Summary of Chicago Atlantic BDC Fireside Chat (January 13, 2026) Company Overview - **Company**: Chicago Atlantic BDC (NasdaqGM: LIEN) - **Industry**: Cannabis finance sector, specifically focusing on mortgage REITs and BDCs Key Points and Arguments Business Model and Strategy - Chicago Atlantic operates three verticals to provide diverse funding solutions, including real estate-backed loans and cash flow lending, allowing for larger fundings and diversified portfolios for investors [1][2] - The BDC has a blend of 20% to 30% non-cannabis direct loans, leveraging its expertise in the cannabis industry while also exploring broader investment opportunities [3] Market Sentiment and Performance - The mortgage REIT and BDC sectors experienced negative performance in 2025 due to declining interest rates and concerns over private credit market saturation, leading to decreased stock prices [9][10] - Chicago Atlantic's portfolio is less exposed to interest rate declines due to high interest rate floors in its floating-rate loan portfolio, which mitigates downside risk compared to broader market trends [11][13] Risk and Reward Profile - Chicago Atlantic lends to cannabis operators at lower leverage ratios (1-2 times EBITDA) compared to the broader private credit industry (4-6 times EBITDA), indicating a more conservative risk profile [23][24] - The company emphasizes the importance of real covenants in its loans, which enhances the reliability of its portfolio compared to competitors [23] Competitive Landscape - The entry of AFC Gamma as a competitor in the cannabis BDC space is acknowledged, but Chicago Atlantic believes its unique positioning and focus on smaller operators provide a competitive advantage [72] - The company maintains that its origination platform and underwriting capabilities are superior, allowing for better control and flexibility in loan structuring [39][40] Regulatory Environment and Future Outlook - Anticipation of cannabis rescheduling in 2026 is expected to increase demand for credit among operators, although the fundamental issues preventing capital flow into the industry remain [44][46] - The potential for cannabis companies to list on U.S. exchanges is viewed as a transformative opportunity for access to capital, more significant than rescheduling alone [46] Financial Performance - In Q3, Chicago Atlantic deployed over $60 million, but faced significant early repayments, which impacted net deployments [66] - The company expects 2026 to be a strong year for investment, despite challenges in predicting repayment schedules [67] Non-Accruals and Risk Management - The company reported approximately $25 million in non-accruals, with expectations for resolution and return to accrual status in the near future [79] Relationship with Vireo Growth - Chicago Atlantic's relationship with Vireo Growth is highlighted as a positive example of supporting borrower growth initiatives, enhancing trust and collaboration within the industry [90][91] Additional Important Insights - The company emphasizes the need for a broader ecosystem of credit providers to support the cannabis industry, including banks, credit rating agencies, and insurance companies [62][63] - Chicago Atlantic's focus on building relationships and trust within the cannabis sector is seen as a critical factor for success in a capital-constrained environment [91]

Core Insights - The article discusses the optimal maturity decisions for Treasury holdings, emphasizing the importance of real yields and inflation in determining investment strategies [1][6][14] Group 1: Historical Performance of Treasury Securities - Longer-dated maturities have historically provided higher yields and superior real returns, with 10-year Treasury notes yielding 206.96% cumulative real returns since 1961, compared to 113.74% for 2-year notes and 56.43% for 3-month Treasury bills [2][3] - Recent performance has deviated from this trend, with 3-month Treasury bills delivering 5.51% real returns over the past three years, while 10-year notes posted -5.70% [4][5] Group 2: Real Yields and Duration Decisions - Real yields have shifted, with 3-month bills currently offering the highest real yields at 1.05%, compared to 0.56% for 2-year notes and 0.34% for 10-year notes, indicating a reversal in the traditional risk-return relationship [7][8] - The article suggests that when real yields are higher for shorter maturities, the rationale for extending duration diminishes, as investors are better compensated for staying short [8][14] Group 3: Inflation's Impact on Treasury Bill Returns - Inflation is identified as the primary driver of Treasury bill real returns, with positive real returns occurring when Treasury bill rates exceed inflation [10] - The article highlights that Treasury bills performed poorly during high-inflation periods when nominal rates lagged behind inflation, emphasizing the need for investors to monitor inflation expectations [10][11] Group 4: Yield Curve Dynamics - The shape of the yield curve provides additional insights, with Treasury bill real returns averaging 0.11% when 2-year yields exceed 3-month rates, but only 0.05% when the curve is flat or inverted [11][12] - The article notes that the yield curve's shape offers minimal guidance for extending from Treasury bills to 2-year notes, suggesting that decisions should be based on absolute real yields and broader portfolio considerations [13][14] Group 5: Strategic Implications - In the current environment, with positive real yields of approximately 1.23% on Treasury bills, the inflation factor strongly favors short-term positioning [17] - Should the Federal Reserve push Treasury bill rates into negative real yield territory, investors may need to consider moving further out the yield curve to capture positive real yields [18]

Core Viewpoint - The bond market indicates that the Federal Reserve may begin its interest-rate cutting cycle as early as next week, prompting investors to consider the duration risk in fixed income investments [1] Group 1 - The bond market is signaling a potential shift in monetary policy with the possibility of interest-rate cuts [1] - Investors are evaluating their strategies regarding duration risk in the context of changing interest rates [1]

Company Overview - Sunstone Hotel Investors, Inc. (SHO) is a hotel Real Estate Investment Trust (REIT) that owns 15 high-end hotels and resorts [1] - The company has a common equity valuation of $1.7 billion [1] Investment Strategy - Binary Tree Analytics (BTA) focuses on providing transparency and analytics for capital market instruments and trades, particularly in Closed-End Funds (CEFs), Exchange-Traded Funds (ETFs), and Special Situations [1] - BTA aims to deliver high annualized returns with a low volatility profile, leveraging over 20 years of investment experience [1]