Druckenmiller Made Ill-Timed Bet Against Internet Stocks in March of 1999

Stanley Druckenmiller is one of the greatest traders that has ever lived.

Imagine being held in such high esteem that you manage money for George Soros.

Imagine not losing money for over 30 straight years.

Imagine being involved in one of the most famous trades (shorted British pound sterling) of all time.

This is Stanley Druckenmiller, though even he isn't immune to taking some incredibly large losses.

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It was the spring of 1999, and Internet stocks were going crazy.

Stanley Druckenmiller had an idea.

Take a basket of what he felt were the trashiest "dot com" stocks and short.

In total, Druckenmiller had a total of 12 Internet stocks that he identified as the worst of the worst. Druckenmiller would end up shorting $200 million worth of stock in total.

Druckenmiller, who would go on to become one of the greatest traders of all time, would end up getting absolutely obliterated in the position.

Over the course of just three weeks, Druckenmiller's position was down $600 million and counting.

There was no choice - Druckenmiller had to take the loss and move on, much to the chagrin of both himself and George Soros.

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Druckenmiller has said that he essentially topticked the covering of his shorts, as they would start to fall apart shortly after he covered.

Druckenmiller, however, had the discipline not to get back in. He'd been burnt once, and wasn't about to take another staggering loss in what was clearly an irrational market.

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Druckenmiller likes to point out that all of the 12 Internet stocks that he shorted - every single one - would end up going bankrupt, like so many other "dot com" era stocks.

Filed under: General Knowledge