Contents

1. Search Funds at a Glance: Traditional vs. Self-Funded
2. How to Invest in Self-Funded Search Deals
3. Traditional Search Fund Statistics (Stanford GSB 2024)
4. Self-Funded Search Fund Statistics (SIG 2023)
5. Investor Returns and Economics
6. Capital Structure: How Self-Funded Deals Are Financed
7. SBA 7(a) Loan Statistics for Acquisitions
8. SBA Policy Changes Affecting Search (2023–2025)
9. The Baby Boomer Succession Wave
10. Search Fund Returns vs. Other Asset Classes
11. Important Caveats for Investors

Search Funds at a Glance: Traditional vs. Self-Funded

A search fund is a vehicle through which an entrepreneur raises capital to find, acquire, and operate a single small business. The model originated at Stanford GSB in 1984 and has since grown into a recognized alternative asset class.¹

The two dominant models work differently. In a traditional search fund, the searcher raises $400K–$600K in initial search capital from investors, then raises a separate pool of acquisition equity once a target is identified. In a self-funded search, the entrepreneur skips the investor-backed search phase entirely, funding the search out of pocket and raising equity only at the point of acquisition — typically alongside an SBA 7(a) loan and seller financing.²

The key takeaway: self-funded deals are smaller, cheaper, faster to close, and show a significantly lower capital loss rate — but the data set is much younger and more limited than four decades of traditional search fund history.

So how do investors actually get access to these deals?

How to Invest in Self-Funded Search Deals

One of the biggest challenges for investors interested in self-funded search is simply finding deal flow. Unlike traditional search funds — where a defined group of investors backs a searcher before the acquisition — self-funded deals come together quickly and quietly, often with equity raised from a small circle of contacts in the weeks before closing.

There are three main channels worth knowing about.

Co-Investment Groups

The most accessible entry point for new investors is a private equity co-investment group that specializes in self-funded search deals. CapitalPad is one of the most widely used examples. CapitalPad aggregates deal flow from self-funded searchers, conducts due diligence, and allows accredited investors to co-invest on a deal-by-deal basis.

ETA Conferences and Networking Events

The Entrepreneurship Through Acquisition (ETA) community holds regular conferences and meetups where searchers and investors connect directly. Events hosted by Stanford GSB, the Search Fund Accelerator, and groups like the SMB Center attract active searchers who are either currently raising or will be soon. Attending even one or two of these per year can generate meaningful deal flow — but it requires time and relationship-building.

Online Communities

Communities like Snowball (small private investor group) or Searchfunder (roughly 10,000 members, with over 80% of active search fund participants claiming an account³⁰) and the r/searchfunds subreddit on Reddit are where searchers discuss deals, ask questions, and occasionally seek investors. These forums won’t hand you a curated pipeline, but they’re useful for learning the landscape, identifying active searchers, and signaling your interest as a capital provider.

Most experienced investors looking how to invest in self-funded searcher deals use a combination of all three — a syndicate for consistent deal flow, events for relationship-building, and online communities for market intelligence.

To evaluate these opportunities, you need to understand the underlying data. Let’s start with the traditional search fund benchmarks.

Traditional Search Fund Statistics (Stanford GSB 2024)

The 2024 Stanford GSB Search Fund Study, authored by Peter Kelly and Sara Heston and published June 28, 2024, is the gold standard for search fund data. It tracks 681 traditional search funds formed in the U.S. and Canada through December 31, 2023, explicitly excluding self-funded searches, accelerators, and long-term hold models.³

Returns

The aggregate pre-tax IRR stands at 35.1% with a 4.5x MOIC. For exited companies only, the IRR rises to 42.9% and MOIC to 6.9x. However, these headline figures are top-heavy: excluding just the top five performers drops the IRR to 32.6% and MOIC to 3.2x. Roughly 69% of acquisitions generated positive returns, while 31% resulted in losses — two-thirds partial, one-third total. About 8% of deals achieved greater than 10x returns.³

Acquisition Activity

Of concluded searches, 63% successfully made an acquisition (down from 66% in the prior study), with the rate hovering around 57% in any given year since 2014. A record 94 traditional search funds launched in 2023. The median search duration is 19–20 months, with searchers signing an average of 3.6 LOIs before closing.³

Deal Characteristics

The median purchase price reached $14.4 million for 2022–2023 acquisitions (down from $16.5M in 2020–2021), at a median 7.0x EV/EBITDA. Median acquired company EBITDA was $2.2 million with 40 employees and $7.3 million in revenue.³

Ecosystem Scale

Search capital raised grew from $5 million in 2010 to $75 million in 2023. Total acquisition equity volume grew from $110 million to $880 million over the same period, with $682 million deployed in 2022–2023 alone.³

Self-funded deals operate in a different segment of the market. Here’s what the data shows.

Self-Funded Search Fund Statistics (SIG 2023)

The 2023 Self-Funded Search Study, published by Search Investment Group (SIG), is the first and only large-scale study dedicated to self-funded search. It collected data from 279 respondents (of 1,027 invited) surveyed between August and October 2022, of whom 109 had successfully acquired a business.⁴

Target Company Profile

Self-funded searchers acquire smaller companies at lower multiples. The most commonly targeted EBITDA range was $750K–$2.0 million, and 83% of acquisitions closed below 5.0x EBITDA. Enterprise values typically fall in the $1–10 million range, with median revenue of $2.5–5.0 million. Thirty percent of acquired businesses had less than $500K in EBITDA.⁴

Top acquisition sectors were business services (34%), manufacturing (17%), and healthcare (14%), with 65% of searchers pursuing a generalist strategy.⁴

Search Duration and Process

Self-funded searchers close significantly faster than traditional searchers. A full 53% closed a deal within 12 months, and 74% closed within 18 months. Full-time searchers were even faster, with 58% completing within 12 months. Successful acquirers submitted an average of 6.9 LOIs with only 2.4 executed, and fewer than 44% of executed LOIs resulted in a closed deal.⁴

Searcher Demographics

The average self-funded searcher was 35.4 years old at search initiation (median 34), compared to a median of 31 for traditional searchers. While 63% held an MBA (versus ~76% for traditional), backgrounds tilted toward operations and management (43%), sales and marketing (27%), and entrepreneurship (27%) rather than investment banking and consulting. A notable 15% had military backgrounds, only 11% participated in an accelerator program, and 74% searched solo.⁴

In the broader ecosystem, 18% of new searchers in 2023 were female — up from 11% in 2020–2021.³

Searcher Industries

This data is taken from Stanford’s study of traditional searchers, not SIG’s study.

The searcher profile is one thing. What investors really want to know is how the returns look.

Investor Returns and Economics

The SIG study found a median investor IRR of 25–30%, with 39% of investors achieving IRRs of 40% or higher and 33% achieving MOIC of 3.0x or greater. Only 5% of deals destroyed investor capital.⁴

5% — that’s the capital loss rate in self-funded search deals, per the SIG 2023 study. For comparison, 31% of acquisitions in Stanford’s traditional search fund dataset produced negative returns — though that figure includes partial losses and measures a different stage of invested capital.⁴³

An important caveat: because 81% of SIG respondents had acquired within the prior three years, many of these returns reflect unrealized estimated values rather than actual exits.⁴

The Yale Reality Check

The October 2025 Yale SOM study “How are Search Fund Investors Really Faring?” analyzed 1,192 observations from 12 investors across 23 funds and found that no investors in their sample matched the Stanford MOIC benchmarks. Stanford reports an “index” of entrepreneur-reported returns, while actual investor portfolio returns vary based on deal access and capital allocation. Fifty-eight percent of deal-level MOIC observations fell in the 0 to 1.99x range, and only 2% exceeded 10x.⁵

The takeaway: headline IRR and MOIC numbers — for both traditional and self-funded search — should be understood as benchmarks, not guaranteed portfolio outcomes.

Typical Equity Structure

The most common self-funded deal structure uses preferred equity (39% of deals), where investors receive a 6–8% preferred annual return (65% of deals) plus a minority share of common equity. Searchers using preferred equity retained 60–80%+ of common equity in 86% of deals — far more than the 10–25% typical in traditional search. Only 13% of self-funded deals used traditional search fund terms.⁴

Individual investor check sizes typically range from $25K–$100K, with specialized funds investing $250K–$2M per deal.⁶

Those equity checks are only one piece of the capital stack. Here’s how the full deal is typically financed.

Capital Structure: How Self-Funded Deals Are Financed

The canonical self-funded deal follows an “80/10/10” structure: approximately 80% SBA 7(a) senior debt, 10% seller note, and 10% equity.⁷ The SIG study confirmed this pattern — 58% of acquisitions used SBA 7(a) loans, 45% incorporated seller notes, 21% used conventional commercial debt, and 12% used no debt at all.⁴

Seller Note Details

The majority (61%) of seller notes represented 10–20% of the purchase price, carried interest rates of 4.0–7.9% (79% of cash-paying notes), and had a typical term of 5 years (44% of notes). Only 9% were on full standby — a figure that may shift given recent SBA policy changes.⁴

Equity Sources

Some 62% of self-funded searchers raised outside equity, while 38% used purely personal capital. Among those raising equity, sources included personal savings (78%), friends and family (42%), high-net-worth individuals (40%), family offices (17%), and PE or institutional investors (14%). Most searchers contributed modestly: 68% put in less than $200K of personal funds, and 24% contributed less than $50K.⁴

For a representative $4 million deal with 80/10/10 structure, the total equity need is roughly $400K, of which the searcher might contribute $40–80K and investors the balance.⁴

Since SBA debt is the backbone of most self-funded deals, let’s look at the lending data.

SBA 7(a) Loan Statistics for Acquisitions

The SBA 7(a) program is the primary debt engine behind self-funded search. Here are the numbers that matter.

Program Volume

FY2024 saw $31.1–31.5 billion in total 7(a) loan volume across 70,200 loans — the highest loan count in over 15 years, a 22.5% year-over-year increase. Through Q3 of FY2025, the program was on pace to match or exceed those levels, with Q2 FY2025 representing the second-highest quarter in program history at over $10 billion. The program’s outstanding portfolio reached $116.3 billion in unpaid principal by end of FY2024.⁸⁹

Default Rates

1.22% — that’s the average annual default rate for SBA 7(a) business acquisition loans from 2019–2023, compared to 1.64% for non-acquisition 7(a) loans. Acquisition loans default at a lower rate than the program average.¹⁰

However, charge-off amounts have been rising — from $0.49 billion in FY2020 to $0.80 billion in FY2023. FY2024 marked the first year of negative cash flow for the 7(a) program in over a decade, prompting congressional scrutiny around early defaults within the first 18 months.¹⁰

Current Terms

Key SBA Lenders for Acquisitions

The most active SBA lenders in the acquisition space include Live Oak Bank (~$1.98B in FY2024, known for acquisition specialization), Newtek Bank (highest dollar volume overall), First Internet Bank (average loan $1.46M, strong for larger acquisitions), and First Bank of the Lake (frequently cited in the search fund community).¹⁴¹⁵

These lending mechanics are shifting. Recent SBA policy changes directly affect how self-funded deals get structured.

SBA Policy Changes Affecting Search (2023–2025)

The SBA regulatory landscape has shifted significantly. Investors evaluating self-funded deals need to understand these changes because they directly affect deal structure and feasibility.

May 2023: The SBA first allowed 7(a) loans for partial changes of ownership. Previously, only 100% buyouts qualified — opening the door to creative acquisition structures and partnership buyouts.¹⁶

December 2024: Multi-step partial changes of ownership with asset purchases were approved, adding further flexibility for staged acquisitions.¹⁷

June 1, 2025 — SOP 50 10 8: The SBA issued a major tightening of lending standards. Collateral is now required for loans above $50K (down from $500K). Seller notes must be on full standby for the entire loan term to count toward the equity injection requirement. The “do what you do” lender discretion policy was eliminated. The 7(a) Small Loan maximum was reduced from $500K to $350K. And the SBA introduced a formal definition of “search funds” that raised concerns in the ETA community.¹⁸¹⁹²⁰

The full-standby seller note requirement is particularly impactful. Previously, seller notes could carry normal payment schedules while still counting toward the 10% equity injection. Now, if a searcher wants the seller note to count, the seller receives no payments until the SBA loan is fully repaid — typically 10 years. This is expected to reduce seller willingness to provide financing on these terms, potentially increasing the equity needed from investors.¹⁸

Despite regulatory headwinds, the macro opportunity remains enormous — and it’s driven by demographics.

The Baby Boomer Succession Wave

The structural tailwind behind search fund deal flow is the retirement of baby boomer business owners.

Between 2.9 million²¹ and 10 million²² baby boomer-owned businesses need new owners. The lower figure (employer businesses with owners aged 55+) comes from U.S. Census data via Project Equity. The higher figure is a broader SBA estimate that includes non-employer businesses and sole proprietorships.

Over 51% of U.S. employer-business owners are aged 55 or older.²¹ Project Equity estimates these 2.9 million employer businesses support 32.1 million employees, $1.3 trillion in payroll, and $6.5 trillion in revenue.²¹ Some 4.1 million baby boomers turn 65 annually through 2027 — roughly 10,000–11,400 per day — the highest rate in American history. By 2030, all 73 million boomers will be 65 or older.²²

The Succession Gap

The Exit Planning Institute’s 2023 survey found that 73% of privately held companies plan to transition ownership within the next decade, and 49% plan to exit within five years. Yet 56–80% of business owners lack a formal succession plan. Only 30% of small businesses successfully sell at time of owner retirement, and the median close rate on BizBuySell was just 6.46% from 2018–2022.²³

The IBBA’s Q3 2025 Market Pulse Survey confirmed that baby boomers make up nearly 60% of current business owners bringing companies to market. Retirement remains the number-one reason for selling at 38% of transactions.²⁴

BizBuySell’s 2024 full-year data showed 9,546 closed transactions (up 5% YoY) with a median sale price of $345,000 and an average cash flow multiple of 2.57x SDE.²⁵

For self-funded searchers targeting the $1–10M enterprise value range, this succession wave creates a persistent supply of motivated sellers — many of whom are willing to provide seller financing because the alternative is often closing the business entirely.

With the macro picture in place, let’s put search fund returns in context against other asset classes.

Search Fund Returns vs. Other Asset Classes

These comparisons deserve a grain of salt. The CFA Institute has published analysis showing that PE IRRs are inflated by capital call timing and credit line usage — a typical PE gross IRR of 23% erodes to approximately 11% on a time-weighted basis after fees. Search fund IRRs face similar distortions: the Stanford figure includes operating companies marked at estimated current values, not just realized exits.²⁷

“In search funds, we get similar or better returns at a fraction of the risk we take on in VC portfolios.”
— José Martín Cabiedes, INSEAD²⁸

The self-funded model’s 5% capital loss rate versus traditional search’s 31% loss rate (and venture capital’s well-known power-law distribution) supports this risk-adjusted framing, even if absolute IRR is somewhat lower.

Before drawing conclusions, there are a few things the data doesn’t tell you.

Important Caveats for Investors

The data paints a compelling picture, but investors should weigh three significant caveats.

The self-funded data set is limited. The SIG study is a single survey of 279 respondents with acknowledged self-selection bias. Eighty-one percent had operated for fewer than three years, so many reported returns are unrealized estimates. There is no equivalent of Stanford’s four-decade longitudinal data set for self-funded search.⁴

SBA policy is tightening. The June 2025 SOP 50 10 8 changes — particularly the full-standby requirement for seller notes and expanded collateral demands — may meaningfully alter deal economics. Investors should expect capital structures to evolve.¹⁸

Reported benchmarks may overstate realized returns. The Yale 2025 study found that no surveyed investors matched Stanford’s index returns. The gap between entrepreneur-reported performance and actual investor outcomes is real and underexplored.⁵

Sources & References

¹ Wikipedia, “Search fund.” Source

² Yale School of Management, “Exploring Various Search Fund Structures” (August 2021). Source

³ Stanford GSB, “2024 Search Fund Study: Selected Observations,” Peter Kelly & Sara Heston (June 28, 2024). Case E-870. Tracks 681 traditional search funds in U.S./Canada through December 31, 2023. Source

⁴ Search Investment Group, “2023 Self-Funded Search Study: Selected Observations.” 279 respondents surveyed August–October 2022. Source

⁵ Yale School of Management, “How are Search Fund Investors Really Faring?” (October 27, 2025). Analyzed 1,192 observations from 12 investors across 23 funds. Source

⁶ Searchfunder.com discussion, “What is the average investor check size for a self-funded deal?” Source; Smash Ventures and CapitalPad investor profiles. Source

⁷ The SMB Scoop (Ben Tigg), “Self-Funded SBA Acquisition Structuring Explained.” Source

⁸ AmPac Business Capital, “SBA 7a Lending 2025: Record Volumes and Small-Business Trends.” Source

⁹ Boxwood Means, “SBA 7(a) Loan Volume Accelerated in 2024 with Key Policy Changes.” Source

¹⁰ Yale School of Management, “Exploring and Understanding the U.S. Small Business Administration 7(a) Loan Program” (February 5, 2025). Includes Lumos Data default rate analysis. Source

¹¹ Live Oak Bank, “SBA 7(a) Loans for Business Acquisitions Explained.” Source

¹² NerdWallet, “SBA Loan Rates 2026.” Source

¹³ Pioneer Capital Advisory, “Equity Injection Explained: What Buyers Need for SBA Approval.” Source

¹⁴ Fit Small Business, “10 Best SBA Lenders for Small Businesses in FY2024.” Source

¹⁵ Security Bank & Trust Co., “Self-Funded Search Fund.” Source

¹⁶ First Bank, “Changes to SBA 7(a) Program for Business Acquisitions.” Source

¹⁷ LoanBud, “SBA Loans Update: Flexible Multi-Step Ownership Changes” (December 2024). Source

¹⁸ Phillips Lytle LLP, “The SBA Reverts Back to Stricter Lending Standards.” Source

¹⁹ Whiteford, Taylor & Preston LLP, “Client Alert: SBA Issues SOP 50 10 8: Key Changes Impacting SBA 7(a) Lending.” Source

²⁰ SMB Center, “Breaking: The SBA Just Redefined ‘Search Funds’ And Got It Wrong.” Source

²¹ Project Equity, “2.3 Million Small Businesses Nationwide Owned by Aging Boomers Preparing to Retire.” Based on U.S. Census Bureau data for employer businesses with owners aged 55+. Source

²² Retirepreneur, “Baby Boomer Statistics.” Includes SBA estimate of 10 million boomer-owned businesses. Source

²³ Teamshares, “Succession Planning Statistics in 2025: Preserving a Legacy.” Source; Project Equity, “20 Key Business Owner Statistics on Exits & Succession.” Source

²⁴ IBBA & M&A Source, “Market Pulse Q3 2025 Survey Results.” Source

²⁵ Small Business Trends, “Small Business Acquisitions Rise 5% in 2024, Driven by Higher-Priced Deals” (BizBuySell Q4 2024 Insight Report). Source

²⁶ Moonfare, “Is Private Equity Still Outperforming Public Markets?” Cites Cambridge Associates U.S. PE Index. Source

²⁷ Kaiser Partner, “You Can’t Eat IRR: On Realistic Performance Expectations for Private Equity.” Source

²⁸ INSEAD Knowledge, “Search Funds: A Rising Asset Class Outperforming PE and VC.” Source

²⁹ IESE Business School, “International Search Funds — 2024 Selected Observations.” Source; IESE Insight, “Search Funds Asset Class Maintains Global Growth.” Source

³⁰ Searchfunder.com (via LinkedIn). Source

The world is a pretty uncertain place right meow.

So many unknowns, so much bad news, and an avalanche of risks all rushing in at once.

Financial quackery, crazy inflation, central bank tightening, the war in Ukraine, rising mortgage rates, the questionable status of the USD, Covid lockdowns, supply chain shenanigans.

The list is long, the reasons many.

It’s all a world-class recipe for surging cortisol and creeping anxiety. I can see the grey-hair gods licking their chops from here.

So what should you be doing? What is the right move to make?

“It depends” is one of the most annoying phrases for good reason, but it’s applicable here. It depends on your goal. If your goal is to speculate, take big swings, and try to get rich from a humble beginning, then I have nothing for you.

But, if like me, your goal is sleep well at night, know you’ll be ok in all situations, and provide freedom for yourself over the long run, then I’ll share with you my thoughts on how to best do that.

(I personally would watch at 1.5x speed)

This is Travis (the founder) writing the newsletter for the first time in quite a long time (and publishing it here as a blog post after the fact).

US dollar hegemony, decline, commodities, and the unintended consequences of Russian sanctions.​

(And what I’m doing about it at the bottom)​

There is not necessarily one single point here, but more of an area of thought that has been occupying my brain-space lately. I thought i’d share it with you.

Let’s be real, we’ve all heard the gold-nuts for decades now ranting about the upcoming collapse of the US dollar, and how the Western countries will enter eons of decline. We’ll be paying with gold and silver coins, and bartering goats for bread. Also, Aliens.





Now while they’ve mostly been a bit nutty, there was always just a grain of truth in everything they said, just enough to make you at least listen for a moment and maybe have a few coins in your closet behind to your cans of SPAM.

Well, as it turns out, “money” has ended up a bit weird, with lots of printing and bailouts and financialization and all that jazz. But, as manipulated as many currencies have become, the USD has still reigned supreme, and no legitimate contenders have come onto the scene to steal the limelight.

The entire world operates on USD. Oil is priced in USD, countries and companies everywhere borrow in USD, money in suitcases in movies is always USD. The demands are many.

Over the last couple of months though, there have been some claims and theories building up that have at least grabbed my attention, and don’t sound quite as crazy as they once did.

Where it begins​

A good deal of of this story begins with the recent Russian sanctions. More specifically, the severity, speed, and line-in-the-sand-crossing of these sanctions. Sanctions can in theory be a good political tool, and IMO were rightfully used, but the way they were used might play out in unexpected ways over time.

To summarize it for you, the two big things I’m talking about here are the removal of Russian banks from the SWIFT system, and the freezing of the Russian Central Bank’s assets.

You probably know, but just in case, to overly simplify it all the SWIFT system is how banks transfer money between each other. Basically all international transfers are based on this.

Who controls the SWIFT system? The West (+ Japan).

Now, how about the freezing of Russia’s Central Banks assets? Well, in the blink of an eye 2/3’s of the foreign currency assets were frozen, to the tune of $630 billion dollars. This effectively means that (in theory) Russia could not support its own currency, and more specifically, spend any of those reserves on the stuff nations need to survive.

There is of course other stuff happening here too, but these are the big points.


Now let’s circle back around. What does any of this have to do with the US Dollar, gold hoarders, and the such?





Let’s role-play a bit. Let’s say that you were Russia. Or, basically any nation that doesn’t always see eye-to-eye with the West (oh hi there China). You’ve now seen what is playing out with these sanctions.

Would you continue operating as you always have, supporting the strength of your currency with lots of foreign reserves that can be frozen, and using the same ole’ banking system and trading everything in US Dollars, or… would you maybe change how you do some things?

I think you would change how you do some things.

I would change how I do some things.

Alternative non-USD based transaction systems have been slowly creeping their way in for years.

China has it’s own sorta-version of SWIFT (called CIPS). Russia is demanding “non-friendly nations” to pay for oil and gas in Rubles. The PetroDollar has long propped up the USD as everyone, everywhere, uses it to buy oil. Now, and this is hard to overstate its significance, Saudi Arabia is considering accepting Yuan for oil instead of Dollars.

Now, THIS is why this big gold and other commodity thesis is starting to seem like it’s finally not so crazy. Not that much of the world is suddenly going to collapse into a Mad Max spinoff, but that sovereigns (nations) will find new ways to store their reserves and wealth, and double-down on transaction systems that don’t revolve around Western control.

So, it’s not that the USD will necessarily be purposely driven into the ground, or that a new reserve currency will swoop in to take the crown. Instead, the theory is that the USD just won’t be propped up in the same way anymore, as the demand for sovereigns holding dollars goes down.
​
The US Dollar has been losing its dominance for foreign reserves for a while, but it’s not like there has been a close 2nd place currency for the wealth to flow to (I don’t want to hold a bunch of Renminbi, do you?). So the thesis is, that instead of storing most wealth in foreign reserves, sovereigns will choose to store it in commodities.

The likely scenario not being that sovereigns suddenly sell off everything (as that would hurt them just as much), but that moving forward they start allocating more of their reserves in other stores of wealth.

What’s the best option for them to use?

Gold, of course, as its historical precedent is already established, as well as a basket of other commodities.

Here is the quote of quotes from Zoltan Pozsars writeup:

Do you see what I see?

Do you see inflation in the West written all over this like I do?

This crisis is not like anything we have seen since President Nixon took the U.S. dollar off gold in 1971 – the end of the era of commodity-based money.

When this crisis (and war) is over, the U.S. dollar should be much weaker and, on the flipside, the renminbi much stronger, backed by a basket of commodities.

From the Bretton Woods era backed by gold bullion, to Bretton Woods II backed by inside money (Treasuries with un-hedgeable confiscation risks), to Bretton Woods III backed by outside money (gold bullion and other commodities).

After this war is over, “money” will never be the same again…

What to do about all of this?

​
*Nothing here is investment advice*

The first thing to remember is that nothing here is certain by a long shot. These are just possible scenarios, and any of these scenarios would most likely take years to play out.

I’m not a “Macro Guy”. I don’t make big bold predictions and bets on what is going to happen in the world. I instead look at possibilities and probabilities and position myself accordingly so that I’m good no matter what.

I believe that the scenarios mentioned above have at least a non-zero chance of coming to fruition.

Every person has a unique set of needs, but for those focusing on wealth preservation the recipe is usually the same: own productive assets.

Businesses with pricing power that kick off cash (I love private ones), and maybe real estate. None of these really do awesome in times of distress, but these are things that can come out on the other side holding their value better than most other alternatives.

And in this case, I personally saw the case to own more gold (ETF’s or physical, whatever). Not so much that it’s a damper on all my other investments, but enough that in times of financial quackery it can preserve its purchasing power.

I currently view it as a sort of “heads I win, tails I don’t lose much” type of bet. If sovereigns are accumulating more, inflation is rampant, and the dollar is shaky and losing ground, then gold seems to me like a reasonable bet.

I am maximizing my sleep-well-at-night portfolio.

If you want to go deeper, I really recommend giving these a read

Above I summarized a bunch of stuff from people with much higher IQ’s than me. Below are some of those high IQ people.

1. ​Bretton Woods III – This is the paper from the quote above. It is THE writeup that everyone completely lost their shit over. Zoltan Pozsar, head of global interest rates at Credit Suisse and a dude a lot of people listen to, wrote about the changes the world is facing now. You can ignore the trader-jargon, just grab the highlights.
   ​
   ​Want a fun 1-minute video summary instead? Kyla Scanlon comes to the rescue: https://www.tiktok.com/@kylascan/video/7087327256250551595​
   ​
2. ​Energy Cancelled. This is a long read from Arthur Hayes, the OG founder of the BitMEX crypto exchange. He’s a controversial big-brained billionaire, going deeper on possible outcomes. He has a knack for explaining narratives in simple ways, and makes some bold claims on what comes next over the next few years (read the gold price target!).

Have any thoughts on any of this?

I’d really love for you to respond and let me know!

Cheers
-Travis

Making a case to just chill

Business has been good to me lately. My companies are doing well, DeFi has been printing yields, my once illiquid investments are paying off, and my desires haven’t notched up too much. This has led to a nice little pile of cash needing to be deployed into some investments.

While this is great, and I’m aware I’ve been very lucky, it is presenting the interesting problem of what to do next. No investments look even remotely attractive to me.

To sum it up:

I actually think the world has gone f’ing mad

“This was because reason was, in fact, out to lunch”
-Hitchhikers Guide to the Galaxy

Or to get more specific, here is a recent Tweet from Michael Burry (of The Big Short fame)

I’m mostly on the same page (and I’m sure Mike will be relieved to hear that). I’ll walk you through my thought process here on an asset-by-asset basis.

caption for image

Equities (Stonks)

Stocks look gross

Highest multiples since 1999. $GME, $AMC, meme-stock madness. Unprofitable public companies are raising more money in secondary share issuances than anytime in the last 40 years (and more than profitable companies to boot).

But even the more traditional value-oriented stocks appear to have a dislocation from the fundamentals based on historical values. Here are a couple charts showing the famed “Buffett Indicator” (ratio of total US stock market valuation to GDP). Notice the only other uptick like this is 1999.

caption for image

Now markets aren’t black and white. This chart alone doesn’t mean it’s a big bubble as there are many factors, but it certainly doesn’t make me feel warm and fuzzy. The higher price that you pay, the lower your expected returns over time.

No one can call market tops, and certainly not a dope like me, but it is possible to take the markets temperature, to roughly know where it is at in the pendulum swing. As the OG Howard Marks says in his memo The Happy Medium:

The mood swings of the securities markets resemble the movement of a pendulum. Although the midpoint of its arc best describes the location of the pendulum “on average,” it actually spends very little of its time there. Instead, it is almost always swinging toward or away from the extremes of its arc. But whenever the pendulum is near either extreme, it is inevitable that it will move back toward the midpoint sooner or later. In fact, it is the movement toward the extreme itself that supplies the energy for the swing back.

Bonds

LOL bonds

I really just wrote this section for a good laugh and would never actually invest in bonds right now. But just for fun, here’s a fun chart for you.

Junk bond yields are basically nothing. These are companies with poor credit ratings, effectively getting money for free. Don’t even get me started on ACTUAL negative yielding bonds that are being sold.

Enjoy ur drugs ser, cause you’re obviously smoking something good

Real Estate

If you’ve followed US real estate, then you’re aware how crazy it is. Just bonkers.

Residential: I meeeean. 10+ bids on a house the first day of listing, regularly going for 6-figures over asking price, bidders having to write the sellers sweet little notes on why they deserve it more than other bidders. All of this seems very normal yes’m.

Commercial: Three words. Work from home. I feel like the writing has been on the wall for a lot of commercial properties for a long time, but Covid is just accelerating things. More and more companies are just switching to permanent remote work. JPmorgan, Citibank, Google, Coca Cola, Deloitte, etc. Obviously this is not possible for all companies, but the shift is real.

Doesn’t look pretty does it? But are there any sweet spots? Well I had more or less written off most RE, but after talking to some smart people I am able to see a few opportunities.

I wouldn’t be trying to flip any houses right now, but those who are focusing just on generating yield should possibly be able to find some deals that work out. Also in commercial, high foot traffic areas will always have an appeal (and storage units for storing tomatoes), and you don’t have to compete with wonky Zillow prices there.

Crypto

Well, if you’re “in it for the tech” then maybe this is your time to buy, as it has been looking UGLY AF out there. I’m def not anti-crypto, I’ve been involved for years and have been handsomely rewarded for it, but I mostly just focus on financial opportunities in front of my face, not the tech. The bull market appears to be running out of steam, and from my viewpoint there doesn’t appear to be a lot of willing buyers left (to fuel ponzinomics).

I just don’t have massive conviction either way. Some possibilities, yes, but for me it’s better described as I can see a future where crypto is important, but I can also see a future where it’s hammered into the ground.

Government regulation, loss of interest, not finding sustained use cases, running out of memes, etc. Also, even if many projects are successful, that doesn’t necessarily equate to values going up. Many of my favorite crypto projects that I use basically accrue no value to token holders even though the projects serve users well.

Let’s take one of my favorites, Polygon ($MATIC). If you don’t know what it is, for simplicities sake from a users point of view it’s almost the same as Ethereum, just multiple orders of magnitude cheaper and faster. It’s a pleasure to use, and already has more transaction volume than Eth itself and is growing rapidly.

But guess what, while the Ethereum network earns $500k/day in fees the Polygon network earns less than $10k/day in fees, yet for some reason has a market cap of almost 7-Billion dollars. And all of this still ignores the “valueless governance tokens” issue.

And don’t even get me started on Dog-money

A couple of months ago I saw the clear signs of a bubble forming and exited large portions of my crypto to stablecoins and I’ve been earning beefy yields on them ever since. This has been great, I dare say even amazing, but with prices crashing and more hodlers moving into stables, the yields are dropping fast. A couple of months ago my stable-yields were regularly 25%-50% for lower risk projects. Now, those same projects are yielding 4%-15% and could still be heading lower. Here is a chart of February vs now showing the yields on Curve (a major battle-tested platform for swaps and yields)

8% is a damn good yield on dollars, but it’s not the same as actual dollars in my bank account. There are platform risks and de-pegging risks and me being dumb risks and unknown risks, and I’m not sure that I want to keep high balances there if I’m not being properly rewarded for for that risk. At the very least, I know I don’t want to put any more into DeFi with these yields.

Venture

I’d already started slowing down my angel investments the last year or two simply because that side of my portfolio got over-balanced, but now I’ve stopped all except for just one rolling fund (he has great clarity) and the super-rare personal check. VC is facing the same problems as everything else. SO MUCH CASH being thrown at companies. Good companies, shit companies, no matter. The failure rate and math doesn’t seem like it’ll add up to me.

Of course if you hit a major winner then valuations won’t really matter, but that’s a tough goal. I like to think of a very well diversified angel portfolio as having a fairly reasonable chance at having ok-ish returns, while at the same time having a high upside lottery ticket stapled to each term sheet in case you hit a unicorn.

But if the chances of ok-ish normal returns go away and you’re just getting the lottery ticket, and those odds aren’t as attractive to me.

Online Businesses

Well, if you’re building and selling online biz’s right now, then BUSINESS IS GREAT. If you’re looking to buy them then it’s not as clear. Like everything else, valuations are at an all-time high.

Some of this seems really natural. The industry is maturing, larger players and funds are entering the space, so naturally valuations will go up. A clear example is Thrasio, a company that rolls up Amazon FBA businesses. They are in talks to go public via a SPAC with a valuation in the billions. Garlic press -> $Billions.

Personally I still think that buying the right private biz for the right person can still be a great investment, it just takes some more digging now and the returns will probably be a bit lower. It’s probably a great fit if you either have more time than money, or have a team that can really scale projects out. Flipping is not your friend here.

So there’s my old-man buzzkill case against absolutely everything

So am I right on it? No way to say.

Should you listen to this? Probs not.

If I was dollar cost averaging into index funds like a good boy I would probably not pay attention to anything here and just keep doing that.

But I’m not a good boy

Also, it’s important to note that I say all of the above in the context of the investing game I’m playing, which is more of a “don’t mess it all up” long game. If you’re a speculator you might not care about anything said here.

Good luck out there

–Travis