Excess Returns

This episode of Excess Returns features Tony Wang of T. Rowe Price discussing how investors can identify “inevitabilities” in technology and position portfolios to benefit from long-term innovation trends. The conversation explores AI, semiconductors, and the evolving investment landscape, while also breaking down Tony’s portfolio construction process and how he navigates cycles, valuation, and disruption risk.
Tony explains why AI is fundamentally changing the cost of intelligence, how agentic systems could reshape software and labor markets, and why the current AI buildout may differ from past tech cycles. The discussion also dives into where we are in the AI cycle, how to think about the Mag 7, and what investors may be missing across the tech stack.
T. Rowe Price Science and Technology Fund
https://www.troweprice.com/financial-intermediary/us/en/investments/mutual-funds/us-products/science-and-technology-fund.htmlTopics Covered
What it means to invest in “inevitabilities” and separating signal from noise in markets

Why AI and compute demand represent a structural shift similar to past tech waves

The rise of agentic AI and how it could transform software and productivity

Whether AI is underappreciated or already priced into markets

The “multiple moons” idea and why AI may not be a winner-take-all market

How AI could reshape the labor market, productivity, and economic growth

The AI CapEx debate and why this cycle may differ from the dot-com buildout

Where we are in the AI cycle: training vs inferencing and deployment phase

The impact of AI on software companies and the innovator’s dilemma

How semiconductors, memory, and infrastructure remain key bottlenecks

The changing nature of the Mag 7 and capital intensity in AI

Tony’s portfolio construction framework across compounders, emerging tech, and value

How he generates ideas using S-curve adoption and economic bottlenecks

Position sizing, risk management, and balancing growth with drawdown control

Sell discipline: valuation, fundamentals, and market signals

Timestamps
00:00 Introduction and Tony Wang overview
01:05 Investing in inevitabilities and long-term thinking
03:00 Differentiating inevitability from hype and consensus
04:45 AI inevitability and the rise of agentic systems
07:00 Cost of intelligence and productivity implications
08:00 Real-world examples of AI adoption (customer service, agents)
09:00 Is AI underappreciated by markets?
11:15 AI as a “space race with multiple moons”
13:30 AI as the dominant driver of markets today
15:00 AI’s impact on jobs, productivity, and the economy
18:30 Creativity, judgment, and the future of work
20:45 Physical AI and robotics opportunity set
22:30 AI CapEx debate vs the dot-com era
25:30 Semiconductors vs software in the AI stack
28:15 AI disruption risk for software companies
31:00 Cyclicality in semiconductors and how AI changes it
33:30 The evolving role of the Mag 7 in AI
36:30 Competition, startups, and AI democratization
38:00 Where we are in the AI cycle today
40:00 Idea generation and S-curve adoption framework
42:30 Case study: memory and AI bottlenecks
44:45 Example position: optical networking and infrastructure
46:40 Portfolio construction and position sizing
49:00 Sell discipline and managing valuation risk

This episode explores the growing signs of a shift beneath the surface of the market, as technical indicators point to weakening momentum in equities and a potential change in leadership. Katie Stockton joins the show to break down what recent signals in the S&P 500, oil, gold, and sector rotation are telling us about where markets may be headed next.
We cover the implications of a new monthly MACD sell signal, the importance of market breadth and leadership, and how investors can interpret shifting trends across asset classes using a disciplined technical framework.

More on Katie's Strategies
https://www.fairleadstrategies.com/

Topics Covered:
Why a new monthly MACD sell signal may signal a longer, choppier market phase

The difference between fast corrections and slow grind bear phases

Key S&P 500 support levels and what a breakdown could mean for downside risk

How technical indicators help filter noise in headline-driven markets

The breakout in crude oil and what it signals about a potential new cycle

Whether sharp price moves are sustainable or likely to reverse

Understanding overbought and oversold conditions across different timeframes

Why mega-cap weakness is critical to overall market direction

The shift from growth to value and what it means for investors

Sector rotation trends and where leadership is emerging in 2025

What gold’s recent run and emerging weakness signal for safe haven assets

How a systematic, technical approach can help manage drawdowns and re-entry timing

Timestamps:
00:00 Intro
04:18 S&P 500 momentum deterioration and MACD sell signal
08:09 Key support levels and downside scenarios for equities
12:53 Crude oil breakout and implications for a new cycle
16:01 What overbought and oversold really mean in practice
20:04 Mega-cap weakness and shifting market leadership
24:41 Concentration risk in investor portfolios
27:52 Value vs growth rotation and cycle dynamics
32:13 Market breadth and confirmation signals
36:19 Moving averages, death cross, and trend interpretation
39:56 Inside the TAC ETF and sector rotation strategy
44:04 Gold trends and why consolidation may be next
47:00 Key signals to watch going forward

In this inaugural episode of our new show, The Intangible Economy with Kai Wu, we explore how AI, intangible assets, and unprecedented capital investment are reshaping the future of markets. Michael Mauboussin joins Kai to break down why today’s AI expectations may be historically unmatched—and what that means for investors trying to assess risk, returns, and who ultimately captures value.
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The conversation moves from base rates and AI growth expectations to competitive dynamics, capital cycles, and the fundamental shift toward intangible-driven business models that are changing how we think about valuation, moats, and market structure.
Papers and Resources Discussed:
Bayes and Base Rates: How History Can Guide Our Assessment of the Future
https://www.morganstanley.com/im/en-us/institutional-investor/insights/consilient-observer/bayes-and-base-rates.html
The Impact of Intangibles on Base Rates
https://www.morganstanley.com/im/publication/insights/articles/article_theimpactofintangiblesonbaserates.pdf
Measuring the Moat: Assessing the Magnitude and Sustainability of Value Creation
https://www.morganstanley.com/im/publication/insights/articles/article_measuringthemoat.pdf
One Job: Expectations and the Role of Intangible Investments
https://www.morganstanley.com/im/publication/insights/articles/article_onejob.pdf
Capitalism Without Capital: The Rise of the Intangible Economy
https://books.google.com/books/about/Capitalism_without_Capital.html?id=J3SYDwAAQBAJ
A Better Estimate of Internally Generated Intangible Capital
https://pubsonline.informs.org/doi/10.1287/mnsc.2022.01703
Underestimating the Red Queen: Measuring Growth and Maintenance Investments
https://www.morganstanley.com/im/publication/insights/articles/article_underestimatingtheredqueen.pdf
Explaining the Recent Failure of Value Investing
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3442539
Guest Links:
Michael Mauboussin Twitter
Topics Covered:
Why OpenAI’s projected growth would be unprecedented in market history

How base rates provide a reality check on AI expectations

The role of diffusion models and adoption curves in forecasting technology

Why massive capital investment in AI may follow past boom-bust cycles

Lessons from large-scale infrastructure projects and why timelines break

How intangible assets change the distribution of business outcomes

The rise of “fat tails” and why more companies now massively win or fail

Who captures value in AI across the stack from chips to applications

Why competition may drive AI profits toward consumers, not producers

How accounting distorts intangible investment and misleads investors

Timestamps:
00:00 Intro and OpenAI growth expectations vs historical base rates
04:32 Why no company has ever achieved 100%+ sustained growth at scale
08:47 Lessons from megaprojects and AI infrastructure buildouts
13:18 Intangible assets and why outcomes now have fatter tails
18:36 Why big tech is growing faster than historical precedents
23:52 Where value accrues in AI and why consumers may benefit most
28:21 Barriers to entry in AI including capital, talent, and scale
32:47 The risk of overinvestment and historical parallels to past bubbles
37:26 Game theory and competitive signaling in AI capital spending
41:58 Why investment returns—not “asset light” narratives—drive value
46:12 How accounting fails to capture intangible investment properly
50:44 Breaking down SG&A into maintenance vs investment spending
55:03 Why understanding reinvestment and ROI is the core investing skill
59:18 Final thoughts on uncertainty, expectations, and base rates in AI

This episode of Excess Returns features Aahan Menon of Prometheus Research breaking down the growing risk of an inflation shock driven by energy markets and what it means for investors. The discussion explores how a potential shift toward stagflation could challenge traditional stock and bond portfolios and why commodities, trend following, and systematic frameworks may be better suited for the current environment.
Prometheus Research
https://www.prometheus-research.com
Aahan Menon Twitter
https://x.com/@AahanPrometheus
Why the current inflation shock may be one of the most significant in recent history

How oil prices and geopolitical conflict are reshaping macro expectations

The growing risk of a stagflationary environment and what it means for portfolios

Why traditional 60/40 portfolios may struggle in sustained inflation regimes

How expected returns differ across equities, bonds, commodities, and FX

Why commodities and energy markets offer the most attractive opportunities today

The role of backwardation and supply shocks in driving commodity returns

Why consensus earnings expectations may be too optimistic relative to macro reality

How inflation flows through the economy from energy to consumer demand

The Fed’s dilemma between inflation control and economic slowdown

A simple rule for when to own treasuries based on inflation trends

Why correlations across asset classes are breaking down in crisis environments

How systematic investors manage risk when markets are driven by news and geopolitics

The case for trend following as a core portfolio strategy

How Aahan’s free trend system works across stocks, bonds, gold, and Bitcoin

The behavioral advantages of systematic investing during volatile markets

Risks of trend following including whipsaws and false signals

How portfolio construction is evolving to include crisis protection and energy overlays

00:00 Inflation shock and why equities and bonds may struggle
01:03 Setting up the macro backdrop before the oil shock
03:12 Labor market slowdown vs strong GDP divergence
04:45 Consumer spending driven by de-saving
05:35 Oil-driven inflation shock as a recession catalyst
07:32 Preparing for stagflation vs disinflationary growth
09:18 Why commodities outperform in inflation regimes
10:45 Expected returns framework across asset classes
12:05 Why commodities and FX offer the best opportunities
14:05 How commodity carry and backwardation work
16:42 Trend following and commodities as pro-cyclical exposures
17:43 Ranking expected returns: energy, FX, bonds, equities
18:51 Challenges of systematic investing in news-driven markets
20:15 Extreme correlations and oil dominating asset pricing
23:47 Earnings expectations vs macro reality gap
28:30 Why the Fed faces an impossible policy tradeoff
30:00 Real-time CPI estimates and inflation pressure
32:00 A rule for when to own treasuries based on CPI
37:30 Stock-bond correlation regime shifts
39:34 How the trend following system works
45:10 Benefits and limitations of trend strategies

This episode explores Harris “Kuppy” Kupperman’s framework for “inflection investing” and how he identifies asymmetric opportunities across global markets. The conversation dives into why he believes U.S. equities are structurally challenged, where he sees better opportunities globally, and how macro, politics, and capital flows drive major investing inflections.
Inflection investing and identifying asymmetric opportunities
How macro and politics create winners and losers in markets
The Argentina case study and why the stock exchange may outperform the country
How to structure trades with limited downside and multi-bagger upside
Time horizon advantages versus short-term Wall Street thinking
Portfolio construction, capital allocation, and when to sell positions
Managing risk, leverage, and liquidity during crises and wars
Building a “shopping list” during market dislocations
Country ETFs vs individual securities in global investing
Why Kuppy prefers international markets over the U.S.
The structural imbalances in the U.S. economy and stock market
Why AI may lead to profitless growth and economic disruption
The impact of AI on jobs, margins, and economic demand
How inflation distorts economic data and investor perception
Finding opportunities in “left for dead” markets like Brazil
The role of elections and policy shifts in market inflections
How to think probabilistically about investments
Avoiding unforced errors and emotional decision-making
The importance of long-term thinking in volatile markets
Psychology and discipline in global macro investing
Harris Kupperman Twitter
https://twitter.com/HedgeyeKuppy
Praetorian Capital Website
https://praetorian-capital.com
Timestamps
00:00 Why the U.S. stock market is structurally overvalued
01:14 What “inflection investing” means
02:54 Top-down vs bottom-up investing framework
04:31 Using politics to identify winning trades
05:00 Argentina trade setup and execution
06:20 Why the Argentine stock exchange is the best play
08:00 Earnings inflection and multiple expansion potential
10:37 Time horizon and holding period strategy
13:00 When to exit positions and recycle capital
18:41 How and when to raise cash
19:41 De-grossing the portfolio during crises
23:14 Real-time decision making during war scenarios
27:00 Building a shopping list during dislocations
29:32 ETF vs individual stock decision process
33:22 Why the U.S. is less attractive than global markets
38:17 The problem with AI-driven “growth”
43:31 Monitoring vs acting across global opportunities
48:14 The psychology of long-term investing and edge