Convexity Maven Harley Bassman: How To Survive The Next Rate Cycle

In this episode, Adam Butler is joined by Harley Bassman, Managing Partner at Simplify Asset Management, for a wide-ranging discussion on interest rate volatility, portfolio construction, and public policy. Bassman explains his creation of the MOVE Index before diving into strategies using long-dated options to create asymmetric payoffs. They also explore the systematic risks that challenge diversified portfolios during Fed policy inflection points. The conversation concludes with Bassman's strong case against the re-privatization of Fannie Mae and Freddie Mac, detailing the potential negative consequences for the housing market.

Topics Discussed

• The creation and mechanics of the MOVE Index as a VIX for the bond market

• Explaining complex financial derivatives by drawing analogies to fundamental physics concepts

• Constructing highly asymmetric, long-term trades based on the shape of the yield curve

• The failure of traditional diversification during major inflection points in Federal Reserve policy

• The paradigm shift to passive investing flows overriding traditional market valuation metrics

• A new trade idea involving a positive-carry call option on Treasury rates as a recession hedge

• The evolution of portfolio tools like Return Stacking and derivative-based ETFs

• Identifying U.S. immigration policy as the most significant and overlooked macroeconomic risk

• The public policy argument against the re-privatization of Fannie Mae and Freddie Mac