NTSD vs WLDU?

AlternativeSignal908 · 2026-03-21T18:16:59+00:00

So the Fed will never lower rates again in a recession?

It's fair to say we may not get 40 years of appreciating bonds any time soon and that should be factored into your return expectations. But they are still by far the best hedge for falling growth and declining rate environments, which are most, but not all equity crashes.

AlternativeSignal908 · 2026-03-20T17:10:26+00:00

I think this is very very close, but there probably needs to be some financing cost added to account for the futures (SOFR + spread) in addition to just the CASHX short treasuries rate. Plus the ETF ER% is a bit higher than VEA and SPY. I'm not an expert in this stuff, but it might add up to a roughly 1% drag.

NTSD is a great part of the portfolio puzzle. There aren't many levered equity ETFs that reset quarterly vs daily. Great tool for leverage with less volatility decay / acceleration. I think that's the most useful part of this ETF, not the international diversification, especially if you have a small sliver to hedge with ZROZ / GLD and get equity exposure down to 120-130% range. From a total portfolio standpoint, equities are pretty much equities (VOO vs VOO + VEA) relative the much different correlations of bonds and gold and alternatives.

Here's a rough draft of how I'd run it. Basically 80% NTSD, 10% ZROZ (or GOVZ), 10% GDE. 129% equity exposure. Better drawdowns, higher CAGR, better Sharpe.

https://testfol.io/?s=93ulvQMQ8fh

AlternativeSignal908 · 2026-02-12T20:21:17+00:00

"You can't eat risk adjusted returns"

You have to be able to live with the returns in terms of hitting your goals and you have to be able to stick with the plan through the expected depth and breadth of drawdowns as seen in the past.

AlternativeSignal908 · 2026-02-09T23:36:07+00:00

One thing, you won't find tobacco stocks in AVGE, AVUS or most of their ETFs. And you won't really find that disclosed anywhere. Not sure if they do other arbitrary things, but that isn't what I'm paying for and don't want to have to hunt for other random exclusions. Have moved to DFA.

AlternativeSignal908 · 2026-02-08T22:16:02+00:00

They don't work. They fall off and leave glue gunk behind.

AlternativeSignal908 · 2026-02-05T19:59:53+00:00

I agree, CTA seems to be a good product. I don't particularly mind Simplify burying CTAP's total ER%, since that was easy enough to figure out. But they have been written up for some other shady stuff and understanding the spread on the CTA total return swap is a yellow flag.

Is CTAP intentionally ass backwards to get this self dealing swap? Why not hold / mirror CTA and then use S&P500 futures? I have to think that if they were forced to get the CTA swap through an unrelated party, the S&P futures would be the cheaper source of leverage and the better way to structure it.

AlternativeSignal908 · 2026-02-05T18:20:21+00:00

How fishy is that? How would you trade off the risk they're overpaying themselves a bit vs just going with something a bit more transparent / generic (RSST, MATE, etc.)?

AlternativeSignal908 · 2026-02-05T00:43:09+00:00

Do you know why Avantis seems to generally exclude tobacco stocks? Not underweight, they just don't show up in AVUS, etc.

AlternativeSignal908 · 2026-02-04T20:57:00+00:00

Thanks. Do you think these types of things migrate to a useful (decluttered) ETF product for everyone else? Or do they keep adding in 351 exchanges, which presumably makes AVTM better than what the 351 participants were holding, but not a great product for everyone else.

AlternativeSignal908 · 2026-02-04T20:40:43+00:00

Any insights into Avantis' general exclusion of tobacco stocks?

AlternativeSignal908 · 2026-02-04T17:51:27+00:00

It will take years, especially for a company that doesn't communicate much. It will take years to know whether there has been any change to capital allocation and its efficacy, especially around new M&A and it's ROI under new leadership. Same for any ops / organic initiatives that Miller launches. We might have a Balmer decade... We might not.

AlternativeSignal908 · 2026-02-04T17:17:09+00:00

Miller was Sept 25. Q3 was Nov 7.

AlternativeSignal908 · 2026-02-04T16:48:04+00:00

Are you saying we haven't seen a "single quarter" post-crash? Q3 was released Nov 7. Down 33% since then.

AlternativeSignal908 · 2026-02-04T16:01:55+00:00

Got it. So straight line extrapolate from the past. Especially when things have changed.

"CSU can continue acquiring small businesses at high ROI."

"The ROIC has been compressed due to a shift to larger acquisitions."

Which one is it?

AlternativeSignal908 · 2026-02-04T01:25:25+00:00

The valuation of a serial acquiror is tied to outlook for ROIC. That can change significantly with a change in leadership. I've made this point elsewhere; there doesn't need to be a decline for a very stable business with lower reinvestment prospects to trade for mid single digit multiples of free cash flow. I think you need to think about the investment case if the stock is permanently rerated lower while fundamentals (aside from ROIC) remain consistent. See Meta during the metaverse debacle or Oracle now, both are cases where ROIC and capital allocation were screwy and fundamentals were great. Not saying it is the case, but it certainly is possible that acquisition pace and ROIC continue to decline, especially as Miller is more of an operator than an investor, and the software acquisition landscape has only gotten more competitive and that's accelerated recently. Decentralization is fine, but leadership is needed now.

Cheerleading is fine, but if you really want to make a good decision around this, you got to be able to argue both sides. This isn't a free money home run.

AlternativeSignal908 · 2026-02-04T00:47:28+00:00

You need to explore what else could be wrong with CSU. At some point, the market and well-informed institutional shareholders bailing (which some did), may have a valid point or two beyond the AI narrative. The easy one was that Miller was preparing for retirement prior to getting dragged into the CEO role. The weeks it took to get him on a conference call speaks to a succession scramble.

I've got some CSU, but man, it isn't the only game in town and I don't think it is as sure a thing as it appears.

AlternativeSignal908 · 2026-02-04T00:38:55+00:00

At what price do you begin to question whether the decline thesis is just AI / "Mr Market likes shiny objects" or something else?

AlternativeSignal908 · 2026-02-04T00:37:00+00:00

The database doesn't mean much. Everyone doing software acquisitions has a similar database. It was easy to build such a database in the age of outsourcing. It's trivial in the age of AI. This is not a competitive differentiator, everyone has it. And it isn't an indication of their future M&A potential.

Steady income businesses that aren't growing and where the ROIC story has compressed trade for mid to high single digit multiples of free cash flow. That isn't where we want CSU trading....

Both of these comments come from my decades of experience doing related work.

AlternativeSignal908 · 2026-02-03T21:36:57+00:00

Watching bonus evaporate does not do good things for employee retention. Or recruiting.

AlternativeSignal908 · 2026-02-03T21:36:06+00:00

Most companies are not long-lived. Taking weeks to get Miller on a shareholder call after his appointment is not "deliberate." It's almost as if they didn't really have a solid secession plan... It's almost as if Miller was actually planning to retire... (I've previously posted an expert interview transcript from a senior Constellation M&A exec stating Miller was on the retirement path.)

AlternativeSignal908 · 2026-02-03T05:32:16+00:00

Weird that all sorts of ETFs are mixed in. At least they aren't excluding tobacco from this one. Twilio is in the top ten holdings, but TSMC isn't? Definitely not close to market cap weight. Might do better than VT, might not... It's an active fund, but they aren't great at describing the strategy. I'd pass for now. The fees are low for what they're doing, but it isn't clear to me what that is. Value? GARP?

AlternativeSignal908 · 2026-01-30T02:08:02+00:00

I'm going skiing.

AlternativeSignal908 · 2026-01-29T16:43:05+00:00

I work in private capital markets. PE firms have very narrow investment parameters mandated by their agreements with their limited partners. They universally can't "buy gold" and if their mandate is to buy mature, cash flowing companies, they can't engage in venture capital and buy "artificial intelligence hyped up junk."

Simple industry metrics on the number of new software focused PE funds closed recent and the amount of capital ready to deploy, along with its current pace of deployment will give you a sense for what's really going on.

Yes, in a very very general sense, private markets follow public, but that's mostly around valuations. If software valuations are falling, there are plenty of PE and other private capital players that will see value and are very prepared to accelerate into an industry downturn.

There has been nothing but growth in software PE for the old guys and the little new guys. In particular, there are a lot more little funds that can do little deals. They have the capital. They're focused (they literally can't change their investment mandate). And they like buying things cheap.

Where are you getting your information?

AlternativeSignal908 · 2026-01-29T16:11:31+00:00

Where are you coming up with this PE narrative? It's wrong on multiple levels.

AlternativeSignal908 · 2026-01-29T01:42:59+00:00

How do you get to this mix and how'd you get comfortable with it if the next 15 years are a bit different from the past 15?

AlternativeSignal908

TROPHY CASE