Briefing · Listenseattle
Black Swan investor Mark Spitznagel says the crash of a lifetime is coming after one more 'euphoric rally'. By Theron Mohamed
Mark Spitznagel, head of Universa Investments, predicts the AI boom will continue but warns of a monumental crash. Universa, a 'Black Swan' fund specializing in catastrophic events, has been 'extremely bullish' for four years despite being one of the most bearish hedge funds. He notes signs of excessive leverage and 'hubristic bets' but does not foresee an imminent crash. However, he warns the economy is 'rolling over' as interest-rate hikes' aftershocks are yet to materialize.
Spitznagel agrees with Michael Burry, the investor from 'The Big Short', about AI hyperscalers' overinvestment in microchips and data centers, but predicts Burry will be wrong about timing. He claims he will be the 'biggest bear' in the months ahead. Spitznagel predicts 'one more really big, risk-on, insane, euphoric rally' before a crash, potentially sooner than later.
Spitznagel describes his investing approach as akin to playing piano for 10 years, hoping to one day master a masterpiece. He founded Universa in 2007 after leaving Empirica Capital, where he worked with Nassim Taleb, author of 'The Black Swan'. Their strategy involves tail-hedging, betting on extreme, rare events to offset daily losses. Universa’s strategy returned 4,144% in Q1 2020 during the COVID-19 crash, demonstrating its effectiveness.
Spitznagel’s strategy parallels Warren Buffett’s use of insurance float to buy bargains during downturns. He emphasizes that small allocations to Universa can reduce portfolio risk while boosting returns, allowing investors to capitalize on subsequent rallies.
Theron Mohamed, a London-based correspondent for Business Insider, covers finance, investing, and markets. He previously worked at Investors Chronicle and Financial Times, and interned at the Wall Street Journal. Spitznagel’s insights reflect his long-term, high-risk, high-reward investment philosophy.
Source: Business Insider
