Legendary Investor Stan Druckenmiller: The Obvious Is Obviously Wrong

One of the most effective methods that I use to get into the right market mindset is to go on a sunset beach walk while listening to my favorite Druck clips

Stan Druckenmiller is not only one of the greatest investors in history, but he is also a great teacher. It’s a pleasure to listen to Druck speak and hear how his brain works.

“Too many investors look at the present. The present is already in the price. You have to think out of the box and visualize 18-24 months from now, what the world is going to be and what securities might trade at….. if you can see something in two years that’s entirely different from the conventual wisdom, that’s how you make money.

My first boss used to say the obvious is obviously wrong. If you invest in conventional wisdom that’s how you’re going to lose your butt.”

I enjoyed this line of thinking. The obvious is obviously wrong and focusing on the present isn’t going to make us any money. In fact, if we’re not paying attention to a rapidly shifting economic landscape or earnings outlook for a particular company, focusing on the present could end up costing us a lot of money.

We need to always be thinking ahead. Thinking ahead looking for opportunities, in addition to thinking about what we could be missing about the future.

We are living through a period of market history in which it is more important than ever for investors to focus on visualizing where the puck is going, not where it is today.

A handful of questions about an uncertain future worth pondering:

• What is the future of AI? Which industries will be most disrupted by AI? Which industries will be able to effectively harness AI and become more profitable and more efficient as a result?

• After Trump 2.0 and Xi Jinping are done reconstructing global trade and the global monetary system, what will the world look like 12 months from now?

• Will the US be able to reenergize its manufacturing and raw materials industries? Will the US really build new smelters and critical minerals processing infrastructure?

• Will the US really annex Greenland? If so, which industries will be the biggest beneficiaries of new infrastructure and mines being constructed in Greenland?

• What is too obvious and in turn fully discounted by the market? What is so obvious that it must be obviously wrong?

In a more recent Druckenmiller interview, he offers a number of absolute gems, including how he views AI and why US exceptionalism really is at risk.

At the 18:45 mark on short-selling and why shorting is a tough game:

“I’ve never had a down year, but I’m not sure I’ve made money with shorts. I like it, it’s fun, but it’s a game that really only professionals should play….. at Soros I shorted $200 million worth of internet stocks in March of ‘99 and in three weeks I covered them at a $600 million loss…. every single one of those stocks eventually went bankrupt.”

On AI and where we are in the AI stock bull market cycle:

“If this is a secular move, if this thing is real, you just don't have 10 month moves, that's not how it works. Even the dot-com bubble lasted two and a half years, and for many it last four years, the Ciscos and Sun Micros.

So could Nvidia go down materially in the short term from any point"? Yes, but I would be surprised if I'm right on AI and the impact isn’t bigger. I mean it's already making the top coders 7x-8x more productive than they were five months ago. If it's as big as I think it is Nvidia is something we're going to want to own for at least 2-3 years, not 10 months.”

NVDA (Weekly)

On entitlement spending and why US exceptionalism is at risk (8:30 mark):

“…now that interest rates have come up, it's a fantasy, in fact it's a lie. We are definitely going to cut entitlements. It's just a matter whether we're going to cut them today or in the future, and the longer we wait, the more it piles up. The interest expense is about 1% or 2% of GDP, it's about 6% of outlays. According to the CBO's estimate, not mine, interest expense is 27% of outlays by 2050. And just entitlements and interest expense, just those two things alone, no defense, no running the government, no money for the disadvantaged, will be 117% of taxes by 2050, and it'll (entitlements and interest expense) be more than all taxes by 2040.”

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