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…..reminded me of this quote from Stan Druckenmiller on the overwhelming temptation to be sucked into manias. The lead-in to this is he had turned a $200M short in early 1999 into a $600M loss in no time. He then hired a couple young guns to run a portion of the fund for him.
“So, I’ll never forget it. January of 2000 I go into Soros’s office and I say I’m selling all the tech stocks, selling everything. This is crazy… 104 times earnings… this is nuts. Just kind of as I explained earlier, we’re going to step aside, wait for the next fat pitch. I didn’t fire the two gun slingers. They didn’t have enough money to really hurt the fund… but they started making 3 percent a day and I’m out. It is driving me nuts. I mean their little account is like up 50 percent on the year. I think Quantum is up seven. It’s just sitting there.”
“So like around March I could feel it coming. I just – I had to play. I couldn’t help myself. And three times during the same week I pick up a… don’t do it. Don’t do it. Anyway, I pick up the phone finally. I think I missed the top by an hour. I bought $6 billion worth of tech stocks, and in six weeks I had left Soros and I had lost $3 billion in that one play. You asked me what I learned. I didn’t learn anything. I already knew that I wasn’t supposed to do that. I was just an emotional basket case and couldn’t help myself. So, maybe I learned not to do it again, but I already knew that.”
This was taken from a letter to Bill Fleckenstein posted today .