Stan Druckenmiller: Invest, Then Investigate

For Morgan Stanley, this is Hard Lessons, where iconic investors reveal the critical moments that have shaped who they are today.

Everybody says I've never had a down year. That's true, but a lot of it's the luck of the calendar. I've had drawdowns where I've been sick physically and mentally within those years, and I still hate them. Today on the show Stan Druckenmiller, the legendary macro investor who ran Duquesne Capital Management with roughly 30% annualized returns and no losing years from 1981 to 2010. Stan now leads the Ducane family office, managing his own capital.

and is a philanthropist championing education, medical research, and the fight against poverty. I think contrarianism is overrated. The crowd's right eighty percent of the time. You just can't be caught in the other twenty percent'cause you can get your head handed to you. But

I do like it when I have extreme conviction and no one else believes it. Stan reveals the hard lessons of his storied career with Ileana Buzzali, Morgan Stanley's global head of derivatives, distribution and structuring. You're gonna continue to make mistakes, you're gonna

Continue to get emotional, but you've got a gift. And just stop torturing yourself. You've been doing this long enough that it's no longer a random accident. They met at the Campbell inside Grand Central Terminal. Stan, thank you very much for joining. Doing this. I'm thrilled to be here. I think the world of Morgan Stanley, so it's the least I can do. Oh, that is uh that's a privilege for us to have you here. The conversation took place on January 30th, 2026, just moments after Stan's.

Colleague Kevin Walsh was nominated to chair the Federal Reserve.

As we arrived, there was some news that Kevin Walsh may be our next uh Fed chair. It seems to me that they're stealing all your employees at this point. Any thoughts? Kevin is extraordinary. He's been like a Swiss Army knife at Duquesne. He runs our private equity. He helps with economic forecasts. Um, because of my dysfunctional personality, he handles the networking outside the firm.

So I'm sad and I'm gonna miss him. On the other hand, I'm incredibly excited for him. I'm excited for the country. And uh I couldn't think of anybody better prepared to be Fed Chair for what's ahead of it. So it's like he's been training for this for twenty-five years. He was the youngest Fed governor, and then he went through the financial crisis. And uh maybe he even learned a little something at Duquesne the last fifteen years. So I think he's

He's got a huge brain, extraordinary talent, and uh I think it's really, really exciting. Fantastic. So I've been privy to some of your equity trades over the past year or so where it did feel you were early.

And I'm curious if you can maybe take us through one or two and how they came together. I'll pick one that might surprise you'cause it's not very sexy and it's not AI or anything. But it I think it's a good example of our process at Duquesne. In the middle of last summer and toward the fall The AI sort of get a little bit of a let me say disturbingly heated and started at least have some rhyme with what I went through in ninety nine, two thousand and we were looking for other areas.

And um the group brought in a company, uh Teva Pharmaceuticals. was this apparently, if you didn't know what was going on, boring generic drug company out of Israel selling at six times earnings.

So we met with the company, big transition going on. Uh Richard Francis had come in, who ran the same playbook at Sandoz, very impressed with them, knew how to take low-hanging fruit in terms of operating efficiency. But Much more importantly, he was taking them from a generic drug company To a growth company by embracing biosimilars, replacing the generic drugs which

That's why they were six times earnings with biosimilars and even some some actual drugs. The amazing thing is The investor base were value investors, so they hated it. So the stocks sat there at six times earnings while you could see this incredible management initiative going on, and no one really believed him. And again growth investors didn't want it'cause An made the transition yet. Value investors didn't want it and were actually selling it because they he was doing a growth strategy.

So that was about six or seven months ago and the stock was sixteen. And today it's thirty two and not much has happened other than he's proved biosimilars, they've come up with a d of a drug that's not a generic, so it's re rated from six times earnings to I guess eleven and a half or twelve times earnings. So It was a whole different set of circumstances, but encapsulates what we look at. If you look at today

you're not gonna make any money. If you try and look ahead and what might change and how investors might perceive something ahead, this one happened a little more quicker than I thought, but that would be a recent name.

Fascinating and very intriguing. I say it's intriguing because I think. Many people, maybe people not in the market, but certainly many people when they think of Stan Drakkeniller, they think of huge macro invest And I have seen you dable, more than double, really go into areas of the market, especially in equities, that are much more niche, such as healthcare or biotech.

And my question is, do you have to be an expert, an analyst, someone that understands the whole pipeline of drugs to get that right? Thank God the answer is an em emphatic no. But I've got to have an expert at Duquesne who is And trust his judgment, and then I've got to have a feel for how the market will embrace the change he's describing. But we we did make a big move into biotech. I could sense

There was a potential leadership change just because of the phobia around AI. And I knew because I'd been on the board of Memorial Swan Kettering for 30 years that probably the best use case out there of AI is biotech through drug discovery, diagnostics, monitoring, everything. So biotech had been on its butt for like four years. I also grew up with technical analysis and you could see the momentum changing.

So That was the theory behind biotech, but honestly When when the analysts start talking about genetic sequencing and gene editing and proteins, it's going right over Stan's head. But I get their level of enthusiasm. We have a very good biotech team. That's really important because I trust them and when they're really enthusiastic That's as important to me as the actual facts'cause I'm not smart enough to understand a lot of the actual facts.

So you filter not just the data but the people that work for you. It's not IQ, it's trigger pulling. I I admit it's some kind of intelligence. My mother in law says I'm an idiot savant. Um I wasn't in the top ten percent of my class. A lot of people think I'm smarter than I am'cause I've I'm good at our business. But I have a very narrow form of intelligence that allows me to love and play this game. Should we turn to market?

Do we have to? Uh it seems to be uh it seems to be almost obligatory with you. Okay. So when it comes to markets, It seems to me you treat them less like forecasts and more like um systems that kind of reveal themselves. So let's pretend you don't have a head. And you come down from Mars right now and you have to start a portfolio from scratch. How do you anchor it at this moment in time? What do you buy first? That's a hard question. So

Just a couple principles before I would start. It appears to me the US economy is already strong and it's going to get much stronger because we're looking at the big, beautiful bill, looking at a lot of stimulus. The Fed is certainly not gonna hike and probably gonna cut. So that's a backdrop, but against that backdrop that would be wonderful if we were undervalued. We're not undervalued, we're toward the top of the uh valuation range historically.

I mean what would be exciting about developing a hedge fund portfolio right now? is the one thing I'm sure of is there's massive disruption and massive change ahead. So actually for the opportunities set for the next three or four years, I'm really excited. Macro has been dead for ten or fifteen years. I don't think that's the case anymore. If you know anything about me, I tend to change my mind every three weeks.

But given the backdrop, we would probably be long More an eclectic basket of equities. For until the fall of last three years our portfolio was very much AI driven. Mm-hmm. We still have drips and drabs AI around, but it's not driving the engine anymore to some extent. We still have big positions in Japan and Korea. Some of them are AI, some of them are not. We're bearish on the US dollar, mainly because

sort of the top of the historic range in terms of purchasing power. And foreigners are way, way overloaded in dollars. And I don't know whether it's like a sell America trade because it's more like if they don't buy American assets on a net basis because of the trade balance. and because of the position the dollar will go down on its own. And we think that is the The most likely course here. And uh we own copper.

It's not a genius trade, it's a big consensus trade. There's no supply coming on, of meaningful supply, very tight for the next eight years. And obviously you have a big add-on from AI and data centers. We're not long uh copper equities as much as we are. The j we just keep rolling the front end. We have some gold. That's mainly a

geopolitical trade. It's not so much a monetary trade. And then because we're long all these risk assets I just mentioned were short bonds. I don't necessarily expect to make money short bonds. But I think we might make a lot. If I'm right on the economy and it's a disinflationary growth, I'd probably break even and I don't lose anything, but it allows me to hold the other assets I mentioned. If I'm wrong

And the strong growth creates inflation. It wouldn't be that unusual if the Fed were to cut into a booming economy for inflation to take off, particularly with what's going on in commodities. So I'm open minded to that. But we create a matrix and the bonds are helpful in both ways.

You said something before that I want to unpack a little bit. You said I don't wanna give you too many views because if you know me I can change my mind in two or three weeks. My question is the equity market Has changed a lot over the past decade. And you have all this new type of capital, whether it's multi-stretch hedge funds, uh retail investors, systematic players, ETFs. How has that changed the time horizon that you feel you have edges?

Versus let's say ten years ago? Are you more comfortable with uh one week, the one month, the one year trade? Or maybe it's not prescriptive? How do you think about that? Most trades I put on I think In terms of eighteen months to three years, that's how long I think they're probably gonna evolve. Not every trade, you know, some are a year, some are five years.

But I will admit that I've put on a three year trade that five days later I'm out of and I've reversed. But if you're talking about how I conceptualize it, All this noise about how much the system and the market has changed, that has not changed what I just said at all. And the violence that creates Is more useful for entry points if it goes against what my belief over the given time frame is.

So I think it's a lot of noise. It makes my life annoying'cause I'd rather just have nice calm markets that move in a direction. But also creates opportunities and you have to use the volatility as opposed to being abused by the volatility other than mentally, which I'm gonna be, but you can't let yourself be a victim of volatility and you can take advantage of it. It's just hard mentally. But you said I'd rather have trending markets.

Am I wrong in sometimes thinking you're more comfortable being contrarian? Or do you embrace the consensus more? How do you think about it? I think contrarianism is Overrated? Soros used to say the crowd's right eighty percent of the time. You just can't be caught in the other twenty percent'cause you can get your head handed to you. I get some intellectual satisfaction out of playing in the twenty percent. But as a as a concept I think contrarianism is overrated.

I do like it when I have extreme conviction and no one else believes it. It gives me even more conviction. But it's not like I go out and like, oh that crate is crowded, you know. I don't care if a trade is crowded if I think The thesis is right and the trend is with me. I mean, for entry points I care, but I don't really care in terms of the investment. It doesn't bother me. You mentioned

It gives me an intellectual satisfaction when I'm early on a trade. And we had an investor zoom call in December 2022. And we were discussing macro, rates, dollar, US versus rest of the world. And after we spoke a little bit, I asked you what you think on RAID. And I will quote essentially verbatim what you said. You said I couldn't care less about rates. The only thing that matters is AI and NVIDIA. I don't remember that, but that's nice. What was going on? How did you see it?

So the NVIDIA story is quite interesting and it it's a perfect example of the process we spoke about earlier where I rely on other people. So I have some young superstars in my firm and they had a network and they started really talking about AI. This was in early to mid-22. And then I started noticing that the kids at Stanford We're shifting from crypto, fifty fifty crypto and fifty fifty AI to more going to AI.

And that's something we've always looked at in venture. When we bought Palantir in oh eight, oh nine, it was'cause that was the cool company back then that all the kids wanted to go to. So my partner had in people from his AI network in there in Palo Alto. They came in and explained AI. Most of it went over my head, but I knew that this was really big.

Why did you feel it was really big? It could have been a fad. You didn't feel this way for other fads. Because I had total trust in my partner. And I thought I was grasping in Normandy. It turns out I wasn't grasping in Normany'cause I didn't know about large language models, but I knew about all the other conventional stuff that was going on in AI. So I said to my partner, what should I buy? And um he said, Nvidia. That's the way to play AI.

So just on this, about as much as you just heard, I bought a not big position in v NVIDIA, but enough to get hurt on or to make some money on. And then about Two weeks later, Chat GPT happened, which had not mentioned our conversation. Well, even I understood. Okay, the enormity of of what that meant when I saw even the rudimentary things it was doing back then. So then I doubled the position.

And then one of the great services you and Morgan Stanley provide are these macro calls. And um All the macro guys, including myself, luckily I hadn't talked yet, were espousing their views on the world, which are probably worth a nickel and a cup of coffee. And an analyst there who was from the tech world said, you guys Or in the trees.

And you're mi you're missing the forest. There's something much bigger than anything you're talking about, even for macro. And he went on to amplify everything I had heard. three weeks ago or four weeks ago about AI, but this time I had Chat GPT between that conversation and him. So then I doubled my position again. And Literally. I don't think I knew how to spell NVIDIA three months before. And when the sock took off. I knew through years of experience when you have massive, massive change.

investors just can't make themselves keep up with it. And it was funny because the person who knew ten times more than anybody at the table and probably fifty times more than me about AI He sold his NVIDIA shortly thereafter.

But I knew that this stock would go up for at least two or three years and go up a lot. And I said publicly in an interview About five months later, I cannot possibly see myself selling NVIDIA over the next two or three years, because it had already gone from like 150 to 390, and this person couldn't believe I still owned it. And I basically said, not only do I own it, the way these things evolve, this stock can't not go up for at least three years.

So then the stock goes to eight hundred and I violated everything I said in the interview. I couldn't stick stand success. It gone from one fifty to eight hundred. I was long term in it. I couldn't deal with it. And I sold it and then it was fourteen hundred like five weeks later and I was sick. But um It's amazing how little I knew about NVIDIA. I couldn't even tell you what the earnings were. So Це сайно, анітс, ян Драка Мула.

That you can be so blatantly honest about the way you think about this thing. And I think it's very encouraging to portfolio managers that are coming up in the business. and they often feel like they need to be uh intellectually very much on their game constantly. But I think that what I'm getting from this, the ability to filter, to manage instead of being wedded to a spreadsheet, is really unique and quite helpful. You said something that you violated.

what you had said and sold that eight hundred, would you have done that twenty years ago? Is this a sign of a more mature way of trading now versus before? Probably not. I'm not used to making six times my money in an equity in two years and I'm not Warren Buffett. You know, most of my big mistakes. Have been selling too early, great companies I often buy too early, but I don't sell, I I hold and hold. So no, I don't I think I would have screwed it up twenty years ago when I was good too.

Let's stay with AI for a little longer, and then I wanna talk a little bit about process. We can't get through this interview without having big intellectual conversations about AI. If I could summarize the consensus right now for AI, it is something like AI will be very deflationary and it will lead to massive job losses. What do you say to that? I say anybody who believes that with conviction

suffers from arrogance and not an open mind. I don't think any of us know how this movie's going to play out. First of all, every technological revolution Since was known to man. It's been declared for jobs, it's the end of the world, all the way back to the horse and buggy. Now, there are brilliant people saying it's going to happen, and I'm open minded to that too, because the speed It's li is like nothing we've ever seen before. But you have to acknowledge

when it's happened every other cycle that it's not a given. And I can't remember who it was talking about radiologists, because when I first learned about AI before Chat GPT. And one of my family members was a radiologist. I told him that you might not have a job in five or ten years. because we had started this company that basically looks for pathology in in prostate cancer and the machines could do it as well or better. So you know what?

That technology is fantastic. It works better even than anybody imagined. It works better than humans. But we have more radiologists now than we had ten years ago. Why? Because the radiologist is now spending his time talking to the patient, going through what this means in their life, going through the decisions. He has more time to do the

the r the real stuff and they trust the doctors. And that's the way it could play out in many, many, many different nursing. I've read the same thing going on. You know, they don't have to do all the monitoring anymore, but they get to spend more time giving comfort and so forth and so on. Now look, it obviously looks disinflationary, but let me ask you this.

When COVID happened, the five-year forward I think went to 40 basis points. And five years later, inflation was 9%. So let's say the pessimists are right on on AI. It's possible you get a government response with printing and universal income, after all inflation is caused by money, that you actually get an inflationary outcome.

So you just have to always be looking at what other people might not be, and then if you're prepared for it mentally, you can adjust quickly enough um in your portfolio to it as a as it unrolls.

who would love to get inside your head and understand your mental models. You spoke to us about your way of thinking. And I have a really honest basic question. How much of it can be taught and how much of it is innate? I was given a gift. I don't know why I was given the gift, but I have this gift. And it's for compounding money. But so certainly part of is innate. Certainly part of it. You either have the skill set for this business or you don't, just like I don't have the skill set.

to be in a biotech lab and come up with good conclusions, they may not have the skill set to do what I do. Having said that, I had a great mentor in Pittsburgh when I started out and I find it very common that great investors have incredible mentors. So to me It's a necessary condition that you have sort of this innate skill set or gift. But it's almost a necessary condition on top of it that you have

a mentor. It's not I'm sure there's some people out there that that's not true of, but for me it was a combination. I was very lucky to have Two mentors. One I basically learned all the kind of stuff we're talking about and then Soros, it's funny, when I went there I thought I would learn what makes the yen and the mark go up and move.

And modestly I learned I knew much more about that than he did. What I learned from him was sizing. It's not whether you're right or wrong, it's how much you make when you're right and how much you lose when you're wrong. And that was a that was an invaluable lesson. So You can have something innate, but if you don't have mentors and people to teach you, you're not going to maximize it as much as you do when you do have them.

And what are some things, if there are some things that You have unlearned. over the past twenty, thirty years or you had to unlearn? I don't unlearn anything because scars are something I always keep keep in mind because they can help you out. But I I will say Through a bunch of circumstances that I won't repeat. I was promoted way too early. I was made an analyst when I was twenty-three, and I was made sort of the head the head portfolio guy by the time I was twenty-six.

And I didn't go to business school. So I never learned all the fundamentals I needed to learn to in terms of analysis. So I relied heavily and my mentor was really into it and back then nobody was doing it on technical analysis and I learned all the intricate details of it. Okay, I can unequivocally tell you that technical analysis is about twenty percent as effective today as the West End because no one was using it.

But when everybody's using it, it doesn't work anymore because you don't have a unique thing to act against. So it's it's kind of sad because it's easy and you can be lazy, you don't have to work that hard, just look at a chart instead of going into into a ten Q and and and all this other stuff. But technical analysis. Is a problem in the same vein, price versus new heat news was huge for me for twenty or thirty years.

And if you had great news and a stock wasn't responding to the news, ninety percent of the time the news was coming that was bad. Unfortunately, around 2000, a lot of smart people started to come to our business. I was the only one in my class, I think, from Bowden that went in the financial industry because we've been in a bear market for ten years. Well then again, every wise guy learned what I'm just talking about, so it doesn't work anymore.

So back then the company reported horrible earnings, opened down in the aftermarket and then was up ten percent the next day, almost guaranteed to be higher six months later. That's not true anymore because everybody else has learned that. So those would be the two big things. I haven't unlearned them, but I don't rely on them to the extent that I used to. They've been loved to death basically.

Are there any other signals that have been elevated in importance then? Conversely to signals that have been diminished? Not really. There's no silver bullet and I'm the great beneficiary of forty years of scars and successes that I can go back on and a lot of pattern recognition because there's not much I haven't seen in this business. And um I'd say The biggest disappointment in my career has been I think I have more wisdom and I have more tools of the trade.

than I had in my thirties and forties, and I was a much better portfolio manager then, because back then I had courage. And I would take bigger convicted positions. I'm trying to regain some of my nerve just because it's more fun. So you're chickening out? Oh for sure, I've been chickening out for a long time. I'm Mr. Taco. Except it's not tea, it's taco. Druck Druck always chickens out. Um in terms of other

Experiences that you've had or a chip on your shoulder. Do you have a chip on your shoulder that makes you better at this? No, no. I just um grew up My dad and my s sisters play games with me all the time. I'm just a really sore loser. I I love games, but I really hate to lose.

So I'm just very driven. It's a sickness. I don't know where it comes from. But I might as well channel it and make it productive instead of just a disease,'cause it is it is a little bit unseemly, but it's it's who I am. Embrace it. Finally, this show is called Hard Lessons. Can you look back in your life or career and maybe take us through something that you had to learn the hard way?

Let me just say I have so many scars, you can't believe it. Like Everyone knows how I played the Nasdaq melt up in 99, sold it perfectly in January, and then bought the exact top, and someone says. What did you learn from that? I said, Nothing. I learned not to do that twenty years before. But I got emotional, which I fight every day. Remember how I told you earlier

that I'm a sore loser. I would literally like throw up like once or twice a week just from anxiety when I'd have a drawdown and so forth. And at some point in my career I learned that you're going to continue to make mistakes, you're going to continue to get emotional, you're going to continue to have that happen from now on then. But you've got a gift. And just stop torturing yourself for like forty-eight hours or maybe longer over this because

You've been doing this long enough that it's no longer like random accident, which I did not believe for like fifteen years. So the hard lessons have been Like hundreds of mistakes. But that they're just a moment in time and when you have these drawdowns and if there's money managers listening to this and you're good.

It's easier said than done. Just get over it and move on. Don't don't look back. That's the hardest and best lessons I've learned. So Stan Drakenmüller had imposter syndrome for fifteen years? Yes. Maybe longer.

Maybe longer. Incredible. As we're finishing, I want to say thank you for being here. I got to know you later in your career. And it's just been fascinating to see you think and trade, to see you in action. You've been very generous with your time. And on behalf of Morgan Stanley, thank you very much. As I said in the beginning I wouldn't do this for many and I think the world of mortgage sales, so it's delightful to be here. Thank you, Stan. Thanks, Ileana.

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