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One of the best investors in the world intentionally loses millions of dollars a year.
He has been doing this for more than a decade, yet he remains one of the best in the business.
Time for a thread
He has been doing this for more than a decade, yet he remains one of the best in the business.
Time for a thread
1) Meet Mark Spitznagel.
He is the founder and Chief Investment Officer of Universa Investments, an American hedge fund that manages more than $4 billion.
He is the founder and Chief Investment Officer of Universa Investments, an American hedge fund that manages more than $4 billion.
2) Mark Spitznagel started his finance career at 16-years old when he interned for Everett Kipp, a legendary corn and soybean trader at the Chicago Board of Trade.
This is where Spitznagel learned the core strategy of being comfortable losing a little money every day.
This is where Spitznagel learned the core strategy of being comfortable losing a little money every day.
3) Eventually Spitznagel heads to NYU, where he becomes a student in @nntaleb's class.
The two men hit it off and in 1999 they start Empirica Capital.
Empirica is a "tail-hedging" fund that focuses on risk-mitigation.
The two men hit it off and in 1999 they start Empirica Capital.
Empirica is a "tail-hedging" fund that focuses on risk-mitigation.
4) Spitznagel continues to hone his craft for almost a decade in partnership with Taleb.
In 2007, he finally strikes out on his own to start Universa Investments.
The strategy is the same — lose a little money every day and patiently wait for an inevitable market crash.
In 2007, he finally strikes out on his own to start Universa Investments.
The strategy is the same — lose a little money every day and patiently wait for an inevitable market crash.
5) Spitznagel's strategy consists of buying far out-of-the-money put options.
He strives to lower the "volatility tax" paid by investors — "the hidden tax on an investment portfolio caused by the negative compounding of large investment losses."
He strives to lower the "volatility tax" paid by investors — "the hidden tax on an investment portfolio caused by the negative compounding of large investment losses."
6) The key to this strategy is being much more patient than everyone else in the market.
"We exploit properties in markets that take years and years, and even decades, to show themselves."
"We exploit properties in markets that take years and years, and even decades, to show themselves."
7) Spitznagel has been patiently waiting for a severe market downturn since 2008.
He finally got his moment earlier this year.
Universa Investments returned 4,144% in Q1 2020.
He finally got his moment earlier this year.
Universa Investments returned 4,144% in Q1 2020.
8) Forbes reports that Spitznagel and Universa Investments have returned a mean annual return on invested capital of 76% since 2008.
This easily makes Mark Spitznagel one of the best investors in the world.
This easily makes Mark Spitznagel one of the best investors in the world.
9) So how exactly does a man who manages $4+ billion remain so patient?
Well, he doesn't spend his days staring at a screen.
Spitznagel and his wife run Idyll Farms in Northport, Michigan, where they make world-class, award-winning cheese.
Well, he doesn't spend his days staring at a screen.
Spitznagel and his wife run Idyll Farms in Northport, Michigan, where they make world-class, award-winning cheese.
10) We live in a world of instant gratification, so it is cool to see how discipline and patience can lead to outsized returns.
And never forget — somewhere there is a goat farmer who is waiting to take your money during the next panic.
And never forget — somewhere there is a goat farmer who is waiting to take your money during the next panic.
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Sources: https://www.forbes.com/sites/antoinegara/2020/04/13/how-a-goat-farmer-built-a-doomsday-machine-that-just-booked-a-4144-return/#3061ca9d3b1b
https://en.wikipedia.org/wiki/Mark_Spitznagel
https://en.wikipedia.org/wiki/Mark_Spitznagel
