Andrew Siegler

@TimmerFidelity I like using Bitcoin to get equity exposure in a more capital efficient way and redirecting that capital to diversifying strategies open.substack.com/pub/andrewsieg…

With bonds and stocks once again positively correlated (per the chart below), the current/recent market episode served as another reminder to look beyond the 60/40 for that balance between returns and risk. Since 2022 I have been advocating for a 60/20/20 model as the “new” 60/40. Why? Because the correlation is positive and because problems can just as easily occur on the 40 side as the 60. The remaining 20 centers on uncorrelated diversifiers, such as managed futures, commodities, gold, cash, and yes Bitcoin.

I thought a post about how Bitcoin improves a typical 60/40 portfolio would be of interest, but people mostly want to read me AI doom and/or trash Citadel research. This is good stuff, though. Bitcoin For Return Enhancement And Diversification open.substack.com/pub/andrewsieg…

@jonbrooks I did a lot of complicated conceptual modeling to say what you put very simply. open.substack.com/pub/andrewsieg…

@dampedspring I like replacing HFGM with HFMF as the closest proxy for positive carry long vol

What's wrong with 100% $ALLW and 30% $HFGM And chill?

@Pat_Stedman Look into Alpha School. Seems like a really good use of technology for this sort of thing

We are going to have our kids continue their international pre-school in Poland the next 1.5 years because it's a few hours a day for them to get out of the apartment and a good opportunity to meet other kids and learn Polish But when we return to America we are getting a few acres in the outer suburbs and homeschooling. I've seen enough. Even against good schools the divide in outcomes is immense and is only going to get bigger this next decade. The rot in education is too deep and tech is moving too fast I'll start doing some subjects at home with the oldest during this bridge period and use it to get up to speed on our longterm educational plan Never honestly thought I'd do this, but the more I reflect the more of a no-brainer it is across every metric. Pretty much all the previous downsides of homeschooling have been mitigated (via co-ops, online resources etc) at least in America The world changes and you need to change with it

@conorsen I think the issue is rich Boomers don’t want to live in the neighborhoods young families can afford, and young families can’t afford the nice neighborhoods where Boomers live. open.substack.com/pub/andrewsieg…

I’m not sure Americans really want multigenerational communities — retirees have shown they don’t want to pay property taxes for schools, and there are some tensions between families with kids and young urbanites too.

@carney Pretty much every economic chart looks exactly like that one. open.substack.com/pub/andrewsieg…

@fejau_inc Looks exactly like the chart of Rolex prices open.substack.com/pub/andrewsieg…

Isn’t this more representative of Covid bubble hiring excess that’s been normalized than any sort of AI related thing?

@conorsen You’ve come to the Boomer mindset, throughout their lifecycle, via first principles

Passing through the various phases of life is interesting because in each one you come the completely objective, rational point of view for why your current phase of life is the one government should be helping more.

@darioperkins My thinking is that if the bottom recovers, that juices asset markets which keeps the top running hot. Monetary policy right now is the sweet spot of keeping Capital up and Labor down. They’re staying marginally too tight now to avoid being maximally tight later

The K-shaped economy is the most consensus idea in the world. (Often with not a lot of critical analysis.) If the top of the K breaks or - more likely - the bottom recovers, US macro is gonna look v different to the Goldilocks view everyone holds right now

@for_yield @NipseyHoussle I’ve thought about this a fair amount since I’m one of those people, and I think it all goes back to the pandemic open.substack.com/pub/andrewsieg… open.substack.com/pub/andrewsieg…

I've never personally known more high earners, peak career years (30s/40s) who are just not working. Can't find jobs, don't know what to do, relying on spouse salary now etc. Boston, DC, SF, LA, Phx etc It's weird, & have to think not sustainable but how/when does it change

Feuding with the Pope is Lindy

@conorsen I think of it as the pandemic bullwhip effect in labor and housing markets finally unwinding open.substack.com/pub/andrewsieg…

Recession risks at the moment are not primarily related to either Trump or AI:

@conorsen Crime isn’t normally distributed — it is more like a power law distribution by perpetrator — so an increase of crime in the neighborhood means a non-linear increase in criminal potential relative to a linear increase in people, making it more dangerous on a forward looking basis

If a city becomes twice as dense and crime goes up 30%, then crime per capita falls — does that mean a city has become safer? The odds of crime happening in your neighborhood have still gone up, it’s a tough one.

@michaelxpettis That's mostly what I've found. There are a few metals in the rare earths complex that might present a few more difficulties in sourcing feedstock, but the processing has always been the bottleneck and there seems to be political will to change that. andrewsiegler.substack.com/p/will-the-us-…

2/2 will be a glut in rare-earth production and processing. After all, if all the advanced economies decide they urgently need secure access to these metals, and if the constraint is not mining but processing, wouldn't they spend a fortune to quickly build processing capacity?

1/2 Many analysts seem to think that China's move on rare earths give it a permanent chokehold on critical minerals. That may make it a very exciting story, but I suspect that it will instead mean that in few years, and sooner than we expect, there... open.substack.com/pub/nixons/p/h…

@JulianKlymochko @onechancefreedm Where would you look to see it in private equity?

The other market where we are not seeing the implications (at least not yet) is private equity. Given ~85% of BDC loans are to sponsor-backed companies at an average ~40% LTV, the significant and widespread NAV discounts within BDCs implies massive losses for private equity funds.

What you’re seeing is a sharp divergence between listed private credit proxies (a Blackstone BDC and Blue Owl’s stock) and the S&P 500. The index is levitating on mega cap tech momentum and easing policy hopes, but private credit is pricing a very different cycle with tighter cash flows at borrowers, rising loss expectations, and margin compression ahead. Private credit’s core exposure is floating rate loans to middle market, sponsor backed companies. Higher short rates were a tailwind at first, yields reset up quickly while credit losses were still muted so BDC earnings looked great. That phase is ending. All in coupons above 10–12% have chewed through interest coverage; adjusted EBITDA add backs are getting harder to defend; and the easy levers (expense cuts, price hikes, sponsor support) are largely pulled. Markets are now discounting three things at once: more non accruals and restructurings, markdowns that follow rather than lead reality, and a turn in net interest income if base rates fall. Losses are inherently lagged in this asset class. Portfolio values are marked quarterly with model inputs; managers can amend and extend to buy time; and covenant lite terms delay formal defaults. Share prices move ahead of those marks. The steep drop in the Blackstone secured lending vehicle isn’t proof of crisis by itself, but it is the market saying expected NAV and dividend paths are lower than recent prints imply. Blue Owl’s selloff adds a second signal. As an alternative manager, it earns management fees on AUM and incentive fees on performance. If fundraising slows (wealth channels re-risk back into liquid bonds & equities) and performance fees fade as portfolios are written down or restructurings eat returns, forward earnings get clipped. In a falling rate scenario, spreads compress and loans refinance out of funds more quickly, fee bases shrink and the peak NII story reverses. Add higher operating leverage and equity beta, and the stock can slide even if current fee revenue still looks fine. There are structural headwinds too. Competition in direct lending has pushed leverage up and spreads down for top sponsors, great for issuers, not for lenders heading into a softer macro. The 2025–2027 refi wall for sponsor backed companies looms; many loans were underwritten

As I wrote before this morning's jobs report, inflation is now a secondary concern for Fed policy. The report and its aftermath only confirms this.

@apralky You’re describing Lindyman, the preeminent social scholar of our age

reminder that a concern with the endless splintering & over-specialization within social sciences, and a desire for an overarching consolidation into a unified discipline that can again re-engage the big questions like "WHERE ARE WE?" "WHERE ARE WE HEADED?" "HOW TO ENSURE A GOOD SOCIAL STRUCTURE?" which simply cannot be tackled by a professor who has spent 40 years studying the Suri people of Ethiopia is not some low-brow prole delusion... and "we do be talking about these questions acktually, you just aren't invited & don't speak the language" is a total LIE. so much so that in the 1930s, a small group of middling professors who were brave enough to unite under shared mission to tackle just such a splintering, sit down, think a little about how things are playing out, in a broad sense, in an interdisciplinary sense, what's happening in the world, how we can direct it... ended up becoming perhaps the paradigmatic thinkers of their time and defining an era..... (I mean the infamous Frankfurt School of course, below references Max Horkheimer's inaugural address, in which he describes the group's mission as above) so what do we learn from this? well, we learn from this that there exists just such an opportunity right now, for a new Frankfurt School, a new Institut für Sozialforschung.. a group of ambitious thinkers who will sit down and ask "for better or for worse, things are clearly changing... can we expound on what's going on? can we suggest ways to drive it? the adults are too busy studying the Suri people of Ethiopia. so shall we give it a shot?" and they will likely define the coming era just the same. the kicker? it could be you, it could be me, it will definitely be post-academic & online. you just need to PUT YOUR HEAD DOWN and STOP SLOPMAXXING

Netflix’s SEC football show did a whole deep dive on last year’s LSU-South Carolina game and didn’t even mention the worst call of the entire college football season.