Excess Returns

Andy Constan, Brent Kochuba and Eric Pachman examine rising bond yields, options positioning and the inflation risks facing stocks. What happens if the rate relief traders are betting on never arrives?
On this month's Last Call, Jack Forehand and Matt Zeigler connect three perspectives on the market. Andy Constan explains why stronger growth and debt supply can push yields higher without signaling a bond crisis. Brent Kochuba examines options flows that suggest traders are still leaning toward a rebound. Eric Pachman traces the path from refinery constraints and diesel shortages to freight costs and consumer inflation. Jack and Matt close with the investment implications of AI spending, efficiency and adoption.

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Topics covered:
Andy Constan on growth, AI capital spending and the supply of debt
Why Andy Constan sees more attractive bonds without calling for a recession
How higher yields can constrain stock returns even when growth remains strong
Brent Kochuba on bond volatility, calm equities and bets on falling yields
Why Brent Kochuba is watching both upside surprises and downside risk
Eric Pachman on crack spreads and why cheaper crude may not mean cheaper fuel
How diesel prices can flow through freight bills into CPI
Eric Pachman on wage inequality and what national averages miss
AI spending, productivity and the difference between slower growth and contraction
The practical obstacles to bringing AI agents into everyday life
Chapters:00:00 Rising yields and the outlook for stocks05:26 Andy Constan: Growth, debt supply and higher yields12:01 Why bonds look more attractive after the selloff18:33 Brent Kochuba: Options flows and bets on rate relief23:21 Equity complacency and risks in both directions31:12 Eric Pachman: Diesel shortages, crack spreads and inflation40:06 Wage inequality and the limits of average inflation44:40 AI capital spending, productivity and investment returns50:34 AI adoption, automation and everyday obstacles
Learn more about the Excess Returns podcast network:⁠https://excessreturns.co⁠
No information discussed in this podcast should be construed as investment advice. Securities discussed may be held by the hosts and guests, their firms or their clients.

Michael Baron of Baron Capital explains his case for AI beneficiaries beyond the biggest tech stocks, including software companies the market fears will be disrupted. He joins Matt Zeigler and Justin Carbonneau to discuss how competitive advantages, management quality, and a long investment horizon shape the firm's growth portfolios.
Baron Capital's co-president and portfolio manager walks through the firm's investments in Tesla and SpaceX, from vertical integration and autonomous driving to reusable rockets, Starlink, and the potential for AI infrastructure in space. He also explains why proprietary data may strengthen some software businesses, how the firm manages positions as winners grow, and what would make him sell. The conversation closes with lessons from Ron Baron on curiosity, primary research, and building conviction.
Topics covered:
Finding growth opportunities across technology, financial services, real estate, and consumer businesses
Why Michael Baron believes some apparent AI losers could become beneficiaries
Proprietary data and the investment cases for Shopify, Guidewire, FactSet, MSCI, and Gartner
Tesla's evolution, energy business, and the potential economics of autonomy and software
SpaceX's reusable rockets, Starlink, and Michael Baron's vision for AI infrastructure in space
Valuing businesses over a long horizon and assessing reliance on key leaders
Lessons from Ron Baron and the importance of management relationships during market stress
Letting winners run while managing concentration, leverage, and portfolio correlations
Distinguishing portfolio trims from selling when a competitive advantage deteriorates
Why Michael Baron believes AI will increase the importance of investment judgment
Learn more about Baron Capital:
https://www.baroncapitalgroup.com/
Chapters:
00:00 Michael Baron on finding growth beyond technology
04:16 AI disruption and the opportunity in software
10:54 Tesla, Elon Musk, and vertical integration
18:33 Long-term valuation and key-person risk
23:28 SpaceX, Starlink, and AI infrastructure in space
34:11 Lessons from Ron Baron and the firm's future
40:08 Evaluating management and competitive advantages
47:11 Time as an edge and managing growing positions
54:11 When to trim a position and when to sell
58:11 Curiosity, primary research, and conviction
Learn more about the Excess Returns podcast network:
https://excessreturns.co
No information discussed in this podcast should be construed as investment advice. Securities discussed may be held by the hosts and guests, their firms or their clients.

How much of your portfolio does a good investment idea deserve? Kris Abdelmessih of Moontower joins Matt Zeigler to explain why having an edge is only part of the decision: position size can determine whether favorable odds translate into long-term growth or damaging losses.
Through a coin-flipping experiment and everyday examples, Kris makes the Kelly Criterion accessible without a complicated derivation. The conversation explores the difference between expected returns and compounded wealth, why growth-maximizing bets can still be uncomfortable, and how uncertain probabilities make a case for betting less. From portfolio decisions to insurance and extended warranties, the goal is to build better intuition about how much risk to take.
Topics covered:
How a favorable coin-flipping game exposed costly mistakes in bet sizing
Why maximizing the expected payoff of one bet differs from maximizing long-term compounded growth
How oversized bets can undermine an otherwise profitable opportunity
The Kelly Criterion's three inputs: probability of winning, probability of losing, and payoff
Why a constant percentage of your bankroll means changing the dollar amount after wins and losses
How different payoffs change the appropriate size of a bet
Applying the framework to hypothetical self-insurance and extended-warranty decisions
Why full Kelly can involve substantial drawdowns, and the tradeoffs of fractional Kelly
Working backward from a position size to the odds needed to justify it
Allowing for uncertainty in your estimates and preserving capital for future opportunities
The essay behind this conversation:
After this post you will be sizing bets in your head
https://www.panoptica.com/after-this-post-you-will-be-sizing-bets-in-your-head/
Research discussed:
Rational Decision-Making Under Uncertainty: Observed Betting Patterns on a Biased Coin
https://arxiv.org/abs/1701.01427
Kris Abdelmessih's Moontower newsletter:
https://moontower.substack.com/
Moontower:
https://moontower.ai/
Kris Abdelmessih on X:
https://x.com/KrisAbdelmessih
Chapters:
00:00 Position sizing and the favorable coin-flip experiment
04:45 Why a good bet can produce bad outcomes
13:49 The Kelly Criterion formula explained
18:10 Adjusting your bankroll and accounting for the payoff
23:03 Applying Kelly to a self-insurance decision
30:25 Full Kelly, drawdowns, and reasons to bet less
34:59 Working backward from bet size and evaluating warranties
41:09 Volatility drag, uncertain odds, and the experiment's results
46:09 How much capital does your edge deserve?
Learn more about the Excess Returns podcast network:
https://excessreturns.co
No information discussed in this podcast should be construed as investment advice. Securities discussed may be held by the hosts and guests, their firms or their clients.

What are headline jobs and inflation numbers missing about the economy investors actually face? Eric Pachman of Data 4 The People joins Matt Zeigler to examine how a changing workforce, rising fuel costs, and differences in household spending could affect inflation, consumer demand, and corporate margins.
Using interactive data tools, Eric looks beneath monthly payroll reports, maps changes in America's labor force, and traces how diesel prices can work their way into retail prices. He also shares a grocery-price study that challenged his own assumptions about CPI and explains how he is using AI to make rigorous data journalism more accessible.
Topics covered:
Why monthly jobs reports need context, including survey uncertainty and revisions
How to spot unusual industry-level payroll changes and assess the quality of jobs added
What county-level labor force trends reveal about aging and rural America
Eric Pachman's research on foreign-born workers and the limits of replacement assumptions
How a shrinking supply of workers could create pressure on service prices
How diesel costs flow through freight surcharges, retailer margins, and consumer prices
What to watch for in retailer earnings calls as companies weigh price increases
Why household income, driving habits, and spending patterns change the experience of inflation
What Eric Pachman's Kroger study found about CPI, the Thrifty Food Plan, and store brands
Using AI to test assumptions and expand access to data journalism
Explore Eric Pachman's research and interactive tools:
https://www.data4thepeople.com/
The Men Who Vanished: Testing Labor Market Displacement
https://www.data4thepeople.com/p/the-men-who-vanished
How do the government's grocery prices stack up against the real ones?
https://www.data4thepeople.com/p/kroger-shelf-vs-cpi-thrifty-food-plan/
Chapters:
00:00 Introduction and Data 4 The People's mission
09:20 Spotting unusual changes in the jobs data
18:27 Mapping America's changing labor force
27:00 Foreign-born workers, aging, and labor supply
34:51 Energy costs and the path to consumer inflation
47:49 Why your inflation experience differs from CPI
56:12 Personal inflation tools and testing grocery prices
1:02:36 AI, data journalism, and challenging your own bias
1:11:17 Where to find Eric Pachman's work and tools
Learn more about the Excess Returns podcast network:
https://excessreturns.co
No information discussed in this podcast should be construed as investment advice. Securities discussed may be held by the hosts and guests, their firms or their clients.

Jack Raines turned $6,000 into roughly $400,000 trading SPACs, then lost $157,000 in three minutes after taking a very different bet. The author of Young Money joins Matt Zeigler to discuss what that experience taught him about investing risk, the urge to chase more, and the time a growing portfolio can cost you.
The conversation follows Jack Raines from SPAC warrants and market narratives to a broader question: how do you allocate money, time, and risk to build a life you actually want? They explore the limits of a trading edge, why cheap stocks can get cheaper, and how debt, career choices, and status shape the decisions investors make beyond their portfolios.
Young Money: A Field Guide to Wealth and Purpose in Your Twenties
https://amzn.to/4AtUsDoJack Raines' Young Money newsletter
https://www.youngmoney.co/
Jack Raines on X
https://twitter.com/Jack_Raines
Topics covered:
How Jack Raines grew his Roth IRA through SPAC warrants and pre-merger common shares, and why those positions carried different risks.
Why an edge in one corner of the market did not translate into a successful concentrated earnings bet.
How a million-dollar target and constant account checking changed Jack Raines' relationship with money and time.
What SEC filings, Discord research, and market narratives contributed to his trading process.
Why Jack Raines bought Figma after questioning the market's AI narrative and speaking with designers.
Applying portfolio thinking to careers, creative projects, and opportunities that change with each stage of life.
Weighing retirement saving against other opportunities, and why Jack Raines treats expensive debt as a constraint on taking risks.
Escaping the "someday" trap while giving long-term venture investments time to develop.
Combining steady income and index funds with independent bets, while treating status as a tool rather than a goal.
Why Jack Raines believes investors learn about risk through experience, with stakes they can afford to recover from.
Timestamps:
00:00 Jack Raines on the lessons of losing money
04:57 Inside the SPAC trades and the $157,000 loss
15:16 Separating market hype from downside math
22:18 Building a life with portfolio principles
29:45 Retirement saving, trading obsession, and the cost of time
36:56 Debt, freedom, and the trap of waiting for someday
44:33 Venture investing: acting quickly and waiting patiently
51:03 Using status without making it the goal
56:08 The investing lesson experience has to teach
Learn more about the Excess Returns podcast network:
https://excessreturns.co
No information discussed in this podcast should be construed as investment advice. Securities discussed may be held by the hosts and guests, their firms or their clients.