Excess Returns

First Principles with Andy Constan launches with a deep dive into market bubbles, AI, semiconductor stocks, and the financial conditions that can turn powerful technological change into a dangerous investment regime. Andy explains how bubbles form, why they are almost impossible to time, how today’s AI boom compares to past episodes like 1987, the dot-com bubble, housing, and the bond bubble, and what investors should watch as expectations, financing, and FOMO build.

Andy Constan on X
https://x.com/dampedspring

Damped Spring Advisors
https://dampedspring.com/

Topics covered:

• Why bubbles are easy to identify in hindsight but nearly impossible to define in real time

• The difference between an expensive market and a true bubble regime

• How new technologies, easy money, regulation, and exogenous shocks can create bubble conditions

• Why AI may rhyme with the internet boom without being an exact repeat

• The role of ChatGPT, Microsoft’s OpenAI investment, and semiconductor earnings expectations

• What the 1987 crash, Japan, housing, bonds, and dot-com bubble can teach investors today

• Why human nature, FOMO, and “keeping up with the Joneses” make bubbles so powerful

• How the late-1990s Fed response to Long-Term Capital Management helped fuel the final phase of the tech bubble

• Why tech’s current size in the economy and market may limit how far the AI boom can grow

• How AI capex, hyperscaler spending, buybacks, debt issuance, and IPO supply could determine what happens next

Timestamps:
00:00 Intro and the challenge of identifying bubbles
04:32 Expensive markets vs true bubble regimes
09:57 The five bubble episodes Andy compares to today
14:35 Root conditions, escalation events, and the peaking phase
19:20 Why the 1987 crash may also have been a bubble
24:25 The late-1990s setup and the Netscape Navigator moment
28:00 Crisis analogs, easy financial conditions, and today’s AI parallels
32:20 Long-Term Capital Management and rocket fuel for the tech bubble
36:11 Why tech’s market share matters more today than in the 1990s
43:18 Policy mistakes, subsidies, and how governments feed bubbles
47:42 Semiconductor earnings expectations and valuation risk
53:45 The AI capex chain and where the money has to come from
58:42 IPOs, corporate debt, and the financing risk behind the AI boom
01:02:27 What investors should do differently in a bubble regime

Edward Chancellor joins Kai Wu on the latest episode of the Intangible Economy to discuss what financial history and capital cycle theory can teach investors about today’s AI boom. They explore why transformative technologies can still produce terrible investor returns, how overinvestment develops, where anti-bubbles may be forming, and what past episodes like the railway mania, the dot-com bubble, China’s investment boom and the post-2008 interest rate regime suggest about the risks and opportunities today.

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Topics covered:

• How capital cycle theory applies to the AI data center boom

• Why railway mania, autos, aircraft and the dot-com bubble offer lessons for today

• Why markets often fund major technology transitions but fail to identify the winners

• The prisoner’s dilemma driving hyperscaler AI spending

• Whether AI demand can justify the supply being built

• How GPU depreciation and AI capital spending may affect reported earnings

• Why hallucinations and reliability may limit the total addressable market for large language models

• The case for looking at AI anti-bubbles instead of shorting the bubble directly

• Why China shows that strong GDP growth does not guarantee strong shareholder returns

• How intangible capital, SaaS valuations and human capital fit into capital cycle analysis

• Whether bubbles can be good for society while still being bad for investors

• Why the long-term interest rate cycle may have changed

• The role of gold in a world of expensive stocks, rising debt and vulnerable bonds

Timestamps:

00:00 Edward Chancellor on capital cycles, bubbles and AI
04:42 Why the railway mania became a classic overinvestment cycle
09:00 Why markets fund technology booms but often miss the winners
13:19 The prisoner’s dilemma behind AI spending
17:30 Will AI demand justify the supply being built
20:00 How capital spending can inflate profits before the bust
25:08 The AI Hindenburg moment and the limits of large language models
30:55 Why AI hype may exceed the proven technology
35:55 Why the anti-bubble may matter more than shorting AI
40:00 The energy transition bubble and the opportunity in overlooked assets
45:08 China’s lesson on GDP growth and shareholder returns
49:27 Big Booze, GLP-1s and the Lindy effect
54:23 Can intangible capital have its own capital cycle
59:54 SaaS valuations and the index creation warning signal
01:04:10 Why bubbles can help society but hurt investors
01:09:09 Why long-term rates may be in a new multi-decade cycle
01:14:07 Why Edward Chancellor still sees a role for gold

Brent Kochuba of SpotGamma joins Jack Forehand for the May 2026 OPEX Effect to break down what options positioning is saying after a massive AI and semiconductor-led market rally. They discuss SPX call volume, zero DTE options, dealer gamma, VIX expiration, NVIDIA earnings, oil risk, AI CapEx, and why options flows may help explain both the market’s recent melt-up and the potential for a volatility shift after OPEX.

Guest Links

Brent Kochuba on X
https://x.com/spotgamma

SpotGamma
https://spotgamma.com/

Topics Covered

• Why the market has ignored oil shocks and geopolitical risk while AI earnings dominate investor attention

• How AI CapEx, semiconductors and mega-cap tech have driven a powerful melt-up in stocks

• Why options volume and zero DTE trading are increasingly important for all investors

• How dealer hedging, delta and gamma can affect stock market moves

• Why options expiration can create short-term turning points in markets and volatility

• What the May OPEX setup says about call-heavy positioning in the S&P 500

• Why single-stock options activity in NVIDIA, Tesla, Apple, Amazon and AI-related names matters

• How record SPX call volume is being driven by short-dated options flows

• Why Brent is watching VIX expiration, NVIDIA earnings and May 19 to May 20 for volatility expansion

• What oil, VIX, correlation and dispersion are signaling about market risk

Timestamps

00:00 Intro: SPX call volume, call-heavy positioning and transient options flows
00:57 Are we in melt-up mode?
05:29 AI, UFOs and how fast market narratives are changing
09:00 Why options flows matter more for everyday investors
13:39 Could SpaceX become the next huge options market?
16:00 How dealer hedging, delta and gamma move through the market
20:44 Why OPEX can become a turning point for stocks and volatility
23:22 Why May OPEX is so call heavy
28:07 The market rally into May expiration
33:00 AI rebranding, meme behavior and downside headline risk
36:07 Reviewing last month’s oil and volatility setup
40:17 How the war flipped market leadership back to tech
44:13 Dealer gamma support in the S&P 500
49:19 Single-stock gamma in NVIDIA, Tesla, Apple and Amazon
51:06 Record SPX call volume and the role of zero DTE
54:55 Semiconductor, AI and memory call volume
57:50 From bearish positioning to peak-bull dispersion
59:22 Oil, the S&P 500 and changing correlations
01:03:06 COR1M, dispersion risk and when Brent considers hedging
01:04:57 Brent’s key takeaways for May OPEX and volatility expansion

Elena Khoziaeva, Co-Chief Investment Officer and Portfolio Manager at Bridgeway Capital Management, joins Excess Returns to discuss factor investing, small caps, value investing, market concentration, intangibles, passive investing, market neutral strategies, and the role of AI in quantitative investment research.

We cover how Bridgeway combines disciplined quantitative models with human judgment, why the S&P 500 may be less diversified than investors think, and how investors can think about diversification when mega-cap growth stocks dominate market returns.

Bridgeway Capital Management
https://bridgeway.com/

I Know What You Did Last Summer
https://bridgeway.com/perspectives/i-know-what-you-did-last-summer/

How Many Stocks Are Effectively in the S&P 500?
https://bridgeway.com/perspectives/how-many-stocks-are-effectively-in-the-sp500/

Topics Covered

• Why quantitative investing still needs human judgment and skepticism

• The difference between smart beta and true multi-factor portfolio construction

• How Bridgeway combines value, quality, sentiment and risk controls

• Why the size premium may depend on how small-cap stocks are defined

• Why recently fallen large caps and IPOs can distort small-cap research

• How the small-cap universe has changed as companies stay private longer

• How intangible assets affect traditional value and quality metrics

• Why value can work in bursts and why timing factor rotations is so difficult

• How concentrated the S&P 500 has become using the HHI framework

• Why passive investing may create opportunities for active small-cap managers

• How market neutral strategies can help investors manage equity market volatility

• How AI can help with data, text analysis and trading without replacing investment judgment

Timestamps

00:00 Why fewer than 50 stocks are driving S&P 500 returns
01:04 Bridgeway’s evidence-based investing approach
02:59 Why quantitative models need human judgment
07:52 Smart beta vs multi-factor investing
11:32 How Bridgeway builds multi-factor portfolios
16:08 Rethinking the size premium
20:31 Has the small-cap universe gotten worse?
23:49 How intangibles change value investing
28:05 Does value still work?
30:09 Why value returns can be episodic
33:11 Why factor investors need patience
35:22 How concentrated is the S&P 500?
40:29 Factor strategies as portfolio diversifiers
41:41 Passive investing and market structure
44:27 Managing volatility with market neutral strategies
49:40 How systematic managers update their models
55:02 How Bridgeway is using AI
01:00:03 Elena’s biggest lesson for investors

This episode of our new showThe 100 Year Thinkers brings together Chris Mayer and Ian Cassel for a deep discussion on long-term stock picking, microcap investing, business quality, AI disruption, management teams, and the behavioral skills that separate great investors from great analysts.

They explore why the edge in investing may increasingly come from judgment, presence, relationships, patience, and the ability to hold the right businesses through uncertainty.

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Topics Covered

• Why being present with management teams may still be an investor edge in the age of AI

• How microcap investing differs from small-cap, mid-cap and large-cap investing

• Why talking to management can build conviction but also create bias

• How Chris Mayer thinks about vertical market software, mission-critical systems and AI disruption

• Why AI may become table stakes rather than a durable competitive advantage

• How small companies can use AI to improve workflows, sales, inventory and productivity

• Why many microcaps have short shelf lives and rarely become true long-term compounders

• The role of intelligent fanatics, owner-operators and repeat winners in great investments

• Why management transitions can create powerful microcap opportunities

• The difference between being a great analyst and being a great investor

• Why execution, position sizing, selling losers and holding winners matter more than hit rate

• How Matt and Bogumil apply the lessons to AI, business quality and the limits of small business scalability

Timestamps

00:49 Introducing Chris Mayer, Ian Cassel and 100 Year Thinkers

04:59 Ian Cassel’s first management meeting and XM Satellite Radio

09:00 Why management meetings deepen understanding but can also mislead

14:32 Chris Mayer on the real edge in long-term investing

18:40 Mission-critical software, systems of record and AI disruption

22:45 How microcap companies are using AI in real businesses

27:02 AI as table stakes and when disruption creates opportunity

31:29 Why most microcaps have short shelf lives35:51 Finding Tom Brady before the market knows he is Tom Brady

40:53 Why owner-operators and intelligent fanatics matter

45:03 Second-in-command leaders, repeat winners and chips on shoulders

49:27 Analyst vs investor and the missing skills of stock picking

54:00 Using data to identify investor strengths, weaknesses and decision errors

58:14 Position sizing and letting small positions earn the right to grow

01:03:00 Peter Lynch, stocks as businesses and learning to think like an owner

01:07:00 AI, human judgment and the limits of automation

01:11:00 Why not every small business can become the next Facebook

01:15:00 Where to follow Bogumil and the 100 Year Thinkers series

This week’s Excess Returns Weekly Wrap examines what Chris Davis and Rich Bernstein can teach investors about letting winners run, inflation risk, market concentration, dividends, AI, and the difference between economic stories and investment returns. Jack Forehand and Matt Zeigler break down clips on portfolio concentration, the 1960s vs. the 1970s, investor complacency, the Fed’s inflation target, durable businesses, and where the next market opportunity may be hiding.

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Topics Covered

• Why letting winners run can be so powerful, but so hard for professional investors

• Chris Davis on how his mother outperformed by never selling great companies

• The tradeoff between concentration, diversification and real-world portfolio risk

• Why Rich Bernstein thinks today may look more like the 1960s than the 1970s

• How oil prices affect consumer behavior when measured against wages

• Chris Davis on why perceived risk can be very different from actual risk

• What cars, insurance and investor behavior reveal about market complacency

• Why the Fed’s 2% inflation target may not reflect the world investors are living in

• The relationship between valuation, durability and software stocks

• Why higher inflation could increase demand for dividends and near-term cash flow

• Chris Davis on why exceptional people and management teams matter in investing

• Why AI may be a great economic story but not necessarily a great investment story

Timestamps

00:00 Letting winners run, 1960s inflation and investor risk perception
02:18 Chris Davis on how his mother outperformed by never selling
08:32 Reinvestment risk and the limits of active management
12:45 Why oil shocks may matter less when gasoline is low relative to wages
20:25 Chris Davis on why feeling safe can make investors take more risk
29:20 Rich Bernstein on whether the Fed’s 2% inflation target is outdated
34:08 Chris Davis on durability, valuation and software stocks
39:39 Why cash flow gives durable companies room to adapt
43:16 Rich Bernstein on dividends, inflation and the need for cash today
51:55 Chris Davis on why people matter more than investors think
56:07 The risk and value of investing with exceptional leaders
1:01:30 Rich Bernstein on AI as an economic story vs. an investment story
1:05:13 Why AI productivity may not translate into obvious stock market winners

This episode of Last Call breaks down one of the most confusing market environments in recent memory: why stocks continue to rise despite war, oil shocks, and growing macro risks. Through conversations with Jim Paulsen, Ben Hunt, Kevin Muir, and Brent Kochuba, we explore the tension between strong earnings, hidden risks in private credit and global growth, and the powerful role of flows and positioning in driving markets higher.

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Topics Covered

• Why markets are ignoring war, oil shocks, and geopolitical risk

• The “supernova” risk in private credit and why it hasn’t hit markets yet

• How supply-driven inflation differs from 1970s-style demand inflation

• Why pessimistic sentiment may actually be supporting markets

• The role of earnings growth and valuation resets in fueling the rally

• Bull vs bear case for markets based on macro, earnings, and positioning

• Why free cash flow trends may be more concerning than earnings

• How options flows and dealer positioning are suppressing volatility

• The AI capex boom and its impact on market leadership and breadth

• The growing divide between Mag 7 earnings and the rest of the market

Timestamps

00:00 Intro and market overview
01:37 Why markets are not falling despite negative news
03:00 Buy-the-dip behavior and earnings resilience
06:11 Ben Hunt on “supernova” risks in private credit
08:00 Hidden credit crunch in middle market companies
10:24 Why private credit matters for economic growth
14:10 Oil supply shocks and global growth risks
17:00 Why markets can ignore risks before they appear
18:48 Jim Paulsen on market resilience and sentiment
20:00 Why pessimism may reduce downside risk
22:24 Inflation vs labor force growth framework
24:00 Why current inflation is supply-driven, not demand-driven
26:00 Potential shift from inflation focus to growth focus
29:11 Kevin Muir on bull vs bear market setup
31:00 War impact on rates, oil, and positioning
33:00 Fed reaction and shifting rate expectations
35:00 Why earnings remain the dominant market driver
37:00 Why geopolitics often doesn’t move markets
40:00 Bear case: weak free cash flow and employment risk
44:26 Brent Kochuba on options flows and positioning
47:00 Why markets ignore rising rates and oil
49:00 Call buying, dispersion, and tech leadership
51:00 Energy as both hedge and AI-driven opportunity
54:00 Correlation, volatility, and market structure
56:00 Dealer positioning and suppressed volatility
58:00 Earnings strength and narrow market leadership
01:01:00 Free cash flow vs earnings debate
01:01:55 AI capex and long-term market implications

This episode explores one of the most important debates in markets today: whether investors are underestimating the risk of higher inflation and overconcentrating in a narrow group of growth stocks.

Richard Bernstein of Janus Henderson Investors joins Excess Returns to explain why today’s environment may look more like the inflationary 1960s than the 1970s, what that means for portfolios, and why many investors may be disappointed with passive index returns over the next decade.

Richard walks through the implications of rising import prices, global conflict, and deglobalization, and how these forces could drive a structural shift toward higher inflation and shorter-duration investing. He also explains why market concentration, AI enthusiasm, and capital flows may be setting up a broadening opportunity across overlooked areas of the market.

Follow Rich on Twitter:
https://twitter.com/RBAdvisors

Company Website:
https://www.rbadvisors.com

• Why investors in S&P 500 index funds may face disappointing long-term returns

• The shift from exporting disinflation to importing inflation through global trade

• How war and geopolitical conflict are influencing inflation expectations and markets

• Why today’s environment resembles the 1960s “guns and butter” period more than the 1970s

• The case for structurally higher inflation and a potential shift in Fed targets

• Why shorter-duration assets, dividends, and cash flow matter more in inflationary regimes

• The risks of overconcentration in AI and mega-cap growth stocks

• How capital flows and valuation distortions create opportunities outside the Mag 7

• The case for international equities and why investors are significantly underweight

• Where Bernstein sees the most compelling long-term opportunities across sectors and regions

00:00 Intro and why index investors could be disappointed
00:01:13 War, inflation, and the impact of rising gasoline prices
00:02:40 Importing inflation and the role of global trade dynamics
00:03:33 1970s oil shock vs 1960s guns and butter comparison
00:05:00 Why today’s inflation environment may be less severe than the 1970s
00:06:30 Defense spending, tax cuts, and inflation expectations
00:08:54 Why Bernstein is taking the “over” on inflation and deficits
00:10:00 The case for a higher long-term inflation target
00:11:00 Why the Fed may resist changing its 2% inflation target
00:12:00 Deglobalization and the rise of global conflict
00:14:00 Global inflation dynamics and divergence across countries
00:15:21 Why cash and short-duration assets may outperform
00:17:00 Asset-liability mismatches and the endowment model stress
00:18:23 Market concentration and parallels to the dot-com bubble
00:20:00 AI as an economic story vs an investment story
00:21:00 Capital flows, valuation excess, and future return expectations
00:22:39 Why market broadening opportunities may emerge
00:24:19 Passive flows, ETFs, and market distortions
00:25:40 Where Bernstein sees sector opportunities today
00:27:34 The case for dividends in an inflationary environment
00:31:00 Why near-term cash flow matters more than long-term growth
00:33:07 Corporate behavior, capital allocation, and rising hurdle rates
00:36:02 Profit cycle strength and why the market should broaden
00:41:36 Evaluating IPOs and speculative investments
00:47:09 The risk of a lost decade for index investors
00:50:21 Gold, commodities, and portfolio diversification
00:53:48 Most attractive overlooked opportunities today
00:58:06 Biggest long-term risks and what keeps Bernstein up at night

This episode with Chris Davis of Davis Advisors explores how investors should think about risk, valuation, and opportunity in a market defined by high valuations, technological disruption, and major macro shifts. Davis lays out a framework for navigating uncertainty, explains why durability matters more than ever, and shares hard-earned lessons on selling great companies too early.

Davis Advisors
https://www.davisadvisors.com

Topics Covered

• Why high valuations signal complacency even in an uncertain macro environment

• The three major forces reshaping markets: higher cost of capital, deglobalization, and AI

• How to identify durable and resilient businesses in a fragile world

• Why growth and value are not opposites and how expectations drive opportunity

• Lessons from past bubbles and why today may resemble 1999 in market structure

• The hidden risks in passive investing and index concentration

• Chris Davis’ five-part framework for investing in AI (winners, enablers, users, protected, disrupted)

• Why most investors lose money by overpaying for growth and underestimating competition

• The importance of management quality and “great people” in long-term investing success

• Why the biggest investing mistakes are often the great companies you sell too early

Timestamps

00:00 Intro and key investing paradox on risk perception
02:45 Why today’s market reflects complacency despite uncertainty
05:20 Valuations, concentration, and optimism in current markets
08:52 Lessons from 1999 and how value investing can outperform in downturns
12:00 Durability, resilience, and why balance sheets matter more now
15:21 Kodak, disruption, and risks of passive investing
18:00 Perception vs reality of risk and behavioral mistakes
21:51 Market structure, moral hazard, and the “buy the dip” mindset
26:34 How investors should think about AI as a long-term technology shift
29:30 Why picking early AI winners is dangerous
33:00 The role of enablers like semiconductors, energy, and infrastructure
36:00 AI users and which companies benefit most from adoption
38:00 Businesses protected from disruption vs “walking dead” companies
42:00 The biggest investing mistake: selling great companies too early
46:00 Portfolio concentration and lessons from real-world experience
50:00 Berkshire Hathaway, long-term culture, and durable business models
54:00 Learning from mistakes: Costco case study
57:00 The importance of management and why people matter more than investors think

This episode explores how massive structural shifts—AI, deglobalization, and the rise of passive investing—are reshaping markets and what that means for investors.

Informed Momentum Company CIO Travis Prentice breaks down why 52 week highs don't mean what you think, the extreme dispersion beneath the surface of the market, why traditional definitions of risk may be flawed, and how investors should think about momentum, quality, and diversification in a rapidly changing environment.

Papers and Resources Discussed:

Risks Hiding in Plain Sight
https://www.informedmomentum.com/risks-hiding-in-plain-sight-how-the-dominance-of-passive-investing-is-reshaping-market-risk/

Is Quality Broken?
https://www.informedmomentum.com/is-quality-broken-ai-driven-disruption-is-testing-standard-definitions-of-quality/

Buy High, Sell Higher
https://www.informedmomentum.com/buy-high-sell-higher/

Topics Covered:

• The hidden divergence beneath index performance and why the market isn’t as stable as it looks
• Why value and momentum are working together—and what that signals about market broadening
• How AI and deglobalization are driving a major regime shift in markets
• Why momentum investors ignore narratives and focus purely on what’s working
• The structural risks created by the rise of passive investing and index concentration
• How tracking error replaced real risk—and why that may be dangerous
• Why quality stocks (especially software) are under pressure in the AI era
• The key insight behind 52-week highs as a powerful momentum signal
• Why buying stocks near highs works despite investor intuition
• How momentum strategies adapt to changing leadership and market regimes
• The importance of combining factors like value, momentum, and quality for long-term success

Timestamps:

00:00 Intro and major market shifts
01:32 Market divergence beneath the surface
03:00 Factor performance and broadening market trends
05:13 Why market concentration hurts factor investing
06:48 AI and deglobalization as structural drivers
08:14 Does this environment change how you invest?
11:02 Has the market sped up? Momentum implications
14:00 Passive investing and hidden structural risks
17:00 Tracking error vs real risk in portfolios
19:00 AI as a potential change agent for markets
21:09 How passive flows impact factor investing
24:00 What defines “quality” in factor investing
27:04 Why software and quality are under pressure
29:13 AI disruption and changing expectations
32:20 How to evaluate factor underperformance
34:35 Comparing today’s market to the 1990s
37:38 Buy high, sell higher: 52-week highs
41:00 52-week highs vs traditional momentum
43:20 Combining signals for better outcomes
46:00 Why 52-week highs improve downside protection
48:17 What momentum is picking up today
50:21 Misconceptions about momentum and growth
52:12 Timing and implementation of momentum
54:18 Momentum reversals and market behavior
57:17 Future research and improving momentum signals