More Money Than God: Hedge Funds and the Making of a New Elite by Sebastian Mallaby

Author:Sebastian Mallaby [Mallaby, Sebastian]
Language: eng
Format: epub, mobi, pdf
Tags: Biography & Autobiography, Finance, Business, Business & Economics, Corporate & Business History, Economic History, Investments & Securities, Hedge funds, Investment advisors
ISBN: 9781594202551
Publisher: Penguin
Published: 2010-06-10T04:00:00+00:00

ONE MILE NORTH OF TIGER’S OFFICE, A SHORT WALK FROM Central Park, Robertson’s friends and rivals at Quantum were fighting a parallel battle. At the start of 1999, Stan Druckenmiller, Quantum’s supremo, had shared Robertson’s conviction that tech stocks were too high; but he had acted differently. Undeterred by the market’s momentum, Druckenmiller had placed an unhedged, outright bet against the tech bubble, picking a dozen particularly overvalued start-ups and shorting $200 million worth of them. Immediately, all of them shot up with a violence that made it impossible to escape: “They’d close one day at a hundred and open at one forty,” Druckenmiller remembered with a shudder.17 Within a few weeks the position had cost Quantum $600 million. By May 1999, Druckenmiller found himself 18 percent down. For the first time in his long career, he faced the prospect of a year with significant negative performance.18

Druckenmiller confronted an acute form of the danger that menaced Robertson. The previous year Quantum had been up 21 percent up while Tiger was down 4 percent, but now that he had stood in front of the technology locomotive, Druckenmiller’s losses were twice as bad as Robertson’s. Inevitably, investors chafed. In May a big feeder fund called Haussmann Holdings announced that it had cut its investments in Soros Fund Management by more than half, and the press reported on a stream of Quantum analysts who were leaving for better opportunities. Commentators started to ask whether the Druckenmiller legend was over. There were rumors that the big man might take a three-month medical leave. When these were vigorously denied, a fresh round of rumors intimated that Soros might be tiring of his alter ego.

And yet in an important way, Druckenmiller was better equipped for the technology boom than Robertson. Tiger’s value-investing tradition made it almost unthinkable for Robertson to buy into the bubble.19 Druckenmiller’s blend of traditional analysis and charts made him altogether less predictable. Whereas Robertson had no patience for investing on the basis of momentum, Druckenmiller was fully capable of following the fundamentals in one period and surfing the trend in the next one. In May 1999 Druckenmiller allocated some of Quantum’s capital to a new hire named Carson Levit, who loaded up on dot-com stocks. The skeptic who had shorted the bubble now climbed aboard the bandwagon.

Two months later, Druckenmiller attended the annual technology and media conference in Sun Valley, Idaho. It was a festival of new-economy bullishness and buzz: Everyone from Hollywood moguls to presidential contenders to Silicon Valley whiz kids got together in the shadow of breathtaking mountains; and even Warren Buffett, whose value-investing style had been hammered by the bubble, could be seen pottering about in a polo shirt and baseball cap, chatting with Bill Gates and Michael Bloomberg.20 When Druckenmiller returned from Sun Valley that summer, he had the zeal of the convert.21 He allocated more of Quantum’s capital to Carson Levit and hired a second technology enthusiast named Diane Hakala, whose hobby was to perform dizzying spins as an aerobatic pilot.

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