Guy Spier (Trades, Portfolio) is a legendary investor and the founder of the Aquamarine Capital. In the first part of this three-part series, I have summarized a 2023 interview he had with William Green. Spier reveals his investing rules, habits, his thoughts on the tech bubble and the impact of global events on his portfolio.
Set rules and act on them
Spier has established a number of “rules” and habits in his life to help him become a better investor. One of them is to attend the Berkshire Hathaway (BRK.A, Financial) (BRK.B, Financial) annual meeting each year, which provides immense value and likely reinforces the wisdom of Warren Buffett (Trades, Portfolio).
He also does not check his stock portfolio every day. The obvious reason behind this is to help mitigate short-term thinking and to avoid being swayed by daily fluctuations. Spier suggests that investors think about how to create “protection” against not getting “caught up in the madness.”
The guru revealed he has learned successful habits from Nick Sleep of the Nomad Investment Partnership. This firm historically achieved a compounded annual return of 20.8% between 2001 and 2013. Spier visited Sleep's former office close to the King's Road in London. There, he discovered that he had a Bloomberg monitor, but it was placed on a very “low bench” as he didn’t want to be swayed by the short-term data on this too often.
This caused Spier to initially cancel his Bloomberg subscription in order to try out this process.
He aslo compared such “rules” to the “Halakhah laws” in the Jewish culture. These laws are meant to “keep you on the straight and narrow.” While he acknowledged there are “better and worse ways” to do a variety of things, from going to the Berkshire Hathaway annual meeting to even “day trading” if one is inclined to do so.
He believes it is a continuous process to “channel ourselves into a positive direction.” When we see a “fork in the road,” it is about taking the right turn.
As for shorting, he believes it does not offer true protection as you are “relying on your system to pay out” your short bet.
Tech bubble popping
During the interview, Green sets context around the tech bubble popping and many technology stocks coming down substantially in price. However, he questioned why Spier is still “cautious” and sitting on “10% cash,” one of the highest levels he has ever had.
The investor explained he used to “yearn” for companies such as Netflix (NFLX, Financial) and had previously written articles on how “amazing” its founder, Reed Hastings is, calling him a true “level 5 leader.” However, stocks such as this now do not excite him as much because he now sees “more danger than opportunity.”
While Spier does not elaborate further, from my perspective, I believe this may be due to increased competitive pressures Netflix is facing. Disney's (DIS, Financial) streaming service has achieved super growth, as has Amazon's (AMZN, Financial) Prime video. In addition, Netflix has reported slowing growth in its subscribers.
Reptilian responses
“Fight, flight, freeze” are “reptilian reactions” which Spier thinks we should all be aware of. When “market mayhem” happens, his default response is to “freeze,” whereas he believes some investors may start to “trade a lot” during periods of volatility.
Getting into debt
Spier revealed that his father had strong opinions regarding not taking on any debt. This even went as extreme to opinions on mortgages, of which he believed one should get a “smaller apartment” as opposed to taking on lots of debt. Of course, these days, house prices have inflated so much mortgages are normal practice and most are considered healthy. However, the principle makes sense.
In his lunch with Warren Buffett (Trades, Portfolio), he revealed Buffett stated that he “wouldn’t want to get into debt” as he wouldn’t want to find out “what he is capable of.”
The Ukraine war
The guru is also watching the Ukraine War closely. He sees opportunities to “de-escalate” are “limited,” but opportunities to “escalate” are “broad.” He believes the reality is it is “two superpowers” in conflict with each other even though NATO is not officially at “war” yet, only supplying weapons.
Despite being cautious, Spier said he does not want to be Chicken Little and say the “sky is falling on our heads.” Therefore, he does not want to sell all of his stocks, but instead continue to hold great businesses.
Supply chain changes
Spier explained that since 1945, there has been extreme “globalization” as companies have scaled manufacturing in order to drive efficiency gains via low-cost labor.
However, now he believes we are going through a period of supply chain “reconfiguration” for “resilience” as opposed to “optimal costs.” Therefore, it is not a surprise to him that prices are going up due to this inflationary pressure. For example, Germany has recently approved semiconductors being produced in the country, which was previously unheard of.
The impact of global events
The investor said he believes we are experiencing the “biggest shift in global dynamics since World War II,” which previously was caused by a “triggering event” in 1914, which caused World War I and a series of “dominos to fall.”
A positive is he does believe the world “tends toward order” eventually. For example, during the Cold War, the West lived side by side with the Soviet Union despite communist ideology.
Another interesting observation is that many Russian oligarchs have had their assets and property frozen in the West, but the West does not “expropriate” or seize these assets, which is a fundamental principle. However, he noted “Russia doesn’t have this principle” and many other civilizations do not either. For example, Spier expressed concerns about China, where he owns assets and “multinationals” that own global assets.
Further, his family has experienced a history of these events. His family in Germany lost assets during the Holocaust. In 1931, Spier's family was living the “good life," but due to a series of “remarkable events,” by 1936 his grandfather could no longer practice law and had property expropriated.
Such situations have partially drawn him to the United States, a country with “strategic depth” and fairly aligned neighbors in Canada and Mexico, in addition to Switzerland, a place where property rights have been respected for a long time.
Final thoughts
Spier is an incredible investor who is truly thoughtful when it comes to his investing strategy. His global outlook and context are immensely valuable as it helps to align one portfolio in an optimal way globally. He is cautious in the current environment, but still remains invested. It is also likely that he will open new positions if they fit his strict criteria.
