The Greater Fool

On April 28, Stan Druckenmiller — one of the most famous names in the business — resigned his position at the Soros Fund Management group. That company, of course, was founded by George Soros, the hedge fund manager extraordinaire, and one of the financial markets’ favorite villains.

Hedge funds make money — huge amounts of it — through complex financial operations by placing bets on the movements of currency, bond and stock markets. But the task of predicting market developments has become greatly complicated of late, as the markets gyrate wildly — without caring too much about fundamentals.

No wonder, then, that since 1998 the Soros group of hedge funds has lost $8 billion. As it turns out, the undoing of Mr. Druckenmiller had been that he initially failed on the fundamental insight of seeing the potential of technology stocks.

Even as the proverbial man-on-the-street was gobbling up shares of Cisco and Intel, Soros’s funds — just like those of Julian Robertson, the other big-time hedge fund manager who recently threw in the towel — stuck with other investment choices.

When Mr. Druckenmiller finally became a convert and decided to move into “New Economy” stocks at the end of 1999, the stock market — and especially the tech-heavy Nasdaq — tanked shortly thereafter. In the lingo of the market, Mr. Druckenmiller had become “the greater fool” — the person who was willing to buy, buy, buy, even as the real pros were getting out of the market.

Still, at the time, George Soros had shown a strong sense of vision and symbolism in appointing Mr. Druckenmiller. After all, quite apart from his investment talents, his family name almost guaranteed that he would earn the hedge fund a great amount of money.

Based on its Germanic roots, a “druckenmiller” most likely was a printer in the days of yore. To make up for all of the losses his hedge fund has racked up lately, Mr. Druckenmiller probably wishes he could have stuck to that ancestral occupation — and printed up dollars, marks, baht and rubles to his heart’s content.