Let me introduce you to this market wizard, Stanley Druckenmiller. You probably don’t know him right now, but this guy is one of the legends!
In the 16th of September in 1992, Drucks together with his mentor and idol
George Soros made Billions in a single trade call. They “Short Sterling” and they almost broke the Bank of England.
When George Soros finally retired, he turned over to Drucks the management of his funds. In his 30s, Drucks finds himself managing one of the world’s largest hedge fund.
Achieving a near 40% return on a $100M portfolio is impressive.
But achieving a near 40% return on a multibillion-dollar fund is incredible.
Druck’s average annual return in his entire career is staggering +45%.
He is in the industry for almost 4 decades already. There’s so much to learn from this market wizard. Specially on his Pigs philosophy, Home runs and flexibility.
Let’s start with the Pig. What are pigs? Obviously, baboy! But in the world of financial market, Pigs are those who are referred as greedy.
As the old saying goes…
“The bulls make money, the bears make money, but the pigs get slaughtered.”
Unfortunately, that old saying is a lie!
Pigs don’t get slaughtered most of the time. Why? Because they have skin in the game. They dominate. In this game, not everyone has the balls to be a Pig.
Being Pigs does not mean you’re being reckless and never manage risk.
It means taking advantage of the opportunity and maximizing your profit during the high conviction trade.
So, who get slaughtered most of the time?
Let me introduce you to the new kind of animal in the market.
They’re the Sheep!
Sheep are gullible people in the industry. Sheep are the exact opposite of being Pigs. Those who can’t stand on their own and decide for themselves.
They only rely on the opinion and recommendation of other people, people who propagate the lie!
Drucks said, it takes courage to be a Pig. It takes courage to ride a profit with huge leverage. If you’re right on something you can’t own enough.
In one of his interview Drucks quote Soros “When you earn the right to be aggressive, you should be aggressive”
And the market is full of possibilities, you won’t gonna win all the time.
Even Pigs loss but the bottom line here is this:
“It’s not whether you’re right or wrong, but how much money you make when you’re right and how much you lose when you’re wrong.” ~ George Soros (Drucks Mentor)
If you’re playing baseball you know what Home Runs means.
“In baseball, a home run is scored when the ball is hit in such a way that the batter is able to circle the bases and reach home safely in one play without any errors being committed by the defensive team in the process.” – Wikipedia
Druck’s says the way to build up long-term returns is through capital preservation and Home Runs. Traders must take full advantage of the situation when the market is in their favor.
If you hit the baseball and it fly out the stadium, what would you do? Will you run to the first base and stop there? Of course not! Same goes in investing. When the market is generous you need to be aggressive. You need to be the Pig!
If you make mistake, respond immediately! Adapt and modify. That’s what flexibility means to Drucks.
Excerpt from Market Wizard book:
“Drucks made an incredible error of shifting (fund position) from short to 130 percent long on the very day before the massive October 19, 1987, stock crush, yet he finished the month with a net gain. How? When he realized he was dead wrong, he liquidated his entire long position during the first hour of trading on October 19 and actually went short. Had he been less open-minded, defending his original position when confronted with contrary evidence, or had he procrastinated to see if the market would recover, he would suffer a tremendous loss. “
I call it Mental Agility. The ability of your mind to adapt, respond and recover to any situation fast.
All the great traders I know has one thing in common. They all have high level of mental agility! The ability to accept unpleasant truths and respond decisively and without hesitation is the mark of a great trader.
Be water my friend. Be flexible!
There are so much to learn from Drucks. You might want to study him further. He’s all over the internet.