Sep

4

Verona and Stan DruckenmillerHere is an article about the lessons from Stan Druckenmiller's career. The author identifies four lessons: "Size matters," "Outperformance is possible," "Excellence takes hard work," "The money doesn't matter."

I note that these platitudes are not unique to money management– and could be straight out of a Tom Peter's Motivational Speech. The sad truth is that no matter how much I love, study and practice basketball and purchase AirJordan shoes, I still won't play like Michael Jordan. But it's a nice dream to think otherwise.

Pitt T. Maner III writes:

With practice there are many (even Rocky) who could give MJ a challenge at the free throw line or from the 3-pt line or playing "HORSE". Specialists in narrow aspects of the game. Trick shot artists. The niche players. So by practicing the unpracticed skills one might eke out a small advantage against the pros in the arcane areas where there is not actual physical contact.

It seems though there is a certain lack of diversity these days in basketball compared to era of Earl the Pearl, "Lucas layups", Pete Maravich, underhand freethrows by Rick Barry, Dr. J, Bird, Magic, et al.—more athleticism and muscle now (aka Shaq-types) with more plain vanilla in most cases and less skill/finesse. More of a business and more money on the line and more risk adverse to unusual styles. Defense and team play emphasized where every knows his "role". Even Lebron will have to adjust to team play at Miami and pass more and do other things.

On another note, interesting also that Mr. G is rolling out new mutual funds and a sequel to his "magic formula" book that apparently has many followers and "still beats the market" for now.

Victor Niederhoffer adds:

Knowing of the humility and inabilities of some of the people mentioned here, including myself, and there is certainly no absence of down years and sub par performance in the ones that I know about very well, including the 50% down year, in the year before I met him of one of them, and 7 years of 0 performance after that, I am still amazed that the records can be so good. I attribute most of it to the remaining winner of the coin toss problem. But something else is going on. The one thing that seemed right in the four lessons. They all go to the same schools. They lived next door to each other in the summer and often had dinners together or talked to each other every day. They all were agrarian reformers. And they all hated free markets. Thus with the idea that had the world in its grips. But mainly, they were always on same page with their positions, especially until the end of the year. Not an artifice I believe.
 

Vince Fulco adds: 

And I think it was mentioned (maybe here, too much reading material this week) that Biggs is his father-in-law? Guessing the Pequot-MS cabal loomed large in the mix.

Russ Sears writes:

After 08-09 it should be clear that much of the MBS and other structured securities markets were a Lemon Market. With the manufactures putting all the faulty parts into the same car, One side knew exactly which cars were clunkers.

Further, while perhaps they were totally naive to get so close to the edge, once near, there was plenty of muscle willing to give company after company the final shove over the edge by marked to market in a lemon market. So much so that even those securities with seasoned cash flows and stockpiled protective subordinates tranches became suspect.

Of course if size is a disadvantage and does not matter, why would you buy so much insurance on these securities that you knew the counterparty would never have enough collateral to pay you. Unless of course that was the whole idea.
 


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