Lesson 2
Asset Allocation by Regime
Build a portfolio for the current regime, not the one you wish existed. Keep regime-appropriate allocations even when they feel wrong.
📊 Indicators mentioned in this lesson (click for details):
Different regimes require different portfolio constructions. Here's how to allocate by regime.
Reflation Portfolio:
- Equities 70% (overweight cyclicals, EM, small cap)
- Commodities 10%
- Crypto 10%
- Cash 10%
- Duration bonds 0%
Air Pocket Portfolio:
- Cash/T-bills 50-70%
- Short-term Treasuries 20%
- Equities 10-20% (defensives only)
- Commodities 0%
- Crypto 0%
Real Rate Squeeze Portfolio:
- Quality equities 50%
- Cash/T-bills 30%
- Gold (GLD) 10%
- Defensive bonds 10%
Debasement Portfolio:
- Gold (GLD) 20-25%
- Bitcoin (BTCUSD)/Crypto 10-15%
- Equities 40% (inflation beneficiaries)
- Real estate/Real assets 15%
- Commodities 10%
- Nominal bonds 0%
- Cash minimized
Transition Rules:
- Don't anticipate regime change too early
- Confirm with 2+ of the 8 Connections
- Transition gradually (25% at a time)
- Accept you'll miss some of the move
Position Sizing:
Size inversely with uncertainty:
- Clear regime: Full position sizes
- Transition zone: Half positions
- Conflicting signals: Minimum exposure
Check your understanding
Lesson Quiz
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Quiz Check
The regime is Debasement (massive money printing, currency confidence eroding). How should you allocate?