Excess Returns

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 todayInflation dynamics and lessons from the 1960s and 1970sThe U.S. government’s role in markets (Intel stake, big government policies)American exceptionalism vs. global capital allocation improvementsEarnings quality and the divergence between accounting and economic profitsPassive investing flows, weak competition, and investor behaviorEnergy investing: from fracking bust to efficiency and capital disciplineComparing the AI boom with past manias and capital cyclesSmead Capital’s investment process and evaluating “wonderful companies”Buffett, Munger, and the lessons of asset-light vs. capital-intensive businessesClosing insights: why returns on capital matter more than EPS or revenue00:00 – Opening quote and fiscal deficits02:00 – Debt, inflation, and recession risks08:50 – Government stake in Intel & big government era12:15 – U.S. exceptionalism and arrogance17:30 – Earnings quality erosion in U.S. businesses24:00 – Passive flows and human behavior27:30 – Opportunities in energy investing34:00 – Energy buildout vs. AI boom38:00 – Smead Capital’s investment process44:00 – Lessons from Buffett and Munger51:00 – 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 matterHow tariffs could reshape growth and inflation dynamicsMarket concentration and the dominance of the Magnificent SevenLessons from past cycles (1999 tech bubble, 2007 commodities, Japan in the 1980s)The role of diversification, including small/mid caps, international equities, and commoditiesActive vs. passive investing and how to evaluate managersRecession signals, rolling recessions, and hidden economic weaknessWhy humility and balance are essential in portfolio construction00:00 – Introduction & importance of diversification02:00 – The Fed’s mandate and tariffs’ impact on growth & inflation07:30 – Reaction to Powell’s Jackson Hole speech & Fed independence15:20 – Hidden recession, labor market signals & AI’s economic role20:30 – Reliability of recession indicators post-COVID26:00 – Tariffs, uncertainty & risks for investors28:40 – Market concentration and the Magnificent Seven34:00 – Rethinking diversification: 60/40, commodities, and international exposure41:20 – Lessons from past market cycles (Japan, dot-com, China, commodities)45:15 – Passive flows, active management, and evaluating skill vs. luck50:00 – 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 acceleratedCommon flaws in covered call strategies and the risks investors missHow Liquid Strategies uses option overlays to add return, income, and downside protectionThe “Swiss Army knife” approach to using put spreads for multiple portfolio goalsThe importance of timeframe in option strategies and the debate around 0DTEWhy “high yield” products often just return investor capitalUsing options for true risk management and hedging vs. cosmetic protectionHow Liquid Strategies structures its ETF suite and interval fundsWhere hedged equity and bond overlays can serve as ballast in portfoliosStandard closing lessons for investors on staying invested and balancing risk00:01 – Introduction to Liquid Strategies and option-based ETFs02:34 – The rise of options in portfolios and industry evolution05:29 – Flaws in common options strategies08:19 – Covered calls: why they often disappoint12:00 – Balancing upside, downside, and income in overlays15:31 – What overlay strategies really mean20:19 – The “Swiss Army knife” of selling put spreads24:09 – Why timeframe matters and 0DTE options debate28:56 – How rates and volatility impact option overlays32:59 – The importance of systematic but flexible processes36:46 – High yield traps and returning investor capital43:04 – Using options for hedging and risk management46:47 – How advisors incorporate overlays into portfolios48:54 – ETFs vs. interval funds explained54:26 – Where overlays fit in today’s asset allocation57:55 – 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 dataHow fiscal policy, tariffs, the dollar, and monetary policy are shaping growthWhy corporate profits outside the S&P 500 remain below trend despite large-cap strengthThe Fed’s inflation obsession, the 2% target debate, and Jackson Hole policy shiftsJim’s case that inflation fears are overblown, with supporting data on CPI, PPI, wages, and expectationsHistorical supports for bull markets (liquidity, interest rates, dollar, confidence) and why they’ve been missingDivergence between S&P 500 valuations vs. the rest of the marketStructural disconnect between small/mid-caps and large-cap earningsThe opportunity for market broadening if the Fed eases policyWhat Jim will be watching heading into year-end00:00 – Economic growth slowdown and risks of recession02:00 – Policy backdrop: fiscal, monetary, dollar, and tariffs07:00 – Why recession may still be avoided15:00 – Powell, Jackson Hole, and the Fed’s inflation stance24:00 – Are inflation fears overblown?36:00 – Inflation surprise index and momentum37:00 – What supports bull markets (liquidity, rates, dollar, confidence)41:00 – Trendline analysis: S&P vs. broader market47:00 – Russell 2000 earnings vs. S&P 500 divergence52:00 – Corporate profits divergence and policy implications59:00 – 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 bondsHow today’s macro regime challenges traditional diversificationThe case for gold and Bitcoin as portfolio diversifiersDebt, inflation, and the shifting role of scarce assetsWhy lack of cash flows is a feature, not a bug, for gold & BitcoinGenerational differences in crypto adoption and advisor psychologyHow return stacking works and why it matters for investorsThe evolving regulatory and institutional landscape for BitcoinRisks: existential threats, quantum computing, policy changesTokenization, blockchain innovation, and the future of financeMike’s one lesson for the average investorTimestamps:00:00 – Why the 1982–2020 period was a golden era03:00 – Stocks, bonds, and changing correlations07:00 – Debt, inflation, and the macro backdrop10:00 – Gold, Bitcoin, and the cash flow debate14:20 – Why investors resist gold & Bitcoin19:00 – Generational divides and adoption rates23:00 – The evolution of gold and parallels to Bitcoin26:30 – What is Bitcoin? Digital gold vs growth asset28:30 – Career risk flipping: from owning to not owning32:00 – Behavioral biases and implementation frictions35:00 – Sizing matters: avoiding “all or nothing” mistakes36:00 – Market-cap weights and neutral allocations38:00 – Long-term real returns of gold & Bitcoin40:00 – Will Bitcoin and gold compete or complement?43:00 – Portfolio construction: risk-weighting gold & Bitcoin44:00 – Return stacking explained49:00 – Trend following and dead money periods51:00 – Risks: quantum computing, regulation, behavior56:00 – Tokenization, blockchain rails, and innovation1:01:13 – 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 designHow buffer ETFs work and why they focus on the “first 10–15%” of drawdownsThe behavioral finance angle: making hedging simple and accessibleWhy 2022 highlighted the weaknesses of traditional 60/40 portfoliosThe mechanics of buffer ETFs: options structures and resetsPopular buffer levels and how investors are using themAddressing critiques: costs, beta instability, and comparisons to cash or commoditiesThe scalability of these strategies and potential market impactBehavioral vs. quantitative advantages of defined outcome fundsFuture developments, including applications to crypto and higher-volatility assetsJeff’s lessons on investing, risk management, and staying invested00:00 – Introduction and the growth of defined outcome strategies02:00 – The genesis of Vest Financial after Lehman’s collapse09:00 – Explaining buffer ETFs in simple terms14:00 – Who uses these strategies and why 2022 was a turning point18:00 – Mechanics of resets and protection at market highs22:00 – Range of buffers, caps, and investor demand27:00 – The options structures behind buffer ETFs30:00 – Liquidity, scalability, and market impact considerations34:00 – How investors are using buffers in portfolios38:00 – Tax efficiency inside the ETF wrapper39:00 – Addressing critiques: cash, commodities, and costs47:00 – Are these strategies more behavioral or quantitative?48:30 – The future of buffer strategies and expansion into crypto53:00 – Jeff’s contrarian investing belief54:00 – 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 2020The pitfalls of relying on single-year P/E ratios and better long-term valuation measuresThe divergence between the “Magnificent 10” and the rest of the marketSmall caps, mid caps, and value: where Toby sees opportunity despite an earnings recessionAI as both a transformative force and a potential bubble-like capital cycleU.S. vs. international markets: structural advantages of American capitalism and where China is catching upThe Fed, interest rates, inflation, and how they really matter for value investorsHousing affordability and demographics as headwinds for the U.S. economyWhy Toby believes the “value vs. growth jaws” will eventually close00:00 – Are markets more expensive than 1929 and 2000?04:00 – Breaking down valuation charts: S&P, Russell, and mid/small caps10:00 – Why single-year P/Es mislead investors14:00 – Lessons from past bubbles: Nifty 50, dot-com era, and now19:00 – Large vs. small: the longest run for growth in history24:00 – 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 rise41:00 – Are today’s U.S. valuations justified?45:00 – The Fed, interest rates, and speculation46:00 – Housing affordability and demographics as headwinds55:00 – Should value investors care about macro?59:00 – Closing question: Toby’s contrarian belief on value vs. growth

In this episode, we sit down with Leigh Drogen of StarKiller Capital, alongside guest co-host Kai Wu, for a deep dive into crypto investing strategies, momentum in digital assets, and market-neutral DeFi yield opportunities. Leigh shares his perspective on where we are in the crypto evolution, the parallels with past technology cycles, and how to survive and advance in one of the most volatile asset classes in the world. From time-series and cross-sectional momentum to the economics of yield farming, this is a comprehensive look at building systematic strategies in digital assets.Topics Covered:The parallels between Web1 → Web2 and today’s crypto transitionWhy the “fat protocol” thesis is giving way to the “fat app” eraThe role of Bitcoin vs. Ethereum in the next stage of crypto adoptionThe “survive and advance” investing philosophyTime-series momentum and cross-sectional momentum in cryptoHow VC behavior is changing momentum dynamicsSector-level momentum and narrowing lookback periodsStarKiller’s approach to asset selection and quality screensBuilding a market-neutral DeFi yield strategyBootstrapping network effects and early liquidity provisioningDiligence, counterparty risk, and managing protocol riskThe competitive landscape and where the biggest edges remain in cryptoTimestamps:00:00 – Crypto’s infrastructure milestones and evolution02:53 – The “fat protocol” vs. “fat app” thesis08:09 – Bitcoin’s role vs. Ethereum’s potential14:20 – “Survive and advance” and limiting drawdowns19:20 – Time-series vs. cross-sectional momentum23:00 – VC selling behavior and regime change in momentum31:47 – Sector-level momentum trends36:13 – Shorter lookback periods and market speed39:56 – StarKiller’s investable universe and filtering process48:00 – Designing a market-neutral DeFi yield strategy52:56 – Rewards farming and bootstrapping network effects58:00 – Market-making vaults and APR opportunities01:00:10 – Managing counterparty and protocol risk01:04:02 – Has crypto alpha become more competitive?01:07:41 – One lesson for the average investor

How Aswath Damodaran Manages His Own Portfolio | Show Us Your PortfolioIn this episode of our Show Us Your Portfolio series, we go inside the personal investing approach of Aswath Damodaran — the “Dean of Valuation.” Known for his expertise in corporate valuation, Aswath rarely discusses how he manages his own money. We cover his philosophy, asset allocation, position sizing rules, lifecycle diversification, and the lessons he’s learned from decades of investing his own wealth.What you’ll learn in this episode:The core mission that drives Aswath’s investing decisionsHow he thinks about risk, concentration, and position sizingWhy he avoids bonds and focuses on equity appreciationHis approach to strategic vs. tactical investingThe role of lifecycle diversification in portfolio constructionHow he decides when to buy and sell individual stocksWhy luck plays such a big role in investing resultsHis views on international exposure, dividends, gold, crypto, and alternative assetsPersonal spending habits and what he values most outside of investingTimestamps:00:00 – Investing’s end game: preserve and grow wealth03:25 – How life stage changes investment approach07:41 – Thoughts on the 60/40 portfolio08:47 – Why he holds no bonds10:12 – The power of compounding12:25 – Separating portfolio from income needs15:02 – Strategic vs. tactical investing18:00 – Managing concentration risk and trimming winners20:30 – Market concentration & the Mag 725:31 – How he buys and sells stocks32:46 – Hit rate and lessons from decades of investing37:26 – Lifecycle diversification41:00 – U.S. vs. international investing43:22 – Dividend investing45:35 – Gold, crypto, and alternative assets53:15 – What he drives and his ESG take54:39 – Spending for joy56:00 – Key investing advice for individuals57:37 – Life outside markets & creative thinking time

In this episode of Excess Returns, Matt Zeigler sits down with Nick Maggiulli — author of Just Keep Buying and his new book The Wealth Ladder. Nick shares his six-level framework for building wealth, why mobility between wealth levels is rarer than most people think, and how your financial strategy should evolve as your net worth grows. From grocery freedom to travel freedom, and from the risks of ego to the realities of taxes and investing at different stages, this conversation offers a practical guide to managing and growing wealth at any level.Topics Covered:The six levels of wealth and how to move between them“Grocery freedom,” “restaurant freedom,” and “travel freedom”Why moving down wealth levels is rare — and why moving up is harder than you thinkStrategies for Level 2: the role of education and income growthStrategies for Level 3: shifting focus to investing and compoundingThe importance of diversification, taxes, and risk management at higher levelsHow ego can derail wealth preservationBehavioral shifts needed when your portfolio outpaces your incomeThe impact of interest rates, taxes, and spending habits on mobilityPlanning for unknown future liabilitiesTimestamps:00:00 – Introduction to The Wealth Ladder framework01:40 – Grocery freedom, restaurant freedom, and travel freedom05:26 – Why moving down wealth levels is rare09:20 – Strategies for moving from Level 2 to Level 315:35 – Shifting from income growth to investing focus24:24 – Diversification and risk management in Level 433:20 – Ego as the most expensive thing some people own39:15 – Interest rates, taxes, and spending across levels46:00 – Planning for unknown future liabilities50:45 – Wealth mobility across generations

In this episode of Excess Returns, we’re joined by Kai Wu of Sparkline Capital to explore one of the most important and overlooked aspects of Warren Buffett’s investing evolution: his shift from tangible to intangible value. Based on Kai’s research paper “Buffett’s Intangible Moats,” we examine how Buffett's portfolio has evolved alongside the economy — and why the intangible drivers of brand equity, intellectual property, human capital, and network effects are central to understanding his success. Kai also shares how quantitative methods can be used to replicate Buffett’s approach and what this means for investors today.Topics Covered:The three eras of Buffett’s portfolio evolution: industrial, consumer, and information ageWhy Buffett’s shift away from deep value investing began earlier than most realizeHow Charlie Munger helped change Buffett’s approach — and why that matteredBuffett’s preference for intangible assets like brand, IP, and network effectsHow to quantify intangible value and its four key componentsSurprising stats: Buffett rarely buys below book value and holds high price-to-book stocksKai’s framework for building an intangible value score across stocksFactor attribution: quality and intangible value explain most of Buffett’s alphaThe impact of portfolio size, sector biases, and evolution of circle of competenceHow to replicate Buffett’s approach using a systematic, factor-based strategyWhy intangible value may be the "quality of tomorrow" and a forward-looking moatTimestamps:00:00 – Buffett’s evolution from value to intangible investor01:55 – Why Kai researched Buffett’s investing style now04:00 – The three eras of Buffett: Geico, Coca-Cola, Apple08:15 – How Buffett’s thinking changed under Munger’s influence10:00 – The rise of intangible moats and Buffett’s definition of economic goodwill13:10 – Four components of intangible value15:10 – Mapping Buffett’s holdings to intangible assets over time17:30 – Does Buffett get enough credit for evolving?20:30 – Only 8% of his holdings were bought below book value24:00 – Average price-to-book of Buffett's portfolio is 826:00 – Defining Kai’s intangible value factor27:50 – Buffett becomes a value investor again — just using a different metric30:00 – Circle of competence vs. expanding opportunity set33:00 – Today’s portfolio is 75% intangible by Kai’s framework34:45 – Decomposing Buffett’s returns into factors38:00 – Quality and intangible value explain 90% of Buffett’s alpha43:15 – Sector exposure vs. true value tilt49:00 – Intangible value as a leading indicator of quality52:00 – Building a Buffett-style quant portfolio using two key factors54:00 – Why Buffett’s future returns may be more muted

📈 In this episode of Excess Returns, we’re joined by Sam Stovall, Chief Investment Strategist at CFRA and author of The Seven Rules of Wall Street. We explore Sam’s timeless, data-driven investing rules and connect them to today’s market environment—including sector trends, interest rates, Fed policy, investor behavior, and why market history is one of the most underrated tools for navigating uncertainty. This conversation blends historical perspective with practical insights, making it essential viewing for long-term investors and students of market behavior alike.🔍 Topics Covered:The power of rules-based investing and emotional disciplineWhy momentum often beats mean reversion in sectorsThe predictive value of January market performanceHow AI hype is shaping today’s market narrativeWhether “Sell in May” still works—and what to do insteadThe case for value investing and high-quality dividend stocksA simple two-sector portfolio that beat tech (with less risk)Whether the 60/40 portfolio is still viableThe failure of equal weight and small caps to outperform recentlyHow to manage fear and stay invested during volatile marketsWhat history teaches about Fed rate cuts and market returnsA momentum strategy for finding “bull markets somewhere”Sam’s top lesson for the average investor⏱️ Timestamps:00:00 – Market performance after strong Januaries02:00 – Let your winners ride, cut losers short04:45 – Current sector winners and market concentration06:30 – As goes January, so goes the year09:00 – Why Year 3 of bull markets tends to be weak11:00 – How AI fits into today’s bull case12:30 – Sell in May—but rotate instead of retreat14:30 – Why value investing has struggled16:00 – Tech as the new consumer staple?17:45 – A free lunch: Tech + staples portfolio20:30 – The 60/40 portfolio and inflation hedging22:20 – Don’t get mad, get even (equal weight vs. cap weight)24:00 – Managing emotions and using history as Valium26:20 – Don’t fight the Fed: Rate cuts and market returns28:30 – CFRA’s Fed outlook for the second half29:40 – There’s always a bull market somewhere31:20 – Sam’s #1 lesson for the average investor

In this episode of Excess Returns, Matt Zeigler sits down with Grant Williams for a wide-ranging conversation on what he calls the “Hundred Year Pivot.” Grant shares his view that we are living through a once-in-a-century inflection point — a deep, structural shift that is reshaping markets, institutions, societal values, and even individual behavior. This isn’t about predicting the next trade; it’s about understanding the tectonic changes happening beneath the surface and how investors can adapt, survive, and eventually thrive.🔍 Topics covered in this episode:What the “Hundred Year Pivot” really meansWhy trust is the foundation of everything — and why it’s crackingThe loss of long-standing institutions and belief systemsHow the freezing of Russian assets triggered a global monetary rethinkWhy central banks are buying gold like never beforeWhy “buy the dip” might be a dangerous relic of a past eraThe return of capital preservation as a core investing principleHow community, religion, and localism are resurfacingThe psychology of luck, risk, and staying richWhat gives Grant hope, despite the darkness of this turning⏱️ Timestamps:00:00 – The hundred-year pivot and deep structural change04:00 – Financial nihilism and the breakdown of institutional trust11:00 – The freezing of Russian assets and its global implications14:00 – Central banks, gold, and the unraveling of the dollar system23:00 – From 40 years of tailwinds to a harder investing environment27:00 – Why “buy the dip” is getting more dangerous33:00 – Capital preservation vs. capital accumulation40:00 – Societal change, community assets, and the new investment mindset54:00 – Grant’s reason for optimism

In this episode of Excess Returns, Justin and special guest host Kai Wu of Sparkline Capital are joined by Verdad’s Dan Rasmussen for a deep dive into the hidden risks lurking in private equity—and why they may be more dangerous than investors realize.Rasmussen, a long-time critic of the asset class, explains why the allure of illiquidity, stale pricing, and past outperformance has led to dangerous capital misallocations. Along the way, we explore the origins of the Yale model, the current liquidity crunch, volatility laundering, and whether small-cap value could be the better bet today. We also dig into bubbles, biotech, and whether AI will concentrate or diffuse economic power.🔑 Topics covered:Why private equity may not be what investors think it isThe original logic of the Yale model—and how it’s broken todayLeverage, small company risk, and the illusion of low volatilityHow private equity portfolios are “money traps” in disguiseSmall-cap value as public market private equityWhy biotech could be the next overlooked opportunityHow innovation bubbles spark long-term progressAI’s capital intensity and implications for Big Tech dominanceBehavioral risks in institutional vs. retail investing📍 Timestamps:00:00 – Why private equity could be a money trap03:00 – The over-allocation to small, low-margin, highly levered companies07:25 – Why private equity’s popularity may signal poor future returns14:30 – The Yale Model’s origin story and how it morphed19:25 – Collapse in private equity distributions23:34 – Volatility laundering and misleading risk metrics27:00 – What happens when private equity goes public31:00 – Do lockups help investor behavior—or prevent learning?35:10 – Could small-cap value be a better alternative to private equity?42:00 – Why biotech is the most beaten-up corner of small caps47:00 – Bubbles, innovation, and the role of speculative excess51:00 – AI, capital intensity, and a return to economic gravity54:00 – Will AI empower monopolies or smaller players?

Macro strategist Darius Dale returns to Excess Returns with a deep dive into the seismic shifts shaping markets today. From the implications of the Fourth Turning to the systemic risks of fiscal dominance, Dale shares how he’s helping investors stay on the right side of market risk using quantitative tools and macro insights from 42 Macro. This episode covers everything from inflation, tariffs, and AI to a systematic framework for navigating regime change in real time. Whether you're a retail investor or an institutional pro, this conversation is packed with insights that matter.🔍 In This Episode:The Fourth Turning’s impact on markets and societyWhy inflation, income inequality, and geopolitical turmoil are convergingHow Darius's market regime model (Dr. Mo) systematically adapts to riskWhat the “KISS” model portfolio is—and how it outperforms 60/40Why recession models failed and how Darius sees the economy nowThe overlooked growth shock from policy—not just tariffsHow AI may shift the economic power structure even more dramaticallyWhy he believes the long-term outlook is structurally bullish (despite the chaos)⏱️ Timestamps:00:00 – Opening macro warning and Fourth Turning setup02:44 – Darius on working with Neil Howe and implications of generational shifts04:13 – How the Fourth Turning creates fiscal dominance and financial repression08:21 – Explaining the market regime system and Dr. Mo14:33 – What institutions get wrong and how volatility front-runs momentum17:13 – The origin of 42 Macro and mission to democratize institutional-grade tools18:35 – Case study: When the model turned bullish in April21:23 – Why tariffs don’t derail the model23:41 – Why recession signals failed & how Dale reads the cycle differently30:13 – Why Dale is still pounding the table on U.S. resilience35:11 – Paradigm A → B → C: the evolution of economic policy under pressure43:49 – Will AI fuel an i-shaped economy? Or something better?50:28 – Inside the “KISS” model portfolio and its 25% average annual return🔗 Learn more at 42macro.com📊 Follow Darius Dale on X: @42macroDDale

In this episode of Excess Returns, Mike Green returns to dissect the structural transformation underway in public markets due to the rise of passive investing. He explains why “there’s no such thing as a passive investor,” how inelastic flows distort prices, and what it means for valuation, volatility, and the long-term sustainability of equity markets. From the math behind market multipliers to the policy distortions driving mega-cap dominance, Mike walks through the macro, micro, and behavioral implications of passive flows — and what investors and policymakers need to do about it.🔍 Topics Covered:Why passive investing isn’t truly passiveThe origins and impact of the inelastic market hypothesisHow passive flows distort price discoveryThe shift from mean reversion to mean expansion in marketsMultipliers and the mechanics of how flows drive pricesWhy market efficiency is breaking down at scaleThe hidden risks of passive-dominant market structureTarget date funds and their unintended consequencesThe fragility of valuations under passive dominanceThe problem with IPO scarcity and capital misallocationOptions strategies for convex tails and market driftWhy the Fed and regulators may act — and what could trigger itBitcoin and private markets as new flow-driven regimesHow policy and tax advantages have reshaped capitalism⏱️ Timestamps:00:00 – "There’s no such thing as a passive investor"01:05 – The origins of Mike’s work on passive flows03:00 – Bill Sharpe vs. Lasse Pedersen on passive flaws06:00 – Index rebalancing and the illusion of passivity07:00 – The rise of flow-based (demand-side) asset pricing10:00 – Why EMH broke down under scale12:00 – The human layer markets forgot14:30 – The math behind price multipliers (5x to 25x)17:00 – Market efficiency vs. market distortion20:00 – Meta, index drift, and fake efficiency23:00 – What individual investors should do25:00 – The Mag 7 and extreme multiplier effects27:00 – Options and convex tail risk management29:00 – Mike’s 2016 survey on marginal buying behavior31:00 – The shift from mean reversion to mean expansion33:30 – When the music stops: wealth-to-income dynamics35:00 – Theoretical crash under net withdrawals36:00 – Why the boomer selloff thesis is flawed39:00 – The overlooked risk: wealthy investors exiting actives41:00 – Public vs. private equity concentration43:00 – Why policy response is likely (and how it may look)46:00 – Political power vs. market dominance49:00 – Bitcoin, passive ETFs, and flow-driven pricing52:00 – Private equity in 401(k)s — implications and risks57:00 – The unintended outcomes of inflated valuations59:00 – The hollowing out of the public equity bid1:01:00 – How Vanguard’s 2015 rebalancing moved the market1:04:00 – Valuation opacity and future withdrawals1:07:00 – What Mike is working on now and next steps

Subscribe on Apple Podcsastshttps://podcasts.apple.com/us/podcast/the-jim-paulsen-show/id1828054999Subscribe on Spotifyhttps://open.spotify.com/show/3QaBDVGuBZ3cZfFZ4mqPFcSubscribe on YouTubehttps://www.youtube.com/excessreturnsIn the premiere episode of our new monthly series, The Jim Paulsen Show we dig into Jim's latest research and the charts that define today's economic and market landscape. Jim lays out a compelling case for why the private sector is more resilient than many believe, why a recession may not be on the horizon, and why so many parts of the market still look cheap despite record index levels. We explore the implications of tariffs, the underappreciated productivity boom, the potential for a market broadening, and the risks posed by policy uncertainty.Whether you're a macro thinker, a data-driven investor, or just trying to make sense of this confusing market, Jim brings clarity, charts, and contrarian insight.

📉 What the Market Is Getting Wrong | Liz Ann Sonders on Debt, Tariffs, and the FedIn this episode of Excess Returns, we welcome back Liz Ann Sonders, Chief Investment Strategist at Charles Schwab, for an in-depth conversation about what's really driving markets right now. Drawing on her latest research and commentary, we dig into retail trading dynamics, the implications of rising tariffs, the debt burden, inflation pressures, market concentration, and why the Fed might be holding the line. Liz Ann delivers clear, actionable insights—cutting through the noise and helping investors understand what matters most in today’s unstable environment.📌 Topics Covered:Why high debt levels suppress long-term economic growth and productivityThe retail trader “fingerprint” on recent market movesHow sentiment extremes created a powerful reversal in AprilThe rising risks around tariffs—and why markets may be complacentWhat companies are doing about margin pressure vs. passing on inflationThe Fed’s “timeout” posture and why the market may be misreading itLiz Ann’s view on Powell’s potential ouster and Fed independenceThe disconnect between contribution to index returns vs. performance (Mag 7)Broadening market leadership and the role of quality stocksWhy utilities and industrials are surprising AI beneficiariesHow inflation is shifting from disinflationary to secularly higherThe overlooked economic effects of immigration policyWhat the labor market is hiding beneath the headline numbersWhy year-end price targets are a “dumb exercise” for individual investors⏱️ Timestamps:00:00 – Opening clip: debt, growth, inflation & the Fed01:00 – Welcome and introduction02:00 – Retail trader impact on market rally since April05:25 – Sentiment washout and pain trade dynamics08:00 – Policy instability and tariff complacency12:00 – What investors can do in the face of uncertainty14:50 – Budget deficits, debt burden, and growth implications18:00 – Inflationary risks embedded in the new spending bill20:30 – Dissecting inflation: tariffs, goods vs. services, and inequality23:45 – Inflation vs. margins: where the impact shows first26:00 – Instability vs. uncertainty: the new investor reality30:30 – Labor market risks and misleading employment metrics35:00 – Immigration's hidden macroeconomic effects38:00 – Fed independence, Powell’s job security, and mispriced rate expectations42:00 – Why the Fed may not cut—and why that’s bullish44:20 – Mag 7 myth: contribution vs. true performance48:00 – Broadening the rally: high-quality vs. low-quality stocks50:30 – AI's second-order effects and sector-level surprises55:00 – Liz Ann’s contrarian take: why year-end targets are pointless

Policy uncertainty is rising—but markets seem unfazed. In this episode, we sit down with Libby Cantrill, Head of Public Policy at PIMCO, to explore the critical policy risks that investors may be underestimating or ignoring altogether.From the real-world implications of the tariffs to questions around Fed independence, fiscal stimulus, and housing market interventions, Libby provides an insider’s perspective on what’s happening in Washington—and why it matters more than the market suggests.She also discusses how policy risk differs from macroeconomic risk, how investors often price the wrong factors, and why the next shock may not come from where most expect.Topics covered include:Why policy risk remains underappreciated by marketsThe lasting impact of tariffs—and how they could evolveThe Big, Beautiful Tax Bill: What’s real, what’s hypeRisks to Fed independence and central bank credibilityGSE reform and the political tightrope in housingThe intersection of fiscal policy and market complacencyWhether you're focused on macro trends, portfolio positioning, or simply trying to understand what Washington might throw at markets next, this is a conversation you don’t want to miss.

Why didn’t the long-predicted recession arrive? In this episode, we talk with Aahan Menon, founder of Prometheus Research, about why traditional macro models are breaking down and what investors are missing in today’s economy. Aahan explains why recession indicators have failed, how monetary policy transmission has changed, and what really matters in understanding economic risk right now.We also explore how Prometheus uses a systematic approach to macro investing, why focusing on the present is more valuable than forecasting the future, and what their models revealed about the true impact of tariffs—before the market reacted. If you’ve been relying on the old playbook, this conversation will challenge your thinking.Topics discussed include:Why recession indicators failed to predict this cycleThe real risk behind the Liberation Day tariff panicHow the Fed’s rate hikes lost their biteWhat’s changed in the economy’s sensitivity to ratesPrometheus’ approach to stress testing and forecastingHow Aahan translates macro data into portfolio strategyThe behavioral traps investors fall into during macro shifts