Excess Returns

Brent Kochuba takes a look behind the scenes at the options flows driving the market heading into the December options expiration and the end of 2025. Subscribe on Spotify ⁠https://open.spotify.com/show/4KR2YVJqk2lnVETMKDavJf⁠ Subscribe on Apple Podcasts ⁠https://podcasts.apple.com/us/podcast/the-opex-effect/id1711880009⁠ Subscribe on YouTube ⁠https://www.youtube.com/channel/UCPYvx_y92dvI1PSdiho0ALw

Ed Yardeni returns to Excess Returns to break down the evolving market landscape, why he moved the Magnificent 7 to underweight, and how AI, productivity, interest rates, global markets, and sector leadership will shape the next stage of the Roaring 2020s. Ed explains why the economy has remained so resilient, what could finally trigger a true market broadening, and how investors should think about everything from tech competition to inflation, private credit risks, and Fed policy heading into 2026. Main topics covered • Why Ed reduced the Magnificent 7 and tech from overweight to market weight • How extreme sector concentration affects portfolio construction • The escalating competition inside AI and large-cap tech • The AI CapEx boom and how it changes earnings, margins, and valuation • Valuation considerations for tech leaders at this stage of the cycle • Whether the Mag 7 should be compared to past tech bubbles • How AI adoption may spread to the broader economy and boost productivity • Economic impact of AI on jobs, wages, and long-term inflation • Why the US economy avoided recession despite persistent warnings • Rolling recessions vs traditional recessions and how they shape markets • Private credit risks and whether they pose a systemic threat • Prospects for small caps, mid caps, financials, industrials, and healthcare • Why 2026 may finally bring true market broadening • The outlook for international investing and emerging markets • Ed’s S&P 500 roadmap to 7,700 next year and 10,000 by 2029 • Fed policy, rate cuts, inflation, bond vigilantes, and political pressure • Key risks investors should monitor heading into 2026 Timestamps 00:00 Mag 7 concentration and the case for rebalancing 03:00 How Ed builds probability-based market scenarios 04:30 Why the Roaring 2020s thesis still holds 06:00 The no-show recession and economic resilience 07:00 Why he moved the Mag 7 and tech to market weight 09:30 How every company is becoming a technology company 12:20 Knowing when a successful thesis has run its course 13:30 The dominance of the US market and global diversification 15:00 Why market weight, not overweight, for tech and the Mag 7 16:00 Tech competition, AI leapfrogging, and margin pressure 18:30 The CapEx boom and valuation questions 21:00 Comparing today’s tech leaders to the 2000 era 23:00 How AI could lift productivity across the entire economy 25:00 Putting AI in historical context 27:00 How new technologies solve constraints like energy and compute 29:00 AI’s long-term impact on productivity and growth 30:00 Labor market disruption and job transition dynamics 31:20 Will AI be deflationary over time? 32:30 Technology, China, automation, and global deflation forces 33:00 Ed’s forecast for the S&P 500 through 2029 35:00 Why recession indicators failed this cycle 37:00 How liquidity facilities prevent credit crunches 39:00 Private credit risks and transparency challenges 40:45 The potential for market broadening in 2026 42:20 Takeaways from the latest Fed meeting 44:00 Should the Fed be cutting rates? 45:00 Fed independence under political pressure 47:00 Why bond vigilantes may return in 2026 48:00 International investing opportunities and ETFs 49:30 Closing thoughts and key risks ahead

In this episode of Excess Returns, we sit down with Andrew Beer to break down managed futures, hedge fund replication, diversification, and what investors can realistically expect from these alternative strategies. Andrew explains why managed futures can act like a “cloudy crystal ball,” how trend strategies capture major macro shifts, why complexity isn’t always your friend, and how advisors can communicate these concepts to clients. We also explore fees, model portfolios, allocation decisions, global macro themes, and what smart-money positioning looks like heading into 2025. Topics Covered What managed futures actually are and how they work How trend strategies capture big macro shifts Why diversification is most valuable during market stress Why investors struggle with complexity and line-item risk The statistical case for adding managed futures to a 60/40 portfolio Barriers to adoption and how advisors should explain the strategy The role of model portfolios and why slow rebalancing can hurt in regime shifts Why Andrew prefers simplicity over complexity in managed futures Fee sensitivity, ETFs, and how this strategy goes mainstream Indexing, replication, and building more efficient alternatives Why manager selection is hard in this space The “rush to complexity” and why it often hurts returns How hedge fund replication works and what it captures What smart money is positioned for today across equities, rates, currencies, and commodities Macro themes: inflation, rate cycles, the dollar, yen, and global equity opportunities Why international equities may finally be turning How managed futures complement – not replace – stocks and bonds What mainstream adoption might look like over the next decade Timestamps 00:00 Intro and why managed futures matter 02:00 Explaining managed futures in simple terms 06:18 The four major asset classes trend funds trade 10:00 Why trends form and how information reveals itself in prices 11:55 Diversification and how managed futures improve portfolios 14:00 Why investors haven’t widely adopted the strategy 17:01 Communicating the “what,” not the “how,” with clients 18:55 How model portfolios behave in regime change 21:55 How managed futures can move faster than traditional allocations 24:00 Why a simple portfolio of major markets works 26:00 Making alternatives feel less risky 28:00 Performance dispersion across managed futures ETFs 30:00 Why complexity doesn’t equal value 35:20 Fees, ETFs, and what mainstream adoption requires 38:00 The real reason for the industry’s “rush to complexity” 40:35 Should managed futures exclude equities and bonds? 43:00 Why it’s so hard to handicap what will work in advance 46:00 The human side of alternatives and advisor communication 47:00 Hedge fund replication explained 50:00 How replication identifies major themes 52:00 Why replication works only in certain strategies 53:10 What smart money positioning looks like today 55:45 Inflation, rates, the dollar, and global opportunities 58:00 The path to managed futures becoming a standard allocation 59:22 Where to find Andrew Beer online

We are including this episode from our separate show Teach Me Like I'm Five in the Excess Returns feed. If you would like to continue receiving new episodes, subscribe using the links below. In the episode, we sit down with Business Breakdowns host Matt Reustle to discuss how he breaks down businesses and the common characteristics that the best businesses he has looked at share. Subscribe on Spotify https://open.spotify.com/show/7zu6lFpPohoPKhcu0Er9kB Subscribe on Apple Podcasts https://podcasts.apple.com/hr/podcast/teach-me-like-im-five-investing-concepts-made-simple/id1815975642

In this episode of Excess Returns, Graeme Forster of Orbis joins us to discuss two major research papers: Six Courageous Questions for 2026 and Sunrise on Venus. We explore how long-running global trends may be reversing, what that means for U.S. dominance, the future of international and emerging markets, the risks and opportunities created by AI and massive CapEx spending, the dollar’s shifting role, and how investors should think about valuation, humility, and navigating a world where the economic “water” is changing. This conversation is packed with global macro insight, long-term investing lessons, and practical frameworks for building more resilient portfolios. Topics Covered: • Why long-term market “water” becomes invisible to investors • Self-reinforcing global cycles and how China’s WTO entry reshaped the world • Signs the 25-year U.S. outperformance cycle may be breaking • How tariffs, political shifts, and corporate reforms change the global landscape • Why international and emerging markets may now offer better expected returns • Why U.S. large caps are not the entire story of American exceptionalism • How to think about valuation, margins, and discounted cash flow models across markets • The AI boom, bubbles, capital cycles, and asymmetric outcomes • How AI CapEx constraints influence winners and losers • The shifting role of the U.S. dollar and why market shocks may behave differently • Maslow’s hierarchy, needs vs. wants, and the return of state-driven capital investment • Deglobalization, reshoring, and the national-security lens for investing • How to evaluate China and Taiwan inside emerging markets • Why humility is an investor’s greatest edge Timestamps: 00:00 Introduction 01:02 Why Orbis wrote Six Courageous Questions for 2026 03:44 The David Foster Wallace “water” analogy and investing 06:12 How a 25-year self-reinforcing cycle powered U.S. outperformance 10:12 Signs the cycle may be breaking 12:00 Corporate reform and opportunity in Asia 13:55 Why active share, benchmarking, and incentives distort investor behavior 17:31 Decomposing S&P 500 returns: margins, valuations, fundamentals 20:20 Expected returns inside and outside the U.S. 22:34 Why international stocks offer richer opportunity sets 24:25 Currency implications and weakening dollar dynamics 26:18 American exceptionalism beyond the top 10 mega caps 28:49 Where Orbis is finding value today 30:25 Biotech, healthcare, and post-COVID dislocation 31:05 How Orbis thinks about valuation in an intangible-heavy world 32:09 Is AI a bubble or the beginning of something bigger? 34:30 Game theory of AI CapEx and right-tail outcomes 36:00 CapEx cycles, history, and who benefits 38:00 Indirect AI beneficiaries and the SK Square example 40:35 Maslow’s hierarchy and the shift from wants to needs 42:32 Deglobalization, national security, and domestic reinvestment 44:00 Capital returning to home markets and strategic industries 46:00 Can anything reverse these structural trends? 48:00 Balancing bottom-up investing with macro awareness 49:45 The deeper risk in emerging markets: owning vs. avoiding 51:00 Valuation still matters for long-term returns 52:29 Corporate behavior, dividends, and re-rating cycles 53:52 How Orbis views China vs. bottom-up opportunity 55:34 Why great investors must be right 90–95% of the time in decision quality 58:00 One lesson Graeme would teach the average investor

James Grant, legendary founder of Grant’s Interest Rate Observer, joins us for a wide-ranging conversation on cycles, interest rates, inflation, credit, the Federal Reserve, private markets, gold, and the future of investing. Grant brings five decades of historical perspective to today’s market extremes, explaining why this era of ultra-low interest rates created distortions that will shape returns for years to come — and where patient investors may ultimately find opportunity. Topics Covered • The historical patterns that define major market cycles • Why interest rate cycles unfold over generations • What the 2021 bond market top tells us about the next decade • How inflation behaves like an underground coal fire • The shift from “capitalism without capital” to the “tangible twenties” • Geopolitical tension, military spending, and inflation risk • The Fed’s role in shaping today’s market distortions • The long-term consequences of QE and financial repression • Private credit, opaque marks, and the fragility beneath the surface • Rising risks inside life insurance balance sheets • Why credit cycles always go further than anyone expects • The challenge of finding long opportunities in today’s market • Why liquidity and patience may be the biggest opportunities • Whether the classic 60/40 portfolio still works • Gold as money and why confidence in paper currencies is eroding • Jim Grant’s one lesson for the average investor Timestamps 00:00 Cycle extremes and market absurdities 01:00 Interest rates over generations 07:00 Defining major tops and bottoms 12:30 Where we are in the current rate cycle 14:00 Inflation, armed conflict, and tangible investment 18:00 The “tangible twenties” and data center boom 19:00 Coal fire inflation analogy 20:00 Fed independence, politics, and monetary power 25:00 The long shadow of the 2008 crisis 30:00 QE, zero rates, and long-term consequences 33:00 Housing affordability and locked-in rates 34:00 Risks in private credit and opaque marks 36:00 How far the credit cycle has progressed 38:00 Japan, value investing, and long cycles 43:00 Where opportunities exist today 47:00 The future of the 60/40 portfolio 49:00 Structural risks from low-rate distortions 51:00 Freedom, politics, and economic consequences 56:00 Gold as money 58:00 What Jim Grant believes most investors disagree with 59:30 The one lesson Jim Grant would teach the average investor

In this episode, we’re joined again by Jim Paulsen to break down the key themes shaping markets and the economy heading into 2026. Jim explains why policymakers may be fighting the wrong battle, why real sustainable growth has quietly collapsed over the past 20 years, and how shifts in policy, demographics, productivity, inflation, and investor psychology all tie together. We also walk through Jim’s latest charts from Paulsen Perspectives and explore what they mean for stocks, sectors, interest rates, the dollar, and leadership in the year ahead. Topics covered in this episode: • The state of inflation and why CPI and PPI may be sending a very different message • The 20-year collapse in real sustainable GDP growth • Why job creation, labor force growth, and productivity have all structurally weakened • The rise in unemployment duration and what it signals about lost “animal spirits” • How demographics, immigration policy, and cultural shifts are shaping growth • Productivity puzzles: innovation vs. distraction in a tech-driven economy • Why the real economic risk may be deflation, not inflation • How monetary policy, the yield curve, the dollar, and fiscal policy have remained contractionary • Tariffs as a hidden tax and their real impact on inflation • How an easing cycle could reshape market leadership in 2026 • Jim’s Total Policy Stimulus Index and what it reveals about small caps, cyclicals, value, and foreign stocks • The difference between today’s tech cycle and the dot-com bubble • What a broadening market might look like if policy finally turns supportive • How international equities could respond to a weaker dollar • Why tech may underperform without collapsing • Jim’s expectations for S&P 500 returns in 2026 and the potential for a more balanced leadership environment Timestamps: 00:00 Market setup and inflation overview 02:00 Reviewing recent corrections and sector broadening 04:00 Bond yields, easing expectations, and fear-based asset leadership 06:00 Tech’s relative performance beginning to fade 07:00 GDP growth collapse over two decades 09:00 Structural slowdown in job creation 10:30 Labor force growth and aging demographics 12:00 The doubling of unemployment duration 14:00 Population trends, immigration, and slowing productivity 17:00 The rise of de-risking and falling monetary velocity 19:00 Trade deficits, globalization, and policy contraction 22:00 Why inflation risk may be overstated 26:00 CPI/PPI data versus the inflation narrative 29:00 Money supply, real rates, and the longest yield curve inversion 31:00 The strong dollar as a contractionary force 34:00 International stock performance and currency impact 35:00 Tax burden relative to slower growth 37:00 Tariffs as taxes and their real economic effect 39:00 What would it take to restore growth and optimism? 42:00 The Total Policy Stimulus Index explained 47:00 Policy’s impact on equal-weight, small caps, cyclicals, and value 52:00 How foreign stocks respond to policy and the dollar 54:00 Tech valuations today vs. the dot-com era 55:00 Fed response differences between now and 2000 57:00 Why today’s tech cycle is structurally different 59:00 What 2026 might look like for the S&P 500 01:01:00 Why price targets are inherently unreliable 01:01:45 Closing thoughts and sign-off

In this special episode of Excess Returns, we share the most important investing lessons from more than 50 of our top guests. After asking more than 200 investors, strategists, academics, and market thinkers the same closing question about the one lesson they would teach the average investor, we compiled the most powerful, timeless, and repeatable insights into a single episode. This collection highlights common themes around patience, discipline, humility, diversification, risk management, and long-term thinking, while revealing how great investors navigate markets, behavior, and uncertainty. Main topics covered: Why investing is about preserving and growing wealth, not getting rich Why neither get in nor get out is an investing strategy The role of base rates in decision-making The dangers of performance chasing Why you should look at your portfolio less often The importance of independent thinking and avoiding envy Treating stocks as businesses, not trading sardines Diversification across assets, strategies, and economic regimes The behavioral traps that destroy wealth Liquidity, supply and demand, and how markets really function The value of patience, long-term thinking, and sticking to your plan How to build a resilient portfolio that survives different market environments Why simplicity often beats complexity The role of humility, self-awareness, and keeping emotions out of investing Timestamps: 00:00 Investing is about preserving and growing wealth 00:45 Why neither get in nor get out is a strategy 01:16 How we arrived at the one-lesson question 02:00 Finding a portfolio you can live with 03:00 Avoiding envy and chasing 10-baggers 04:00 Why watching markets too closely hurts results 05:00 The Matt Levine rule of unbelievable returns 06:00 The power of base rates 08:00 Look at your portfolio as little as possible 10:00 Treat your holdings like real businesses 12:00 Be invested early and think independently 14:00 Be kind to yourself and keep taking action 15:58 Do not chase performance 17:00 Treat every position like you put it on today 18:31 Your portfolio is secondary to your life 19:44 Buy when others are fearful 20:00 Be Rip Van Winkle, not Nostradamus 22:00 Navigate the noise and avoid the siren song 23:38 The value of simplicity and studying history 24:59 Patience and tuning out the noise 26:00 True diversification and preparing for unknown regimes 27:50 Stick to a strategy that fits your personality 29:00 Diversify and be humble about what you know 30:00 Most results come from the market, not manager skill 32:38 Keep investing simple 34:00 Focus on what is knowable 35:00 Believe in long-term economic and market resilience 37:00 Get out of your own way 38:22 Build a philosophy you can stick to 39:00 Misjudging probabilities and confidence 40:46 Book your gains and contain your losses 41:00 Diversification is protection against bad luck 42:00 Supply, demand, and liquidity always matter 45:00 Markets as a political utility 46:00 Find something real if you want true alpha 47:00 Write down your decisions 48:32 Why 100 percent indexing is unrealistic for most 50:00 Alpha through portfolio structure, not just stock picking 52:00 Dividends and long-run investing 53:56 Valuation, time horizons, and patience 55:00 Embracing uncertainty and avoiding pigeonholing 56:33 Rules-based processes 57:35 Buy good businesses, not just cheap ones 59:00 Think long term and save early 01:01:00 Focus on the basics first 01:02:00 Avoid catastrophic losses 01:03:22 Evidence-based investing and avoiding resulting 01:04:09 Know what you own and keep fees low 01:05:00 Simple strategies often work best 01:06:00 Compounding and emotional control 01:07:00 Treat savings as savings, not lottery tickets 01:07:50 Balance enjoying today with protecting tomorrow 01:08:00 Stay invested and think long term 01:08:41 Be humble, patient, and systematic 01:09:00 Do your own work and build conviction

In this episode of Excess Returns, Matt sits down with Ben Hunt to break down his new Epsilon Theory essay, World War AI. They explore how the US government, markets, and Big Tech are rapidly shifting the AI narrative from productivity and progress toward a national security arms race with massive implications for energy, capital, jobs, inflation, and the broader economy. Ben explains why AI buildout is consuming enormous resources, how this echoes World War II scale mobilization, why consumers are already feeling the strain, and what policies could still steer the country toward a healthier economic path. Topics covered: • Why the AI narrative flipped from optimism to national security • How AI CapEx creates shortages of energy, capital, and investment elsewhere • The parallels between AI buildout and World War II economic mobilization • Why the promise of AI-driven productivity and leisure was never realistic • The coming squeeze on consumers through higher prices and reduced availability • Why energy bottlenecks and electricity scarcity may lead to rationing • The risk of stagflation and a shrinking job base as AI replaces human labor • The political paths this could take, from authoritarianism to backlash • Ben’s three-policy plan: reshoring, energy expansion, and electricity caps • How investors should think about the boom-bust risk of hyperscale growth • Why awareness and public conversation are essential before the window closes Timestamps: 00:00 AI narrative shift and the failure of the carrot 01:20 Measuring narratives through Perscient Pro 05:30 Why Ben wrote World War AI 07:30 The carrot vs. the stick in AI storytelling 11:00 Utility bills, consumer squeeze, and rising economic pressures 12:30 World War II-level spending and debt dynamics 15:30 Crowding out the consumer economy 17:00 Interest rates, borrowing, and capital shortages 20:00 Energy usage, electricity scarcity, and cost-push inflation 24:00 Rationing risk and historical parallels 26:00 Jobs, productivity, and AI’s impact on labor 31:00 The lack of new job creation in an AI-driven economy 33:00 Why new-tech job optimism does not apply here 38:00 Market skepticism and narrative extremes 41:00 Political risk, backlash, and potential future paths 42:20 The three policies: reshoring, energy buildout, electricity caps 49:30 Investment implications and the boom-bust cycle 55:00 How AI growth must be subordinated to broader economic goals 57:00 Why connecting consumer pain to AI buildout is essential 59:30 Early signs of state-level limits on data centers 01:02:00 Where to follow Ben Hunt and the continuing story

In this episode of Excess Returns, we sit down with Louis-Vincent Gave of Gavekal Research for one of the most wide-ranging and eye-opening conversations we have ever hosted. Louis breaks down how China transformed its economy over the last seven years, why Western observers consistently misunderstand the country’s growth model, and what this means for global markets, AI competition, supply chains, currencies, energy, demographics, and the next decade of investing. If you want a clearer picture of China, global macro dynamics, and the forces shaping markets today, this is essential viewing. Topics covered in this episode: • Why Western investors misread China’s economy • China’s response to the US semiconductor embargo • How China redirected all lending toward industry • The scale and speed of China’s move up the value chain • China’s EV dominance and the BYD vs. Tesla comparison • The new global deflation and reflation forces • Why China now looks like the US did in 2009 • Energy, labor, and industrial competitiveness • China’s open-source AI approach vs. America’s closed systems • “Hunger Games” capitalism and the impact on investors • Where foreign investors consistently get China wrong • The RMB as the most mispriced major asset • How China’s demographics shape policy and markets • Why fears of a Taiwan conflict are overblown • How Louis is positioning for China’s next bull market Timestamps: 00:00 China’s economic shock and the US semiconductor embargo 02:00 What the West gets wrong about China 04:00 Competition, local governments, and industrial incentives 06:10 China’s lending shift: real estate to industry 08:00 China’s rapid climb up the value chain 10:00 BYD vs Tesla and China’s engineering surge 12:30 The global deflationary shock and US–China tensions 15:00 From defense to offense: China’s policy pivot 17:00 China’s reflation and emerging market implications 18:20 Scarcity of energy, labor, and time 21:00 China’s cost advantages vs the US 24:00 Comparing AI strategies: open vs closed systems 28:00 “Hunger Games” capitalism in China 31:30 Investing challenges and opportunities in China 34:00 China’s new high-tech niche champions 37:00 Capital-light Chinese AI vs US capital intensity 40:30 Rethinking US-China blocs and global alliances 44:00 Why Europe will be torn apart by the next phase 45:30 Will China outperform the US over the next decade? 47:00 The massively undervalued RMB 49:00 China’s barbell investment setup 50:00 China’s demographic crisis and policy response 53:00 Taiwan risk: myth vs reality 58:00 How Louis could be wrong 01:00:40 Louis’s contrarian investing belief 01:02:00 Louis’s one lesson for investors

In this episode, we sit down with Sanctuary Wealth Chief Investment Strategist Mary Ann Bartels to break down her new 2026 outlook. We cover her long-term S&P 500 forecast, why she believes we are still early in a secular bull market, how technological innovation is fueling productivity and profitability, the risks she’s watching in 2026, and the case for international stocks, gold, and diversification. Mary Ann also explains why skepticism suggests we are not yet in a true bubble, how valuations fit into today’s market, and what investors should understand about cycles, inflation, and long-term compounding. Topics Covered • Secular bull markets and why the long-term trend still points higher • Whether today’s market is following historic bubble patterns • AI, technology cycles, and the connection between innovation, productivity, and profits • Why skepticism means we are not yet near euphoria • The 2026 “reset” and how the presidential cycle could affect markets • Valuations, earnings trends, and interest-rate dynamics • Market concentration, structural changes, and the role of mega-caps • Growth vs value and why growth leadership may persist • Why international markets may be entering their own secular bull market • Inflation outlook, tariffs, and what the data now suggests • Private credit concerns and overall financial-system stability • Gold’s surge, future targets, and its role as portfolio diversification • Portfolio construction, risk, and the importance of compounding for younger investors Timestamps 00:00 Market patterns, bubbles, and early-cycle dynamics 01:00 Introduction 02:00 Long-term S&P 500 outlook 04:00 Historical bubble analogs and market psychology 06:00 Skepticism vs optimism 09:00 2026 reset and election-year dynamics 13:00 Valuations and PE expansion 17:00 Long-term valuation trends 17:40 Innovation cycles and economic growth 20:20 Productivity, AI CapEx, and profitability 21:00 Technology adoption across industries 22:20 Digitization and long-term tech layers 22:30 Market concentration and structural changes 25:00 Why corrections are more frequent 27:20 Growth vs value 31:00 International markets outlook 36:00 Correlations, deglobalization, and opportunity 38:40 Inflation short-term vs long-term 40:30 Private credit and financial stability 43:30 Gold outlook and targets 45:40 Diversifying concentrated portfolios 48:40 Crypto, private markets, and generational shifts 49:20 Key risks for 2026 51:40 What most investors get wrong 53:00 The one lesson for the average investor 54:40 Closing

In this episode of Excess Returns, we talk with Carl Kaufman, Co-President and Co-CIO of Osterweis Capital Management, about navigating today’s fixed income landscape. Carl breaks down the major segments of the bond market, explains how credit and interest rate cycles interact, discusses private credit risks, and shares how he builds durable, low-volatility bond portfolios. Drawing on more than two decades managing one of the top multi-sector income funds, Carl offers clear, practical insights for investors trying to understand yields, defaults, duration, and where returns are most attractive today. Main topics covered: • Overview of investment grade, high yield, leveraged loans, and private credit • How today’s credit quality is shifting across the bond market • Why the high yield market may be higher quality than most investors realize • How levered loans and private credit have changed system dynamics • How Carl uses the interest rate cycle and credit cycle to position the portfolio • Why he avoids style boxes and instead buys bonds like a stock picker • The flaws in fixed income indexing and why active management matters more in bonds • How he evaluates companies, business models, leverage, and free cash flow • Why distributors and equipment rental companies are strong long-term bond businesses • The risks of the AI Capex boom and echoes of past bubbles • Where defaults are rising and why private credit concerns may not be systemic • Why his portfolio is short duration and how he uses cash as optionality • How he protects against large drawdowns and manages risk across cycles • His perspective on the Fed, inflation, employment data, and rate cuts • Carl’s one investing belief most peers disagree with • The one lesson he would teach every investor Timestamps: 00:00 Intro and bond market quality shift 01:00 Carl’s background and fund philosophy 02:42 Defining investment grade, high yield, loans, and private credit 08:00 Why high yield quality has improved 10:07 The two-cycle approach: interest rates and credit 14:31 How today’s cycle differs 18:03 Why forecasting matters less than knowing where you are 18:52 Buying bonds like a stock picker 25:28 Index flaws in fixed income 26:56 Sectors Carl prefers 29:16 Thoughts on AI Capex, Nvidia, and financing trends 33:10 Sector concentration in bond portfolios 34:51 Position sizing and portfolio construction 35:43 Cracks in private credit and default data 39:45 Private credit for retail investors 40:34 Why Carl is short duration today 44:57 Using cash and liquidity as a strategic tool 45:44 Risk management and drawdowns 47:29 The Fed, inflation, employment, and policy uncertainty 53:53 Closing questions: belief peers disagree with 54:45 One lesson for the average investor

Follow Us on Substack: https://excessreturnspod.substack.com/ In this episode, we sit down with Rob Arnott for a wide-ranging discussion on bubbles, valuations, AI spending, market history, index construction, and long-term return expectations. Rob explains how to think about bubbles in real time, why today’s market echoes the late 1990s, and what investors can practically do to improve future returns. He also digs into Research Affiliates’ latest work on fundamental indexing, growth investing, and the opportunities in international and emerging markets. Topics covered: • How Rob defines a bubble and why narrative drives market pricing • Lessons from the dot-com era that apply to today’s AI-driven market • Why disruptors eventually get disrupted • Practical portfolio steps for investors concerned about concentration • Why value stocks remain historically cheap • CapEx vs R and D and what history says about future returns • The role of AI spending and why many companies struggle to monetize it • How AI may reshape industries and who the real long-term winners could be • Index construction flaws and how RA’s RAFI and RACWI approaches differ • A new way to build growth indexes using actual business growth • Why expensive companies with slow growth are the worst quadrant to own • Insights on emerging markets, international value, and forward return expectations • How Rob invests personally and what he sees as the best long-term opportunities Timestamps: 00:00 Defining bubbles and why narrative matters 02:00 Are we in a bubble today 06:20 Lessons from the dot-com boom 12:00 What investors can practically do now 14:00 Value, RAFI, and rebalancing alpha 17:00 AI CapEx and its historical parallels 20:30 Who benefits most from AI 23:00 Disruption, technology cycles, and productivity 35:00 Reinventing index construction 40:00 A new way to define and weight growth stocks 43:30 The problem with expensive slow-growth companies 46:00 Magnificent Seven through the growth lens 52:00 Rob’s outlook on emerging markets 55:00 Why the US is priced for perfection 57:00 Averaging out and trimming expensive winners 58:00 New research and future product ideas from RA 59:00 Rob’s personal portfolio approach and long-short ideas 01:00:20 Closing thoughts and outlook

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Follow us on Substack https://excessreturnspod.substack.com In this episode, we sit down with Bob Elliott for a wide-ranging conversation about the late-cycle economic backdrop, the Fed’s dilemma, AI’s real economic impact, the cracks forming beneath the surface of private credit and private markets, and the growth of hedge-fund-style strategies inside ETFs. Bob walks through what he is seeing in the labor market, inflation, tariffs, and risk assets, and then breaks down how Unlimited is building replication-based ETF strategies to capture hedge fund returns at low cost. Topics covered:• The late-cycle economy and the disconnect between markets and weakening real-world data• Why labor markets look softer than headlines suggest• How tariffs are affecting inflation, growth, and consumer spending• The Fed’s policy bind and why reasonable cases exist for both cutting and holding• The slowdown in household income growth and the idea of a “slow-cession”• AI spending, productivity claims, and why the economic benefits are not yet showing up• The self-referential nature of Big Tech AI spending and poor return on AI CapEx• Why real-economy companies may not see meaningful profit uplift from AI• The private credit and private equity concerns Bob sees building• Hidden risks and information asymmetry in private-market products• New hedge-fund-style ETF strategies built using replication technology• Equity long-short, global macro, and managed futures as standalone ETF exposures• Why fee reduction is the most durable source of hedge-fund alpha• How advisors are shifting from 60/40 toward 50/30/20 allocations with alternatives Timestamps:00:00 Macro conditions and weakening labor market02:00 Disconnect between markets and the real economy04:00 Working without government data during the shutdown06:00 Inflation trends and tariff impacts10:00 Fed policy, cuts, and late-cycle dynamics12:30 Income-driven vs debt-driven cycles15:00 Slow-cession and household spending power18:30 Fed uncertainty and prediction challenges21:00 Why the Fed paused quantitative tightening25:00 Liquidity, reserves, and bank system mechanics28:00 Equity markets, expectations, and AI mania31:00 AI spending, productivity doubts, and return on investment37:00 Business models, layoffs, and macro implications40:00 Private credit, private equity, and hidden risks45:00 How some private-market ETFs may disadvantage retail investors47:00 New Unlimited ETF strategies and how replication works52:00 Equity long-short, macro, and managed futures inside an ETF55:00 Late-cycle benefits of tactical positioning57:00 Future strategies and expanding the replication lineup59:00 Fee advantages and democratizing hedge-fund-style returns

Subscribe on Spotify ⁠https://open.spotify.com/show/5IsVVM27KWP6SUW6KN2ife⁠ Subscribe on Apple Podcasts ⁠https://podcasts.apple.com/us/podcast/the-100-year-thinkers-long-term-compounding-in-a-short-term-world/id1845466003⁠ Subscribe on YouTube ⁠https://youtube.com/@excessreturns In this episode of The 100 Year Thinkers, Chris Mayer, Robert Hagstrom, Bogumil Baranowski, and Matt Zeigler dive deep into what truly makes a great business and how long-term investors can develop the conviction to hold through volatility, dead-money periods, and inevitable mistakes. They break down the characteristics of the perfect business, the behavioral challenges of long-term investing, the pain of errors of omission, how to evaluate management, and why returns on capital and cash generation matter so much over decades.

Follow us on Substack https://excessreturnspod.substack.com Bill Bengen, the creator of the 4% rule, joins us to revisit one of the most important ideas in financial planning and retirement research. In this conversation, he explains the origins of the 4% rule, how his thinking has evolved over 30 years, and why he now believes retirees can safely withdraw closer to 4.7% — or even more — under certain conditions. We explore the data behind his findings, how to think about inflation, valuations, longevity, and sequence of returns risk, and the philosophy of living well in retirement. Topics covered: ​The origins and evolution of the 4% rule ​How Bill discovered the worst-case retirement scenario (1968) ​The role of inflation and market valuations in withdrawal rates ​Why he now recommends 65% equities instead of 55% ​How diversification increases sustainable withdrawals ​The logic behind a U-shaped equity glide path ​Sequence of returns risk and how to mitigate it ​Thoughts on the permanent portfolio and gold ​Bucket strategies and cash reserves ​Dynamic vs. fixed withdrawal methods ​How longevity and FIRE affect planning horizons ​Why retirees should spend and enjoy more ​The philosophy behind “A Richer Retirement” Timestamps:00:00 The origins of the 4% rule03:00 The 1968 retirement “buzz saw” scenario07:00 Common misconceptions about the 4% rule10:00 Inflation and valuation adjustments13:00 Diversification and higher withdrawal rates15:00 Longevity, FIRE, and extended retirements16:00 The U-shaped equity glide path18:00 Rebalancing and allocation timing19:00 The permanent portfolio and gold20:00 Sequence of returns risk explained22:00 Cash reserves and bucket strategies23:00 Dynamic withdrawal approaches24:00 Why the rule is now closer to 4.7%27:00 The changing market environment29:00 Key charts and frameworks from the book31:00 The eight essential elements of planning33:00 Withdrawal strategies and asset allocation34:00 Required minimum distributions36:00 Reflections on creating the 4% rule38:00 Bill’s philosophy on life and retirement40:00 Closing thoughts and where to find his book

Follow us on Substack https://excessreturnspod.substack.com In this episode, we kick off our book project, The Most Important Investing Lesson: What the World’s Best Investors Would Teach You, with a deep dive into the ideas of Michael Mauboussin. We explore his most enduring lessons—concepts that have reshaped how we think about investing, decision making, and life. From base rates to expectations investing, we unpack how Mauboussin’s frameworks can help investors build better models of the world and make more rational, probabilistic decisions. Main topics covered: ​Why base rates are the most underused yet powerful tool in investing and life ​How to apply expectations investing and reverse engineer stock prices ​Why multiples are not valuation and how to earn the right to use shortcuts ​Understanding the paradox of skill and why luck matters more when everyone is good ​Lessons investors can apply across fields like business, sports, and personal decision making ​How humility, reference classes, and feedback loops improve judgment ​Reflections on learning, writing, and how AI tools are changing the creative process

Rupert Mitchell of Blind Squirrel Macro joins Matt Zeigler to talk global markets, China’s resurgence, the AI CapEx boom, and where investors can still find value in a concentrated, overvalued U.S. market. Rupert shares insights from his recent trip to China, his evolving macro framework, and how he’s positioning across equities, credit, and real assets in what he believes could be the start of a long cycle shift away from U.S. dominance. Topics covered: China’s accelerating industrial and market recovery Why he sees the start of an 8–10 year bull market in China The “CapEx time bomb” under the Mag 7 U.S. vs. international equity performance and valuations The rise of fallen angels and how private credit changed high yield Why he may soon flip from short to long credit The end of the stock-bond correlation era His “Bushy” portfolio and defensive positioning Trend following, precious metals, and EM local debt Emerging opportunities in Africa and Uzbekistan The global energy complex and long-dated crude exposure Short ideas in fast casual restaurants and the “forgotten 493” How investor sentiment extremes create opportunity Timestamps: 00:00 China’s transformation and why Rupert’s bullish 05:00 The Made in China 2025 plan and global dominance 07:00 U.S. vs. international equity rotation 10:00 The Mag 7’s CapEx problem 14:00 The “forgotten 493” and passive flow dynamics 18:00 Bonds, credit spreads, and what the yield curve says 21:00 Private credit, fallen angels, and the next credit setup 25:00 The end of risk parity and correlation breakdown 27:00 Inside the Bushy portfolio and alternatives 30:00 Gold, miners, and precious metals strategy 33:00 Frontier and EM opportunities – Africa and Uzbekistan 39:00 The Acorns portfolio and global positioning 44:00 Energy stocks, refiners, and long-dated crude 49:00 The restaurant short thesis and U.S. consumer trends 53:00 Where to follow Rupert and Blind Squirrel Macro

Follow us on Substack https://excessreturnspod.substack.com In this episode, we are joined by Richard Bernstein, CIO and CEO of Richard Bernstein Advisors. We discuss why this is one of the most speculative market environments he has seen in his 40-year career, why he still believes it may also be one of the best eras for patient long-term investors, and how to think about the real opportunities hiding beneath the market's current narrow leadership. Richard breaks down his profit cycle framework, shares why investors are confusing economic stories for investment stories, and explains why non-US quality stocks and dividend strategies may be primed for a comeback.Topics covered• Speculation across asset classes and why it matters• Why fundamentals still offer big opportunities• The profit cycle vs the economic cycle• Divergence between the market leaders and the broader market• Inflation, pricing power, and corporate margins• Parallels between the AI boom and the dot-com bubble• Misallocation of capital and risks to the market• The case for non-US quality stocks• Where value investing could shine again• Dividend compounding and long-term wealth building• How RBA approaches macro-driven ETF investing• What investors are getting wrong about diversification• Deglobalization, reindustrialization, and long-term themes Timestamps00:00 Intro and speculative environment01:46 Best opportunities for patient investors03:52 Profit cycle framework explained06:00 Where we are in the profit cycle07:32 What investors are missing on inflation09:12 Lessons from the dot-com era and AI comparisons13:46 What could trigger the speculative unwind17:18 Valuations, CAPE, and return expectations20:23 AI’s impact on margins and productivity22:39 Can value outperform again25:41 International opportunities and quality stocks34:31 Market breadth and narrow leadership36:00 The Fed, inflation targeting, and policy risks40:11 RBA’s investment process and ETF selection47:13 Diversification vs speculation behavior49:26 Misallocation of capital and market risks52:00 Deglobalization and manufacturing opportunities54:13 Closing question: Stock market vs horse race57:40 The business Richard would start today58:29 Where to follow Richard Bernstein

In this episode, we sit down with Victor Haghani, founder of Elm Wealth and one of the original partners at LTCM, to explore his journey from running complex hedge fund strategies to adopting a simplified, evidence-based investment approach. We discuss how investors should think about expected returns, portfolio construction, dynamic asset allocation, valuation signals, buybacks, managed futures, and the dangers of extrapolating past returns into the future. Topics covered: • Victor’s journey from LTCM to simple, systematic investing • Why position sizing is as important as what you own • How to think about expected returns and valuation frameworks like CAPE and P-CAPE • The role of risk, risk premia, and personal utility in portfolio decisions • Why 60/40 and the permanent portfolio ignore expected returns • Buybacks, market elasticity, and capital flows • Indexing misconceptions and asset allocation discipline • The ETF structure and tax efficiency in asset allocation strategies • Concentration in large tech stocks and long-term equity returns • The importance of dynamic asset allocation vs static allocation • Key lessons for individual investors and avoiding “too good to be true” opportunities Timestamps: 00:00 Intro and Victor’s investing journey 03:00 Lessons from LTCM and shift to simplicity 09:00 Position sizing vs asset selection 13:00 Risk as a cost and thinking in expected returns 18:00 CAPE and the P-CAPE framework 26:00 How to use expected return estimates 34:00 The impact of buybacks on equity markets 39:00 Indexing vs poor asset allocation habits 43:00 Portfolio construction and global diversification 46:00 Why the permanent portfolio falls short 47:00 Managed futures and factors beyond stocks and bonds 50:00 Inside Elm’s dynamic allocation ETF 55:00 Market concentration and equity issuance risks 01:01:00 The case for dynamic allocation 01:02:50 Victor’s one investing lesson

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Follow us on Substack https://excessreturnspod.substack.com In this episode, Cem Karsan returns to Excess Returns to break down the market through the lens of liquidity, reflexivity, and options-driven market structure. We cover why he believes we are in a bubble but still early in its trajectory, the mechanics behind today’s volatility dynamics, the role of AI spending in sustaining the cycle, and why traditional 60/40 portfolios may face major challenges in the years ahead. Cem also explains how investors should think about tail risk, true diversification, and building portfolios for a world where liquidity flows dictate outcomes. Main topics covered ​Why we are in a bubble but still likely to go higher first ​Fundamentals vs liquidity as drivers of returns ​Options as the “3-D” market and how they now drive equities ​Reflexivity and how option flows influence asset prices ​Retail adoption of options and misperceptions in the space ​AI investment boom, tail risks, and market liquidity feedback loops ​Historical valuation regimes and recency bias in markets ​Portfolio construction beyond the 60/40 model ​Tail hedging and the role of long volatility ​Importance of true diversification and managing interest-rate risk Timestamps00:00 Bubble dynamics and why being bullish can coexist with danger 03:00 Fundamentals vs liquidity as market drivers 08:00 Rise of options and how they now influence markets 14:00 Reflexivity explained in simple terms 19:00 Mistakes investors make with options and structured products 24:00 AI spending, liquidity expansion, and similarities to 1999 31:00 Tail risks, China/Taiwan, private markets, inflation signals 38:00 Why 60/40 has worked recently – and why it may fail ahead 52:00 Inequality, cycles, crisis as a clearing mechanism 54:00 Building a portfolio for the next decade: diversification, tail hedging, box spreads, and non-correlated strategies 1:04:00 Closing thoughts and takeaway for investors

Kai Wu of Sparkline Capital joins Excess Returns to discuss his paper Surviving the AI CapEx Boom. In this episode, Kai breaks down the unprecedented level of investment in AI infrastructure, why today’s AI buildout mirrors past technology booms, and what it all means for investors. He explores the parallels between AI and historic bubbles, the implications of massive corporate CapEx spending, and where value might ultimately be captured as the cycle plays out. Topics covered: Why big tech’s CapEx spending has exploded and how much they’re investing The trillions in revenue needed to justify AI infrastructure spending Historical parallels with the railroad and dot-com buildouts Why companies that invest heavily often underperform How the Mag 7 are shifting from asset-light to asset-heavy businesses The risks of “circular deals” and financial entanglement in AI Why the AI race resembles a prisoner’s dilemma Which layers of the AI stack may capture long-term value How early adopters and infrastructure players differ in capital intensity and returns Where investors might find opportunity beyond the obvious AI names Timestamps: 00:00 Introduction and overview of AI CapEx boom 03:00 Why Kai researched AI investment cycles 05:00 Scale of big tech’s CapEx spending 07:00 Revenue needed to justify AI infrastructure 08:30 Market concentration and valuation risks 11:30 Historical parallels: railroads, internet, and AI 14:30 The capital cycle and overinvestment dynamics 17:30 “This time is different?” and lessons from bubbles 18:00 Factor investing and high-asset-growth underperformance 21:00 Sector and firm-level CapEx trends 22:30 Winner-take-all dynamics and competitive pressure 26:00 How the Mag 7’s business model is changing 30:00 Comparing tech CapEx to utilities 34:00 The circular deal problem and financial risk 37:30 The AI arms race as a prisoner’s dilemma 40:30 Will AI be winner-take-all? 43:30 Lessons from the railroad and dot-com eras 47:00 Where the value is captured in infrastructure vs adoption 48:00 Identifying early AI adopters and hidden beneficiaries 50:30 Sector and geographic AI exposure 54:00 Capital intensity and valuation differences between infrastructure and adopters