Entry 16: The Crash Guy, The Philosopher, and The Mapmaker: Three Warnings for a Bullish Market

Last week, it was raining in Bristol as it had been for most of the first twenty days of September. The sort of persistent, unpredictable rain that hammers down, then drizzles, seeps into your bones, and makes the city’s Georgian terraces glisten. Meanwhile, the United Kingdom was basking in the full force of President Trump’s visit — a spectacle of red carpets, protest placards, and the peculiar theatre of the ‘special relationship’ which is central to transatlantic diplomacy.

Billions of pounds of investment were promised for the UK’s ailing economy, along with whatever else was fed out from the unpredictable channel of Truth Social. Against this backdrop, the talk in financial circles was not of pageantry, but of peril, uncertainty, tariffs, and surging markets. At the heart of any conversations about the direction of the current markets, there are three characters who are not distracted by pagentry and are experienced enough not to understand current perils. While subtle with their analysis, each is cautious, each is watching the bull market’s triumph with a wary eye, and each is quietly preparing for collapse. Mark Spitznagel, the crash guy; Howard Marks, the philosopher of uncertainty; and Ray Dalio, the mapmaker of risk.

The Crash Guy: Mark Spitznagel

Plenty of fund managers will tell you they’re bullish about stocks. Try finding one who says so yet stands to make a killing if prices collapse. “I’m the crash guy—I remain the crash guy,” says Mark Spitznagel, who earned $1 billion in a single day for his clients during 2015’s “Flash Crash.” A protégé of “Black Swan” author Nassim Nicholas Taleb, his hedge fund, Universa Investments, also scored major gains when Lehman collapsed and when Covid-19 sparked a meltdown.

The alarming part of Spitznagel’s current outlook is that he sees conditions akin to 1929, the year of the Wall Street crash. The silver lining for those hoping the bull-market music will keep playing a while longer: He thinks this is more like the early part of 1929, when stocks added significantly to their Roaring ’20s gains.

How excited—or worried—should ordinary investors be? Take a deep breath and understand the way Spitznagel made those past killings. He wasn’t reading the tea leaves and predicting the timing of stock swoons. Even the smartest trader couldn’t know a pandemic or trading glitch was coming. Universa buys so-called tail-risk protection that loses money most of the time and then pays off hugely if a downturn is particularly sharp.

The Biggest Risk is Not the Market

Other successful fund managers have drawn public attention with similar calls, and they occasionally get them right. In July 2024, Spitznagel himself sounded a similar tune, predicting “something really, really bad,” but with a last hurrah for stocks first. The S&P 500 has gained 23% since then. Market timing is notoriously difficult and often costly for individual investors who shift their portfolios on fearful headlines—something Spitznagel pointedly doesn’t recommend. Individuals who can’t buy sophisticated tail-risk protection will still make attractive returns in the long run if they can hang on. Many don’t. “The biggest risk to investors isn’t the market—it’s themselves,” he says.

Timing aside, the euphoric and then cataclysmic scenario Spitznagel is describing could be good for his particular strategy. When investors are optimistic, his fund can purchase exotic tail-risk derivatives cheaply. His clients, mostly traditional investors such as pension funds, pay for protection so that they can more confidently reap the full benefit of rising markets.

Forest Fires of 1929

The reason Spitznagel thinks the current bull market’s comeuppance could be the worst since 1929 is repeated federal rescues of markets and the economy. He compares it to the practice of quickly extinguishing forest fires only to have too much dry tinder accumulate. Amid today’s near-record stock valuations, the eventual “firebomb” could burn hotter. Before that happens, though, he calls conditions such as Federal Reserve rate cuts ideal for the market to push higher, with the S&P 500 hitting 8000 points quickly. That would be a 20% gain from today’s level. If a major selloff really is just over the horizon, big gains now wouldn’t be unusual. Since 1980, the S&P 500 has returned an impressive 26% annualised in the 12 months preceding the start of a bear market. The final 12 months’ rally was more than twice as high as that average ahead of the 1929 peak.

Higher than Tech-Bubble Levels

Both individual and professional investors tend to increase their stock exposure at times like today. Strategists at State Street noted last month that institutional investors’ exposure to equities just reached its highest since November 2007, just before a vicious bear market. American households’ allocation to stocks is also at a record, surpassing tech-bubble levels. Two other signs that investors are throwing caution to the wind: The premium investors require to own investment-grade-rated bonds hit its lowest since 1998 on Friday, and trading volume on U.S. stock exchanges was just shy of the April record during the Liberation Day panic.

“The markets are perverse,” says Spitznagel. “They exist to screw people.”

The Philosopher: Howard Marks

If Spitznagel is the crash guy, Howard Marks of Oaktree is the philosopher of uncertainty. In his memo “Nobody Knows (Yet Again),” published in April 2025, Marks reflects on the impossibility of forecasting in a world where all norms have been overthrown. “There are no experts on the subject at hand,” he writes. “Economists have analytical tools and theories to apply, but no economist and no tool will produce a conclusion in this instance that we can follow with confidence.”

The future, Marks reminds us, is not something to be analysed, but endured — with humility, scepticism, and a willingness to act in the absence of certainty. “Most of the time the world doesn’t end,” he notes, “but when unfavourable developments are raining down, that’s often the best time to step up.”

The Mapmaker: Ray Dalio

Meanwhile, Ray Dalio of Bridgewater warns that the world is “very close to a recession,” and perhaps something worse, as trade wars, mounting debt, and the unravelling of the post-war order threaten the global economy. Dalio’s prescription is as much political as financial: reduce deficits, negotiate rather than escalate, and remember that the value of money itself is at stake.

Lessons from History — and a Wry Smile

History, as Mark Twain observed, doesn’t repeat, but it does rhyme. The euphoria before a crash, the scramble for safety, the search for scapegoats — these are as old as markets themselves. Yet, as Marks, Spitznagel and Dalio all remind us, nobody knows for certain what comes next. The best we can do is prepare — not by chasing headlines, but by building resilience, questioning easy narratives, and, above all, keeping our wits about us.

As for the British weather, it will rain again. Best to keep an umbrella handy.

Further Reading & Source Material
• Memos from Howard Mark - Oaktree Capital
• Mark Spitznagel’s market crash warnings — MSN/Wall Street Journal
• Ray Dalio’s crisis map for 2025 — Tactical Investor/ A smart Rabbir has three holes

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