Jason Buck, Mutiny Fund – Carry, Convexity & The Cockroach | #440

Episode Summary

Executive Summary: Jason Buck explains how losing money in the 2007-08 real estate crash pushed him to build portfolio solutions centered on survival, diversification, and hedging entrepreneurial risk. He argues most portfolios are “offense-only,” and promotes a modern permanent portfolio using long volatility, tail risk, managed futures, gold, and crypto to create resilient savings and better behavior through crises.

Main Topics: Origin story: from entrepreneur to risk manager (Priority: 5/5): Buck recounts his background in soccer, real estate development, and the devastating 2007-08 housing crash, which changed his career from building projects to studying hedging and volatility. True diversification and offense/defense balance (Priority: 5/5): The conversation emphasizes that most investor portfolios are biased toward offensive, GDP-linked assets, while real diversification requires explicit defensive assets that can perform in liquidity shocks. Modern “cockroach portfolio” / permanent portfolio 2.0 (Priority: 5/5): Buck describes Mutiny’s total-portfolio framework: global stocks, global bonds, long-volatility strategies, commodity trend, plus gold and crypto—aimed at making portfolios resilient across macro regimes. Long volatility, tail risk, and strategy design (Priority: 5/5): He distinguishes classical tail-risk hedging (deep OTM puts) from opportunistic long-volatility approaches, and explains why an ensemble of managers and monetization styles is needed. Manager selection, SMAs, and portfolio construction (Priority: 4/5): Buck discusses using separately managed accounts, cross-margin efficiency, and tracking dozens of managers to build a diversified convexity overlay while replacing underperforming or noncompliant managers. Current market environment and 2022 performance (Priority: 4/5): The pair discuss why slow grind-down markets with elevated vol can hurt classic tail-risk strategies, while cross-asset vol, dispersion, and CTA trend following may do better. Applications beyond portfolios: entrepreneurship, VC, and corporate treasury (Priority: 4/5): Buck argues that entrepreneurs and corporate treasuries should think countercyclically, using liquid defensive assets to protect business risk and create dry powder in downturns.

Key Arguments: Most portfolios are mostly offensive; diversification should explicitly include defensive assets that thrive when correlations rise and liquidity disappears. The 2007-08 crash showed that leverage and illiquidity can turn a good thesis into a wipeout; hedging is not optional for entrepreneurs exposed to macro shocks. Long volatility and tail risk are hard to access in retail wrappers, so an ensemble of specialized managers is a practical way to approximate institutional access. Buying deep OTM puts provides clear convexity but negative carry; opportunistic long-vol can improve carry, at the cost of less certainty. Ensemble approaches are better than single-manager bets because volatility events have multiple path dependencies and monetization styles matter. A modern permanent portfolio should replace some cash with long volatility and some gold with commodity trend following, because these better match today’s macro regime. A small hedge allocation is often inadequate if the goal is true risk reduction; meaningful ballast requires a substantial defensive sleeve. Corporate treasuries and venture portfolios are often mismanaged because they ignore countercyclicality and treat cash as “safe” despite inflation erosion.

Data Points: Cropland lost to urbanization: 4.8 acres per minute - Used in the ad read to justify farmland as a hedge against scarcity and inflation. AcreTrader minimum investment: $15,000 - Passive farmland access for retail investors. Time in Napa Valley: 13 years - Buck says he has lived in Napa for about 13 years. Long-vol launch managers: 5 initial managers; 14 current managers - Mutiny’s long volatility strategy began with five managers and expanded to fourteen. Managers tracked: 35 to 40 managers - Buck says they track nearly the entire long-vol/tail-risk manager universe. Target negative attachment point: -20% SPX move - He describes the behavioral threshold where tail risk hedges should begin paying off. Typical small-move threshold: -10% SPX move or less is noise - He says hedging every small decline is too expensive and not practical. Inflation peak poll: 9-1 - Meb references a Twitter poll asking whether inflation had topped for the cycle. Interest rate hedge example: VIX at 32 implies roughly 2% daily move - Buck uses the rule of 16 to translate VIX into expected daily variance. Option position example: 97% long SP / 3% put options - He gives a classical tail-risk example of holding most capital in equities and a small put hedge. 2022 ETF performance examples: VXTH down about 18%; PPUT down about 14% - Used to show that classic hedge products can still lag in a grinding drawdown. Portfolio allocation example: 25% stocks, 25% bonds, 25% long volatility, 25% commodity trend - His conceptual four-quadrant/modern Harry Browne-style framework. Cockroach fund exposure example: About 220% total exposure / 2.2x - He describes how futures/options create gross exposure across sleeves in the portfolio. Alternative sizing example: 50% global stocks, 50% global bonds, 50% long-vol, 50% commodity trend, 20% gold/crypto - Illustrates capital-efficient exposure levels used in their implementation. Real estate collapse timing: 2007-2008 - Buck’s commercial real estate development business was wiped out during the GFC.

Pivotal Quotes: "the only form of actual winning in this game is surviving" — Jason Buck: He summarizes his investment philosophy as survival-first portfolio construction. "You have to keep people, like you were saying, surviving. So by having defensive assets, you allow people to not make stupid mistakes" — Jason Buck: Discussing why hedges are partly about behavior and staying invested. "I’m so tired of us talking about investments when they’re really savings" — Jason Buck: He reframes portfolio construction as protecting savings rather than chasing returns.

Implications: The episode argues that investors, entrepreneurs, and treasuries should treat portfolios as survival tools, not return-maximizers. Meaningful defensive allocation, ensemble hedging, and countercyclical thinking may improve long-term compounding and reduce catastrophic drawdowns.