Analog Capital Partners

08/27/2026

The financial industry is very good at measuring wealth.

It is much less skilled at asking what wealth is actually for.

Income is generally associated with greater well-being. And the widely repeated idea that happiness stops increasing once someone earns $75,000 is not a universal rule.

A 2023 joint analysis by researchers Matthew Killingsworth, Daniel Kahneman, and Barbara Mellers found that emotional well-being continued to rise with income for most people. For the least-happy group, however, the gains largely flattened at approximately $100,000 of annual income in the study’s U.S. sample.

In other words, money can remove many sources of unhappiness—financial insecurity, inadequate housing, lack of healthcare, debt, and limited choices.

The relationship becomes even more interesting among the wealthy. Two studies involving more than 4,000 millionaires found that additional net worth was associated with only modest increases in happiness, with clearer differences appearing primarily at very high wealth levels.

Perhaps the most useful finding is that how we use money may matter as much as how much we accumulate.

Research suggests that money is more likely to improve well-being when it is used to:

— Buy back time
— Reduce chronic financial stress
— Create autonomy and flexibility
— Support people and causes we care about
— Strengthen relationships and shared experiences

Experiments have found that spending money to save time can improve happiness, and that spending on others can create greater happiness than equivalent spending on oneself.

This is why the objective of financial planning should not be to maximize net worth at any cost.

The objective is to convert wealth into a better life—more freedom, more resilience, more time with the people you care about, and a greater ability to live according to your values.

At Analog Capital Partners, we believe every meaningful financial plan should answer two questions:

What is your money for?

And how much is enough?

Because becoming wealthier and living better are related—but they are not the same objective.

08/20/2026

How much should you Roth convert every year?

The answer is not:

“Convert as much as possible.”

The better goal is:

Recognize the right amount of taxable income today to reduce your lifetime tax bill.

For some people, the appropriate annual Roth conversion may be:

- $0 during a high-income year
- $50,000 during an ordinary retirement year
- $200,000+ during an unusually favorable tax window

The amount depends on much more than your current tax bracket.

A Roth conversion can also affect:

- Medicare Part B and Part D premiums
- Health-insurance subsidies before age 65
- The taxation of Social Security benefits
- Capital-gains taxation
- State income taxes
- Estimated-tax and withholding requirements

A practical starting point is:

Target income ceiling
− Projected income before conversion
− Margin of safety
= Potential Roth conversion

For example, assume a retired couple expects $120,000 of income and selects $200,000 as its planning ceiling.

That creates preliminary conversion capacity of approximately $80,000.

But converting the full $80,000 immediately may not be prudent.

They might convert $65,000–$70,000 first, then update the projection near year-end after dividends, capital gains, deductions, and other income become clearer.

For many families, the most valuable Roth-conversion window occurs:

After retirement, but before Social Security, pensions, and required minimum distributions fully begin.

Other attractive opportunities may include:

- A temporary drop in income
- A significant market decline
- Before moving to a higher-tax state
- Before the death of a spouse
- Before leaving large retirement accounts to high-income heirs

However, a large conversion can be a mistake when it creates excessive taxes, raises Medicare or insurance costs, weakens liquidity, or accelerates income that would otherwise be taxed at a lower rate later.

The question is not simply:

“How much can I convert?”

It is:

“What multiyear Roth-conversion strategy gives my family the best lifetime after-tax outcome?”

08/13/2026

Volatility Is the Price of Compounding

Everyone wants the long-term returns of the stock market.

Far fewer investors want the experience required to earn them.

That experience includes corrections. Bear markets. Recessions. Bad headlines. Periods when diversification seems unnecessary—and periods when it feels like nothing is working.

Volatility is not necessarily a flaw in investing. It is often the price of admission.

If an asset offered attractive long-term returns, perfect liquidity, and no meaningful fluctuations, investors would quickly bid up its price until much of that excess return disappeared.

The discomfort matters.

Over long periods, compounding can be extraordinarily powerful. But compounding only works if capital remains invested long enough to benefit from it.

A 10% decline can feel significant.

A 20% decline can feel frightening.

A 30% decline can make an otherwise disciplined investor question the entire strategy.

And that is precisely when long-term plans are most vulnerable.

The greatest threat to compounding is often not volatility itself.

It is interrupting the compounding process because of volatility.

Selling after a major decline, chasing whatever has recently performed best, abandoning diversification, or repeatedly moving between risk-on and risk-off positions can turn temporary market fluctuations into permanent losses of capital and opportunity.

At Analog Capital Partners, we don't believe the objective should be to eliminate volatility.

We believe the objective is to build portfolios where the amount and sources of volatility are intentional—using diversification, thoughtful asset allocation, risk management, and a long-term investment discipline.

Because wealth is rarely created in a straight line.

The return is the reward.
Volatility is part of the price.
Compounding is what happens when you stay in the game long enough.

08/06/2026

The best investment decision you make may not be choosing the right stock.

It may be choosing the right financial advisor.

Most investors believe they are hiring someone to manage a portfolio. In reality, they are hiring someone who may influence hundreds of decisions involving investments, taxes, retirement income, estate planning, risk, and how they respond when markets become difficult.

That is why asking, “Are you a fiduciary?” matters—but it is not enough.

Fiduciary status is the starting point, not the finish line.

An advisor can be a fiduciary and still charge excessive fees, build an unnecessarily complicated portfolio, overlook tax consequences, communicate poorly, or operate without a disciplined investment process.

Before hiring an advisor, ask better questions:

How are you compensated?

What is your investment philosophy?

Who actually makes the investment decisions?

How are taxes incorporated into the portfolio?

What happens when markets decline?

What services do you provide beyond investments?

How do you define success?

The strongest answers will not revolve around market predictions, last year’s returns, or a particular financial product.

They will reveal clear incentives, a coherent philosophy, a repeatable process, and an ability to coordinate your investments with the rest of your financial life.

The right advisor will not promise certainty.

They will help you prepare for uncertainty, remain disciplined when conditions are difficult, and make better decisions over decades—not quarters.

I wrote a detailed guide for Houston investors who are choosing an advisor or considering a second opinion.

Whether you ultimately work with Analog Capital Partners or another firm, the goal is the same:

Know what to ask.

Understand the incentives.

Demand clear answers.

Read the complete guide:

https://na2.hubs.ly/H072t2q0

By Analog Capital Partners How to Choose the Right Financial Advisor May Be the Most Important Financial Decision You'll Ever Make Most investors believe they're hiring someone to manage money. They're not. They're hiring someone who will influence hundreds—if not thousands—of financial decisio

07/24/2026

The S&P 500 Is at a Concentration Extreme—But It Is Not a Crash Clock

At the end of 2025, the ten largest companies represented 40.73% of the S&P 500. The five largest—Nvidia, Apple, Microsoft, Alphabet and Amazon—accounted for more than 30%.

In practical terms, more than $40 of every $100 invested in a capitalization-weighted S&P 500 fund went to just ten companies. A portfolio may hold 500 names, yet its results can still depend heavily on a small group of mega-caps.

Historically, concentration at this level deserves attention. The mid-1960s was the last comparable S&P 500 extreme. From June 1965 through June 1975, the index delivered only 1.17% annualized price returns, excluding dividends, while the top ten companies’ combined weight fell by 9.16 percentage points.

That is a meaningful warning—but not proof that a crash is imminent.

The popular claim that “every time the top ten crossed 40%, the market crashed” oversimplifies the evidence. The modern S&P 500 did not exist before 1957, and long-term studies often use different universes: the total U.S. market, the 500 largest companies or the modern index. Those figures are related, but they are not interchangeable. Even the dot-com-era S&P 500 concentration peak remained below today’s level.

The more durable lesson is that market leadership changes. The giants of the 1960s eventually lost influence, while the index evolved and new leaders emerged. High concentration can unwind through falling prices, stronger performance by the rest of the market, or both.

Why does this matter now?

A handful of companies can drive index returns, valuation swings and investor sentiment. Investors may also be less diversified than they believe. Owning an S&P 500 fund, a Nasdaq fund, a technology fund and individual mega-cap stocks may look diversified on a statement while repeatedly concentrating capital in the same businesses.

The right question is not: “Will the market crash tomorrow?”

It is: “How much of my portfolio ultimately depends on the same ten companies—and is that exposure intentional?”

07/21/2026

Quarterly Letter | Q2 2026 - When the Margin for Error Narrows

Markets remain resilient, but several conditions deserve closer attention. U.S. equity valuations are elevated, borrowing against brokerage accounts has accelerated, and portions of the housing and employment data have begun to cool.

These developments do not tell us when markets will turn. They do suggest that the consequences of relying on a single favorable outcome may be increasing.

In our latest quarterly letter, we examine:

• Why valuation is a measure of vulnerability—not a market-timing signal
• How leverage can turn ordinary volatility into forced selling
• What a cooling labor and housing market may mean for portfolios priced for strong outcomes

Read “When the Margin for Error Narrows”
https://na2.hubs.ly/H06LS370

Our objective is not to predict every change in the market. It is to help clients remain in control of their decisions across a range of possible outcomes.

Please reply directly with any questions or circumstances you would like us to discuss.

Warm regards,
Billy

When the Margin for Error Narrows Valuation, leverage, and a cooling economy Markets do not decline simply because they are expensive. They become vulnerable when high expectations encounter an unexpected disappointment. Today, several long-term valuation measures suggest that investors are payin

07/16/2026

The infrastructure can be real—and the returns can still disappoint.

That is the lesson from history’s capital-expenditure booms.

Railways transformed transport, but many investors were wiped out. Electrification changed production, but productivity gains took decades and required organisational redesign. Fiber enabled the internet, yet the telecom boom ended in bankruptcies and an investment-led recession. Shale revolutionised energy supply while destroying many producers’ economics.

In each case, the technology thesis was broadly correct.

The capital-allocation thesis was not.

Today’s AI infrastructure cycle has similar characteristics. Amazon, Microsoft, Alphabet and Meta are guiding to roughly $700 billion of capex in 2026, much of it linked to data centres, chips, networking and power.

AI demand is real, capacity is constrained and major investors have strong balance sheets.

But scarcity today can still become overcapacity tomorrow.

Data centres and power infrastructure take years to build. Meanwhile, AI hardware depreciates quickly, models become more efficient and competition is lowering the cost of compute. Demand may grow enormously while returns on undifferentiated infrastructure compress.

My base case is neither “AI is a bubble” nor “there is no bubble.”

It is a productive overbuild:

The infrastructure gets built.
Capex supports growth.
Too much capacity arrives too early.
Returns on marginal projects disappoint.
Compute becomes cheaper.
The largest gains migrate to downstream users.

That would be positive for long-term productivity, but more complicated for markets.

The questions that matter are:

Are revenues and cash flows keeping pace with depreciation?
How much capacity is genuinely utilised?
Is the build-out funded with cash or increasingly with debt and private credit?
Who captures the value: infrastructure owners or businesses using cheaper intelligence?

History’s warning is clear:

A technology can change the world without rewarding everyone who financed its first wave.

07/11/2026

In the years leading up to the 1987 crash, portfolio insurance was marketed as a way to reduce risk. In reality, it often did the opposite.

The strategy relied on selling stock index futures as markets declined. Individually, that seemed sensible. But when thousands of institutions followed the same rules simultaneously, selling fed on itself. Falling prices triggered more selling, which caused prices to fall further. Liquidity disappeared, and the result was Black Monday.

Today, I see an uncomfortable parallel with leveraged equity ETFs.

These funds promise a fixed multiple of the daily return of an index. To maintain that leverage, they must rebalance their exposure every day. After strong market gains, many are forced to buy more equities near the close. After sharp declines, they are forced to sell into weakness to reduce exposure.

Under normal conditions, this rebalancing is manageable.

But during periods of extreme volatility, these mechanical trades can become very large. If enough capital is concentrated in leveraged ETFs, their end-of-day rebalancing can reinforce market moves—much like portfolio insurance did nearly four decades ago.

There are important differences:

• Leveraged ETFs are more transparent than 1980s portfolio insurance.
• Today's markets are deeper, more electronic, and supported by multiple liquidity providers.
• Circuit breakers and market structure reforms help slow panic selling.

Even so, the underlying dynamic is remarkably similar: a risk management product that can become a source of market risk when everyone follows the same rules at the same time.

Markets rarely break because of one bad idea. They break when many investors are forced to do the same thing at the same time.

History doesn't repeat exactly, but it often rhymes.

As investors, it's worth paying attention not just to valuations and fundamentals, but also to the growing influence of systematic and rules-based strategies. Sometimes the biggest risk isn't bad news—it's the market's own structure.