The Wolf Den #893 - Stanley Druckenmiller
The story of a legend.
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In This Issue:
Stanley Druckenmiller
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
Did OpenSea Just Predict The Bottom?
This Headline Is Annoying
Bitfinex is Getting a Movie
Crypto Will Reach $9 Trillion In 5 Years | Peter Smith, Blockchain.com
Stanley Druckenmiller
If a Wall Street Hall of Fame existed, it's undeniable that the legendary investor Stanley Druckenmiller would earn a spot. Born in 1953 and raised in a quintessential middle-class home in Philadelphia, Stanley stood out early on, displaying remarkable intelligence and a unique eccentricity. Although he aspired to attend an Ivy League university, circumstances led him to a liberal arts college instead. There, Stanley showcased his resourcefulness by selling hot dogs to cover his tuition fees.
In college, Stanley's performance was impressive, yet he found himself at odds with conventional academic teachings. His perspective and approach hinted at the unconventional investment strategies that would later define his career.
“I took Economics just so I could read the paper intelligently. I went to get a PhD in Economics and I went there and I said: These people are crazy. They’re trying to shove the economy into a math formula. It doesn’t make any sense.”
Deciding against a Ph.D., Stanley took a decisive plunge into the finance sector, eager to delve into the intricacies of the market. He started as a stock analyst at PNC, trading the academic track for real-world experience in stock analysis.
Embracing technical analysis (TA), Druckenmiller honed his distinct investment approach. This shift not only defined his unique style but also marked the beginning of an extraordinary rise in his career.
“I never use valuation to time the market. I use liquidity considerations and technical analysis for timing. Valuation only tells me how far the market can go once a catalyst enters the picture to change the market direction.”
At the mere age of 28, Druckenmiller made a pivotal move from PNC, gathered a million dollars, and founded his own hedge fund, Duquesne Capital, in 1981.
In just one year, as a recession loomed, Druckenmiller astutely seized the moment to go long on bonds, securing substantial profits. This early success was a mere preview of his audaciously bold investment philosophy.
Druckenmiller's career is a tapestry of diverse strategies, all woven together by his ability to consistently outmaneuver the market. He adeptly minimized losses while maximizing gains. Within less than ten years of honing his craft, he made bets that were not just profitable but legendary, cementing his status as the undisputed master of high-stakes, high-conviction investing.
“Druckenmiller's first bet came when the Berlin Wall fell in the late 80’s. The perceived difficulties of reunification between East and West Germany had depressed the German mark to a level that Druckenmiller thought extreme. He initially put a multimillion-dollar bet on a future rally, until Soros told him to increase his purchase to two billion German marks. Things played out according to plan and the long position came to be worth millions of dollars.”
Three years on, Druckenmiller's path intersected once more with pivotal moments in financial history. His career reached a zenith in 1992 when he teamed up again with Soros, masterminding the famed episode known as "breaking the Bank of England." This maneuver, involving a massive short position against the British pound, led to a legendary trade that yielded profits exceeding $1 billion.
Their strategic play exerted such immense pressure that it compelled the Bank of England to cease defending its currency, leading to the historic day known as 'Black Wednesday.'
“I walked into his (Soros’) office, and I told him I wanted to put a $7 billion dollar position (the entire firm at the time). He looked at me with the most disgusted look; I was getting angry with his body language and feedback. He said, 'Look, you only get an opportunity like this maybe 2 or 3 times in your career. This is a one-way bet. You just aren't betting enough. We shouldn't put 100% of the fund in the trade; we should put 200% of the fund in this trade. Go for the jugular, go for the kill.”
You can probably understand why Druckenmiller is famous for saying, “I like putting all my eggs in one basket and then watching the basket very carefully.”
Throughout the 90s and into the 2000s, Druckenmiller's career was marked by a succession of lucrative ventures. Yet, it's worthwhile to pivot our attention to his philosophy and views on Bitcoin. Central to Druckenmiller's triumphs are his fervor for the craft, steadfast confidence, and exceptional intuition. While mirroring his intuitive prowess might be elusive for many, there's much to learn from his confidence, enthusiasm, and insights on Bitcoin.
“I think I would die if I couldn’t have some connection with the investment markets during the day.
I’m not very good at golf.
I like doing stuff I’m good at and I think that’s part of what we’re talking about with passion. No one likes being a loser. So yeah, I think I’ll probably go to my grave doing this stuff.
If you’re not really passionate, if you don’t love this stuff, go do something else. I’ve hired guys with 50 or 60 points higher than me who stink in my business.”
Now at 70, Druckenmiller's sharp intellect remains intact. Despite his multi-billionaire status, he presently doesn't hold Bitcoin. However, he recognizes its potential. In a candid admission late last year, he revealed, “I don't own any Bitcoin, to be frank, but I should.” This acknowledgment reflects his ongoing engagement with emerging financial trends and opportunities.
“I'm 70 years old, I own gold. I was surprised bitcoin got going but ... it's clear the young people look at it as a store of value because it's a lot easier to do stuff with and 17 years, to me, it's a brand. [But] I like gold because it's a 5,000-year-old brand. The young people have all the money. I like them both.”
It's intriguing to ponder how Druckenmiller might have approached Bitcoin had it emerged earlier in his career. The closest parallel today might be Michael Saylor, whose actions are incredibly bold. Saylor has staked MicroStrategy's future, and more on Bitcoin, positioning him as the contemporary equivalent of Druckenmiller in the realm of cryptocurrency.
As for the GBTC narrative, its resolution is eagerly anticipated this week. Even if it doesn't fully conclude, it's likely nearing its end. Despite the uncertainty, the market retains a bullish stance; patience is key in this evolving landscape.
Bitcoin Thoughts And Analysis
Bitcoin's weekly candle was a beautiful hammer (red box), with a long wick down and small green body. This is usually a bottom signal and indicates a reversal to the upside. We will see if it confirms with a green candle this week, but this is a very encouraging sign that the bottom is likely in.
Bitcoin was rejected at the 50 MA, which is not unexpected on the first try after dipping below. We talked about how losing this blue line was a bearish signal, as it had been traveling well below price since $26,000 in September/October. Flipping this to support would be yet another major sign that the bottom is in.
Trading Alpha is yet to give green dots on the daily chart - but it already has on every time frame below, including the 12 hour. The good news is that we no longer see red dots, and price is back above an ascending green track line. It should only be a matter of time.
This indicator (which has become my go to and is available at Trading Alpha) really simplifies charting.
Altcoin Charts
For those who are new here, I share SETUPS and not SIGNALS. These are ideas that I am watching - if a certain thing happens, then the trade triggers. I am not telling you what to buy or when. I am showing you how I am watching certain charts and what has to happen for me to take a trade.
The good news? Solana seems to be breaking through descending resistance, which give a target of the recent highs?
The bad news? I only filled about 25% of my position, as I was waiting for the $75-$77 area.
No regrets When you bid a key support level, you always have to be willing to miss, so I am happy that I made the adjustment and started this smaller position.
I would like to see a bit more volume here. The breakout was weak, basically sideways across the line - but, we do have a nice retest as support and price heading up.
Legacy Markets
Markets began the week cautiously, with attention on upcoming central bank decisions, a slew of major corporate earnings, and escalating tensions in the Middle East. The Stoxx 600 index remained strong, driven by the energy sector, while futures for the S&P 500 and Nasdaq 100 showed little change. Oil prices surged, reaching their highest since November, amid geopolitical unrest and a recent attack on a Russian fuel vessel by Houthi rebels.
Investors are poised for a packed week, eyeing policy updates from the Federal Reserve and the Bank of England, as well as significant earnings reports from tech giants like Apple, Microsoft, and Alphabet.
Corporate news saw Holcim Ltd. planning to spin off its North American business, while Royal Philips NV faced setbacks with a suspension of certain medical device sales in the US. Bayer AG’s Monsanto faced a hefty legal penalty, and Ryanair Holdings Plc adjusted its profit projections downward.
Currency markets showed the dollar holding steady and a slight dip in the euro, with the European Central Bank hinting at a potential rate cut by April, though cautioning against premature actions that could hamper inflation progress.
In Asia, markets responded positively to China's efforts to boost its equity market, despite challenges faced by property shares after a court ruling against China Evergrande Group.
Global equities face a challenging period ahead, according to UBS Group AG, with slowing growth expected to impact earnings. The firm suggests a focus on defensive sectors, noting an unusual disconnect between market optimism and weakening economic data, and cautioning that this relationship may soon shift.
Key events this week (there are A LOT!):
Australia retail sales, Tuesday
Eurozone economic confidence, GDP, consumer confidence, Tuesday
European Central Bank board members Boris Vujcic and Philip Lane speak, Tuesday
US Conf. Board consumer confidence, Tuesday
Microsoft Corp., Alphabet Inc. to report earnings, Tuesday
Australia CPI, Wednesday
Japan industrial production, retail sales, Wednesday
China non-manufacturing PMI, manufacturing PMI, Wednesday
France CPI, Wednesday
Germany CPI, unemployment, Wednesday
ECB chief economist Philip Lane speaks, Wednesday
Fed rate decision, US employment cost index, Wednesday
Boeing Co. announces earnings, Wednesday
US Treasury quarterly refunding, Wednesday
Japan PMI, Thursday
China Caixin manufacturing PMI, Thursday
Eurozone S&P Global Manufacturing PMI, CPI, unemployment, Thursday
Bank of England rate decision, Thursday
ECB Governing Council member Mario Centeno speaks, Thursday
US ISM Manufacturing, initial jobless claims, Thursday
Apple Inc., Amazon.com Inc., Meta Platforms Inc. to report earnings, Thursday
ECB Governing Council Member Mario Centeno speaks, Friday
US employment report, University of Michigan consumer sentiment, factory orders, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 was little changed as of 10:29 a.m. London time
S&P 500 futures were little changed
Nasdaq 100 futures rose 0.2%
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index rose 1%
The MSCI Emerging Markets Index rose 0.7%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro fell 0.3% to $1.0816
The Japanese yen rose 0.2% to 147.86 per dollar
The offshore yuan was little changed at 7.1935 per dollar
The British pound was little changed at $1.2698
Cryptocurrencies
Bitcoin rose 0.6% to $42,231.01
Ether rose 0.3% to $2,270.26
Bonds
The yield on 10-year Treasuries declined four basis points to 4.10%
Germany’s 10-year yield declined six basis points to 2.24%
Britain’s 10-year yield declined five basis points to 3.91%
Commodities
Brent crude was little changed
Spot gold rose 0.5% to $2,028.19 an ounce
Did OpenSea Just Predict The Bottom?
At the height of the NFT boom, OpenSea achieved a remarkable valuation of $13.3 billion, bolstered by a $300 million funding round. The current valuation is unclear, yet it wouldn't be surprising if it's adjusted significantly downwards, perhaps to the $1 or $2 billion range, especially considering the downturn in the NFT market and the emergence of competitors like Blur. Adding an intriguing layer to the narrative, OpenSea's CEO, Devin Finzer, has hinted at openness to acquisition, stating, “We think that if the right partnership comes along, then that’s something we should certainly consider.”
While the statement doesn't exude desperation, the notable decline in NFT volumes could be viewed as a potential indicator of market bottoming in the future. As evidenced in the image above, OpenSea is poised to conclude January with a record low in monthly volume. The concept of an airdrop remains a potential strategic move for the company, serving as an ace up their sleeve amidst these challenging times.
This Headline Is Annoying
Is it just me, or are the repeated announcements of the status of Tesla’s Bitcoin beyond annoying at this point? Sure, if Tesla comes back with a substantial purchase or liquidation, I’ll bite, but the constant updates and finger-pointing at Tesla are too much. ‘Tesla missed out on X if it had done Y,’ or ‘Tesla sold when it should have bought’ are ridiculous claims, considering Tesla is not an investment-focused company, and Bitcoin is not a high priority for Elon. The article linked above went as far as tracking TSLA vs Bitcoin and produced these stats:
TSLA vs. BTC: -40.1%
BTC vs. USD: +7.39%
TSLA vs. USD: -35.7%
Companies are inevitably going to add Bitcoin to the balance sheet, so let’s act professionally and be patient rather than making them regret interacting with us in the first place.
Bitfinex is Getting a Movie
Amazon MGM Studio is in the process of creating a film about the duo behind the colossal $4 billion Bitfinex hack. Although the project is yet to be titled, its potential is underscored by the involvement of acclaimed actors, alongside a strong team of writers and directors. This real-life story, if portrayed compellingly, seems destined to captivate audiences—except, perhaps, those still grappling with the aftermath of the scam. Meanwhile, "Dumb Money" has made its debut on Netflix, offering an entertaining narrative with nods to the crypto world. Furthermore, the FTX saga is ripe for cinematic adaptation, and there's hope that the upcoming bull market, if it unfolds positively, might also be portrayed on the big screen for all the right reasons.
Crypto Will Reach $9 Trillion In 5 Years | Peter Smith, Blockchain.com
Peter Smith is the CEO and Co-Founder of Blockchain.com, and he is a true crypto OG. He has been running Blockchain.com for over 10 years, which makes him one of the longest-standing CEOs in the crypto industry. In this episode, you will learn why Peter has been buying Bitcoin for under $100 and for $40,000, and will continue to do so, how Blockchain.com manages to survive major crypto contagions, and why we still haven’t seen institutional crypto adoption.
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Good issue, thank you very much!
The Druck is a god. Great synopsis