Universa Investments Mark Spitznagel

1 universa investments

1.1 tail-hedging

1.1.1 stock market timing calls


1.2 commodities trading

universa investments

in 2007, spitznagel founded hedge fund universa investments, chief investment officer, , specializes in profiting (and providing type of insurance against) extreme market risk. universa “made 1 of biggest profits on wall street during 2008 financial crisis” (according cnbc), scoring returns of on 100% standard & poor’s 500-stock index lost on third of value, , making spitznagel “a fortune” according wall street journal.

spitznagel has said targets “lumpy returns” in trading (what forbes has called “a string of mediocre results interrupted spectacular years”) says “ultimately keep away competitors.” has compared patience , discipline required in betting on rare events “hemingway’s santiago waiting seems eternity catch big fish.”

as spitznagel describes “extreme asymmetric payoffs” of approach:

we tend lose or draw—most of time—these small battles or skirmishes. but, ultimately, win wars.

spitznagel delivering keynote @ bloomberg invest new york, 2017


tail-hedging

spitznagel pioneer in so-called “tail-hedging,” or “black swan” investing, investment strategy intended provide “insurance-like protection” against stock market crashes, owning far out-of-the-money put options on stocks. spitznagel considers tail-hedge strategy “a less conventional , more exotic” (as superior) form of safe haven investment. (spitznagel says “has spent life trying create best safe haven investment out there.”) while has called strategy “in many ways functionally equivalent” gold safe haven, has claimed (in 2016 barron’s article what’s best safe haven investors?) “explosive protection , nonlinearity” of strategy make “the 1 safe haven as—and better than—gold.” (according spitznagel, conventional safe havens such u.s. treasuries, swiss franc, high dividend-paying stocks, hedge funds, fine art, , u.s. farmland have crash returns low , negative, “they not provide insurance protection.” called vix futures “a real stinker of trade.”)

spitznagel calls himself “a hedge fund manager hedges clients. of old fashioned idea in day of gambling on next fed bailout.” describes “highly nonlinear, insurance-like” strategy “explodes in value” in crash investment “is there presumably can risky wouldn’t otherwise do.” new york times has described universa’s investors’ ability profit in bull market, , how spitznagel’s strategy allows investors hold long stock positions otherwise wouldn’t. spitznagel has said “what not playing defense,” “also playing offense,” , strategy allows investors “responsibly long” stock market. in 2015 video (“spitznagel on paradox of higher returns lower risk”), spitznagel explains how “asymmetry” of payoff allows investors “in both , down markets,” lower risk. nassim taleb has said:

when comes investing in environment, colleague mark spitznagel articulated well: investors left simple choice between chasing stocks have increasing chance of crash or missing out on continued policy effects in short term. incorporating tail hedge minimizes risk in tail, allowing investors remain invested on time without risking ruin.

some have called spitznagel’s tail-hedging strategy “doomsday” investing, which, according forbes, has many “copycat” followers. spitznagel presumed employ positions such out-of-the-money puts on overvalued equities (for example, lehman brothers, has responded “it’s regrettable aspect of our trade tend on others’ misfortune”), regards value-driven bullish play on cheapened markets, providing dry powder when asset prices depressed (making him “the inverse warren buffett”). spitznagel has said,

i call greatest investment strategy there is, attributable john d. rockefeller, “buy when blood running in streets.”

“spitznagel’s strategy stems skepticism toward government efforts revive economy.” in reticence discuss funds, has been “content descriptions fund had small losses each year wagered against market.”

for profiting off market crashes, “i’m in position jerk,” spitznagel has said. “the jerks should ben bernanke , alan greenspan,” because of federal reserve actions create asset bubbles, or ways in fed intervenes stave off inevitable consequences of bubbles. spitznagel says has been investing against federal reserve , monetary policies entire career, , has called central banks “the root of evil in market.”

the wall street journal alleged large purchase of put options spitznagel in minutes leading 2010 flash crash (when dow lost on 9% of value during day) among primary triggers (and spitznagel subpoenaed u.s. securities , exchange commission). wrote wall street journal op-ed in defense.

in 1999, spitznagel , author , financial mathematician nassim nicholas taleb (who spitznagel’s professor @ nyu) created first ever tail-hedging fund, empirica capital, , “became close partners, spitznagel disciplined trader, taleb more abstract theorist.” taleb went on popularize “black swan” concept in books, whereas spitznagel went on found universa , modify , implement strategy, became major hedge fund investment asset class. taleb joined spitznagel’s universa distinguished scientific advisor, “but in strictly hands-off, passive capacity” (contrary occasional press crediting him universa’s investing). taleb has said “one thing mark taught me when isn t afraid of losing small amounts, they’re invincible.” “mark’s portfolio robust.”

ironically, spitznagel largely indifferent concept of “black swan events.” in 2015 new york times op-ed titled “the myth of black swan market events”, connected every similar high point in tobin s q-ratio since 1900 (specifically in 1905, 1929, 1936, 1968, 2000, , 2007) past monetary interventionism , subsequent stock market losses (of -19%, -85%, -36%, -29%, -44%, , -50%, respectively), called “perfectly predictable, economic logic alone”—and implied crash coming. spitznagel has said crash ”is not black swan. reason i’m going still call black swan because markets still price black swan.” wrote in dao of capital:

truly, real black swan problem of stock market busts not remote event considered unforeseeable; rather foreseeable event considered remote. vast majority of market participants fail expect should be, in reality, expected events.

stock market timing calls

spitznagel has made market timing forecasts, , has called attempts @ timing crash “a fool’s errand, , fortunately such efforts largely irrelevant” strategy. in 2013 said:

i think it’s naive think can pinpoint such thing. if history guide, should expect sooner later. but, history need not guide because we’re in monetary experiment likes of haven’t seen before.

still, spitznagel has publicly made several stock market calls—both bearish , bullish:

in june 2011, cnbc reported on research piece spitznagel predicted 20% correction in s&p 500 stock index, , s&p 500 subsequently fell 20% within 4 months.
in 2013 book, spitznagel vaguely described long-only, value-based equity strategy employs in family office.
in may 2015 bloomberg tv interview (“meet world’s bearish investment manager”), spitznagel called himself “the bearish investment manager find today. there may hiding in basement who’s more bearish.” called stock market second greatest stock market bubble in last one-hundred years. spitznagel said attempts short market reckless “blow-up trade” and, month later, advocated “a greater stock allocation” paired tail hedging strategy in order profit rising market. 2 months later, spitznagel’s strategy reportedly made $1 billion in august 2015 stock market decline.
in june 2016, before market recovered brexit-plunge make new all-time highs, spitznagel dismissed brexit “a lot of fear mongering,” saying “the decentralisation of power away hubristic central planners world needs more of.”

commodities trading

from age of 16, spitznagel apprenticed 50-year veteran corn , soybean trader everett klipp (a.k.a. “babe ruth of chicago board of trade”), stood him in commodity futures pits , groomed him risk averse, disciplined trader. klipp “pretty brainwashed him age of 16” “limit losses having him exit trades moved against him.” likened “quickly folding hand” in poker, , mantra “you’ve got love lose money, hate make money.” 22, spitznagel exchange member , independent pit trader @ chicago board of trade.

as spitznagel recalled end of trading day in pit:

even if i’d lost money, happy going home knowing i’d traded way wanted trade.

since leaving chicago trading pits, spitznagel has continued actively speculate in commodities. in july 2009, spitznagel launched new strategy betting on “a big leap in prices of commodities such corn, crude oil,” , precious metals—a notably “huge wager,” according wall street journal, spitznagel “bet reputation.” on next 2 years, prices of corn, crude oil, gold, , silver gained approximately 100%, 50%, 100%, , 200%, respectively, in has come known “2000s commodities boom.”

spitznagel has strong austrian views on precious metals , against fiat money, saying “as dollars decaying asset, there’s sound economic logic behind gold’s long-term appreciation.” however, regarding run in gold prices , gold trading, spitznagel has said, “how many people acquire gold after goes up, , dump when doesn’t? i’d recommend opposite strategy.” has written “gold’s millennia of safe haven attributes remain intact,” , considers gold , tail-hedging “two safe havens worthy of name.” (spitznagel lamented “the sad monetary degradation of swiss franc” away hard currency safe haven status.)