My Age of Investment

"How do you capture the patterns of crises?"

Xia Jingxing looked at Spitznagel with great interest. The appearance of this guy made him see a possibility that could make up for a missing segment in Envision Capital's strategy.

Spitznagel pointed to his head, "It's very simple, calculate!

The "barbell strategy" mentioned by my mentor Taleb in the book "Antifragility" - 90% of the funds are low-risk and 10% are high-risk. Then your loss will not exceed 10%, but there is no upper limit on the income. of.

Of course, his data enumeration is very general and is not suitable for all financial trading models.

If you want to truly make money during a crisis, you need a more sophisticated investment portfolio.

Our company has 12 PhDs in mathematics, who are specially hired to solve mathematical problems.

We don’t hire a large number of math PhDs, astrophysicists, statisticians and computer scientists to study quantitative trading models like Simons’ Renaissance.

We don’t need to consider so many market variables, we only need to calculate whether the short portfolio can cover the risk exposure of the long portfolio. "

Abel smiled and said: "Aren't you buying a bunch of put options and then waiting for crisis events to occur? For example, floods, hurricanes, wars, food production reductions, economic crises..."

Spitznagel smiled, "We just operate like fools, and we feel like fools, but we're not really fools.

When the Empirical Fund was operating until 2004, Mr. Taleb withdrew from the company due to health reasons. I also closed the fund and went to work as the head of options trading in Morgan Stanley’s proprietary department for two years.

More than a year ago, I started my business again and founded the current global investment fund, with the goal of becoming the first investment institution in the industry to systematize tail risk strategies.

The shortcoming of general black swan funds is that they often perform poorly when the stock market is good.

The tail risk strategy I want to create is not only to obtain high returns when the short-term market crashes, but also to outperform the market by at least double in a bull market! "

"Isn't that easy?"

Abel felt that Spitznagel was a bit fanciful. If it weren't for the sake of his mentor and the huge amount of money this guy made during the 911 incident, he would never have agreed to invest money in this crazy person. of the guy.

"If others can't do it, it doesn't mean that Global Investment Fund can't do it." Spitznagel said confidently.

Abel smiled and said nothing.

Spitznagel's face gradually turned cold. He was questioned by Abel several times. No matter how good-tempered he was, he couldn't coddle him like this.

For a moment, the two of them stopped talking, and the atmosphere became a little awkward.

Jiang Ping came out to smooth things over and said: "Mark, I believe you, there is no road in this world, but there will be a road when more people walk.

Black swan funds did not exist before, but now many large investment institutions have deployed such a special fund to resist the risks caused by the outbreak of black swan events.

What Global Investment is doing is very pioneering.

Once successful, it will surely lead the industry trend. "

Hearing this, Spitznagel's face brightened slightly and he said: "We could have made more money from the financial crisis caused by the collapse of Lehman Brothers, but because we were not net short, we offset a lot of the gains.

This is what we have always insisted on, being a long-term investor rather than a short-term speculator. "

Hearing this, Jiang Ping and Abel couldn't help but look at Xia Jingxing, their eyes seemed to say: Boss, this guy seems to look down on net short sellers like us, calling us speculators.

Xia Jingxing smiled. Envision Capital was a net short, and it should be the largest net short in the world. It was short for tens of billions of dollars and not even a penny long.

It is not wrong to say that he is a speculator.

However, Xia Jingxing also has a long-term trading strategy. After the financial crisis blows over, he will be bullish on U.S. stocks across the board and win at least for twelve years.

What to do next?

Xia Jingxing hopes that Liu Hai, Jiang Ping, Li Yaozu, Ye Shuhui, Deng Fenghua and other fund managers can grow up as soon as possible.

If they cannot continue the glory of Vision Capital after 2020, then Xia Jingxing will have no choice but to change his trading strategy, shrink the size of the fund, or even transform Vision Capital into a family office.

At the same time, he also needs to find some excellent external fund managers to manage the assets of the family office.

This is the common saying that eggs cannot be put in one basket.

But the egg basket is all in one truck.

What should I do if the truck overturns?

For example, even if Xia Jingxing spreads his funds to dozens of external hedge funds, if an event similar to the 2008 financial crisis occurs after 2020, and more than 90% of global assets plummet, he will basically be unable to survive alone, and the entire truck will overturn.

Because Global Investment does not take an unusual path, it can be regarded as another truck.

There is no need to put dozens of baskets of eggs, you only need to put one basket of eggs in Global Investment.

When this basket of eggs is delivered safely, it can offset the loss of dozens of other baskets of eggs.

As far as Xia Jingxing knows, Spitznagel's tail risk trading strategy was really successful in his previous life.

During the ten-year bull market in U.S. stocks, the Global Investment Fund outperformed the S\u0026P 500 Index's 7.4% return with a compound annual return of 12.3%.

Although it still falls short of what Spitznagel calls "outperforming the market by at least double," it's not far off.

And this is when the U.S. stock market has been in a bull market for ten years, and it has not yet calculated the benefits generated by the outbreak of black swan events.

In 2020, due to the two "black swans" of the epidemic and the collapse of oil prices, stocks, bonds, gold and other assets all plummeted, and global investment achieved a return rate of 3,600% in one month.

He invested less than $100 million in put option premiums and made more than $3 billion.

And this isn't the first time Spitznagel and Global Ventures have succeeded.

Excluding the 911 incident and the 2008 financial crisis, Global Investment bought a large number of S\u0026P 500 put options at a price of less than US$2 per contract in 2010. A month later, the US stock market crashed again due to the Greek debt problem. After pulling back, Global Investment sold all these put options at a price of US$60 per share, easily earning more than 30 times the profit.

In 2015, A-shares suffered a second stock market crash due to the exchange rate reform. The Dow Jones Industrial Average plummeted nearly 4% that day, and Global Investment made a huge profit of US$1 billion that day.

Success after success has completely established the reputation of Spitznagel and Global Investment.

Even Xia Jingxing couldn't help but admire him.

No matter whether the market is good or bad, this unusual black swan fund can make money.

However, ordinary black swan funds can only make money when encountering black swan events that are rare in a few years or even ten years.

This is the biggest difference between Global Investment and ordinary black swan funds.

Why can this be achieved?

This is because this fund has turned "short-term speculation business" into "long-term investment business."

Spitznagel and Global Investment Fund are playing a game of survival between "big fish" and "little fish."

On weekdays, investors around the world make a small amount of money easily, that is, premium income, by selling short-term put options to global investment funds.

These little fish keep tearing off tiny strands of meat from Global Investments. Every day, Global Funds are slowly bleeding...

And when unprecedented crises such as 911 and the epidemic cause a market crash, Global Investment, a big fish that usually sleeps, will be caught off guard and open its mouth to eat up all the small fish hanging in the trap and earn a lot of money. The profits are several times or dozens of times the normal losses, and some retail investors may even lose everything because of their greed for small money.

This is also commonly known as three years without opening, and three years after opening.

Xia Jingxing also went short, but only occasionally.

Global Investment, on the other hand, is shorting all the time.

It’s not that Spitznagel is a master prophecy who can predict major events that affect financial markets again and again.

Instead, he led the team to create a trading model and stuck to it consistently.

How many years can the average person endure continuous losses? The kind that loses money every day, every moment.

So this guy wants to become a farmer, mainly to divert his attention. Otherwise, after a few years of focusing on the market, the whole person will become bad, and then the investment strategy may be shaken.

Xia Jingxing said: "Mark, can you share your specific trading strategy?"

Spitznagel did not refuse, but asked with a smile: "Are you sure you want to know? Just a friendly reminder, this is a bomb, and most people can't play with it."

Xia Jingxing glanced at Jiang Ping, who understood and said: "We don't plan to do it, we just want to understand it and gain insights."

"Okay, come with me!"

Spitznagel stood up with a smile on his face and led Xia Jingxing and the others downstairs, seemingly not worried about core business secrets being leaked.

Because he firmly believes that it can be imitated but cannot be surpassed.

－－－－－－Digression－－－－－

Thanks to book friend sidneyliu for the 10,000-coin reward. I have been giving the reward for several days. I just remembered to thank you today. It’s my fault.

One chapter will be added after the holiday. In addition, there is still one chapter missing on New Year's Eve, and I still owe Liang Xiao's book friend two chapters to be updated. A total of four chapters are missing. I will start paying off the debt after the Spring Festival. The time is limited in these two days, so please forgive me.

Another thing to note is that the QQ book club group has been reported and blocked by someone. It should be the person who reported the chapter before. I will create a new group later and everyone can add it again.