"[Ray] Dalio tends to say you can have 16 uncorrelated return streams. Thatâs just categorically untrue." Mutiny Fund's Jason Buck doesnât mince words. In a world where portfolio theory has been sanctified into gospel, Buck arrives as the heretic. The industry, he argues, has misled investors into believing their savings are investmentsâsomething they can gamble with in hopes of retirement on a sun-soaked beach. But savings arenât investments; they are survival. And in markets where correlations tend to crash to one in liquidity events, Buckâs warning is more relevant than ever.
Offense, Defense, and the Illusion of Diversification
Most investors believe they are diversified. They arenât.
âWhen March 2020 happens, all of your assets sell off at once, and thatâs why we call them all offensive assets.â Buck dismantles the traditional portfolio pie chart, exposing its fatal flaw: it's just a house of cards built on long GDP, short volatility. In other words, portfolios today are designed for good times.
â[In our portfolios] We have half for offensive assets, half for defensive assets,â he explains. Stocks, bonds, private equityâoffense. Commodity trend following? Uncorrelated. Long volatility and tail risk? Structurally negatively correlatedâdefense. Defensive assets. Most investors donât hold enough of the latter.
Dalioâs "uncorrelated streams" narrative crumbles under Buckâs scrutiny. In a crisis, the true diversifiers are the ones that make money when everything else is falling apart. The real question is, do you have the self-awareness to recognize your own blind spots before itâs too late?
The Rodman Portfolio: The Unsung Hero of Stability
"Iâm going to tell you about the greatest basketball player of all time from the Chicago BullsâŚ" Buck sets the trap.
Michael Jordan, right? Nope. Dennis Rodman.
Rodman, the lowest-scoring player in the Hall of Fame, was a statistical anomaly. "At his height, he was six standard deviations better than any other defensive rebounder in the league." He made everyone around him better. This is how Buck wants you to think about portfolio construction. The flashy stocksâyour Jordansâgrab the headlines. But without the Rodmansâlong volatility, uncorrelated assets, anti-fragile playsâyour portfolio is one bad break away from oblivion.
The Minnesota Vikings learned this the hard way. Trading for star running back Herschel Walker in 1989, they thought they were adding an MVP. Instead, the Cowboys flipped those picks into an 18-player haul that built a dynasty. Investing isnât about one great trade. Itâs about an ensemble that works together. The real winners are those who resist the impulse to chase flashy trades and instead cultivate patience, foresight, and discipline.
The Mirage of Uninterrupted Growth
Everyone wants to believe in Americaâs perpetual outperformance. Buck doesnât buy it.
"Iâd love to believe in American exceptionalism, but I canât help the little voice in the back of my head going, you know, weâre not that special. If it can happen anywhere, it can also happen to us."
History doesnât repeat, but it sure does rhyme. Japanâs lost decades. Europeâs stagnation. The illusion of uninterrupted US market dominance could one day unravel. "Even 60/40 portfolios have been underwater for twenty years in some countries," Buck points out. "Italy from 1960-1980, negative 72%. Spain, negative 59%."
Yet investors pile into US stocks, convinced that past performance guarantees future results. Itâs the cognitive equivalent of believing that ice baths create billionairesâmistaking correlation for causation. The capacity to step back and critically evaluate your assumptions is an emotional intelligence trait many investors lack, to their own detriment.
Ergodicity: The Fatal Flaw in Your Retirement Plan
Whatâs the biggest mistake investors make? Believing in averages.
"The industry treats markets as ergodic systems," Buck explains. "But theyâre not."
Most investors plan their financial futures assuming a 7% CAGR (compounded annual growth rate). But compounding doesnât work that way. Averages mislead. "If your path doesnât line up with the ensemble average, youâre in a non-ergodic system," Buck warns. In plain English: if you hit the wrong sequence of returns, you go broke before you ever reach the long-term average.
One solid historical illustration of this concept can be summed up by comparing how investors in a fund perform vs. the fund itself. Take Fidelity Magellan Fund, for instanceâit averaged a 29% annual return under Peter Lynch's 13-year run, however, many investors lost money because their individual outcomes depended on when they entered and exited the fundâshowing that individual trajectories (investor behavior) did not align with the fund's overall average performance.
Imagine a gambler with a winning strategy. Every day, they make 50% on their money, but once every 28 days, they lose everything. The expected return is still positive. But in reality, they are doomed. Thatâs the problem with market returnsâan average 7% means nothing if your personal sequence includes a 50% drawdown right before retirement.
The lesson? "Portfolio diversification isnât just about expected returnsâitâs about survival," Buck says. The game isnât to maximize returns. Itâs to ensure you live to see them. And that requires emotional resilienceâthe ability to accept uncertainty, manage risk, and control knee-jerk reactions to market swings.
The Market Doesnât Care About Your Plans
"Only a fool trips on what is behind them," Buck quips. Past performance may be comforting, but itâs not predictive. The market isnât going to reward you for believing in American exceptionalism, for trusting that the Fed has your back, or for assuming that buying the dip always works. Itâs a system that punishes ignorance, slowly at first, then all at once.
Diversify intelligently. Hold assets that zig when others zag. Build a team, not a superstar portfolio. And above all, stop thinking about your savings as an investment.
Or donât. The market doesnât care. But you should, because your ability to navigate uncertainty with self-awareness and discipline may be the only thing standing between you and financial ruin.
Copyright Š AdvisorAnalyst
