Rand Paul Names Hedge Fund Chief Mark Spitznagel as Economic Adviser

New York Times
by Alexandra Stevenson
June 19, 2015


Senator Rand Paul of Kentucky has appointed Mark Spitznagel, the hedge fund manager, as a senior economic adviser as he seeks the Republican presidential nomination.

At first blush, the two might seem like an odd pair. Mr. Spitznagel is the founder of Universa Investments, a $6 billion hedge fund that is set up to make money in an economic crisis.

But the two share a similar outlook on the government’s role in the financial markets: that it should not have one.

Mr. Paul, whose policies are inspired by libertarianism, has promoted his belief in limited government spending and a hands-off approach to the economy by the Federal Reserve. Mr. Spitznagel has argued that the Fed’s recent policy of quantitative easing, which involved pumping trillions of dollars into the financial system, set the stage for the next market reckoning.

“As I travel across the country, the top concern of the American people is our failing economy,” Mr. Paul said in a written statement. “I look forward to working alongside Mark to solve our nation’s economic problem and to restore the American dream,” he added.

In his own statement, Mr. Spitznagel credited Mr. Paul as the only presidential candidate who understood “the destructive ramifications” of the Fed’s current policy. “I look forward to working with him on his ideas and message to change that policy,” Mr. Spitznagel said.

Mr. Spitznagel, who is 44, gained credibility for predicting two market routs over the last decade, first in 2000 and then in 2008. In the 2008 financial crisis, his Universa funds rose by 115 percent as the Standard & Poor’s 500-stock index plummeted. Mr. Spitznagel believes the next market rout is coming soon.

“There needs to be a purge,” he said in an interview with The New York Times in 2013. “If there isn’t a purge, you don’t get healthy growth.”

His thinking is shaped by the Austrian school of economics, which has its roots in 19th-century Vienna and makes the argument that the government should not meddle in any part of the economy because when it does, it causes all kinds of distortions.

In addition to limiting the role of the government in the markets, Mr. Spitznagel has had other ideas on how to bolster the economy. Last year, he brought 18 goats to a blighted neighborhood in Detroit to help clean it up. Part of his plan was to employ local residents to take care of the goats, which he hoped to increase to 60 in total.

But the plan was thwarted by city officials who argued local laws prohibited animals from grazing on city property. Within 48 hours the goats were back on a truck, destined for the butcher.

Mr. Spitznagel is also a friend of Mr. Paul’s father, Ron Paul, a former Texas congressman and presidential candidate. The elder Mr. Paul wrote a foreword in Mr. Spitznagel’s book, “The Dao of Capital” (Wiley, 2013), in which Mr. Spitznagel outlines his philosophy of the markets.