AI Summary
→ WHAT IT COVERS Matt Cherwin, co-founder and CIO of Merrick Capital, explains how sixteen years at JPMorgan Chase — including a front-row seat to the 2019 repo crisis and the COVID-era financial system — shaped a proprietary MCCLR framework (money, capital, credit, liquidity, regulation) now applied across a multi-asset credit hedge fund launched in 2024. → KEY INSIGHTS - **MCCLR Framework:** Cherwin structures every investment decision through five lenses — money, capital, credit, liquidity, and regulation — arguing these five forces drive all economies, markets, and prices. Applying this lens reveals cross-market mispricings that narrowly mandated institutional investors systematically miss, creating exploitable gaps across rates, mortgages, ABS, CLOs, and corporate credit simultaneously. - **Financial System Disaggregation:** The traditional bank model has effectively been re-split along Glass-Steagall lines. GSIBs like JPMorgan hold deposits safely while firms like Apollo, Blackstone, and Ares now make the majority of credit extension decisions. Traders like Citadel Securities handle market-making. Recognizing which entity controls which function reveals where credit pricing dislocations originate and persist. - **Trophy Office CRE Mispricing:** Merrick identifies trophy-quality office buildings in gateway cities — New York, Miami, DC, San Francisco — as triple-B rated bonds that fundamentally perform as double-A credits. New GSIB firms (Apollo, KKR, Ares) are growing rapidly, face a genuine supply shortage of premium space, and occupy these buildings at near 100% occupancy despite broad market pessimism. - **Financing Flywheel Underestimation:** When rates fall and credit spreads tighten simultaneously, asset values rise, loan-to-value ratios improve, and refinancing costs drop further — compounding in a self-reinforcing cycle. Cherwin argues markets consistently underestimate the magnitude of this flywheel effect, and Merrick positions roughly 20 thematic trades to capture successive ripple effects rather than single-point price moves. - **Liability-First Risk Management:** Cherwin frames portfolio survival around liabilities, not assets, stating firms fail because of their liability structure before their assets deteriorate. Merrick uses stress-based scenario frameworks — including rate shocks, credit crunches, and flight-to-quality events — as starting points for attribution conversations rather than treating VAR or DV01 figures as definitive risk answers. → NOTABLE MOMENT On his third day running JPMorgan's CIO group in late 2019, Cherwin authorized lending against Treasuries at 10% overnight — a rate he immediately recognized as extraordinary. That repo market seizure, followed within months by the pandemic, became the catalyst that reframed his entire twenty-year trading career. 💼 SPONSORS [{"name": "Public", "url": "https://public.com/market"}] 🏷️ Alternative Credit, Structured Products, Risk Management, Private Credit, Mortgage-Backed Securities