How to make $1 Billion in a day? | Stanley Druckenmiller Top 10 Trading Quotes |

Stanley Druckenmiller is a legendary trader with an estimated net worth of $6.6 billion.  Investing Strategy:   Contrarian, Economics, Trader, Momentum Trader

How did Stanley Druckenmiller make his money?

Stanley Druckenmiller made his money running hedge funds such as Duquesne Capital which he ran from 1981 to 2010. At the time of closing Duquesne Capital had over $12 billion in assets under management.

Stanley was also the head portfolio manager of the Quantum Fund, founded by the Legendary investor George Soros.  Druckenmiller is reported to have made $260 million in 2008 alone. These days he manages his wealth through Duquesne Family Office, a New York-based investment group which he started with $3 billion in 2010.

What has Stanley Druckenmiller invested into?

Druckenmiller has been bullish on tech stocks recently. He has large investment stakes in Microsoft Corporation (NASDAQ: MSFT), Amazon.com, Inc. (NASDAQ: AMZN), and Alphabet Inc. 

Greatest Trade of all Time

Druckenmiller is most famous for executing what has been called the “greatest trade of all time” in which he made up $1 Billion in a single day!

This was accomplished by a bold bet against the British pound during the early 90’s when Stanley Druckenmiller was at the Quantum Fund with another Legendary investor George Soros. 

How to make $1 Billion in a day?

In 1979, Many European countries decided to link their currencies together at a fixed rate. This was called the Exchange Rate Mechanism (“ERM”). This was a band of rates that each currency had to remain within.

The idea was to hedge currencies against exchange rate fluctuations, which could harm European Trade.

The National banks of the various countries were given the job to keep their country’s currency in the allocated band. For example, If selling volume was high and pushed the rate down, the banks had to buy. If buying was strong, they had to sell to keep the rate stable.

In 1990, Britain joined the ERM (despite Prime Minister Margaret Thatcher being strongly opposed). 

Thatcher proceed to resign and John Major (a major advocate ERM) became Prime Minister. Afterwards Britain entered a recession.

The Bank of England needed to cut interest rates it order to lower the cost of borrowing & stimulate the economy…but their hands were tied by the currency peg.

Lowering interest rates would have devalued the British pound and forced the country to exit from the ERM. The Bank of England was forced to continually go into the open market and purchase British pounds to keep the peg in check. 

In 1992, Stanley Druckenmiller & George Soros saw the opportunity. It was obvious at the time the British Pound was in trouble and most believed a devaluation was coming at some point. There was just one issue, no catalyst…thus Soros & Druckenmiller decided they would be the catalyst! 

Breaking the Bank of England:

Quantum fund started to short the British pound. This involved selling British pounds which were borrowed from banks and then using the proceeds to buy German marks. The idea was to be able to buy back British pounds cheaper & then return what he borrowed.

Soros & Druckenmiller started with a modest $1.5 billion short, but rates didn’t move.

Then news broke out, September 16, 1992, the German Bundesbank president said he didn’t rule out some currencies coming under pressure.

Soros & Druckenmiller saw this as sign to turn up the heat. They built their short position to a massive $10 billion! 

With this flood of selling hitting the market, the British pound came under tremendous pressure to “break the Buck” (the currency peg).

The Bank of England entered chaos. They purchased 27 billion on the open market to try and stop the currency change. But the pressure from the $10 Billion short was too much to bear. At 7pm September 17th 1992, Britain announced it would leave the ERM and would allow the devaluation of the British pound.

This date would forever be known in history…as Black Wednesday.

Top 10 Stanley Druckenmiller Quotes

10. “Go for the Jugular”

“Soros has taught me that when you have tremendous conviction on a trade you have to go for the jugular” – Stanley Druckenmiller (Billionaire Trader)  . When Druckenmiller originally brought the idea of shorting the British pound to Soros, Soros urged him to bet huge as it was a high conviction bet. 

9. Take Low Risk, High Reward Bets

“It’s not about whether your right or wrong but how much you win or lose either way” – Stanley Druckenmiller (Billionaire trader). Investing or Trading is a game of probabilities, we are looking to take bets with a low risk, high reward profile. Billionaire Investor Ray Dalio call this an asymmetric Risk/Reward Ratio. Value investor Mohnish Pabrai calls this Dhando Investing.

8. Hit Home Runs then Preserve capital

“The way to build wealth is through preservation of capital and home runs” – Stanley Druckenmiller (Billionaire Trader) . This investing quote is a slight contradiction, as hitting “home runs” usually involves a different strategy then capital preservation.

Perhaps this is similar to the “barbell” investing strategy. One side is very low risk investments (Index funds, Real estate which generates cash flow etc) then the other side is high risk investments. 

7. Bitcoin is worth what people will pay

“Bitcoin is like anything else in the world, it’s worth what people will pay for it” – Stanley Druckenmiller . Druckenmiller was previously sceptical of bitcoin but has now flipped and says it’s better than gold! He goes onto say:

“Bitcoin could be an asset class that has a lot of attraction as a store of value to both millennials and the new West Coast money and, as you know, they got a lot of it”.

 Druckenmiller expects bitcoin bet to “work better” than gold. However, he did state his gold position is “many, many more times” larger than his current bitcoin holding.

6. What do people think it will earn?

5. Play Investing Game 

Stanley Druckenmiller Quotes gallery x 10