This week, Bloomberg’s Suzanne Woolley published an exclusive on Basic Capital’s public launch from the business desk, followed by columnist Matt Levine, who explored our product further in his Money Stuff newsletter — decisively calling the concept “cool.” 

Levine’s May 13 edition, “Mortgage Your 401(k),” builds on Woolley’s reporting. Together, their in-depth coverage offers the first look at the product and its operations — and why it represents such a departure from how retirement accounts have traditionally worked.

Levine’s piece stands out for its clear grasp of both the mechanics and intent of the offering. He even followed up further in his May 14 edition to emphasize “why you might leverage up your retirement accounts, particularly as a young professional.” 

Basic Capital’s model is sophisticated by design, and admittedly easy to misinterpret at a glance. Levine cuts through the complexity with a real gift for explanation, capturing both the structure and the spirit of what we’re building.

“This Is Cool”

As Levine correctly asserts, the traditional retirement system is built around the idea of modest, long-term accumulation. Save steadily, invest conservatively, and hope it adds up over time. But what if a 30-year-old saver actually should be putting double (or even five times) their net worth into long-term assets like stocks or diversified portfolios?

Levine makes that case better than most and presents Basic Capital as a structural response:

What percentage of her net worth should a 30-year-old professional have in the stock market? . . . There is, however, a good theoretical case that the right answer is really 200%, or 500%: Most of a young professional’s economic wealth is the present value of her future employment income, and borrowing money to buy more stocks is a good way to diversify away from that one risky asset.

. . .A mortgage on a house is a pretty standard product in the US, but a mortgage on a retirement account is not.

This is cool. There are already various ways to get leverage in your stock portfolio…but they tend to be focused on the short term and prone to blowing up. This is not that: This is . . . something much closer to a mortgage.

The comparison to a mortgage works not just as a metaphor, but as a structural parallel: preferred equity financing, no margin calls, and no personal recourse. 

The IRA owns the LLC; the LLC secures the financing. Just like a house secures a mortgage, the investment portfolio secures the capital (not the individual). 

This unlocks leverage without exposing savers to short-term volatility or the risk of margin calls.

Why Bonds Come First

One of the most common misconceptions about leveraging a retirement account is the assumption that it must mean “leveraged equities.” But capital structure matters, especially when it comes to interest payments. If an investment doesn’t generate income, the cost of borrowing can outweigh the benefits. That’s why Basic Capital prioritizes positive carry by focusing first on bonds, rather than stocks.

Levine breaks this down clearly:

The problem with borrowing a lot of money to buy stocks for retirement is that it has negative carry: It requires you to pay cash every month, rather than bringing in cash.

. . . Who would lend you money to buy stocks with (1) a five-year term, (2) no margin calls, (3) no recourse to you, (4) a fairly low interest rate . . . and (5) an 80% loan-to-value ratio?”

Basic Capital is well aware of these problems, and it has a solution: Instead of buying stocks in your levered retirement account, you mostly buy bonds. The bonds will give you steady cash flow to cover the interest payments, so you don’t need to pay out of pocket.

That solution — to allocate most capital to income-generating bonds — is a core feature that allows the portfolio to support itself. As explained in Woolley’s initial write-up, the strategy uses diversified bond ETFs and private credit to ensure that expected yield exceeds borrowing costs, while still preserving upside through equity exposure:

But, the thinking goes, the startup can find private credit investments from the major players in the industry that yield more like 9%, meaning they will throw off enough cash to cover the borrowing costs and then some. Mix in some traditional stock-market exposure, and — assuming those private credit yields persist and that equities gain in line with historical averages — the startup said savers can expect low double-digit returns.

You can read Woolley’s full story here, and Levine’s Money Stuff newsletter here.