Mark Spitznagel

Mark Spitznagel (/ˈspɪtsneɪɡəl/; born March 5, 1971) is an American investor and hedge fund manager. He is the founder, owner, and chief investment officer of Universa Investments, a hedge fund management firm based in Miami, Florida.[2]

Mark Spitznagel
Born (1971-03-05) March 5, 1971
Ann Arbor, Michigan, United States[1]
NationalityAmerican
Alma materNew York University, Kalamazoo College
OccupationInvestor, hedge fund manager
Known forFounding and managing Universa Investments
Spouse(s)Amy Spitznagel

He is known as a pioneer in so-called “tail-hedging”[3] or “black swan” investing, an investment strategy intended to provide “insurance-like protection” against stock market crashes.

Early life and education

Spitznagel has a graduate degree in Mathematics from the Courant Institute of Mathematical Sciences at New York University and an undergraduate degree from Kalamazoo College.[1]

When he was 16 years old, Spitznagel was apprenticed by 50-year veteran corn and soybean trader Everett Klipp.[4][5] Spitznagel became an independent pit-trader at the Chicago Board of Trade and later a proprietary trader at Morgan Stanley in New York.[6]

In 1999, Spitznagel and author and financial mathematician Nassim Nicholas Taleb (who was Spitznagel's professor at NYU) established the Empirica Capital “tail-hedging” fund.[7][8]

Investment career

In 2007, Spitznagel founded the hedge fund Universa Investments, where he is the Chief Investment Officer, and which offers a type of insurance against extreme market risk.[9]

In 2018, The Wall Street Journal reported that “a strategy consisting of just a 3.3% position in Universa with the rest invested passively in the S&P 500 had a compound annual return of 12.3% in the 10 years through February (2018), far better than the S&P 500 itself” (and portfolios with “more traditional hedges”).[10]

Moreover, “Universa was among a handful of funds that made huge gains" during the financial crisis of 2007–2008.[10] In 2010, it was alleged that a large trade by Spitznagel in the minutes leading up to the 2010 Flash Crash (when the Dow Jones Industrial Average lost over 9% of its value during the day) was among its primary triggers.[11]

Investment approach

Spitznagel's self-described investment strategy is focused on risk mitigation in portfolio construction, and is intended to allow his clients to take more systematic risk.[12] In general terms, he does this by owning far out-of-the-money put options on stocks. He has called “investing Übermensch” Friedrich Nietzsche’s slogan “amor fati”—or the love of one’s fate—“the secret to successful investing.”[13]

Spitznagel is dismissive of Modern Portfolio Theory, and specifically its emphasis on correlations and mean-variance (or Sharpe ratios),[12][14] and skeptic of market forecasts,[12] although, according to a New York Times article, he predicted two market routs in the past decade, first in 2000 and then in 2008,[15] as well as the “2000s commodities boom.”[4]

He has described what he does as lowering what he calls the “volatility tax” paid by investors—"the hidden tax on an investment portfolio caused by the negative compounding of large investment losses.”[16] He detailed in an investor letter how “mathematically, it is the rare big loss, not the frequent small losses, that matters most to long-run compounding,” and called the Swiss mathematician and physicist Daniel Bernoulli “Universa’s Patron Saint.”[17]

Spitznagel wrote a book in 2013 titled The Dao of Capital: Austrian Investing in a Distorted World about the Austrian School of economics and its ostensible application to investing.[18] Paul Tudor Jones said of Spitznagel's book that it “shows how a seemingly difficult immediate loss becomes an advantageous intermediate step for greater future gain, and thus why we must become ‘patient now and strategically impatient later’.”[19]

Political and economic views

As a libertarian and advocate of Austrian economics, Spitznagel has been very critical of central bank monetary interventionism. For instance, he has written pieces on Ludwig von Mises (“The Man Who Predicted the Depression”)[20] and about the Fed's alleged culpability for “increasing wealth disparity,”[21] which focused on the economic distortions that ostensibly result from money creation. The Sveriges Riksbank Prize in Economic Sciences winner and New Keynesian New York Times columnist Paul Krugman has critically addressed these positions.[22]

In his book[19] and in a 2015 op-ed (“The Myth of Black Swan Market Events”), Spitznagel connected every similar high point in the Tobin's Q-ratio since 1900 with past monetary interventionism and subsequent stock market losses, which he called “perfectly predictable, by economic logic alone.”[23]

Along with entrepreneur Peter Thiel, Spitznagel was a major supporter of the 2012 Republican Presidential campaign of U.S. Congressman Ron Paul, a friend and fellow libertarian who “shares [Spitznagel's] contempt for the Federal Reserve”[24] and his desire for a non-interventionist foreign policy.[25] Spitznagel was also senior economic advisor to the 2016 Republican Presidential campaign of Ron's son, U.S. Senator Rand Paul.[26]

Personal life

Spitznagel is among the many financial executives and hedge fund managers who moved their residence and operations to Florida.[27] In 2014, he moved his hedge fund offices from Los Angeles to Miami, citing Florida's “more hospitable business and tax environment” than California's.[28] There is no income tax or estate tax in the state of Florida.[27]

According to The Wall Street Journal, Spitznagel splits his time between his Miami office and Michigan, where his family lives.[6]

He and his wife built, own, and operate Idyll Farms, a farm in Michigan that pastures dairy goats and produces artisanal chèvre. A Bloomberg article claimed that the farm is making "some of the best goat cheese in America.”[29]

Spitznagel also reportedly flies planes and practices ashtanga yoga.[6]

gollark: .
gollark: I'll run another 10000
gollark: I think the reason the small ones work better is due to the higher variance.
gollark: They *can't* keep growing, in an 8x8 grid, though.
gollark: (they do wrap)

See also

References
  1. The Secret to Mark Spitznagel’s Success? Not Following the Crowd Archived April 14, 2010, at the Wayback Machine, CIMS Newsletter, Fall/Winter, 2009
  2. Universa Investments L.P., firm website
  3. Tail-Risk Hedge Pioneer Spitznagel on Safe Havens, Keynote address, Bloomberg Invest New York Summit, June 7, 2017
  4. Patterson, Scott. Spitznagel Bets Reputation on Inflation, The Wall Street Journal, June 17, 2009
  5. Veteran Trader of the Chicago Board of Trade, Chicago Tribune, January 31, 2011
  6. Meet Mark Spitznagel, the Investor Behind Universa’s Big Gain, The Wall Street Journal, August 31, 2015
  7. Malcolm Gladwell, Blowing Up Archived February 24, 2011, at the Wayback Machine, The New Yorker, April 29, 2002
  8. Malcolm Gladwell, What the Dog Saw: And Other Adventures. Little, Brown and Company. 2009
  9. Mark Spitznagel beats drum for tail risks as markets stall, Financial Times, May 16, 2016
  10. Triumph of the Market Pessimists, The Wall Street Journal, September 21, 2018
  11. Did a Big Bet Help Trigger 'Black Swan' Stock Swoon?, The Wall Street Journal, May 11, 2010
  12. Future Financial Crises Will Be Deeper, Universa's Spitznagel Warns, Bloomberg TV, September 14, 2018
  13. Amor Fati, (Universa website), January 2019
  14. Universa's Spitznagel on Fed Policy, Hedge Funds and Insuring Market Risk, Bloomberg TV, February 5, 2019
  15. A Hedge Fund Manager Who Doesn’t Mind a Losing Bet, The New York Times, June 29, 2011
  16. The Volatility Tax, (Universa website), February 2018
  17. Spitznagel, Universa Decennial Letter: What’s Past is Prologue, March, 2018
  18. Black Swans Are A Myth, Government Intervention Is The Only Black Swan, Forbes, August 21, 2013
  19. The Dao of Capital: Austrian Investing in a Distorted World. New York: John Wiley & Sons. September, 2013
  20. Spitznagel, The Man Who Predicted the Depression, The Wall Street Journal, November 6, 2009
  21. Spitznagel, How the Fed Favors The 1%, The Wall Street Journal, April 19, 2012
  22. Krugman, Plutocrats and Printing Presses, The New York Times, April 20, 2012
  23. Spitznagel, The Myth of Black Swan Market Events, The New York Times, February 13, 2015
  24. Hedge-fund manager Mark Spitznagel to host Ron Paul fundraiser, Digital Journal, March 6, 2012
  25. Americans Must Choose Non-intervention For Peace and Prosperity, Mises Institute
  26. Hedge fund manager Mark Spitznagel to advise Rand Paul, CNBC, June 20, 2015
  27. More investors leaving U.S. northeast for Florida, Reuters, September 13, 2016
  28. Spitznagel’s Universa Moves To Miami Archived September 10, 2015, at the Wayback Machine, FINalternatives, Feb 19, 2014
  29. Zimberoff, Larissa. A Hedge Fund Pioneer Is Making Some of the Best Goat Cheese in America, Bloomberg Pursuits, November 7, 2017
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