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Safe Haven: Investing for Financial Storms
Safe Haven Investing seeks to answer the question: what is the safest thing to invest your money in? Which investments can withstand a crash? Mark ultimately argues that an equity tail hedge is the one safe haven that is as good as--and even better than--gold. Mark will work through other areas that are typically considered safe, like farmland and real estate, before showing the reader how to align his/her portfolio to withstand a potential crash. Topics covered include:
What is a safe haven investment and how do they fit in a portfolio? Silver and gold Real Estate, Art, & Farmland Dividends & Hedge Funds Derivatives & Tail Hedging What you, as an investor, should ultimately do
What is a safe haven investment and how do they fit in a portfolio? Silver and gold Real Estate, Art, & Farmland Dividends & Hedge Funds Derivatives & Tail Hedging What you, as an investor, should ultimately do
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Displaying 1 - 30 of 67 reviews
August 24, 2021
The book contains unique and practical information for long-term investors. Probably, short-term traders will find it interesting too. However, its writing style is terrible. I got the impression that the author is deliberately mocking his readers.
This book is by no means an investment book for dummies. To benefit from it, you need to have significant knowledge and experience beforehand: options, Gaussian statistics, diversification and its shortcomings, the Kelly criterion, and understand nonparametric (bootstrap) statistics. This book is meant for people who have pondered a lot about getting a high risk-adjusted return on investment. You'll grab several ideas about how to preserve good sleep while being exposed to risky markets.
The author tries to convince you that you should have some OTM put options in the portfolio. Those options serve as insurance against tail risk events. Before examining the book 'Safe Haven Investing,' I did not understand why people buy those expensive options. From now on, I will not only sell but also buy them under favorable conditions. The book changed my beliefs regarding investment and portfolio management. I find its ideas to be unique, very important, and utilitarian.
However, the book does not provide any specific guidance on which options to use. Several years ago, Mark Spitznagel and his colleagues released a paper "Capital Asset Pricing Mistakes." It contains practical recommendations. That document is available online, but there is no link to it in the book. The author tried very hard not to make life easier for his readers accidentally.
The book's language is heavy. Numerous giants of world philosophy, mathematics, and other sciences are mentioned in vain. You will have to wade through many details from their lives that are in no way related to investment and portfolio management. The volume of the book could be reduced at least four times without loss of information. My hands are itching to write a summary of 40-50 pages. Maybe I will do it later.
This book is by no means an investment book for dummies. To benefit from it, you need to have significant knowledge and experience beforehand: options, Gaussian statistics, diversification and its shortcomings, the Kelly criterion, and understand nonparametric (bootstrap) statistics. This book is meant for people who have pondered a lot about getting a high risk-adjusted return on investment. You'll grab several ideas about how to preserve good sleep while being exposed to risky markets.
The author tries to convince you that you should have some OTM put options in the portfolio. Those options serve as insurance against tail risk events. Before examining the book 'Safe Haven Investing,' I did not understand why people buy those expensive options. From now on, I will not only sell but also buy them under favorable conditions. The book changed my beliefs regarding investment and portfolio management. I find its ideas to be unique, very important, and utilitarian.
However, the book does not provide any specific guidance on which options to use. Several years ago, Mark Spitznagel and his colleagues released a paper "Capital Asset Pricing Mistakes." It contains practical recommendations. That document is available online, but there is no link to it in the book. The author tried very hard not to make life easier for his readers accidentally.
The book's language is heavy. Numerous giants of world philosophy, mathematics, and other sciences are mentioned in vain. You will have to wade through many details from their lives that are in no way related to investment and portfolio management. The volume of the book could be reduced at least four times without loss of information. My hands are itching to write a summary of 40-50 pages. Maybe I will do it later.
December 5, 2021
This book was mentioned a couple times at #RWRI16. I'm probably slightly the wrong audience for it: I'm not a full-time investor, nor do I have the time to be a full-time investor. There were some really interesting ideas in the book (I love exploring risk asymmetry), but I'm not sure how to apply what I learned (or if I will). The book also suffered a few problems.
The key idea in the book: cost-effective risk mitigation. How do you mitigate the risk of market crashes and protect your capital/portfolio?
Spitznagel takes a page from Nassim Taleb (who wrote the foreword) and happily tears apart most economists, financial professionals, and Modern Portfolio Theory (MPT) which he shows is ineffective at managing risk through diversification.
Basically (and this is probably far too condensed a summary): your life and your investing decisions are a sample size of n=1, and "the value of getting this [i.e., your] path right eclipses the value of getting the expected path right" (p61). MPT thinks in expected averages and aggregates, but you can't afford an "expected average" return if some of the individuals that make up the average fail horribly!
Some of the ideas I got a better handle on are expected averages (MPT) vs. geometric averages. A geometric average "maps and tracks the evolution of your capital base through time, something which is lost within the arithmetic average" (p77). Spitznagel lays out the Kelly criterion in a way where it seemed to click for me (but ask me a few months from now...). It's maximizing the geometric average of ending wealth (i.e. the end result of capital and investing decisions over time), even at the expense of the arithmetic average (p80).
So how do you mitigate risk in your portfolio? If you're looking for the "how-to"... buy a different book, Spitznagel tells us on p4. This is a "why-to" and a "why-not-to". If you are looking for quick tips, or really specific actionable recommendations, you will NOT find them here.
The reader is told that cost-effective risk mitigation is very difficult, as "safe [investing] havens" are moving targets. Essentially: these safe havens are portfolio insurance, that will generate an outsized (think: many hundreds of percent, or more) return if the bulk of your invested capital goes down. In practice, this would be options (puts/calls) and other derivatives, but Spitznagel does not use any of those terms in the book at all.
Spitznagel likely doesn't get into specific actions for a few reasons: safe havens are constantly changing, not wanting to give away the secret sauce at Universa Investments, and preventing boneheads like me from wasting a bunch of money on portfolio insurance that is not cost-effective. (I could buy deep OTM for the rest of my days and it's highly likely it would be a total waste of fees and premiums and also fail to pay off in a crash). It was interesting at RWRI16 how people were discouraged from building these types of portfolio insurance (playing with options) themselves.
Favourite quote: "Profit is finite. Risk is infinite." (p56)
Biggest complaints: There was something intangible about the writing that failed to really draw me in. Also, the formatting was awful: bolding, italicizing, and bold-italicizing were WAY overused to the point it was meaningless. Probably best to read on Kindle so you can minimize how distracting this is. Fortunately both of these complaints are mitigated by the book's short length (200 pgs).
The key idea in the book: cost-effective risk mitigation. How do you mitigate the risk of market crashes and protect your capital/portfolio?
Spitznagel takes a page from Nassim Taleb (who wrote the foreword) and happily tears apart most economists, financial professionals, and Modern Portfolio Theory (MPT) which he shows is ineffective at managing risk through diversification.
Basically (and this is probably far too condensed a summary): your life and your investing decisions are a sample size of n=1, and "the value of getting this [i.e., your] path right eclipses the value of getting the expected path right" (p61). MPT thinks in expected averages and aggregates, but you can't afford an "expected average" return if some of the individuals that make up the average fail horribly!
Some of the ideas I got a better handle on are expected averages (MPT) vs. geometric averages. A geometric average "maps and tracks the evolution of your capital base through time, something which is lost within the arithmetic average" (p77). Spitznagel lays out the Kelly criterion in a way where it seemed to click for me (but ask me a few months from now...). It's maximizing the geometric average of ending wealth (i.e. the end result of capital and investing decisions over time), even at the expense of the arithmetic average (p80).
So how do you mitigate risk in your portfolio? If you're looking for the "how-to"... buy a different book, Spitznagel tells us on p4. This is a "why-to" and a "why-not-to". If you are looking for quick tips, or really specific actionable recommendations, you will NOT find them here.
The reader is told that cost-effective risk mitigation is very difficult, as "safe [investing] havens" are moving targets. Essentially: these safe havens are portfolio insurance, that will generate an outsized (think: many hundreds of percent, or more) return if the bulk of your invested capital goes down. In practice, this would be options (puts/calls) and other derivatives, but Spitznagel does not use any of those terms in the book at all.
Spitznagel likely doesn't get into specific actions for a few reasons: safe havens are constantly changing, not wanting to give away the secret sauce at Universa Investments, and preventing boneheads like me from wasting a bunch of money on portfolio insurance that is not cost-effective. (I could buy deep OTM for the rest of my days and it's highly likely it would be a total waste of fees and premiums and also fail to pay off in a crash). It was interesting at RWRI16 how people were discouraged from building these types of portfolio insurance (playing with options) themselves.
Favourite quote: "Profit is finite. Risk is infinite." (p56)
Biggest complaints: There was something intangible about the writing that failed to really draw me in. Also, the formatting was awful: bolding, italicizing, and bold-italicizing were WAY overused to the point it was meaningless. Probably best to read on Kindle so you can minimize how distracting this is. Fortunately both of these complaints are mitigated by the book's short length (200 pgs).
November 4, 2021
Spitz gets a lot of flack for not making specific recommendations. This bothers me on two levels. First, you cannot make specific recommendations in a book. By the time it's published they're irrelevant. Second, why would he give free advice to people when his clients pay 2 and 20 for it?
That said, this book is for people who want to take investing to the next level. I would suggest a minimum of 3-5 years active options trading experience before you write him off.
To use his method you have to...
1) Understand the math behind fat tails. (It's actually simple)
2) Know when options may be underpriced.
3) Understand duration.
and finally, be ready to write off to zero 10% of your portfolio.
To make money on fat tail investments you have to be right when everyone else is wrong. If everybody knows what you know, the options will be too expensive to get the 50X return you need as a risk management tool.
For example right now (Nov 2021) both gold and junk bonds are valued absurdly. Keep in mind, most of the market is absurd, but these are absurd to the nth degree. So a portfolio long FANG and long gold share calls going out to 2023 as well as a out of the money JNK put would be a portfolio with a chance of survival.
Spiznageel tell you how to structure a hypothetical portfolio in terms of a gaussian distribution.
This is as good as it gets.
www.gig2big.com
That said, this book is for people who want to take investing to the next level. I would suggest a minimum of 3-5 years active options trading experience before you write him off.
To use his method you have to...
1) Understand the math behind fat tails. (It's actually simple)
2) Know when options may be underpriced.
3) Understand duration.
and finally, be ready to write off to zero 10% of your portfolio.
To make money on fat tail investments you have to be right when everyone else is wrong. If everybody knows what you know, the options will be too expensive to get the 50X return you need as a risk management tool.
For example right now (Nov 2021) both gold and junk bonds are valued absurdly. Keep in mind, most of the market is absurd, but these are absurd to the nth degree. So a portfolio long FANG and long gold share calls going out to 2023 as well as a out of the money JNK put would be a portfolio with a chance of survival.
Spiznageel tell you how to structure a hypothetical portfolio in terms of a gaussian distribution.
This is as good as it gets.
www.gig2big.com
December 6, 2021
Similar to Benoit Mandelbrot's The (Mis)Behavior of Markets, this book caused a paradigm shift in my understanding of risk and risk mitigation. It would be irrational to expect a veteran hedge fund strategist to share his secret sauce for 20 bucks, and to some extent Spitznagel gives you more bang for the buck by simply opening your mind to the core tenets of his investment philosophy.
For if you can't develop your own tail hedging strategy using all of the pointers in this book as a jump off point, you most likely would fail miserably implementing whatever generic option-based strategy cook-book Spitznagel could have given you. As will probably be many other readers, I for one am content to better understand the "risks" of being unhedged as well as understand the costs I would incur hedging my portfolio haphazardly.
Some of my favorite quotes in this book include:
"...Bernoulli inadvertently revealed the geometric average as the optimal criterion for valuing those risky gambles. Arithmetic returns are false hopes; the truth lies in geometric returns."
and:
"Profit is finite. Risk is infinite. You need to avoid plunging down the logarithmic Bernoulli Falls! This is, by far, the most important concept in safe haven investing—nay, of all investing."
as well as:
"It’s like a pinch of salt—just a pinch becomes the most important ingredient to the dish, whereas more than a pinch ruins it."
and finally:
"And let’s always remember that great twist of safe haven investing, that a cost-effective safe haven is not about slashing risk. To the contrary, we mitigate risk deliberately so that we can do more, not do less."
Amor fati.
For if you can't develop your own tail hedging strategy using all of the pointers in this book as a jump off point, you most likely would fail miserably implementing whatever generic option-based strategy cook-book Spitznagel could have given you. As will probably be many other readers, I for one am content to better understand the "risks" of being unhedged as well as understand the costs I would incur hedging my portfolio haphazardly.
Some of my favorite quotes in this book include:
"...Bernoulli inadvertently revealed the geometric average as the optimal criterion for valuing those risky gambles. Arithmetic returns are false hopes; the truth lies in geometric returns."
and:
"Profit is finite. Risk is infinite. You need to avoid plunging down the logarithmic Bernoulli Falls! This is, by far, the most important concept in safe haven investing—nay, of all investing."
as well as:
"It’s like a pinch of salt—just a pinch becomes the most important ingredient to the dish, whereas more than a pinch ruins it."
and finally:
"And let’s always remember that great twist of safe haven investing, that a cost-effective safe haven is not about slashing risk. To the contrary, we mitigate risk deliberately so that we can do more, not do less."
Amor fati.
September 20, 2021
Loved The DAO of Capital, and he's done it again! Only this time, with far more technical and mathematical detail, which I appreciate. This guy's quoting Feynman, Nietzsche, Popper, Newton, weaving this cohesive vision of scientific thinking into his particular niche profession, investing. I could care less about investing, but I love that there are intellectuals out there who really synthesize what they read and turn what normal people might find a boring subject into something that excites the imagination.
His whole thesis could be summed up by saying "All models are wrong, but some are useful." So why are we clinging to financial models that consistently lead us astray time and time again? Tradition? Any idiot can code up a Monte Carlo simulation and quickly confirm these little scenarios. Traditional models work sometimes, even most of the time, but they are built upon the shaky foundation of bad assumptions that have a tendency to prove themselves wrong from time to time. And when that foundation cracks, the whole house falls down, no matter how strong and pretty it was on merit.
His whole thesis could be summed up by saying "All models are wrong, but some are useful." So why are we clinging to financial models that consistently lead us astray time and time again? Tradition? Any idiot can code up a Monte Carlo simulation and quickly confirm these little scenarios. Traditional models work sometimes, even most of the time, but they are built upon the shaky foundation of bad assumptions that have a tendency to prove themselves wrong from time to time. And when that foundation cracks, the whole house falls down, no matter how strong and pretty it was on merit.
January 12, 2023
Fool me once, shame on you. Fool me twice, shame on me.
After reading the disaster that is “The Dao of Capital” I figured this book would be much better (I enjoy mark’s investing philosophy and want to learn more). Wow was I wrong.
This book was written strictly for the sake of writing another book and it shows. Add in Nassim Taleb’s nonsense at the beginning and you have a perfect disaster parading as an all time classic.
After reading the disaster that is “The Dao of Capital” I figured this book would be much better (I enjoy mark’s investing philosophy and want to learn more). Wow was I wrong.
This book was written strictly for the sake of writing another book and it shows. Add in Nassim Taleb’s nonsense at the beginning and you have a perfect disaster parading as an all time classic.
August 27, 2021
The premise is that in our search of risk mitigation we must have a cost effective strategy because it is actually the best performing one. There are (I guess) some assets that provide that, but don’t expect to learn who they are in this book. What value you can draw from this is an approach to asset evaluation and some quick analysis in the end showing that Tbills, gold and crypto aint it.
Read
October 17, 2021Amor Fati
November 6, 2021
I really appreciate that this book doesn't tell you what to do, but rather encourages you to think through problems yourself.
Read
February 7, 2023Tries and fails to imitate Taleb’s writing style.
December 1, 2021
Excellent book. Much better than his predecessor book as it is far more succinct. He explores the seemingly arcane difference between arithmetic and geometric averages in the context of portfolios and shows that simplistic arithmetic thinking is hugely damaging and that we must think geometrically.
For example if you have 24 years where you make 10% and one year where you make -100% you have an average return of 5.6%. However, if you look at the geometric average, the actual average that you will receive when you invest over those 25 years, no matter when the -100% return occurs you will have a -100% return. So its important to think in geometric terms.
He then goes on to examine a series of safe haven investments that are either mechanically orientated to pay off when the S&P declines by 15% or statistically likely to do so based on historical experience. He does not leave you with a solution unfortunately but provides a very solid framework for those reasonably adept at maths to be able to think about portfolio construction.
Thoroughly recommended for any concerned with their long-term wealth.
For example if you have 24 years where you make 10% and one year where you make -100% you have an average return of 5.6%. However, if you look at the geometric average, the actual average that you will receive when you invest over those 25 years, no matter when the -100% return occurs you will have a -100% return. So its important to think in geometric terms.
He then goes on to examine a series of safe haven investments that are either mechanically orientated to pay off when the S&P declines by 15% or statistically likely to do so based on historical experience. He does not leave you with a solution unfortunately but provides a very solid framework for those reasonably adept at maths to be able to think about portfolio construction.
Thoroughly recommended for any concerned with their long-term wealth.
June 21, 2022
The core idea is fascinating. Investors tend to think about arithmetic averages as the relevant measure for expected portfolio returns, but in more extreme probability distributions (Extremistan to make the Taleb link) that would lead you to silly conclusions.
Say you throw a coin: heads triples your investment, while tails wipes it entirely. Expected value of each game: 50% gains. Will you play this game with your entire net worth? Likely not. The reason is that the all-heads path is an increasingly narrow band in a vast spectrum of outcomes, mostly leading to zero. Clearly we actually care about the geometric average - the mode of the distribution of outcomes - in this case a neat zero.
Taking that geometric assumption and running with it, we can start to burn down some of the basic tenets of financial theory. It becomes possible to add an asset with a lower expected return than the (arithmetic) portfolio average and yet push up the portfolio's (geometric) return. Think of an insurance product which has shabby returns, but really comes to the fore when the rest of the portfolio crashes. Likewise in the above example with our coin, you could hold much of your assets in cash and decide on how much to gamble in each game by using the Kelly Criterion. Have we found a safe haven? Risk mitigation: not as a tradeoff but as additive to wealth creation. Yes, there is arithmetic cost, but at geometric benefit. We then consider some different types of safe havens - insurance comes out as a clear leader vs uncorrelated (store of value) or negative correlation (alpha) assets as insurance only spoils a small chunk of the arithmetic portfolio return. An interesting reference too to some red herrings - pretender safe havens - steer clear of diworsifier havens ("losing less".
This book was helpful in developing my thinking on investment, though it clearly has its roots in derivatives trading and not all lessons carry over neatly to the world of equities where in the long run business returns ought to dominate market movements. Financial markets are not dice-throwing games. Nevertheless, n=1, we live in a non-ergodic world. This book has pointed me to the idea that there are really two ways of going about equity portfolio construction - one is to go full in on an arithmetic approach - choose high conviction ideas in concentrated portfolios and sit through hurtful ups and downs - the other is to implement some of the safe haven approach and go for a smoother ride. If a managers is effectively trying to do the second, they might want to take heed of some of the lessons here.
Why only 3 stars? I don't think it is very well-written. My own background primed me relatively well for the book, but I would not recommend to a general audience. Spitznagel makes little effort to explain what actual safe havens he uses. Yes, that might send people down a dangerous path, but it is really not that hard to write a few pages on deep OTM put options, how they work and why some may be well-placed as insurance, at least historically. For me there is an element of arrogance and pomp in the book as well - leading to these kinds of omissions. While some of the many references to scientists and philosophers make perfect sense, it does get a bit dense and I don't think this has to be the nature of the subject matter.
Say you throw a coin: heads triples your investment, while tails wipes it entirely. Expected value of each game: 50% gains. Will you play this game with your entire net worth? Likely not. The reason is that the all-heads path is an increasingly narrow band in a vast spectrum of outcomes, mostly leading to zero. Clearly we actually care about the geometric average - the mode of the distribution of outcomes - in this case a neat zero.
Taking that geometric assumption and running with it, we can start to burn down some of the basic tenets of financial theory. It becomes possible to add an asset with a lower expected return than the (arithmetic) portfolio average and yet push up the portfolio's (geometric) return. Think of an insurance product which has shabby returns, but really comes to the fore when the rest of the portfolio crashes. Likewise in the above example with our coin, you could hold much of your assets in cash and decide on how much to gamble in each game by using the Kelly Criterion. Have we found a safe haven? Risk mitigation: not as a tradeoff but as additive to wealth creation. Yes, there is arithmetic cost, but at geometric benefit. We then consider some different types of safe havens - insurance comes out as a clear leader vs uncorrelated (store of value) or negative correlation (alpha) assets as insurance only spoils a small chunk of the arithmetic portfolio return. An interesting reference too to some red herrings - pretender safe havens - steer clear of diworsifier havens ("losing less".
This book was helpful in developing my thinking on investment, though it clearly has its roots in derivatives trading and not all lessons carry over neatly to the world of equities where in the long run business returns ought to dominate market movements. Financial markets are not dice-throwing games. Nevertheless, n=1, we live in a non-ergodic world. This book has pointed me to the idea that there are really two ways of going about equity portfolio construction - one is to go full in on an arithmetic approach - choose high conviction ideas in concentrated portfolios and sit through hurtful ups and downs - the other is to implement some of the safe haven approach and go for a smoother ride. If a managers is effectively trying to do the second, they might want to take heed of some of the lessons here.
Why only 3 stars? I don't think it is very well-written. My own background primed me relatively well for the book, but I would not recommend to a general audience. Spitznagel makes little effort to explain what actual safe havens he uses. Yes, that might send people down a dangerous path, but it is really not that hard to write a few pages on deep OTM put options, how they work and why some may be well-placed as insurance, at least historically. For me there is an element of arrogance and pomp in the book as well - leading to these kinds of omissions. While some of the many references to scientists and philosophers make perfect sense, it does get a bit dense and I don't think this has to be the nature of the subject matter.
December 29, 2022
Great value, but not a leisure read
I first came across the book when I was looking for the recent update of Mark’s friend: Nassim Nicolas Taleb; a famous and outspoken inventor and author. If Nassim’s writings are more from the philosophical aspect on how to survive (and hopeful thrive) in an environment disproportionately impacted by rare events, this book provides the first step to connect the philosophy to real world implementation. While it illustrates under the context of investing, the underlying message can be applied to almost all aspects of life.
The book has changed my thinking process, and I can strongly recommend. However, I do want to point out that it felt a little dry at my first read. One of the reasons is that I was treating it purely as a leisure read and didn’t concentrate much. However, the insights started shocking me when I later re-read it seriously. It’s not a technical book, but is a little more technical than Nassim’s books. Prepare yourself and enjoy the feast.
I first came across the book when I was looking for the recent update of Mark’s friend: Nassim Nicolas Taleb; a famous and outspoken inventor and author. If Nassim’s writings are more from the philosophical aspect on how to survive (and hopeful thrive) in an environment disproportionately impacted by rare events, this book provides the first step to connect the philosophy to real world implementation. While it illustrates under the context of investing, the underlying message can be applied to almost all aspects of life.
The book has changed my thinking process, and I can strongly recommend. However, I do want to point out that it felt a little dry at my first read. One of the reasons is that I was treating it purely as a leisure read and didn’t concentrate much. However, the insights started shocking me when I later re-read it seriously. It’s not a technical book, but is a little more technical than Nassim’s books. Prepare yourself and enjoy the feast.
September 25, 2022
Mark is definitely not a good writer as he needs to understand the difference between writing a book and putting down all the thoughts going through one’s mind.
On the other hand, the books contains high quality material and mark shares his perspective about math science and investing in the modern era. I particularly liked the part he focused on why things work and how things work instead of just what works, in his words telling part pseudoscience from the real science. It is particularly valuable given the recent popularity of the so-called AI or machine learning schemes
On the other hand, the books contains high quality material and mark shares his perspective about math science and investing in the modern era. I particularly liked the part he focused on why things work and how things work instead of just what works, in his words telling part pseudoscience from the real science. It is particularly valuable given the recent popularity of the so-called AI or machine learning schemes
December 4, 2021
Read a blog post on Kelly criterion and arithmetic vs geometric compounding and you’ll have most of the book
February 7, 2023
It all sounds good, but Spitznagel’s hedge fund, Universa, has notoriously underperformed over the last few years where you’d expect his strategy to pay off. His strategy doesn’t pay off.
February 23, 2022
This book can be characterised by the following phrases, which I found myself uttering mostly internally (but also, at times, audibly, externally, giving the impression that I am one of those cunts who belongs to the group of people who have precisely 0 self-awareness and exactly 0 concern for other members of the public that are sharing the same space as them. Those bellends that play music without headphones on buses, talk loudly on the blower in the quiet section on trains, and deliver constructive criticism of the book they are currently reading, out-loud, whilst they are reading it.):
"Meh" "Ah" "Ok" "That's true" "Ok, so what?" "You've said that before" "Yeah, I knew that" "Well, that wasn't really necessary, was it?"
I opened this book with fairly high expectations; I thoroughly enjoyed Spitznagel's first book and I'll gobble up books on this subject matter all day long.
Alas, I didn't really learn anything from Safe Haven Investing. Admittedly, this is partly my fault. Having consumed a substantial % of the content in this area, authors are bound to explain shit that I already know. However, this is a consequence of Mark "Spitz" Spitznagel not really saying much. It reads like he banged out the bulk of the text in a week of focused work, or maybe a few months writing in the moments between a busy family and social life and, say, running a hedge fund or something.
There just wasn't enough meat here to get one's teeth stuck into. This is why Spitzy is forced to repeat himself too many times and to chuck in unneeded, pretentious paragraphs that have approximately little to do with the main point he is driving at. His central thesis seems to be correct and is well-supported by an array of statistics, simulations, and logic, but this doesn't require a book to lay out. A long blog post would have been much better.
"Meh" "Ah" "Ok" "That's true" "Ok, so what?" "You've said that before" "Yeah, I knew that" "Well, that wasn't really necessary, was it?"
I opened this book with fairly high expectations; I thoroughly enjoyed Spitznagel's first book and I'll gobble up books on this subject matter all day long.
Alas, I didn't really learn anything from Safe Haven Investing. Admittedly, this is partly my fault. Having consumed a substantial % of the content in this area, authors are bound to explain shit that I already know. However, this is a consequence of Mark "Spitz" Spitznagel not really saying much. It reads like he banged out the bulk of the text in a week of focused work, or maybe a few months writing in the moments between a busy family and social life and, say, running a hedge fund or something.
There just wasn't enough meat here to get one's teeth stuck into. This is why Spitzy is forced to repeat himself too many times and to chuck in unneeded, pretentious paragraphs that have approximately little to do with the main point he is driving at. His central thesis seems to be correct and is well-supported by an array of statistics, simulations, and logic, but this doesn't require a book to lay out. A long blog post would have been much better.
April 4, 2024
This book is about how to protect investments from large losses. The author makes sure we understand the basics of risk calculation and the disproportionate role of a few large losses in a portfolio. There is some math to explain the concepts and introduce the idea, but it is simple, and also optional.
There is an introduction to the important, but not much talked about "non-ergodic" nature of risky investments (for example stock markets).
The later parts of the book shows simple examples of games of risk and strategies to reduce risk in those games. These example sare simple, but highly effective and easy to understand the concept.
The book explores common risk management techniques on these examples - high allocation to cash (no risk), allocating no more than 40% of the portfolio (Kelly criterion) etc - and their relative risk hedging effectiveness.
The conclusion is that a strategy of buying a small insurance like investment (that is lost when there is no risk, and multi-fold returns when a total loss happens) will enhance overall portfolio returns.
This concept is not really esoteric - we already buy insurance for our cars life, health and home, where the premium is an expense that returns -100%, i.e., it is not given back, but there is a large payout when bad things happen). It was just not more talked about in investing.
I highly recommend it.
There is an introduction to the important, but not much talked about "non-ergodic" nature of risky investments (for example stock markets).
The later parts of the book shows simple examples of games of risk and strategies to reduce risk in those games. These example sare simple, but highly effective and easy to understand the concept.
The book explores common risk management techniques on these examples - high allocation to cash (no risk), allocating no more than 40% of the portfolio (Kelly criterion) etc - and their relative risk hedging effectiveness.
The conclusion is that a strategy of buying a small insurance like investment (that is lost when there is no risk, and multi-fold returns when a total loss happens) will enhance overall portfolio returns.
This concept is not really esoteric - we already buy insurance for our cars life, health and home, where the premium is an expense that returns -100%, i.e., it is not given back, but there is a large payout when bad things happen). It was just not more talked about in investing.
I highly recommend it.
December 16, 2021
Mark Spitznagel is founder and CEO of Universa Investments L.P., a hedge-fund that provides tail-hedging (risk mitigation) strategies for portfolios. If you're looking for a book that provides clear answers of where to invest your money during a financial storm, then this book is not for you. After providing historical context around risk mitigation, Spitznagel moves onto a thorough di-section of what elements effectively create a cost-effective risk mitigation strategy for a portfolio in the event of a market crash.
In the end, the conclusion is a bit depressing, however, I found the perspective to be beneficial in that it provided me the foundation to be critical of my own assumptions around passive-investing and where I might find some safe investment opportunities. The math presented is a bit dense, and I fluctuated between rapt absorption and my eyes being glazed over. That being said, if you have ever enjoyed reading the likes of Nicolas Taleb (whom he has worked with on occasion in the past), then you'll most likely enjoy this book as well.
In the end, the conclusion is a bit depressing, however, I found the perspective to be beneficial in that it provided me the foundation to be critical of my own assumptions around passive-investing and where I might find some safe investment opportunities. The math presented is a bit dense, and I fluctuated between rapt absorption and my eyes being glazed over. That being said, if you have ever enjoyed reading the likes of Nicolas Taleb (whom he has worked with on occasion in the past), then you'll most likely enjoy this book as well.
February 10, 2022
This book was both challenging and interesting. It is very Math-centric but I like how the author lets the reader know that understanding the math isn't crucial. He wants you to walk away with the concepts and ideas that he is trying to hammer home. He certainly does barrage you with the same concepts and ideas but I believe that is a good thing because although there are many details I won't remember in a month from now — I will always remember the key concepts. I like reading about contrarians and people that have ideas that go against the grain. And the author really won me over with not only his writing but also his critique of modern investing and the 'professionals' practicing what he calls pseudoscience when it comes to portfolio returns. Additionally, I liked his examples in order to explain his concepts and although I sometimes had to read them out loud in order to understand them, I never became overwhelmed by them. I think if one is willing to come in with a learning intention then you will enjoy and benefit from this book.
November 14, 2021
Not terrible, but I frankly expected more. It read a lot like a Taleb-esque rant (mind you I say this as someone who actually likes Taleb). It just didn't go deep enough into the substance for me, and further it had a LOT of random diversions and repetitions. This would have been a lot better with a good editor. Fortunately it was a fairly short book.
Negatives aside (also the narrator of the audible version was pretty terrible), the way he explains various parts of the payoff theory, geometric vs arithmetic effects, and even the presentation of analysis about various "safe havens" was actually super good. It just felt more like an advert for his hedge fund, which isn't really necessary. Anyone who follows the smart guys on volatility twitter probably has at least some idea how they do what they're doing so no need to be all hush hush and aloof.
Negatives aside (also the narrator of the audible version was pretty terrible), the way he explains various parts of the payoff theory, geometric vs arithmetic effects, and even the presentation of analysis about various "safe havens" was actually super good. It just felt more like an advert for his hedge fund, which isn't really necessary. Anyone who follows the smart guys on volatility twitter probably has at least some idea how they do what they're doing so no need to be all hush hush and aloof.
October 6, 2022
This books gives you an introduction to ergodicity. and why using averages (that assumes you have the luxury to live 100s of lives to gain the benefits of averaging) is the wrong way to go with investing. The better way is to use Median average to reflect the fact that we only have one life to live and maximize.
This is paired with the authors maxim that safe haven should not only help you during hard times, it should increase the - now median - earnings of your portfolio.
Then we are presented with a framework to evaluate some known choices that might be considered safe havens. But we are, of course, not left with a clear winner. After all, Mark makes a living out of this and this might borderline trade secrets for Universa.
Interesting read that gives you exposure to this line of thought in the word of investing.
This is paired with the authors maxim that safe haven should not only help you during hard times, it should increase the - now median - earnings of your portfolio.
Then we are presented with a framework to evaluate some known choices that might be considered safe havens. But we are, of course, not left with a clear winner. After all, Mark makes a living out of this and this might borderline trade secrets for Universa.
Interesting read that gives you exposure to this line of thought in the word of investing.
November 27, 2021
Life being non-ergodic is a key insight. Geometric mean (Bernoulli Expeced Value) needs to be maximized instead of arithmetic mean (regular expected value). Nietzsche's demon's thought experiment is energizing:
'This life as you now live it and have lived it, you will have to live once more and innumerable times more; and there will be nothing new in it, but every pain and every joy and every thought and sigh and everything unutterably small or great in your life will have to return to you, all in the same succession and sequence—even this spider and this moonlight between the trees, and even this moment and I myself. The eternal hourglass of existence is turned upside down again and again, and you with it, speck of dust!'
'This life as you now live it and have lived it, you will have to live once more and innumerable times more; and there will be nothing new in it, but every pain and every joy and every thought and sigh and everything unutterably small or great in your life will have to return to you, all in the same succession and sequence—even this spider and this moonlight between the trees, and even this moment and I myself. The eternal hourglass of existence is turned upside down again and again, and you with it, speck of dust!'
November 29, 2021
Interesting and well-presented story about "safe haven investing"
I enjoyed the historical anecdotes and the (high school level) math behind the fundamentals of the argument. Math equations were a bit hard to absorb fully in audio form, but key impact points were clear.
My only squabble was the focus on 'insurance-based strategies' as key safe haven needed a bit more quantifying on the cost of insurance. I think the goal of general theory understanding (not cookbook investment advice) was why author did not elaborate, but this was the one point where generality left me with a tiny bit of vagueness.
But, overall a powerful thesis and really quite well-executed in the clarity of the imagery and language to keep it clear for the reader.
I enjoyed the historical anecdotes and the (high school level) math behind the fundamentals of the argument. Math equations were a bit hard to absorb fully in audio form, but key impact points were clear.
My only squabble was the focus on 'insurance-based strategies' as key safe haven needed a bit more quantifying on the cost of insurance. I think the goal of general theory understanding (not cookbook investment advice) was why author did not elaborate, but this was the one point where generality left me with a tiny bit of vagueness.
But, overall a powerful thesis and really quite well-executed in the clarity of the imagery and language to keep it clear for the reader.
November 30, 2021
Excellent book. Really changes your thinking, especially how lowering risk can improve your returns, and how geometric cost is critical rather than arithmetic cost and returns. Author analyses various strategies such as cash, treasury bills, bonds and gold, and confirms it is very difficult. The author does not give a 'secret sauce' of this is what you must do, but rather convinces you to change your thinking. In reality, the author probably uses derivatives such as puts on SPX or calls on the Vix, all out of the money but sophisticated in a way to rollover without incurring too high a cost to portfolio (2-3% annual) giving 1000%+ returns during crashes. I also recommend his prior book, Dao of Capital.
November 12, 2022
This is a book for intermediate (or higher) level investors--the type of investor who's lived through a major market cycle or two and wants a deeper understanding of investing's more abstract (though no less real) risks. If you're a beginner investor, most of this book will make little sense to you. But if you already have some experience under your belt, you will walk away from this book with a solid intuitive grasp of concepts like sequence of return risk, different types of tail risks, and making yourself "convex" rather than "concave" to different market scenarios.
It's unfortunate, but these risks and ideas simply d... [see the rest on my book review site.]
It's unfortunate, but these risks and ideas simply d... [see the rest on my book review site.]
December 7, 2021
Spitz makes it very clear that if he had a choice, if he could amor fati, he would have chosen “Bernoulli” as his family name. We are lucky to have Spitz in the modern English-speaking world, however. He adds a small portion of his impressive experience into a SPX-like basket of philosophical ideas, mathematical formulas, and cryptoHODL flirtations, and shows that if we spend sufficient amount of time on each page, we actually get smarter than if we had not read the book. I would recommend this to myself 3 years ago before I began falling off the cliff, but I can see that its lessons may still prove useful as the dice is still rolling. Thanks, Spitz.
November 12, 2022
Mathematical analysis that is formal and makes sense
As a PhD in the analytical engineering sciences, I fully understand and endorse the mathematical principals and approach. My one contrary remark is that the methods ignore that circumstances are often known and a circumstance blind analysis does not capture that reality. The author would dismiss this as having a crystal ball, with some validity but not entirely. The other gap is not showing the effects of continued investment (when working) or continued withdrawal (when retired) with a specific endpoint (e.g. death) which could result in a nonstationary policy.
As a PhD in the analytical engineering sciences, I fully understand and endorse the mathematical principals and approach. My one contrary remark is that the methods ignore that circumstances are often known and a circumstance blind analysis does not capture that reality. The author would dismiss this as having a crystal ball, with some validity but not entirely. The other gap is not showing the effects of continued investment (when working) or continued withdrawal (when retired) with a specific endpoint (e.g. death) which could result in a nonstationary policy.
November 13, 2023
"Safe Haven" by Mark Spitznagel offers a refreshing and unconventional approach to investing that sets it apart from traditional financial literature. Spitznagel's insights provide a unique perspective, challenging conventional wisdom in the world of finance. However, I found myself yearning for more real-life examples to illustrate his concepts, as they would have added practical depth to the theoretical framework presented. The mathematical aspects might be challenging for some readers, but the overall takeaway is undeniably valuable. Despite the complexity, Spitznagel's unconventional approach makes "Safe Haven" a worthwhile read for those seeking a different perspective on investing.
April 4, 2024
I have the highest regards for Mark as a trader for he is a genius beyond doubt. This book, however, is too complex and esoteric for even someone like me who’s into serious investing and must have read over 100 investing related book. This simply is a collection of mathematical concepts beyond comprehension for even an engineer turned investor.
The problem with people rating it 4-5 stars is that they are too timid to call this out. They’re scared that maybe people will judge them to be less intelligent or that they didn’t get the book.
I am not stupid, I didn’t get the book- the book is too complex, period!
The problem with people rating it 4-5 stars is that they are too timid to call this out. They’re scared that maybe people will judge them to be less intelligent or that they didn’t get the book.
I am not stupid, I didn’t get the book- the book is too complex, period!
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