Off the Charts Thinking: A Conversation with Andrew Sarna

Vanessa Hui and Anthony Berg sit down with Andrew Sarna, Portfolio Manager at Forthlane (Cayman Islands), to dive into the insights behind his widely read macro note, Off the Charts. 

With over 830 issues published and nearly 2,300 subscribers, Andrew has built a loyal audience by offering sharp, independent perspectives on markets, risk, and macro trends. 

He shares the origin story of the note, how he curates each edition, and why he believes traditional investment playbooks are challenged.

From equity complacency and geopolitical risks to real assets, crypto, and private equity’s uncertain future, this conversation is a masterclass in macro thinking for a new investing era.

WHAT TO LISTEN FOR

0:39 Birth of Off the Charts

3:02 How Andrew Picks the Day’s Chart

5:46 The Dangerous Complacency in Today’s Market

8:52 Why the Old Playbook No Longer Works

14:33 The “Pre-Earnings Inflection” Strategy

20:42 A Coming Reckoning in Private Equity?

GUEST: Andrew Sarna, Portfolio Manager

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Anthony Berg, Senior Investment Analyst

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CONNECT WITH VANESSA HUI

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Listen to the podcast:  Apple/ Spotify/ Online
Not yet a subscriber? Sign up for Off the Charts Here

Chapters

• 0:39 Birth of Off the Charts
• 3:02 How Andrew Picks the Day’s Chart
• 5:46 The Dangerous Complacency in Today’s Market
• 8:52 Why the Old Playbook No Longer Works
• 14:33 The “Pre-Earnings Inflection” Strategy
• 20:42 A Coming Reckoning in Private Equity?

Transcript

Vanessa Hui (00:07)

Welcome to another episode of Forthlane Features, a podcast where we dive into the world of global wealth and asset management. I'm Vanessa Hui, Senior Client Advisor at Forthlane Partners, and I'm joined today by my colleague, Anthony Berg, Senior Investment Analyst. We're excited to sit down with Andrew Sarna, Portfolio Manager at Forthlane, and the voice behind the widely followed morning macro note, Off the Charts. Good morning, Andrew.

Andrew Sarna (00:36)

Hey Vanessa, thanks for having me.

Vanessa Hui (00:39)

So Andrew, since launching off the charts about three and a half years ago, you've published over 837, maybe 838, counting today, macro briefs and grown a loyal following of nearly 2,300 subscribers. I consistently hear from people that it's the only morning note they make a point to read every day. To kick things off, can you give our listeners an overview of

off the charts. What is it? What inspired you to start writing it? And what do you hope people get out of it?

Andrew Sarna (01:17)

Yeah, sometimes I wish there was a visionary story about me having the grand vision to start this morning note that would gain such a following. But I mean, the truth is I was asked to begin putting it together to engage with one of our prospects. And from there, a couple of people were at it. I was sending it over email every day and more and more people got at it. I brought it to Substack and

next thing you know, three and a half years later and myself committing to doing it pretty much every single business day year round. I'm almost up to 2500 subscribers and I get a lot of really nice things said to me about it.

Vanessa Hui (02:04)

Yeah, have definitely been in rooms where people not knowing that I'm part of 4th Lane will come up to me and say, have you heard of Off the Charts? Like this guy Andrew Sarna writes this great morning note, you should read about it. And I would have to say in our seven year ⁓ relationship, Andrew working together, those are some of my proudest moments.

Andrew Sarna (02:25)

Yeah, I would say ⁓ the biggest celebrity moment was definitely when I called Barry's bootcamp and I was booking a class and they asked, wait, are you the guy who writes the morning note? Yeah, exactly.

Vanessa Hui (02:38)

You're like, yes, so do I get a discount?

So 837 notes, that is a lot of dedication, a lot of commitment, and a lot of time and energy that's gone into this. So how do you decide what topic you're going to feature on a daily basis? And how do you just call through all the charts and decide which to highlight each day?

Andrew Sarna (03:02)

Yeah. ⁓ So I think because of the volume, ⁓ you know, you just need to sort of think about as many topics as possible. So you can't really be tactical. It's sort of whatever is you're seeing on a day to day basis and a couple of themes you stick together. You're like, okay, I guess this is going to be today's topic. I mean, from time to time, ⁓ I'll do a deep dive on, a specific topic where

⁓ Again, over time, over a couple of weeks, I'll sort of highlight the charts that I see on a specific topic, then put them together and try to string together a narrative. But really just given the volume in my day-to-day day job as I'm working, I've sort of flagged anything interesting that I see. then at the end of the night, I begin putting together ⁓

the newsletter of curating everything I saw on that day. And normally just something comes together or something interesting. And, you know, I try to lead with something that really caught my attention that, and maybe it's topical of something that's happening ⁓ in markets today, or it's just like that broader deep dive that maybe I've been working on for a few weeks.

Vanessa Hui (04:16)

Right, and for those who are new to Off the Charts, can you just describe what you cover? So other than markets, what other areas are you covering?

Andrew Sarna (04:28)

Yeah, I mean, mainly markets, but other things investment related that I find interesting that ⁓ maybe are topical to other investment managers, whether you're a hedge fund manager or you're a family office or you're someone who's retired and just likes to follow markets. I mean, the thing I try to emphasize is I personally feel like I'm inundated with

a bunch of emails every single morning and it's really hard to get through. So what my MO is, is put together something like very visual, something that doesn't feel like a chore to get through. And I feel like it really ⁓ resonates with my subscriber base.

Vanessa Hui (05:14)

Definitely. Anthony?

Anthony Berg (05:16)

So thanks, Andrew and Vanessa, for giving us some context on how off the charts got started and how you come up with material on a day-to-day basis. You've written about a few different themes recently that I'll give you the chance to touch on now. So there's impact of AI, deglobalization, the fiscal situation in the US and abroad, and just generally increasing geopolitical tensions as well. What's a narrative out there in the market today that you think markets are too complacent about?

Andrew Sarna (05:46)

Yeah, thanks, Anthony. Yeah, a theme today is really just, I mean, markets at all time highs and geopolitics flaring up and tariffs are still in place on many countries around the world. And ⁓ last night, the Nasdaq hit an all time high ⁓ and it just feels like the market is overall super complacent. we've just been so conditioned to the fact that markets only go up any time there's a dip, we buy it.

⁓ And if you look back over history, now when markets are conditioned to think like this, ultimately, it's sort of the beginning of the end. ultimately, ⁓ markets can stay irrational longer than you can stay solvent. So markets can continue to still going up, even though valuations don't necessarily make a ton of sense. ⁓ It's just really, really hard. And I think over the long run, ⁓

it's important to think about how much exposure you have to equity markets because again, going back at history, ⁓ a 40 % drawdown is sort of run at the mill over every 10 years. So I think you need to go in eyes wide open and think about how much risk you're running and if you're comfortable ⁓ holding through losses like that.

Anthony Berg (07:08)

Yeah, and to highlight one of our managers recently, they switched actually from being short US equities to long US equities and the fear that maybe markets do stay irrational for longer. So Andrew, how long can this sort of irrational exuberance continue and how do you position yourself? Maybe it's just a lower weight to equities, but how do you position yourself for when the music eventually does stop?

Andrew Sarna (07:31)

Yeah, you just need to find other return drivers that are not equities. So equities tend to be your risk on or the return driver in many portfolios. And unfortunately, many ⁓ retail investors are sort of restricted to equities. But in an ideal situation, you're diversifying the return streams within your portfolio. And I think diversifying return streams

is not to say like add private equity because my perspective is really an equity is an equity, whether it's private or public, but find other investments like absolute return, hedge funds, or credit, more defensive credit type investments, or more defensive type equities like infrastructure that in the event that the S &P 500 is down 40, 50 % that

your portfolio is going to be okay because you're not entirely relying on that.

Vanessa Hui (08:31)

Yeah, that makes a lot of sense and it echoes a market narrative you've written about extensively. The idea that the investing playbook of the last 40 years, so relying on equities to drive returns and bonds as the primary defensive position, may not hold up in the environment we're heading into. Can you unpack that for our listeners?

Andrew Sarna (08:52)

Yeah, I think we're going through a period of regime change, or it seems we're fast approaching. And I think the hard part is timing. But again, you look across all these asset class and I mean, ultimately, interest rates drive a lot of performance across whether it's fixed income or equities. ⁓ They have impacts on the performance of these asset classes and with interest rates rate ⁓ reaching the zero bound.

⁓ things are likely to change and because things are likely to change, the next 40 years are likely going to be different, ⁓ than the previous 40 years. Howard Marks, ⁓ wrote a paper about this and he likens it to in the past 40 years with interest rates falling. It's like you were walking on one of those, ⁓ conveyor belts at the airport where, ⁓ it's propelling you forward or it's like having the wind at your back.

And now that interest rates can't really fall much further, know, things are going to be different. And because things are going to be different, I think we need to position portfolios differently and look for different solutions and really start from a bottoms up first principles perspective and ask why things are the way they are and build your portfolios.

to prepare for a changing regime.

Anthony Berg (10:23)

Yeah, that's really great, Andrew. ⁓ I think what this also tees up is a look at real assets, because I think for a lot of the reasons that fixed income is not attractive, real assets do look attractive. Can you maybe touch on what are real assets and why those might perform better over the next decade than fixed income?

Andrew Sarna (10:41)

Yeah, real assets tend to be, ⁓ I mean, as the name would indicate, real. So think of them more as tangible. So when we take like a broader lens of the real asset landscape, you could include things like real estate. So again, real buildings or infrastructure, bridges that are again, real or something that you can feel, whereas like, again, ⁓ we can talk about equity markets, but

That's a little less tangible. It's hard to like imagine holding a business in your hand. And if you want to get more specific on the real asset side and where we're spending a lot of our time is ⁓ things like commodities, precious metals and ⁓ resources that are scarce. ⁓ And why are we focusing on that segment? Well, in the 2000s, we went through a bull market that was fueled

by ⁓ China's infrastructure build and a voracious appetite for commodities. ⁓ Now, post-2010 or post-global financial crisis, ⁓ as prices rose in the previous decade, these commodities producers were aggressively spending on CapEx and that CapEx is future supply, which ultimately flooded the market with

commodity supply and then post global financial crisis, there was less building occurring and we didn't need these commodities as much as we did before, which led us in essentially an oversupplied market. And that was essentially the start of a 10 to 15 year bear market in commodities. And what do bear markets do? Well, these stocks got punished and because stocks were getting punished and these companies were struggling,

and markets were oversupplied, no one was investing in new supply. And the thing about real assets is ⁓ supply for some of these resources is very inelastic. So when you think about something like copper ⁓ and when the market goes into shortfall in copper, it takes 10 to 15 years to bring on new copper supply. So when the market is being squeezed on supply, it's not like

⁓ it takes a year and that copper is going to be on the market and the market will balance itself. It could take up to a decade for the market to rebalance itself. So when that demand occurs, prices squeeze higher because there is no supply response. And this has really occurred across the commodities complex. And one of the things from an investment lens that we like here at Forthlane is explore opportunities that are

not in the headline. So you want to be ahead of the curve. I like to say that when you're seeing these themes make headlines on Bloomberg, it's too late. The market already knows about it. So we're in a position where we can build up these positions. because it's easy enough to understand

⁓ the supply and demand dynamics of these markets, can see that eventually the short squeeze or the supply squeeze is going to happen and it's going to be making headlines. And that's when these equities ⁓ or these commodities are going to benefit.

Anthony Berg (14:19)

Thanks Andrew, ⁓ that's really helpful and it sounds like you're pretty excited about real assets over the coming decade. Are there any other themes that you're really excited about in the coming years that you think might be good places to go hunting for opportunities?

Andrew Sarna (14:33)

Yeah, there's some, I mean, I don't necessarily think they're themes, but maybe we'll touch on a manager that caught our attention recently. This manager is based out of the West coast of the U.S. and they take a concentrated approach to building equity portfolios. So they have 10 to 12 names in their portfolio and what they look for are businesses with these strategic modes.

They're actually former strategy consultants and they look to identify these companies that are not necessarily over earning yet, but they're positioning themselves strategically in a market where one day they will be able to harvest those gains. So think of this as what has happened to the Magnificent 7 over the past decade, but identifying the inflection in earnings growth, which ultimately drove stock prices.

back 10, 15 years ago. So they try to find these companies that had built these modes and then they almost go into to harvest mode where ⁓ it begins flowing ⁓ through into earnings. again, I think even if you're pessimistic from a top down perspective, there will always be pockets of the market. And I think something that we try to do is find those pockets of the market where

someone has identified an inefficiency or someone has an edge and can take a bottoms up perspective because ultimately I think what you're trying to do from an investment perspective is by great businesses that have an opportunity to grow earnings at reasonable prices. ⁓ So always taking that value lens.

Anthony Berg (16:25)

Recently,

Andrew, a lot of the off the charts notes and lot of the news headlines had really been dominated by geopolitics and tensions globally. So maybe you can just quickly touch on your views around tariffs, Middle Eastern conflicts and what that says for markets going forward.

Andrew Sarna (16:43)

Yeah, I'm certainly not a geopolitical strategist, but I mean, do think it's pretty particular or peculiar that again, all this happens in the Middle East and markets don't even react. like oil jumps over the weekend, but by the time the week came around or the work we came around, oil was down. ⁓ So markets are completely fading, which

Over the past 20 years, that has been the right ⁓ answer for markets to ignore the geopolitics and nothing ever really happens. But I mean, who knows, maybe at some point, this is the event that occurs that really does matter. ⁓ So it's tough from an investment perspective. probably I'd be cautious that markets are at all time highs because I feel like there should be some risk of being priced in. And the same really goes for tariffs.

We're going to start seeing the impact of tariffs in the next couple of months. I think it impacts two things. It's either one, we see inflation rise or two corporates have to start eating some of the impact of tariffs and that's going to impact margin. So it's really tough to see the scenario where ⁓ it does not impact markets. Maybe if Trump walks it all back, but

with the recent taco ⁓ rhetoric, which is Trump always chickens out, ⁓ I have a feeling that he ⁓ is not going to want to chicken out because then everyone is just going to double down on that narrative and that's not how he wants to be viewed.

Vanessa Hui (18:25)

I mean, you may not be an official geopolitical strategist, but I think you can give yourself a bit more credit than that. Over the last three and half years, you've synthesized hundreds of data points and charts. And on that note, would you say there's a topic where your views on the theme have changed materially over the years?

Andrew Sarna (18:46)

Yeah. I think an interesting place or an interesting data point takes me back to sort of post pandemic. So ⁓ as everyone remembers, there was the helicopter money where everyone got free money in the pandemic in the U.S. And something the market was keying on so closely was when will these excess savings

⁓ run out and that was when the economy was going to be begin rolling over. So I remember vividly, there's one single chart that you would get update on update on fairly periodically was savings running out. ⁓ and then eventually savings go into negative and it was like, okay, the end of the world is going to happen. Now is the time for the recession. And here we are, I think two years post those excess savings going negative. And you sort of realize.

that it didn't even matter. Maybe this is a funny view, but ⁓ you can always pick the data, cherry pick the data to tell the story that you want to tell. But I think that the reality of the situation is, that financial markets and the economy, it is so complex that no one ultimately knows what is going to happen. So you can pick

cherry pick the data that you want to tell the narrative and spin that story. But at the end of the day, nobody knows.

Vanessa Hui (20:20)

and you just have to be prepared for all.

Andrew Sarna (20:23)

Exactly. has a crystal ball. know, build your portfolio accordingly.

Vanessa Hui (20:30)

Okay, so we talked about things that kept coming up in Off the Charts. What is something that you're watching or researching right now that has yet to make its debut into Off the Charts, but might soon?

Andrew Sarna (20:42)

The that I'm looking to put some charts together on is private equity. I mean, it's interesting. So private equity was sort of the darling of the past two decades and was the top sort of consensus top performing asset class. ⁓ Now, the question to me is, will that continue to happen? And was maybe fall 40 years of falling interest rates the driver of why private equity is outperformed and what happens if that isn't happening anymore?

And in private equity right now, ⁓ sort of everyone is complaining about the lack of exits. And something Bill Gurley said that has stuck with me is that ⁓ it's not that there's no liquidity in the market. It's just that the owners of these assets have the wrong price for these assets or are over optimistic. They're not willing to sell at the price they can get. Something will something or in a market like this, especially with public equity markets at all time highs.

is really that private equity just has two lofty expectations. So it's going to be interesting ⁓ to see how that plays out. And on top of that, I think over a 10-year period, ⁓ was private equity sort of a flash in the pan that benefited from falling interest rates? Or is there actually a structural illiquidity premium that a lot of these institutions ⁓

sort of used as rationale to have big allocations to the space. And what happens when this all shakes out, like we're hearing stories now, or there's headlines now of like the Yale endowment, Harvard having to sell off large stakes or large secondary portfolios of private equity holdings. And ⁓ a lot will have to be cleaned up, I think.

Vanessa Hui (22:37)

That's a really interesting view and I know that in my experience with clients coming into fourth lane, a lot of people have leaned heavily on private equity as their exposure to alternatives. So it will be interesting to see how the next decade plays out in private equity. And on that note, if you could give one piece of advice to investors trying to navigate this next decade, what would it be?

Andrew Sarna (23:03)

mean, given all this uncertainty right now, it's probably simply ⁓ diversify. Again, we're conditioned that equity markets only go up. But if you look back over history, ⁓ that is not the case. Maybe, again, going back to that other point on the fixed income, it's you can't look at the 40

past years of performance and say, okay, it's good. This is going to happen again. You need to think about it from a first principles perspective and ask why, what drove these returns and will that happen again? I think that gives a sort of a fresh lens, ⁓ on the forward outlook. And then maybe not over a 10 year period, but just in general, ⁓ a piece of advice is like markets are hard.

Stock picking is extremely hard. Think about who you're going up against. So whether you're a retail investor picking stocks, I always think you should acknowledge that, there's someone probably smarter than you who's spending 80 hours a week trying to pick stocks. And that goes for me too. There's someone out there smarter than me.

who's spending 80 hours a week looking at healthcare socks. So what gives me the right to win ⁓ picking healthcare socks? Like I don't have an edge.

Anthony Berg (24:36)

Yeah,

thanks for that, Andrew. And I think I think that's a really important piece is to remain humble throughout the investment process so that you can deliver the best results possible. ⁓ But to take the other side, if we did force you and put you on the spot to give us some some views on markets, maybe we do a rapid fire on different asset classes that we've touched on throughout. So if you can just summarize for me your outlook for these asset classes as we go in a few words, that'd be awesome.

So we'll start maybe with public equities. How do you feel about them right now? Very quick, fixed income.

Andrew Sarna (25:07)

expensive.

⁓ Fixed income is for trading, not for investing. Over the long run, I think you're going to lose purchasing power, especially on an after-tax basis.

Anthony Berg (25:23)

Also, real assets.

Andrew Sarna (25:25)

Yeah, bullish, ⁓ under supplied, but timing it is hard. could be two years. We began seeing ⁓ squeezes and things like oil, copper. It could be five years. So I think timing is the big question mark there.

Anthony Berg (25:46)

How about infrastructure?

Andrew Sarna (25:49)

Infrastructure interesting because I think these defensive equities ⁓ and infrastructure sort of positions itself as a defensive, more defensive, stable equity, as long as you're paying ⁓ a reasonable price for these assets. You know, I think maybe this is where some of your fixed income allocation or you take some equity exposure, you take some fixed income exposure and it goes into something like equities that

or infrastructure that has a higher likelihood of protecting purchasing power over the long run.

Anthony Berg (26:21)

And what about private equity and venture capital?

Andrew Sarna (26:24)

Venture capital, ⁓ that's a tough one right now. ⁓ A lot needs to be cleansed from the space. Private equity, again, from a top-down perspective, need certainly to let the excesses flush. Maybe excesses flush is the wrong word. You need to allow proper prices ⁓ to show through. With that being said, and this goes ⁓ for everything, ⁓

Within the rubble, when there is a challenged asset class, there's always going to be opportunities. So ⁓ like private equity as an example, I think there's going to be opportunities on the secondary side to ⁓ provide liquidity to people who overextended themselves.

Anthony Berg (27:11)

And what about absolute return type strategies?

Andrew Sarna (27:13)

Absolute return, hard for retail investors to access. ⁓ Again, I look back on my journey. ⁓ The first 10 managers I met with, I thought I knew what a good absolute return manager was, but it's really not until you meet a thousand that do you start ⁓ being able to identify who truly has an edge and hopefully who can generate a tractor return. But absolute return is interesting because

I can generate a return above fixed income that hopefully will be a real return, but I protect my downside in the event that ⁓ equity markets sell off.

Anthony Berg (27:54)

And last but not least, crypto.

Andrew Sarna (27:57)

So 99 % of the crypto space doesn't have value, unfortunately. I think crypto broadly is still looking for its killer use case. However, there is a small percentage of the space where real things are being built. I think Bitcoin is one of those. And I'm long-term bullish Bitcoin. with that being said, the next two, three years,

there's going to be a 50 to 60 % drawdown. So ⁓ it's not for the faint of heart.

Vanessa Hui (28:33)

So I want to wrap up with just two more questions to you, Andrew. First, I know it's like asking you to pick a favorite child, but are there one or two issues of off the charts in your recent memory that you would want to direct readers to because they say something very salient or surprising or something that you want all investors to consider?

Andrew Sarna (28:58)

OK. Number one, think the UBS family office report summary is pretty interesting, ⁓ especially for family offices and ultra high net worth individuals out there. I think it's a good benchmark to understand directionally, ⁓ am I making decisions that my asset allocation is in line with the broader market. ⁓

I essentially think it's a good starting place and it's always interesting to see what your peers, ⁓ how your peers are thinking. Not saying that it's the Bible. mean, the classic is you meet one family office, you've met one family office and there's certainly varying degrees of sophistication, but ⁓ it's a good gut check. The second issue, and maybe it's not an issue, but just like a theme that ⁓

a theme that comes up often is obviously the AI. ⁓ And I think in particular when you ⁓ when I have the opportunity to highlight sort of a demo of some of these use cases. ⁓ And one of the things I think about and it's actually in relation to crypto that I surface this clip, but ⁓ Bill Gates was on Letterman, I think in like 97.

David Letterman asked Bill Gates what the internet does and Bill Gates brings up this example of, you can listen to a baseball game on the internet. And David Letterman mocks him as, have you heard of a radio? And a lot, and this relates to some of these AI use cases that we're seeing right now. And in the early days, it might feel like a toy. And obviously no one knows what the true potential of this technology is, but like,

some of the the ability to create content and some of these videos that you're seeing there like it's truly mind blowing ⁓ what someone typing in a few words can create now. So ⁓ I think like and I usually try to keep Fridays a little lighter. So I normally try to highlight something like that on a Friday.

Vanessa Hui (31:09)

I'll be looking forward to seeing what comes out tomorrow. So in conclusion, I want to ask you a question that I ask all our guests on 4th Lane Features. What is one lesson you learned early on in your career that has stuck with you and continues to guide you today?

Andrew Sarna (31:26)

⁓ Yeah, I think one lesson ⁓ on the investment side ⁓ that I learned is you need to stray from the crowds. think the best investment opportunities or some of the best investment opportunities come from when ⁓ nobody is talking about a specific asset class and that's really when you want to be looking over it when it's completely overlooked and bombed out. That's when you can go get a deal.

so whether that be an example might be biotech in today's environment where they're in a very deep bear market, ⁓ over the long run evaluations and sentiment tends to normalize, or it could be something like oil as everyone's super bearish on oil at a point. Now that's not exactly today, but I mean, looking back a few weeks, everyone was freaking out about the oil markets and, ⁓ they've

Provide a pretty healthy return over the next couple of weeks. And then once they do make headlines, that's sort of your opportunity to run for the exits or that's your sign to run for the exits.

Vanessa Hui (32:37)

Okay,

Andrew, I'm gonna let you get back to your day job and getting ready for the next issue of Off the Charts, which I will be expecting in my inbox at 6.45 a.m. tomorrow. ⁓ For our listeners, there will be a link to subscribe for Off the Charts in our show notes. On that sub stack link, you'll be able to see all of Andrew's archived issues. And Andrew, thank you for always keeping us up to date. ⁓

with this ever-changing landscape. I really, really appreciate your time today and thank you for joining us.

Andrew Sarna (33:14)

Thanks Vanessa.