Excess Returns

Jurrien Timmer of Fidelity explains how he reads a stock market correction by looking at what has changed in earnings, interest rates and the price investors will pay for future growth. A selloff driven by higher rates can look much like one driven by fears of slower growth on a stock chart. The difference matters when you’re counting on bonds to cushion the decline.

Jurrien joins Justin Carbonneau and Jack Forehand to put the AI investment boom in that historical context. The companies building data centers once had enough cash left over to buy back large amounts of their own stock. Now much of that cash goes back into the business. He explains why a slower buildout could help some of the biggest spenders, and how a semiconductor stock can look cheap just as its earnings are peaking.

They also look beneath the S&P 500, where a handful of large companies can pull the index lower even as most stocks remain in uptrends. Jurrien discusses what higher bond yields offer a long-term investor, why he considers gold and other diversifiers alongside stocks and bonds, and how rebalancing can turn a market decline into an opportunity to buy when others need to sell.

Topics covered:
- What CoreWeave’s bonds signaled about the cost of financing AI infrastructure
- Why semiconductor earnings and price-to-earnings ratios can move in opposite directions
- How Treasury yields affect the price investors will pay for stocks
- What the 1994 correction reveals about strong earnings in a rising-rate environment
- How Jurrien Timmer’s investment clock pairs earnings growth with financial conditions
- Why bonds can provide income even when their value as a hedge changes
- How gold, commodities and other diversifiers fit into a 60/20/20 portfolio
- How the shift from buybacks to capital spending changes the economics of owning the Magnificent Seven
- What market breadth and long-term valuations suggest about opportunities beyond the largest U.S. stocks
Chapters:
00:00 The AI buildout meets the limits of financing
07:44 Semiconductor cycles and peak earnings
11:57 The Fed model and the competition between stocks and bonds
19:16 Growth scares, rate scares and inflation risk
24:01 The investment clock and the stock market’s influence on growth
29:00 Bond income and the case for a 60/20/20 portfolio
34:27 Real yields, fiscal risk and Fed policy
42:57 What comparisons with 1994 and 1999 can tell us
47:23 From share buybacks to AI capital spending
55:58 Rebalancing when other investors are selling

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.

Corey Hoffstein and Adam Butler explore why diversification is hard to stick with and how return stacking changes what investors can hold alongside stocks and bonds. When stocks keep climbing, a strategy that trails them for years can feel like a mistake. When inflation pushes stocks and bonds down together, the reason for owning something different gets easier to see.

Drawing on their Return Stacked symposium, the two join Matt Zeigler to discuss which risks are worth adding to a portfolio. Corey explains why even a strategy with little connection to the stock market can lose money on the day stocks fall. Adam revisits 2008, when some hedge funds suspended withdrawals just as investors needed cash to rebalance.

They use managed futures to show how return stacking works. An investor can keep the stock and bond exposure of a 60/40 portfolio and use futures to add another strategy. That introduces leverage and makes two questions especially important. What will the portfolio need to hold as collateral, and can the investor stay with the strategy through a long drawdown?

Topics covered:
- What Corey Hoffstein took from Cliff Asness’s early experience running AQR
- Why an inflation shock can hurt stocks and bonds at the same time
- How Adam Butler adds managed futures while keeping a portfolio’s stock and bond exposure
- Why the same leverage can produce very different outcomes depending on the strategy added
- The difference between low correlation and protection during a stock market crash
- What went wrong when institutions paired liquid futures with illiquid hedge funds in 2008
- How holding both exposures in one fund changes collateral management and rebalancing
- Why managed futures can fit alongside stocks, bonds or gold
- How long a diversifier can disappoint before an investor gives up on it

Return Stacked research
https://www.returnstacked.com/

Return Stacked ETFs
https://www.returnstackedetfs.com/

Seven Thoughts on Running Big Money for the Long-Term | Cliff Asness
https://www.integrityia.com/wp-content/uploads/2014/06/Seven-Thoughts-on-Running-Big-Money-For-the-Long-Term-2009.pdf

Corey Hoffstein’s Flirting with Models podcast
https://www.flirtingwithmodels.com/episodes

Corey Hoffstein on X
https://x.com/choffstein

Adam Butler on X
https://x.com/gestaltu

Return Stacked Portfolio Solutions on LinkedIn
https://www.linkedin.com/company/return-stacked-portfolio-solutions

Chapters:
00:00 Corey Hoffstein on Cliff Asness and investing for the long run
07:15 Adam Butler on AQR’s early years
12:58 When inflation hurts both sides of a 60/40 portfolio
17:21 How return stacking preserves stock and bond exposure
23:02 Choosing which risks to add with leverage
29:15 Why investors give up on diversifiers during drawdowns
33:27 Portable alpha and the liquidity failures of 2008
38:13 How a single fund manages collateral across both exposures
43:26 What decades of managed futures returns can tell us
50:37 Adam Butler on market timing and the case for spreading risk

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.

Chris Mayer and Robert Hagstrom explain how they decide whether a falling stock price has exposed a mistake or given them a chance to buy a business they already know well.
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On 100 Year Thinkers, Matt Zeigler and Bogumil Baranowski ask both investors to put that judgment to work during a Nasdaq selloff. Robert starts with an unlikely pair: Nvidia and Walmart. What assumptions about growth and returns on capital would justify paying a higher earnings multiple for the retailer? Chris starts with free cash flow per share. He explains what he wants to know about a business before its stock drops 30% and he has to decide whether to buy more, hold on or sell.

They give their winners the same scrutiny. Chris admits that a run of strong quarters can tempt him to spend all his research time on the companies that are struggling. Robert borrows a habit from Sherlock Holmes: look for the evidence that could overturn your favorite explanation. The conversation closes with a question for AI executives trying to win over a town that would host a data center. What does the community get in return for the power and water the facility will use?

Topics covered:
- Robert Hagstrom on why volatility rises when different investors start making the same trade
- What the valuations of Nvidia and Walmart imply about their future earnings
- Chris Mayer on free cash flow per share and Ben Graham’s voting machine and weighing machine
- What readers of The Warren Buffett Way and 100 Baggers sometimes miss about their authors
- How Robert Hagstrom uses detective work to test an investment thesis
- Why Chris Mayer revisits companies that keep delivering strong results
- What a concentrated portfolio asks of an investor and where indexing fits
- How a watchlist helps both investors put a sharp price decline in context
- When share buybacks make sense and what AI companies need to explain to local residents

Robert Hagstrom’s research at EquityCompass
https://www.equitycompass.com/author/robert

Chris Mayer’s books at Woodlock House Family Capital
https://www.woodlockhousefamilycapital.com/portfolio

Chris Mayer on X
https://x.com/chriswmayer

Chapters:
00:00 What a Nasdaq selloff tells long-term investors
12:23 Ben Graham’s weighing machine and free cash flow per share
17:58 Who sets the example for patient investors today?
22:07 What readers miss about Robert Hagstrom and Chris Mayer
26:07 Sherlock Holmes and the evidence against an investment thesis
32:52 Studying winners as skeptically as mistakes
39:05 The case for picking businesses in an indexed market
44:36 Building a shopping list before prices fall
49:12 When a falling price earns a closer look
53:37 What shareholders need to hear from CEOs
1:02:07 Why data centers are a hard sell for their neighbors

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.

Mike Hunstad, president of Northern Trust Asset Management, estimates that AI accounts for more than half the risk in the S&P 500. For an investor who sees real promise in AI, that poses a practical question. How much of the portfolio should depend on being right about it?

Hunstad joins Jack Forehand and Justin Carbonneau to explain where he expects the payoff from AI to show up first. A company that uses AI to do the same work at a lower cost could see its margins rise well before the gains show up in GDP. He also explains how the stock market can move the economy in the other direction. If wealthy households have been spending some of their stock gains, a 20% equity decline could change what they buy.

The conversation turns to what investors actually own. Hunstad uses the changing makeup of the Russell 1000 Value Index to show how a value fund can carry more technology exposure than its name suggests. He also shares the question he would ask an active manager after hearing their best stock picks. Which stocks did you underweight to pay for those bets, and do you have just as much conviction in those decisions?

Topics covered:
- What Treasury yields tell Mike Hunstad about inflation and the Fed’s choices
- Why profit margins are his first test of whether AI spending is paying off
- How the spending habits of wealthy households can turn a stock market decline into an economic slowdown
- Where quality, value and low-volatility stocks fit in a portfolio with a large AI exposure
- How much stock actually becomes available to investors when a large private company goes public
- Why price-to-book can miss value in businesses built on intangible assets
- How tracking a company’s suppliers, customers and peers changes the way investors measure momentum
- When a factor looks cheap and why timing a shift into it is difficult
- How the stocks a manager leaves out can overwhelm the gains from the ones they pick
Chapters:
00:00 What stock prices and economic headlines are saying
06:45 The Fed, interest rates and the 10-year Treasury yield
11:11 AI productivity and the case for a positive supply shock
18:31 How a stock market decline could reach consumer spending
22:51 AI capital spending and the lessons of the dot-com era
28:54 Who captures the gains from AI, and how to measure them
34:18 Mega-IPOs and how much stock comes to market
38:36 What private markets add to a public equity portfolio
44:11 Measuring value and momentum through investor behavior
49:10 Can investors time their factor exposures?
57:16 The portfolio risk in stocks you leave out

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.

Peter Boockvar of OnePoint BFG Wealth Partners explains how AI demand can keep growing while the companies building data centers struggle to earn a return. CoreWeave has committed to years of lease payments. What happens if the price it can charge customers for computing power falls before those leases run out?

The author of The Boock Report joins Matt Zeigler to trace who bears that risk. A lender, a chipmaker and an electrician building a data center all depend on the same project, but a slowdown reaches each of them differently. Boockvar draws on the history of the memory chip business to explain why a stock can look cheapest just as its earnings are peaking.

They also look at the economy beyond AI. Boockvar compares what concert venues and hotel operators are hearing from customers, explains why reopening the Strait of Hormuz would still leave oil inventories to rebuild, and shares where he sees value in overseas stocks, healthcare and consumer staples.

Topics covered:
- How much hiring a data center supports during construction and after it opens
- Why new memory chip supply matters to Micron shareholders even if demand keeps rising
- How CoreWeave’s lease commitments and borrowing costs compare with IREN’s approach
- Who could keep an existing data center running in a restructuring, and who loses orders if the next one never gets built
- Why Peter Boockvar sees the Fed making smaller policy adjustments and watches the cost of financing AI projects
- What sold-out concerts, travel bookings and hiring by industry reveal about the consumer
- How depleted oil inventories could sustain demand for crude after shipping resumes
- Where Peter Boockvar finds overlooked businesses outside the U.S. and in healthcare and consumer staples
- What gold prices mean for miners’ margins and why refinancing matters for private credit

Chapters:
00:00 How much of the economy depends on the AI buildout?
06:25 The workers who build data centers and the jobs that last
11:14 Micron and the trap of buying peak earnings
18:23 Who bears the losses if an AI infrastructure company defaults?
23:19 How AI financing costs enter the Fed’s rate debate
29:05 What concerts, hotels and hiring tell us about the consumer
37:03 Oil supply and the long job of rebuilding inventories
44:44 Looking overseas for overlooked stocks
49:42 The case for consumer staples and healthcare
56:52 Rush at Madison Square Garden and Peter Boockvar’s first concert

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.