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Mark Spitznagel Explains How To Make A Fortune (Or Go Broke)
Originally posted at Men's Health,
It's a new year, and a new opportunity to get rich. Or at least start making better financial choices.
But where to begin? You could seek guidance from your uncle, who swears he has investing ideas that could make you a small fortune. You could watch that Mad Money CNBC show, where Jim Cramer smashes red buttons and pretends he has any idea what he's talking about. You could find a broker who hopefully isn't a crook, or a penny stock investment guru who hopefully isn't full of shit. Or you could skip the middlemen and just ask a billionaire.
Let's try the billionaire approach.
We asked Spitznagel the questions you want to know. We also asked him the questions you didn't know you wanted to know, but you really should know if you're serious about making a lot of money in 2015. And of course, we asked him at least one question about the likelihood that we'd ever own a private island, because how cool would that be?
What's the easiest, fastest way to get rich in 2015?
Here's a better question: What's the easiest, fastest way to get very poor in 2015? Answer: Going for the easiest, fastest way to get rich in 2015—or punting on what's worked in the recent past.
Don't fall for the trap of myopically following yesterday's winners. Protect yourself, keep your powder dry (meaning, the cash you’ve set aside for investing), and wait for a better day. Think more about getting rich in 2020 or beyond.
How do I decide whether a stock is a bargain?
If you’re searching for stock-market bargains, this is the wrong time to be looking. The Federal Reserve has been single-handedly setting interest rates at essentially zero and purchasing everything from government debt to mortgages—all of which has turned the entire investing population into zombies (with a gambling addiction, I might add) wandering aimlessly in search of any tiny extra return to ravenously consume.
This has left stock markets as elevated and overvalued as they’ve been since the dot-com mania (and more than they were in 1929 and 2007), which history has shown will likely lead to significant declines ahead.
I’m not saying the market is going to drop like a stone tomorrow (although with each passing day, the odds of that happening increase), but these aren’t ideal conditions for investing, to say the least.
I want to be a hedge fund manager. Should I bother with college, or should I be out in the real world, getting first-hand experience?
Hedge fund management is essentially a rather sophisticated form of casino-like gambling. College would be a good way to learn the financial tools to play that game.
But why do you want to be a hedge fund manager so badly? There are far more important (and likely more lucrative, in the future) real-world things to do for a career in this life than waste your time punting on irrelevant financial variables (most of which are controlled by the Federal Reserve). Try medicine, medical research, manufacturing, or farming and make something new and more efficiently that people really need.
But if you still insist on becoming a hedge fund manager, the most valuable things you'll need to learn to be good at investing are patience, resilience, and self-discipline. You aren't just going to learn these in school. My best financial advice: practice yoga.
You built a goat farm. Are you just being quirky, or is this some genius investing plan that's going to make you another billion? Should I be investing in goats too?
C’mon, there’s more to life than just money! My farm, Idyll Farms, is all about sustainable agriculture, making delicious goat cheese in a natural, healthy and ecologically sustainable way—that is, through pasture management rather than the use of factory-like monoculture feed.
But, to answer your question, I’m a firm believer that agriculture is going to be a great investment and entrepreneurial opportunity for the next generation. Farming is headed for a sea-change: farmers are getting old, we’re depleting the fertility of our topsoil, creating highly susceptible GMO monocultures, and we don’t fully appreciate the implications of water—just to name a few.
So in that sense, yes, it wouldn’t be a terrible idea to start investing in goats. But my motive is to change the way that we approach agriculture in this country, not just profit.
What's the worst investment you've ever made? How about the best?
The worst investment I ever made (other than when I acquired my pug Papageno, who constantly uses my kitchen floor as his personal toilet—especially when I’m eating breakfast) was a derivative contract (a financial instrument that’s based on the value of something else, such as a stock option that derives its value from the stock itself) where I lost 100% of my capital investment. And, I’ve done this countless times.
You see, this has been both my worst and my typical investment. But, as they say, the poison is in the dosage. Each time, I only invested a tiny amount of capital—not enough to hurt me.
In fact, I love to lose small amounts frequently and then occasionally score big. (Every so often, these derivative contracts turn out to be huge winners.) I call this my “roundabout” strategy, which is also the subject of my book The Dao of Capital.
The best investment I ever made (surely in October 2008) was on a derivative contract where I made thousands of percent more than I lost on my worst investments.
I’m approaching 40, and my savings is pathetic. Am I doomed, or is there still hope that I can retire on a tropical island?
Sounds like you aren’t all that unusual. After all, why should anyone save when the Fed has set interest rates at zero?
One word of encouragement I can give is that I am certain that there will be generational investment opportunities to come in our lifetime. Fortunes will be made by those with the dry powder of capital to invest when everyone else is stampeding for the exits and trying to sell their investments—because few others will have kept their powder dry.
Most everyone is all-in today. So, despite the markets’ run-up, you aren't necessarily really missing much. As has always been the case when Federal Reserve monetary policy creates asset bubbles, these bubble profits are ephemeral.
So let this light a fire under you to start socking savings away, starting now. Every dollar saved will be worth many multiples later if you have the stomach to wait while the market keeps going up and invest them once all the zombies have finally been obliterated in the next crash.
You’ll know when that happens, because everyone will be crying over their losses, and the TV pundits will be wearing signs that say “the end is near.”
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nah
If Nah" is the right answer; than why was I able to buy B. of A. stock for $5.00, and Ford for $10, in 2008, when precisely the only message that could be heard anywhere; especially right here, was "the end is near". The quoted author knows what he's talking about. Get out now, and wait patiently for the next crash; or if you're very, very, conservative, just go into Silver Bullion; but get out now is definetly correct.
Keeping powder dry means keeping cash. This crowd knows this but the average plunker at CNBC hasn't put two and two together to realize they gotta be out not in when the market is overpriced.
Hmmm I could never seem to log in to ZeroHedge on 2008.
maybe if you tried in 2009 i said maybe
but he does have a valid point , need to cash out and apply "yoga" to your cash, and wait for another 2008 to buy cheap
And by 'keeping your cash', KEEP YOUR CASH! Keep it where no revenuer or bankster can touch it.
Spitz~fucking~nagel... I'm all fucking noses (I mean 'ears' ~ Sorry, my face must have just gotten re-arranged)
How to make a fortune: Be a jew and go to jewish money printers for funding
How to go broke: Be a goy and attempt the same thing
pretty sure hes austrian/german..you stupid fucking goyim
GO BAKC TO WORK!! lols!!
Mark Spitznagel was born to a Jewish family.
.
Funny that everyone blames the Fed.
Where'd all that money go again? Not Washington DC that's fer sure...
I guess you haven't driven through the rat's nest colloquially known as the Beltway lately?
Didn't Tyler post an article within the last few years about the location of the 5 richest counties in the country and they all surround the criminal empire formally known as D.C.?
Sad but true.
Whatever your plans, you had better keep a wary eye on the tax man.
He's right about farming. Farms have become far too large and one dimensional, based around one or two crops and leveraged up the wazoo.
Whatever you have, attachment to the land will help with perspective and sanity.
(It also keeps the kids in touch;)
Yes and no, monoculture practice done with proper rotation practices work well but corn ethanol has really screwed things up....
many farmers just do the same thing their grandfathers did. Government subsidies keep them in business. Most dairy farmers would go broke if the milk subsidies were removed. There is a huge surplus of milk in America. The demand wpuld only support a small number of them. They are like buggy whip factories.
The best farm advice and food comes from people who still farm like their grandfathers.
Big Ag backed by the USDA and EPA killed small farms. Like the media there are a handful of giant corps that control the foods supply. They are also the primary beneficiaries of gov. Subsidies. 2014 farm bill written by and for big Ag.
If you are not growing it yourself or buying it from a local farmer whom you trust you may want to do a little research into what you are really eating...
Otherwise enjoy your GMO cheerios topped off with a little white liquid completely devoid of nutrients.
This is why they invented the phrase "go for broke".
Also "he died with his boots on".
"Every day that goes by, the probability of a crash increases"; yep. This is not sustainable. and what is not sustainable is not sustained. The Fed. has to bail out the Big Bankers; as we all know, now; if we didn't realize it "before". But do the Big Bankers have to bail outl the FED. ? NO. No ? uh-huh, no. So who has the whip hand, here ? Can the Big Banks just decide it'd be fun to go short the Stock Market, ( over-elevated prices, and a thin, nervous market make this very attractive); you all keep saying the FED runs everything; Does it ? The Big Banks can decide to crash the Stock Market, for fun and profit; and what can the FED do about it ? Well, they can say, come on guys, don't do that, you're really fucking with our little house of cards, here. But suppose the Bankers decide not to listen; not listening could be extremely profitable. The Big Banks can tell the FED to fuck off; the FED cannot tell the BIG Banks to fuck off; okay ?
duuuuude
I'm framing your quote and putting it up on my wall, I think I just got my chakras sorted (they use chakras in yoga right?)
The banks are the Fed. The Fed is the banks.
Wall Street boys can't leave this money on the table.
They'll have to trigger a panic and take it.
Is it so hard to put it all on red? Ten times in a row?
Well put.
There are lottery winners every week. That does not make the lottery a good investment.
Gotta give him credit for those seven gold medals.
Waste of time. Sounds like some marketing bullshit with promises of a pot of gold at the each end of the rainbow and a two leprechauns waiting to steal everything. Nobody needs someone that says they can tell you how to do it when they haven't done it themselves
For the US based, or entrepreneurial others, there's a guy in the US (west coast I believe) who made around 1/4 Billion planning effectively ahead of the last crash. Although I can't recall his name or details of his strategy, which were only minimally disclosed, you may be able to search and locate him. I don't recall his initial investments to get to that point so the exact return is unknown but I do seem to recall thinking at the time that it was phenomenal
My plan for the last crash was only about 75% successful. If I can nail the whole package this time I'll open up my own University. Free admission to most ZH contributors. ZH post wizards are welcome to guest speak without remuneration from behind the curtain and with voice alteration (just like in OZ). Just keep that rat Toto (aka Papageno) from pissing or shitting on our floor. As always we reserve the right to refuse service to anyone for no reason. Cost: TBD
Never trust a person who dislikes Pugs (or hails from Miami).
So many Countries all across the planet have screwed their small farmers... that will come back to haunt them one fine day.
Keep your powder dry and your hookers clean.
Hi guys, I recently started my own blog in which I would like to discuss the stock markets from a technical point of view. Feel free to comment on my ideas! Www.tripstrading.com
Just go long uvxy for 2015
If you want to make money in trading open a brokerage business.
Whatever's coming it's likely something no one's expecting, cash isn't necessarily safe it's value can be rapidly infladed away, cash in the bank sure isn't safe. The future is a place none of us has yet been to, so who really knows what's in store ? I wouldn't want to be holding the U.S. dollar when it loses it's reserve status or any currency that's likely to be rapidly infladed in response to said event. I'm not sure there's such a thing as a safe way to keep powder dry or that if you do keep dry it won't turn out to have been made redundant while you were storing it. Global deflationary depression with imploding banks corzining away everyone's money ? Global competitive hyperinflationary spasm with everyone's money being rendered worthless ? But no one's expecting the Spanish inquisition !
Infladed? Are you in pre school? Gee, I'll sure take your advise seriously.
"advise" ? Dose who don't know good spellin demselves shouldn't be going and correctin others.