Thread by @choffstein

I know leverage is often seen as a “no-no” for home office gate keepers, but ETF’s like $NTSX and Simplify’s coming $TYA (sec.gov/Archives/edgar…) get my creative juices going.

e.g. 66% $NTSX + 34% $COM gives you a 60/40 with a 33% overlay in long/flat commodities

That’s a potentially interesting inflation hedge that can “turn itself off” during commodity drawdowns.

And there’s tons of examples like this if we are willing to look at net portfolio exposure rather than on an itemized basis.

All of a sudden a go-nowhere, low-vol ETF like $BTAL becomes an interesting low-correlation overlay profile.

It’s not a question of “what do I have to sell to buy this?” It’s a question of, “what do I want to layer on top of my core asset allocation?"

To benefit from capital efficiency, we either need product sponsors to start co-mingling positions (e.g. “here’s your beta + overlay”) or we need to accept that our itemized portfolio may look weird.

e.g. 60% $SPY + 16% $TYA would give you a 60/40. But you now have 24% free.

We can think of that 24% as an overlay to our 60/40, but the financing cost is embedded in the Treasury futures from $TYA!

I should add that there are a bunch of mutual funds that are doing something similar.

e.g. the PIMCO StocksPLUS series or DoubleLine Enhanced Shiller CAPE, both of which are 100% stocks + 100% bonds.

Also $MAFIX and $BLNDX are 50% SPY + 100% managed futures.

(And it’s an approach embraced by your’s truly as well.)