Excess Returns

In this episode of Excess Returns, we sit down with Brent Donnelly, veteran trader, author, and president of Spectra Markets, to dive deep into macro markets, trading philosophy, the role of the Fed, and how AI is changing the way traders operate. Brent shares insights from his decades in FX and macro trading, his flexible approach to positioning, and the lessons he’s learned about risk management, narratives, and humility in markets.

Topics Covered:

• Why the Fed is becoming more political and what that means for markets

• The “re-acceleration that wasn’t” and lessons from quickly abandoning trades

• How to structure trades like gold calls and TLT puts for asymmetric payoff

• FX as the “exhaust valve” for tariffs and global capital flows

• Canada’s housing bubble and CAD vulnerabilities

• Inflation targeting, bond vigilantes, and the Fed’s credibility

• Avoiding the trap of perma-bearishness and using stop-losses as forced humility

• The importance of imagination in regime changes and Fed forecast errors

• How Brent is using LLMs and AI to trade headlines, structure trades, and analyze patterns

• Trading bubble names with options and risk-aware structures

• Lessons on flexibility, humility, and embracing uncertainty in markets

Timestamps:
00:00 – Fed independence and political pressure
02:00 – The failed “re-acceleration” thesis
06:00 – Structuring gold calls and TLT puts
14:00 – FX as the exhaust valve for tariffs
20:50 – Canada’s housing market and CAD risks
26:30 – The Fed as a political institution
32:40 – Inflation targeting and 3% as the new 2%
35:20 – Avoiding perma-bear bias and using stop-losses
42:00 – The Fed dinner story and the humility of wrong forecasts
46:30 – Using LLMs and AI in trading
53:00 – Shorting bubble names with call spreads
56:00 – Cheat sheets and pattern recognition with AI
59:30 – Lessons on flexibility and humility in trading
1:02:15 – Closing thoughts and where to follow Brent

In this episode of Excess Returns, we welcome back Cullen Roche of Discipline Funds for an in-depth conversation on the economy, markets, demographics, AI, and investing frameworks. Cullen cuts through the noise to explain the real forces shaping inflation, interest rates, the role of the Federal Reserve, and why he believes the U.S. faces more disinflationary pressures than inflationary risks. We also dive into his “defined duration” investing framework and preview his upcoming work on portfolio strategies.

Topics Covered

• Why fears of a looming debt crisis may be misplaced

• Inflation outlook, tariffs, and the Fed’s “soft landing” challenge

• The importance of Fed independence and risks of politicization

• Immigration, demographics, and long-term disinflationary trends

• How AI is reshaping productivity, inequality, and the job market

• Defined Duration Investing and asset-liability matching

• Lessons from all-weather strategies and the Permanent Portfolio

• Cullen’s “Forward Cap Portfolio” and future of global markets

Timestamps
00:00 – Cullen on debt crisis fears
02:32 – State of the U.S. economy post-COVID
05:18 – Inflation, tariffs, and shelter costs
10:25 – Soft landing vs. rolling recessions
14:07 – The Fed’s role and impossible job
19:25 – National debt and Ray Dalio’s crisis warning
27:52 – AI boom and disinflationary forces
31:01 – Immigration, demographics, and inflation
37:23 – Aging population and wealth inequality
43:00 – How AI impacts productivity and jobs
52:00 – Defined Duration Investing explained
1:01:34 – Portfolio strategies: Permanent Portfolio & risk parity
1:03:54 – Cullen’s “Forward Cap Portfolio”
1:06:31 – Closing thoughts and future projects

In this episode of Excess Returns, we sit down with EricPachman of Bancreek Capital to explore the intersection of data, economics, andinvesting. Eric shares his unique journey from the corporate world tohealthcare transparency and ultimately to building a data-driven investmentfirm rooted in information theory. We dive deep into employment trends,healthcare’s role in the economy, immigration, inflation, and how hissystematic process identifies companies with the endurance to thrive.

### Topics Covered

* Eric’s unconventional career path: from Morgan Stanley andExxonMobil to founding 46Brooklyn and joining Band Creek

* How personal experiences led him to tackle healthcaretransparency and drug pricing reform

* The role of **information theory** in investing and thefoundation of Band Creek’s systematic process

* Building powerful data visualizations to understand labormarkets, inflation, and structural economic changes

* Why healthcare dominates recent U.S. job growth and therisks of overreliance on one sector

* The impact of immigration on labor force growth andstructural inflation

* Key drivers of inflation and how to interpret CPI and PCEdata

* How Band Creek applies systematic endurance and the KellyCriterion to equity selection

* Sector exposures and lessons learned from applyingdata-driven models internationally

* Eric’s views on cognitive biases, why most investors can’treliably beat the market, and the power of data analysis

In this episode of Excess Returns, we welcome back Cole Smead of Smead Capital for a wide-ranging conversation on markets, history, and the principles of value investing. Cole shares his perspectives on fiscal largesse, inflation, passive flows, energy markets, U.S. exceptionalism, and the timeless lessons of Buffett and Munger. His insights bridge economic history with today’s market realities, giving investors a framework to think about risk, capital allocation, and opportunity costs.

• Deficits, monetary policy, and why recessions are hard to find today

• Inflation dynamics and lessons from the 1960s and 1970s

• The U.S. government’s role in markets (Intel stake, big government policies)

• American exceptionalism vs. global capital allocation improvements

• Earnings quality and the divergence between accounting and economic profits

• Passive investing flows, weak competition, and investor behavior

• Energy investing: from fracking bust to efficiency and capital discipline

• Comparing the AI boom with past manias and capital cycles

• Smead Capital’s investment process and evaluating “wonderful companies”

• Buffett, Munger, and the lessons of asset-light vs. capital-intensive businesses

• Closing insights: why returns on capital matter more than EPS or revenue

00:00 – Opening quote and fiscal deficits
02:00 – Debt, inflation, and recession risks
08:50 – Government stake in Intel & big government era
12:15 – U.S. exceptionalism and arrogance
17:30 – Earnings quality erosion in U.S. businesses
24:00 – Passive flows and human behavior
27:30 – Opportunities in energy investing
34:00 – Energy buildout vs. AI boom
38:00 – Smead Capital’s investment process
44:00 – Lessons from Buffett and Munger
51:00 – Standard closing question

In this episode of Excess Returns, we sit down with Brent Schutte, CIO of Northwestern Mutual, to discuss the current macro landscape and what it means for investors. Brent shares his balanced perspective on the Fed, inflation, tariffs, concentration risk in markets, and why diversification may be more important now than ever. With over 30 years of investing experience, Brent provides valuable lessons from past cycles that help put today’s environment in context.

• The Fed’s dual mandate and why both inflation and unemployment risks matter

• How tariffs could reshape growth and inflation dynamics

• Market concentration and the dominance of the Magnificent Seven

• Lessons from past cycles (1999 tech bubble, 2007 commodities, Japan in the 1980s)

• The role of diversification, including small/mid caps, international equities, and commodities

• Active vs. passive investing and how to evaluate managers

• Recession signals, rolling recessions, and hidden economic weakness

• Why humility and balance are essential in portfolio construction

00:00 – Introduction & importance of diversification
02:00 – The Fed’s mandate and tariffs’ impact on growth & inflation
07:30 – Reaction to Powell’s Jackson Hole speech & Fed independence
15:20 – Hidden recession, labor market signals & AI’s economic role
20:30 – Reliability of recession indicators post-COVID
26:00 – Tariffs, uncertainty & risks for investors
28:40 – Market concentration and the Magnificent Seven
34:00 – Rethinking diversification: 60/40, commodities, and international exposure
41:20 – Lessons from past market cycles (Japan, dot-com, China, commodities)
45:15 – Passive flows, active management, and evaluating skill vs. luck
50:00 – Government stakes in companies (Intel discussion)
52:00 – Standard closing questions & final lessons

In this episode of Excess Returns, we sit down with Shawn Gibson and Eric McArdle of Liquid Strategies to explore the rapidly growing world of option-based ETF strategies. With the rise of covered calls, buffered products, and hedged equity funds, it’s more important than ever for investors to separate smart solutions from risky marketing gimmicks. Shawn and Eric break down how their firm approaches overlays, income generation, and downside protection in a way that helps advisors and investors achieve better long-term outcomes.

• The evolution of options in ETFs and why adoption has accelerated

• Common flaws in covered call strategies and the risks investors miss

• How Liquid Strategies uses option overlays to add return, income, and downside protection

• The “Swiss Army knife” approach to using put spreads for multiple portfolio goals

• The importance of timeframe in option strategies and the debate around 0DTE

• Why “high yield” products often just return investor capital

• Using options for true risk management and hedging vs. cosmetic protection

• How Liquid Strategies structures its ETF suite and interval funds

• Where hedged equity and bond overlays can serve as ballast in portfolios

• Standard closing lessons for investors on staying invested and balancing risk

00:01 – Introduction to Liquid Strategies and option-based ETFs
02:34 – The rise of options in portfolios and industry evolution
05:29 – Flaws in common options strategies
08:19 – Covered calls: why they often disappoint
12:00 – Balancing upside, downside, and income in overlays
15:31 – What overlay strategies really mean
20:19 – The “Swiss Army knife” of selling put spreads
24:09 – Why timeframe matters and 0DTE options debate
28:56 – How rates and volatility impact option overlays
32:59 – The importance of systematic but flexible processes
36:46 – High yield traps and returning investor capital
43:04 – Using options for hedging and risk management
46:47 – How advisors incorporate overlays into portfolios
48:54 – ETFs vs. interval funds explained
54:26 – Where overlays fit in today’s asset allocation
57:55 – Closing lessons for investors

In this episode, Jim Paulsen of Paulsen Perspectives joins us to break down the state of the economy, the Fed’s policy stance, inflation risks, and what’s really happening beneath the surface of the stock market. Jim explains why the headline numbers often mask the struggles of many companies, why the S&P 500 looks stretched while much of the market remains undervalued, and what investors should watch as we head into the fall.

• Weak GDP growth, jobs slowdown, and why the U.S. may avoid recession despite sluggish data

• How fiscal policy, tariffs, the dollar, and monetary policy are shaping growth

• Why corporate profits outside the S&P 500 remain below trend despite large-cap strength

• The Fed’s inflation obsession, the 2% target debate, and Jackson Hole policy shifts

• Jim’s case that inflation fears are overblown, with supporting data on CPI, PPI, wages, and expectations

• Historical supports for bull markets (liquidity, interest rates, dollar, confidence) and why they’ve been missing

• Divergence between S&P 500 valuations vs. the rest of the market

• Structural disconnect between small/mid-caps and large-cap earnings

• The opportunity for market broadening if the Fed eases policy

• What Jim will be watching heading into year-end

00:00 – Economic growth slowdown and risks of recession
02:00 – Policy backdrop: fiscal, monetary, dollar, and tariffs
07:00 – Why recession may still be avoided
15:00 – Powell, Jackson Hole, and the Fed’s inflation stance
24:00 – Are inflation fears overblown?
36:00 – Inflation surprise index and momentum
37:00 – What supports bull markets (liquidity, rates, dollar, confidence)
41:00 – Trendline analysis: S&P vs. broader market
47:00 – Russell 2000 earnings vs. S&P 500 divergence
52:00 – Corporate profits divergence and policy implications
59:00 – What Jim is watching heading into year-end

In this episode of Excess Returns, we sit down with Mike Philbrick of Resolve Asset Management to discuss why the traditional 60/40 portfolio may no longer be enough, the role of “psychological commodities” like gold and Bitcoin, and how return stacking can change the way investors think about diversification. Mike shares insights on macro regimes, investor psychology, and why these once-fringe assets may now be foundational in building resilient portfolios.

Topics Covered:

• Why the 1982–2020 period was a “golden era” for stocks and bonds

• How today’s macro regime challenges traditional diversification

• The case for gold and Bitcoin as portfolio diversifiers

• Debt, inflation, and the shifting role of scarce assets

• Why lack of cash flows is a feature, not a bug, for gold & Bitcoin

• Generational differences in crypto adoption and advisor psychology

• How return stacking works and why it matters for investors

• The evolving regulatory and institutional landscape for Bitcoin

• Risks: existential threats, quantum computing, policy changes

• Tokenization, blockchain innovation, and the future of finance

• Mike’s one lesson for the average investor

Timestamps:
00:00 – Why the 1982–2020 period was a golden era
03:00 – Stocks, bonds, and changing correlations
07:00 – Debt, inflation, and the macro backdrop
10:00 – Gold, Bitcoin, and the cash flow debate
14:20 – Why investors resist gold & Bitcoin
19:00 – Generational divides and adoption rates
23:00 – The evolution of gold and parallels to Bitcoin
26:30 – What is Bitcoin? Digital gold vs growth asset
28:30 – Career risk flipping: from owning to not owning
32:00 – Behavioral biases and implementation frictions
35:00 – Sizing matters: avoiding “all or nothing” mistakes
36:00 – Market-cap weights and neutral allocations
38:00 – Long-term real returns of gold & Bitcoin
40:00 – Will Bitcoin and gold compete or complement?
43:00 – Portfolio construction: risk-weighting gold & Bitcoin
44:00 – Return stacking explained
49:00 – Trend following and dead money periods
51:00 – Risks: quantum computing, regulation, behavior
56:00 – Tokenization, blockchain rails, and innovation
1:01:13 – Mike’s one lesson for the average investor

Defined outcome ETFs have exploded in popularity, offering investors a way to combine downside protection with upside participation. In this episode of Excess Returns, we sit down with Jeff Chang of Vest Financial to break down the mechanics of buffer ETFs, how they fit into portfolios, the critiques they face, and where this space is headed. Jeff shares the origin story of Vest, the innovations that made these strategies accessible and how Buffer ETFs work behind the scenes.

• The origin of Vest and the impact of the Lehman collapse on product design

• How buffer ETFs work and why they focus on the “first 10–15%” of drawdowns

• The behavioral finance angle: making hedging simple and accessible

• Why 2022 highlighted the weaknesses of traditional 60/40 portfolios

• The mechanics of buffer ETFs: options structures and resets

• Popular buffer levels and how investors are using them

• Addressing critiques: costs, beta instability, and comparisons to cash or commodities

• The scalability of these strategies and potential market impact

• Behavioral vs. quantitative advantages of defined outcome funds

• Future developments, including applications to crypto and higher-volatility assets

• Jeff’s lessons on investing, risk management, and staying invested

• 00:00 – Introduction and the growth of defined outcome strategies

• 02:00 – The genesis of Vest Financial after Lehman’s collapse

• 09:00 – Explaining buffer ETFs in simple terms

• 14:00 – Who uses these strategies and why 2022 was a turning point

• 18:00 – Mechanics of resets and protection at market highs

• 22:00 – Range of buffers, caps, and investor demand

• 27:00 – The options structures behind buffer ETFs

• 30:00 – Liquidity, scalability, and market impact considerations

• 34:00 – How investors are using buffers in portfolios

• 38:00 – Tax efficiency inside the ETF wrapper

• 39:00 – Addressing critiques: cash, commodities, and costs

• 47:00 – Are these strategies more behavioral or quantitative?

• 48:30 – The future of buffer strategies and expansion into crypto

• 53:00 – Jeff’s contrarian investing belief

• 54:00 – The one lesson Jeff would teach every investor

In this episode of Excess Returns, we welcome back Tobias Carlisle — author, host of Value After Hours, and manager of the Acquirers Funds. Toby shares his candid perspective on market valuations, value investing’s long struggle, and why he still believes mean reversion will eventually swing back in favor of small caps and value stocks. We also dive into AI, global markets, the Fed, housing, and where investors might find opportunity outside today’s expensive U.S. mega-caps.

• Market valuations: why today’s market may be more expensive than 1929, 2000, or 2020

• The pitfalls of relying on single-year P/E ratios and better long-term valuation measures

• The divergence between the “Magnificent 10” and the rest of the market

• Small caps, mid caps, and value: where Toby sees opportunity despite an earnings recession

• AI as both a transformative force and a potential bubble-like capital cycle

• U.S. vs. international markets: structural advantages of American capitalism and where China is catching up

• The Fed, interest rates, inflation, and how they really matter for value investors

• Housing affordability and demographics as headwinds for the U.S. economy

• Why Toby believes the “value vs. growth jaws” will eventually close

00:00 – Are markets more expensive than 1929 and 2000?
04:00 – Breaking down valuation charts: S&P, Russell, and mid/small caps
10:00 – Why single-year P/Es mislead investors
14:00 – Lessons from past bubbles: Nifty 50, dot-com era, and now
19:00 – Large vs. small: the longest run for growth in history
24:00 – AI’s impact: transformative technology or capital cycle trap?
32:00 – Toby’s personal experience with AI (and why it disappoints him so far)
33:00 – U.S. advantages vs. international markets and China’s rise
41:00 – Are today’s U.S. valuations justified?
45:00 – The Fed, interest rates, and speculation
46:00 – Housing affordability and demographics as headwinds
55:00 – Should value investors care about macro?
59:00 – Closing question: Toby’s contrarian belief on value vs. growth