My Guy Spier Interview: Investing During an Economic Crisis

Right now, the global economy is facing a crisis on the scale not seen since the Great Recession of 2008. But what on Earth do we do about it as investors? The annual inflation rate in the United States sits at a staggering six percent. Interest rates are rising, with the FED funds rate at around four and a half percent. Stimulus checks have stopped, and the average consumer is struggling. Investors are coming off a year where the S&P 500 fell 20%, with some well-known tech companies suffering even more heavily. The housing market is tapering off, cryptocurrency is dead, banks are collapsing, and there are global fears surrounding stagflation and concern about a long, dark recession in the years ahead.

There's no doubt the economy looks shaky. So, to learn more about what the heck is going on and what we should do about it, I reached out to legendary super investor Guy Spear, who you all know from the Aquamarine Fund, or "The Education of a Value Investor," or simply as "the guy" that placed the winning bid for a charity lunch with Warren Buffett back in 2007. So stick around to the end because Guy takes the time to explain exactly how we should all be investing in this time of economic crisis.

But the first thing I wanted to ask him is: Should somebody interested in investing right now actually be paying attention to the hectic macroeconomic environment, or should we be purposefully blocking it out?

"There's a very easy and simple answer to that, Brandon," says Guy. "You absolutely should block it out and just forget that it was even there. Just realize that macroeconomics is important from a macro perspective, but we're operating on the scale of our own personal savings or the savings of us and our investors. We're operating on it at a completely different scale where it kind of doesn't matter for us. What we're trying to do is we're trying to own a piece of the productive economy."

Another way of looking at it is, "If you're an ant walking around amongst elephants, you absolutely care where the elephants are, you know, and you care where they step and all of those things. But at the end of the day, you know what you need to do is you need to work on building your nest. You need to work on gathering food. It's just such a different scale that it's not going to affect what you need to do on a daily basis. And you shouldn't allow, in that analogy, the movements of the elephants to affect what is your daily task, which is to say own a slightly larger proportion of the world's productive assets at the end of the day."

So even though interest rates and inflation are basically the only topics the news is covering right now, I find it interesting that Guy thinks we should absolutely block that out of our mind. His reasoning makes sense. We have absolutely no control over the macro. We can't predict it; we can't influence it. So why worry about it? As an ant, we have no influence over where the elephants step.

So what are we going to do? Are we never going to leave the nest on the off chance that an elephant might be out there somewhere? Of course not. We just have to stay focused on finding those individual opportunities—those businesses that are high quality and fairly priced. The economy is going to go up and down; interest rates are going to go up and down. We're going to go through recessions, and we're going to go through periods of bubbles, but it doesn't matter. You know, that ship is sailing; it has its North Star.

So it's not so much about, "Is now a good time to invest?" It's "How do I become a better version, or how do I become a person who is on a daily basis more capable of investing?"

To take the running analogy, it's now a good time to go running versus, "I am a runner. I'm a guy who goes out running come rain or shine." I like this analogy. If you look at the drop of 2020, there were a lot of investors wondering if now was a bad time to invest. Well, if you got fearful and decided to never pull the trigger, even today, just three years later, you've lost out on at best 15%, and at worst 65%.

So my takeaway is that we should definitely focus on being an investor, as Guy suggests, as opposed to wondering if now is a good or bad time to get in. But of course, in practice, it's still really difficult to ignore the fear and negativity spouted out by the media because it's absolutely everywhere. And actually, studies have shown that as the stock market falls, pessimistic media narratives rise. So with the stock market down 20% in 2022, it's just unavoidable right now; you're going to be bombarded with negativity.

So knowing that, what are some practical steps that investors can take to ensure we don't succumb to the negative emotions of fear, uncertainty, and doubt?

"Well, they could spend more time watching your YouTube channel," jokes Guy. "Wait, kind of there, JJ? That's all they need to hear?"

"Yeah," I respond, "back on me, back on me."

"No, of course, I'm just kidding," he laughs. "It's fun to promote Brandon on his own channel. But also because I think it's a whole bunch of little steps, and yeah, tuning into the right YouTube channels is one of them. The other thought that came straight into my mind—because this was part of the discussion that we had before we came live—was come to the Berkshire meetings. You know, and you sort of say, 'Well, why shouldn't I go to the Berkshire Hathaway meeting? I can do everything from—I can watch it all online.' But at the Berkshire Hathaway meeting, the minute you board the plane to Omaha, you're going to start meeting people. Really, it's about getting around the right kinds of people. All of us can succumb to the kind of thing that people succumbed to over the last few years, and myself included, Warren Buffett included. And so, you know, we need to build fences around ourselves that lead us in a good direction, not a bad direction, if you like."

"And Charlie Munger said, 'Everything's one damned interconnectedness after another.' Pretty much everything that we do, you know, there's an element where we could look at it and say, 'Well, does this lead me closer to a path of intelligent investing or further away?' And if it leads you closer, then do it. And if it leads you further away, then maybe you should consider not doing it."

I like Guy's approach here because it goes back to exactly what he talks about in his book. A critical step in investing intelligently, investing rationally, is setting up your environment right. What media do you consume? What environment do you work in? And who do you listen to? That's why here on the channel, I don't cover what the stock traders think; I don't cover what politicians are doing; I don't cover what the CNBC hedge fund managers are saying. I look into the teachings of the super successful long-term rational value investors—like Guy, like Warren Buffett, like Charlie Munger, like Monish Pabrai. When I need to read up on a stock, I'm not hanging out in the forums; I'm reading annual reports or listening to earnings calls. These are the important things to do to stay grounded. Listening to mainstream media is just a losing battle.

Remember the study: We can look at the S&P 500 and already know what bias we're going to see in the media. We know we'll never get ahead looking at that stuff, and realistically, it's more likely we'll end up making emotional short-term decisions that lead to long-term underperformance.

And look, it is a natural thing to be hesitant; it's a natural thing to be fearful. So I think that my words to that person is: Don't deny your feelings; don't deny your fears; don't pretend they're not there. The goal is not to block them out because you cannot not be aware of them. The goal is to understand that they are not relevant for the thing that you're trying to do, and to sort of see them for what they are, which is a distraction.

And the reason why they're so distracting is that they are relevant in a certain way, where the elephants put their legs really does count for you. So it's not surprising that you want to pay attention to them, but you cannot affect the outcome of where their legs go. You cannot affect the outcome of where interest rates go, and what we need to do is develop the habits of the kinds of things on a daily basis that will get us closer to our goal.

That's the number one thing I took out of talking to Guy: It's about the habits you form; it's about the environment that you create as an investor. For Guy, this meant moving to Zurich, away from the buzz of Wall Street. It meant surrounding himself with and talking to like-minded investors like Monish Pabrai.

He definitely made the point that in investing, it's not about trying to block out your emotions; it's about creating the environment and the friend network that can keep you grounded and rational in times like this, where everything is turning to mud and your emotions do run a little bit wild.

But with that said, with our portfolios down 20% from 2022 and with a lot of uncertainty heading into the future, how should we actually be investing right now? Yes, we should remain rational; yes, we shouldn't focus on the macro, but what should we actually do?

Let's say that you're somebody who, you know, you look back on the last few videos and decide that you invested far more or too much of your investable funds into, say, crypto or something that was riding high but is now down a lot. What you don't want to do is you don't want to compound those mistakes. Even if the first time it didn't work out, it would be a terrible thing to stop after just one try. If we're watching our children learn to walk, we don't watch them fall over once and then say, "Oh, that, you know, give that a break."

Or just to give another analogy, if we think of exercise, the key to becoming fit is not so much about trying hard on your first workout or even your 10th workout; it's turning yourself into somebody who regularly works out. So this is not about taking the plunge; this is not about what happened last year; it's about becoming a person who's an investor.

And if we just go to Warren Buffett, whom you mentioned, I mean, every month, every year, the Hathaway's buying pieces of America—shares. Every month, there's share purchases taking place, and so we should become more like that.

So Guy's advice for investing right now is, first and foremost, to keep at it. You know, don't be brought down by the events of the market. You know, I imagine investing a huge chunk of money at literally the worst possible time in recent history—the 9th of October, 2007. By March of 2009, you would have lost 56.7%. Now that sucks, but hey, if you didn't sell, and in fact, you just held on and you adopted the investor mentality, then today, that horrible investment is actually sitting at a 146% gain. And if you had the courage to invest at the market bottom in 2009, that investment will be sitting at a whopping 470% gain. Think about that!

Last year, as Guy mentioned, cryptocurrency collapsed; the S&P 500 fell 20%. A lot of high-flying stocks over the past five years suffered even worse than that. And for all we know, this might continue into the next few years as well. But should we shy away from investing and maybe come back in five years? No way! As Guy says, become an investor. Someone who always wants to own pieces of productive businesses; someone that doesn't look at the ups and downs of stock prices every day, but someone who continues to search for long-term opportunities to buy high-quality businesses at discounted prices.

You know, I think that I actually look at the stock price even less frequently than I used to. You know, so it's just like—it's just not worth looking at it. It's not worth looking at it because it just drives brain cycles. You're better off just reading the 10-K once every quarter or even every six months.

And these brain cycles bring us full circle to the start of the video, where we're talking about getting sucked into the noise. But one topic that I did want to ask Guy specifically, before he had to go, was his thoughts on passive investing, especially as he is an active fund manager.

"Take a listen to what he said," I suggest.

"The world is full of so many different kinds of people," Guy begins. "I think that it comes down to the individual knowing yourself and knowing, 'Who am I, and what kind of relationship do I want to the world of business and investing?' I guess, and I think that, you know, all options are valid—well, all sensible options are valid. Taking your money to a casino or to the equivalent of a casino is not a great way to preserve your wealth. And, you know, the great thing about investing in public securities is that you don't have to do one or the other. So I don't think that there's anything wrong with somebody saying, 'Look, I know that the index is going to work pretty well, but I do want to spend some time doing some of it on my own. So I'm going to do one-third the index; I'm going to pick an index; I'm going to do one-third individual stock picks, and I'm going to do one-third cash because that's going to make me feel safe.' But I think that the key is to know yourself and know what your interests are, and if your interests are somewhere else, then that's totally fine. Do an index, you know. So at the end of the day, be true to yourself and decide what relationship you want to have with investing and go from there."

And remember, passive investing is still a very, very viable strategy if you're just not that interested in stocks. And hey, at worst, you've beat 93% of active fund managers, so it's not bad.

But overall, guys, that was my discussion with Guy Spear on investing during challenging economic times. I want to say a huge thank you to Guy and his team for helping make this happen.

And of course, if you did want to follow Guy, he's active on Twitter at @GSpear, and you can also follow his YouTube channel, which is linked down below. I'll also leave his fund's website down in the description if you want to check out what he does, and also leave a link to his book, "The Education of a Value Investor," down below, which I personally really, really enjoyed reading.

But how cool is that? Hey, a super investor here on New Money; pretty awesome! Also, if like me, you wanted to thank Guy for actually coming over on the channel, please definitely leave a comment below, and I'll be sure to pass along the comments to him.

But apart from that, guys, that is it from me. Please leave a like on the video if you did enjoy it. And with that said, I'll see you guys in the next video!