Stan Druckenmiller: Invest, Then Investigate

0:01Stan Druckenmiller: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 Duquesne family office, managing his own capital, and is a philanthropist championing education, medical research, and the fight against poverty.

0:42Stan Druckenmiller:I think contrarianism is overrated. The crowd's right 80 % of the time. You just can't be caught in the other 20 % because 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 Bouzali, Morgan Stanley's global head of derivatives, distribution, and structuring. You're going to continue to make mistakes. You're going to 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.

1:20Stan Druckenmiller:They met at the Campbell inside Grand Central Terminal.

1:23Iliana Bouzali:Stan, thank you very much for doing this.

1:26Stan Druckenmiller:I'm thrilled to be here. I thank the world of Morgan Stanley, so it's the least I can do.

1:32Iliana Bouzali:Oh, that's a privilege for us to have you here.

1:35Stan Druckenmiller:The conversation took place on January 30th, 2026, just moments after Stan's colleague, Kevin Warsh, was nominated to chair the Federal Reserve.

1:47Iliana Bouzali:As we arrived, there was some news that Kevin Walsh may be our next Fed chair. It seems to me that they're stealing all your employees at this point. Any thoughts?

2:02Stan Druckenmiller:Kevin is extraordinary. He's been like a Swiss Army knife at Duquesne. He runs our private equity. He helps with economic forecasts. because of my dysfunctional personality. He handles the networking outside the firm. So I'm sad and I'm going to miss him. On the other hand, I'm incredibly excited for him. I'm excited for the country. And I couldn't think of anybody better prepared to be Fed chair for what's ahead of us. It's like he's been training for this for 25 years. He was the youngest Fed governor and then he went through the financial crisis, and maybe he even learned a little something at Duquesne the last 15 years.

2:48Stan Druckenmiller:So I think he's got a huge brain, extraordinary talent, and I think it's really, really exciting.

2:56Iliana Bouzali: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

3:17Stan Druckenmiller:because it's not very sexy and it's not AI or anything, but I think it's a good example of our process at Duquesne. In the middle of last summer and toward the fall, the AI thing started to get, let me say, disturbingly heated and started at least have some rhyme with what I went through in 99-2000. And we were looking for other areas. And the group brought in a company, Teva Pharmaceuticals. So Teva 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. Richard Francis had come in, who ran the same playbook at Sandoz.

4:14Stan Druckenmiller:Very impressed with him, 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 actual drugs. The amazing thing is the investor base were value investors, so they hated it. So the stock 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 because they hadn't made the transition yet.

5:05Stan Druckenmiller:Value investors didn't want it and were actually selling it because he was doing a growth strategy. So that was about six or seven months ago and the stock was 16. and today it's 32 and not much has happened other than he's proved biosimilars. They've come up with a drug that's not a generic. So it's re-rated from six times earnings to, I guess, 11.5 or 12 times earnings. So it was a whole different set of circumstances. But it encapsulates what we look at. If you look at today, you're not going to 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.

5:57Fascinating and very intriguing.

5:59Iliana Bouzali: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 Druckenmiller, they think of huge macro investor. and I have seen you dabble, 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?

6:43Stan Druckenmiller:Thank God the answer is an 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 did make a big move into biotech. I could sense that there was a potential leadership change just because of the phobia around AI. and I knew because I've been on the board of Memorial Sloan 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.

7:36Stan Druckenmiller: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 because I'm not smart enough to understand a lot of the actual facts.

8:15Iliana Bouzali:So you filter not just the data, but the people that work for you.

8:22Stan Druckenmiller:My advantage is not IQ, it's trigger pulling. I admit it's some kind of intelligence, but Mother of Mala says I'm an idiot savant. I wasn't in the top 10 % of my class. A lot of people think I'm smarter than I am because I'm good at our business. but I have a very narrow form of intelligence that allows me to love and play this game.

8:46Iliana Bouzali:Should we turn to markets?

8:48Stan Druckenmiller:Do we have to?

8:50Iliana Bouzali: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 systems that kind of reveal themselves. So let's pretend you don't have a hedge fund 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?

9:27Stan Druckenmiller:That's a hard question. So just a couple of principles before I would start. It appears to me the U.S. 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. My guess is the Fed is certainly not going to hike and probably going to 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 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.

10:15Stan Druckenmiller:So actually for the opportunities set for the next three or four years, I'm really excited. Macro has been dead for 10 or 15 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 the last three years, our portfolio was very much AI driven. We still have drips and drabs of 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.

10:57Stan Druckenmiller:we're bearish on the U.S. 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 most likely course here. And we own copper. It's not a genius trade. It's a big consensus trade. There's no supply coming on, a meaningful supply, very tight for the next eight years. And obviously you have a big add-on from AI and data centers.

11:46Stan Druckenmiller:We're not long copper equities as much as we are. We just keep rolling the front end. And 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, we're 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 what's going on in commodities.

12:40Stan Druckenmiller: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.

12:51Iliana Bouzali:You said, I don't want to 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, retail investors, systematic players, ETFs. How has that changed the time horizon that you feel you have edging versus, let's say, 10 years ago? Are you more comfortable with the 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 18 months to three years that's how long

13:47Stan Druckenmiller:i think they're probably going to involve not every trade you know some are a year some are five years but i will admit that i 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. 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 that makes my life annoying because I'd rather just have nice, calm markets that move in a direction.

14:30Stan Druckenmiller:But it also creates opportunities, and you have to use the volatility as opposed to being abused by the volatility, either mentally, which I'm going to be. But you can't let yourself be a victim of volatility and you can take advantage of it. It's just hard mentally.

14:47Iliana Bouzali:But you said, I'd rather have trending markets. Fair. Am I wrong in sometimes thinking you're more comfortable being contrarian or do you embrace the consensus more? How do you think about that?

15:08Stan Druckenmiller:I think contrarianism is overrated. Soros used to say the crowd's right 80 % of the time. You just can't be caught in the other 20 % because you can get your head handed to you. I get some intellectual satisfaction out of playing in the 20%. But 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.

15:53Stan Druckenmiller:It doesn't bother me.

15:55Iliana Bouzali: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 rates. 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.

16:40Stan Druckenmiller:I don't remember that, but that's nice.

16:44Iliana Bouzali:What was going on? How did you see it?

16:48Stan Druckenmiller:So the NVIDIA story is quite interesting and 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 were shifting from crypto, 50-50 crypto and 50-50 AI, to more going to AI. And that's something we've always looked at in venture. When we bought Palantir in 08, 09, it was because that was a cool company back then that all the kids wanted to go to. So my partner had in people from his AI network.

17:47Stan Druckenmiller:They're in Palo Alto. They came in and explained AI. Most of it went over my head. But I knew that this was really big.

17:59Iliana Bouzali:Why did you feel it was really big? It could have been a fad. You didn't feel this way for other fads.