it’s more fun.

Bouzali: So, you’re retreating?

Drukenmiller: Oh, definitely. I’ve been retreating for a long time. I’m “Mr. Taco,” just not T, but D-A-C-O—Druck Always Chickens Out.

Bouzali: And about your other experiences, or is there a kind of never-give-up mentality? Does that mindset make you better at this?

Drukenmiller: No. I just played games with my dad and sisters since I was young—I’m a sore loser. I love games but hate losing. So I’m highly motivated—it’s a pathological trait. I don’t know where it comes from, but I try to channel it productively rather than just see it as a flaw, because it’s a bit unseemly. But that’s the real me.

Bouzali: Embrace it. Finally, this show is called Hard Lessons. Can you reflect on a moment in your life or career where you had to learn something the hard way?

Drukenmiller: I just want to say I have so many scars, you wouldn’t believe. Everyone knows how I operated during the 1999 Nasdaq bubble. I sold perfectly in January, then bought back precisely at the top. Someone asked what I learned from that? I said, nothing—I learned not to do that 20 years ago, but I got emotional, which I fight every day. When I hit a drawdown, I used to feel like vomiting from anxiety almost weekly. At some point in my career, I realized I’d keep making mistakes and get emotional—that’s just part of it. But I have a gift, so I shouldn’t torment myself for 48 hours or more. Because I’ve been doing this long enough, with a long enough track record, it’s no longer just random luck—I used to not believe that for 15 years. So, the so-called hard lessons are just hundreds of mistakes, but they’re just moments. When you hit a setback, if you’re a good capital allocator—easier said than done—you just get through it and keep going.

Bouzali: So Stan Drukenmiller once had impostor syndrome for 15 years?

Drukenmiller: Yes, maybe longer.

Bouzali: As we wrap up, I want to thank you for being here. I only got to know you later in your career, and watching your thinking, trading, and actual operations is truly fascinating. You’ve been very generous with your time, and on behalf of Morgan Stanley, I thank you.

Drukenmiller: Like I said at the start, I don’t do this for many people. I value Morgan Stanley very much, so I’m glad to be here.

Bouzali: Thank you, Stan.

Drukenmiller: Thank you, Iliana.

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