Billionaire Investor Who Predicted 2000, 2008 Crashes Says Market Euphoria Will Top Soon, Warns Of ‘Black Swan Event’
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Mark SpitznagelThe co-founder of Universa Investments believes that the stock market is in a “goldilocks phase” after the crisis. Interest rate cuts by the Federal Reserve and stimulus measures in China. After last month’s collapse, the market has risen to new highs, but Spitznagel warns that this euphoria will not last for long. Interview with Bloomberg.
He expects an imminent recession and believes the current rise is only temporary.
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Spitznagel, known for his focus on hedging “tail risk,” which protects against extreme and unpredictable market events, says the largest market bubble in history is about to burst. He expects stagflation in the future, where the Fed will have to act, but it will not be enough to save the economy.
Spitznagel has had success hedging during major market downturns, using out-of-the-money put options as a way to “buy insurance” against market paths. The buyout is generally offered to the market through the SPDR S&P 500 ETF Trust (NYSE:spy) or ETFs with broad exposure can be a way to protect against market volatility.
Although the market may continue to rise in the short term, it will soon exit the Goldilocks zone, perhaps by the end of the year, Spitznagel said. With the recent “inversion” of the yield curve, Spitznagel feels the market is now in “black swan territory.”
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What is a black swan event: A black swan event is an unpredictable event that causes market volatility. The market crash due to COVID-19 is a recent example of a black swan event.
He also criticized traditional investment strategies such as diversification as a “big lie.” He argues that modern portfolio theory has distracted investors, often making them poorer in the long run. Instead, he urges investors to focus on how their portfolios have performed in both good and bad markets.
According to Spitznagel, the key is to protect against one’s own tendencies, not just market movements. Instead of focusing on what the market will do next, investors should think about how they would react in boom-and-bust scenarios to avoid emotional mistakes like selling at the low and buying at the high.
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This article Billionaire investor who predicted crashes in 2000 and 2008 says market euphoria will peak soon, warns of ‘black swan event’ Originally appeared on Benzinga.com
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