Mark Spitznagel - Austrian Economics and Investing

Austrian Economics and Investing

In Spitznagel's forthcoming book The Dao of Capital he coins his investing approach as “Austrian investing” (what some have also called “doomsday” investing, for which, according to Forbes, he has many “copycat” followers). The theories inform his notorious very concentrated bearish bets in his so-called “tail-hedging” funds. Spitznagel has said that he has basically been investing against the Federal Reserve and its monetary policy his entire career.

He is presumed to employ positions such as out-of-the-money puts on overvalued equities (for example, Lehman Brothers, about which he has responded “It's a regrettable aspect of our trade that we tend to do very well on others' misfortune”), which he regards as primarily a value-driven bullish play on cheapened markets, providing dry powder specifically when asset prices are depressed (making him “the inverse Warren Buffett” and linking him to the value investing philosophy).

In a series of Wall Street Journal and Forbes op-eds, Spitznagel extolled the views of Ludwig von Mises, Eugen von Böhm-Bawerk, and Frédéric Bastiat, and criticized the interventionism of Federal Reserve chairman Ben Bernanke (calling him “easily the most significant market manipulator in history”) and U.S. President Barack Obama.

Specifically, in his article “Christmas Trees and the Logic of Growth”, Spitznagel made an analogy of the lessons learned from previous wildfire suppression policy in Yellowstone Park (what he calls the “Yellowstone Effect”) to the Fed's bailout and crash-suppression policies (and resulting malinvestment). He has also blamed the Fed for increasing wealth disparity, drawing on the works of Mises, Rothbard, and Hayek.

Spitznagel's Austrian positions have made him a target of notable Nobel and Keynesian economist Paul Krugman.