Bruce Richards

Marathon Asset Management is pivoting toward "Asset-Based Lending" (physical assets like aircraft, transformers, turbines) and away from cash-flow lending to software. In a world where AI disrupts intellectual property and software moats, physical assets (Real World Assets) retain value and provide collateral. The "re-industrialization" of the US requires massive capital for physical equipment. LONG. Focus on credit secured by hard assets. Global recession reducing demand for physical capital goods (e.g., travel downturn hurting aircraft leasing).

Richards states, "We love the physical world... concrete... roads... infrastructure building... transformers or cranes." He notes a "huge re-industrialization happening" requiring capital for plant, equipment, and materials. The macro regime is shifting from "asset-light" software growth to "asset-heavy" industrial build-outs (reshoring, AI data centers, chip manufacturing). Companies that supply the physical tools for construction (CAT, URI), the materials (VMC), and the power grid components (ETN) are the direct beneficiaries of this capex cycle. LONG "Physical World" Industrials and Infrastructure plays. A deep recession would halt capital expenditures and construction projects, hurting cyclical industrial stocks.

"Public private equity markets... they're going to be in a really good position to buy a lot of this at pennies on the dollar." While lenders (Private Credit) take the losses on defaults, the large Alternative Asset Managers (Private Equity side) have the dry powder to acquire distressed software companies at reset valuations (4x EBITDA instead of 10-20x). LONG the "Vulture Capital" that will feast on the coming distress. These firms also have large credit arms (Private Credit) that could suffer from the very defaults they hope to exploit on the equity side.

Richards highlights a recent "aircraft securitization" deal, noting 41% of their aircraft are leased to European/Asian airlines. He explicitly states, "We love asset based lending... whether it's airlines or airplanes." In a high-rate environment, owning cash-flowing hard assets (planes) that can be leased out provides better inflation protection and collateral security than lending against software "recurring revenue" which can evaporate. Aircraft lessors (AER, AL) fit this "Asset-Based Lending" thesis perfectly. LONG Aircraft Leasing companies. Geopolitical conflicts grounding fleets or a global travel recession reducing demand for aircraft.

Richards highlights a recent "aircraft securitization" deal, noting 41% of their aircraft are leased to European/Asian airlines. He explicitly states, "We love asset based lending... whether it's airlines or airplanes." In a high-rate environment, owning cash-flowing hard assets (planes) that can be leased out provides better inflation protection and collateral security than lending against software "recurring revenue" which can evaporate. Aircraft lessors (AER, AL) fit this "Asset-Based Lending" thesis perfectly. LONG Aircraft Leasing companies. Geopolitical conflicts grounding fleets or a global travel recession reducing demand for aircraft.

When asked about contagion, Richards says, "I'm not really worried about contagion. I think the banking sector has very little exposure to software." The market often sells off banks in sympathy when "credit events" occur. However, Richards identifies this as a contained crisis within the "shadow banking" (Private Credit) world. Traditional banks are insulated, making them a relative safe haven if the market panics over credit quality. LONG Traditional Banks as a contagion hedge. Unforeseen exposure to other stressed sectors (e.g., Commercial Real Estate) could still hurt banks, even if software does not.

Buy SPCX at IPO (June 12, Nasdaq): $20B debt refinancing slashes annual interest costs ~$1B, credit migrates toward IG (BBB-), ~$80B net cash post-IPO makes $20B debt inconsequential at ~1% of ~$2T market cap — structurally de-risked balance sheet at a generational scale IPO.

Select software companies like Salesforce, ServiceNow, Intuit, and Adobe are trading at roughly 8 times forward earnings, which is very cheap given their high margins and strong earnings. These companies have significant upside potential as they transition to AI-first software platforms, though not all will succeed.

Select software companies like Salesforce, ServiceNow, Intuit, and Adobe are trading at roughly 8 times forward earnings, which is very cheap given their high margins and strong earnings. These companies have significant upside potential as they transition to AI-first software platforms, though not all will succeed.

Select software companies like Salesforce, ServiceNow, Intuit, and Adobe are trading at roughly 8 times forward earnings, which is very cheap given their high margins and strong earnings. These companies have significant upside potential as they transition to AI-first software platforms, though not all will succeed.

Select software companies like Salesforce, ServiceNow, Intuit, and Adobe are trading at roughly 8 times forward earnings, which is very cheap given their high margins and strong earnings. These companies have significant upside potential as they transition to AI-first software platforms, though not all will succeed.

Richards argues public software companies have "0.5 turns of leverage" and strong free cash flow, whereas private software companies are leveraged 8-10x. In an AI disruption cycle ("creative destruction"), companies with cash (public) can pivot and survive. Companies with high debt (private) cannot afford the capex to transition and will default. Long Public Software (via ETF IGV) as a flight to quality away from private software credit. AI disruption is so severe it kills public incumbents regardless of balance sheet.

Richards explicitly promotes the "HALO" trade: "Hard Assets, Low Obsolescence." He cites specific examples: Concrete, Rebar, Sod, Aircraft, Maritime, Turbines, Cranes, and Engines. He argues the economy is fine, but the *software* sector is broken. Capital will flow away from intangible, high-leverage tech into tangible industrial assets that are critical for infrastructure and have high recovery values in default scenarios. LONG. Buy the industrial and material base of the economy. Global recession reduces demand for heavy machinery and construction materials.

Richards explicitly promotes the "HALO" trade: "Hard Assets, Low Obsolescence." He cites specific examples: Concrete, Rebar, Sod, Aircraft, Maritime, Turbines, Cranes, and Engines. He argues the economy is fine, but the *software* sector is broken. Capital will flow away from intangible, high-leverage tech into tangible industrial assets that are critical for infrastructure and have high recovery values in default scenarios. LONG. Buy the industrial and material base of the economy. Global recession reduces demand for heavy machinery and construction materials.

"Public private equity markets... they're going to be in a really good position to buy a lot of this at pennies on the dollar." While lenders (Private Credit) take the losses on defaults, the large Alternative Asset Managers (Private Equity side) have the dry powder to acquire distressed software companies at reset valuations (4x EBITDA instead of 10-20x). LONG the "Vulture Capital" that will feast on the coming distress. These firms also have large credit arms (Private Credit) that could suffer from the very defaults they hope to exploit on the equity side.