Full Transcript: Last Call May 2026
Markets, macro, and the biggest IPO ever — with Aahan Menon, Ben Hunt, and Brent Kochuba
Matt: You’re watching Excess Returns, the channel that makes complex investing ideas simple enough to actually use, where better questions lead to better decisions. This is Last Call, a different kind of market wrap. Jack Forehand, I raise my tumbler of vodka, gin. I don’t know what I’m drinking in here today. Oh, this is exciting. We got a— I raise this in your direction. Are you, are you ready to market wrap?
Jack: If that is vodka and you’ve actually, actually... if you actually take that down during the episode, we are, yeah, we are, we are in for some fireworks here by about 45 or 50 minutes.
Matt: I mean, I think we’re in for fireworks no matter what. We’ve got some killer guests lined up. Do you wanna run down the people that we’re talking to this month?
Jack: Yeah. We brought Aahan Manan on, who’s great, who has a really systematic approach to looking at macro, and we talked about what’s going on with the economy, inflation, a lot of different things. You’ve got a great interview with Ben Hunt on World War AI, which is— we’ll leave that open so people can hear later what it’s about. Then we’ve also got Brent Kochuba as usual, talking about flows behind the scenes. So we’ve got a really good episode.
Matt: This is a really great way to check in with some of our favorite people on stuff that happened in the last month, recent history, and then map this all forward. I love this because it kind of gives a good excuse to start to think about conversations that I know we’re all having in our lives in the next weeks and months ahead. So this is a good crash course behind some of the best thinkers on what they’re watching right now. So I’m excited to dive into all of these.
Jack: Before we start, we always like to take a look at the rear view mirror to see what happened last month. I think the thing we have to talk about when we look at the last month is this idea that on one hand we’ve kind of got what a lot of people are viewing as fundamentals and events and valuations on one side, and then what the market’s actually doing on a different side. And people are having a hard time connecting those two things and seeing how they relate to each other. I mean, we’ve got a war going on right now. The market keeps getting more and more expensive. People are sort of questioning many things around that.
Matt: Well, as our resident Strait of Hormuz expert, where can you point at the Strait of Hormuz trade data showing up in the current stock market valuation and price?
Jack: We forgot to do... we were gonna do the picture of you in the boat. We were gonna do the backdrop to have you be in the boat for the episode. We forgot to do that. I mean, we know Citrini actually sent someone in a boat to the Strait of Hormuz to get some information, but we were gonna do a fake Matt Ziegler trip to the Strait of Hormuz, but we forgot to do that. Maybe next
Matt: month I can report live from the boat when the Strait of Hormuz situation still isn’t resolved. Should that be the case, we’ll, we’ll
Jack: work on doing that. But what’s interesting to me about this is there’s two kinds of things. One is the market’s ability to see maybe what it thinks is gonna happen in the future, and that’s happened so many times in my career where we’re sitting at some event where we’re like, “All right, the market should be down. Something should be happening.” And the market kind of sees through that, and there’s a major change going on in the background, which five years later we realize, oh, that was a major change going on in the background. And I kind of feel that way about the Strait of Hormuz and AI right now. Like, I feel like the market, especially when Claude Mythos came out, you started seeing big changes in earnings estimates across many of these tech-type companies, particularly the semi companies. The market’s seeing a very big future right now, and that might be a legitimate fundamental reason for it to be kind of ignoring the here and now to some degree.
Matt: I believe there’s an actual exhaustion element of all this, too. The AI stuff is so overwhelming, so everywhere, that it’s exhausting, so we just... The natural tendency is to make certain assumptions that this is big, this is immovable, and this is here. Same thing with Strait of Hormuz. It’s so confusing and none of this makes any sense that we’re exhausted by it, and therefore somehow suppressing all of this as if it doesn’t matter. There’s no case on either of these that we don’t look back and either say— and it can go in either direction. It could either be, “We were way more worried about the Strait of Hormuz moves than we ever should have been, and look how great everything turned out,” or, “Holy crap, what a disaster this turned into.” And same thing with AI. This changed every single business in some material way. We completely underestimated it, or we completely overestimated it. And after that SpaceX IPO, everything just went off a cliff, crashed and burned, years and years of political chaos. These are such big, giant stories that we almost don’t know how to think of them, so we’ll just ignore them. I mean, there’s a lot of therapy in the world over this topic.
Jack: Talk about exhaustion. Like the— we have a deal, we don’t have a deal. Like, this person’s involved, this person’s not involved. We’re done with it. I mean, this has been going on for months, we’ve had a deal or we haven’t had a deal. Maybe it’s some sort of tactic, like some sort of exhaustion tactic where people just start throwing their hands up and stop paying attention to it. Because it seems like maybe we’re getting close to having a deal now, but who knows? By the time this comes out, maybe there’s no deal.
Matt: Are you saying there’s an art or is this more of a science of a deal, Jack?
Jack: Yeah. Can I bait you into
Matt: this? It could be, it could be either. Can I bait you into this?
Jack: And I couldn’t even tell you what’s in the deal, by the way. Like it’s just, there’s been so many things floated about what’s in the deal and what’s not in the deal. It’s like, who even knows? I don’t even know how, as a market, how I could even interpret that because God only knows what’s in the deal, what’s not in the deal, or if there even will be a deal.
Matt: God only knows how much I love you, sir. And let’s not forget behind that Beach Boys reference, this idea that earnings and expectations, they all keep going up. Like our year-over-year estimates, we’re getting the quarterly earnings reports. Everything that’s coming in still suggests everybody looking beyond both of these things to some version of a fairly optimistic future where there’s a lot of growth. And so far, markets seem to be more or less keeping pace with these rising expectations that are digesting and ignoring some of these major issues that, again, feel like the dominant headlines of the day, but they barely register when we look at these expectations for even six or 12 months down the road.
Jack: I mean, that was one of the biggest takeaways from our Adam Parker episode this week, which by the way, I’d recommend everyone go watch. It was a great episode. But this idea— he was able to track the change in earnings estimates to exactly what’s going on in the market. Like the market is up by the change in earnings estimates this year. The sectors that are up the most are up by the change in earnings estimates. The ones that are down are down by the change in earnings estimates. So whether those estimates are right or wrong is a different question. But if you’re thinking the market’s not tracking fundamentals, the market’s tracking the fundamentals, at least the ones that analysts believe are going to happen. And the other point I would make is with AI, we don’t know— Adam made this point— that we might be trading on 2030, 2031 fundamentals. And there is a version of the world, and again, you and I are like the people that are out there looking at this risk with the Strait of Hormuz moves and seeing what’s going on and saying, “This could go the wrong way.” But there’s a version of the world where those 2030 and ‘31 fundamentals are phenomenal because of AI. There’s a version of that world where we look back and we’re like, “What was the Strait of Hormuz? Why did I even care about that?” I’m not saying that’s necessarily the base case, but that version of the world exists because we’re in the middle of a completely transformative technology where no one has any idea what the real impact’s gonna be five years from now.
Matt: So reformed AI bull Jack is still with us?
Jack: I don’t know. Jack has been very much a world of probabilities type of guy.
Matt: I need some more of the proverbial vodka I think for
Jack: AI bull Jack. I’m just trying to accept the reality, because as you know, whenever we put anything positive out in the podcast, we’re just getting destroyed with comments these days. So I feel like we’re in a very close-minded world about different alternatives. And I feel like Jack needs to be a person who looks at probabilities. There is this very bad probability out here, but there’s also this really good probability, and there’s a bunch of stuff in the middle. And all of us that are trying to predict which one’s gonna come to play— we just don’t know.
Matt: You gotta think about it in terms of a distribution. And I agree, you have to think about it like that. Because if you remove or change any of these things, the mean on whatever your distribution of these expectations are, that mean can shift. If the Strait of Hormuz gets solved tomorrow, and the AI stuff keeps proliferating in a certain way, that mean might actually move a lot in your range of potential outcomes. Conversely, there’s the other scenario too, where the Strait of Hormuz, all of a sudden we realize it is a bad thing, and markets decide it’s a bad thing, and a bunch of the other forward expectations come back in. And in that case, the whole mean of your expected possible values can shift. This is probably— we’ve had several guests say this to us— one of the most confusing times in global markets that a lot of these people have ever experienced. I know it certainly feels that way for me.
Jack: Yeah, and if those types of people are admitting they don’t know the answer, then we don’t know the answer either. And the idea that— and Bob Elliott I think has talked about this— to some degree, the Strait of Hormuz has done some degree of damage to the economy here, even if it opens tomorrow. So what is that? We don’t really know. That’s the— we talked about the positive side a lot. A lot of the negative side would be, obviously, if it doesn’t open. But also oil prices being this high has certainly probably had some impact on the global economy, less on the US probably than some other countries. But what that impact is, we don’t know, and that’s what we’ve got to figure out going forward.
Matt: Yeah, all we know is that somebody paid for and used oil, gas, crude, et cetera, somewhere in the world during this thing.
Jack: I know I did, Matt. It was a lot the other day.
Matt: Listen, about to purchase a hybrid car and feeling very, very good about that trade, seeing what the miles per gallon is on that thing given the current situation. I understand it. There are ramifications of this. They’re not all rosy, and we still don’t know what they are, and that’s part of what’s gonna be the game of 2026.
Jack: So maybe it’s a good time to bring in an actual macro expert, Matt, instead of us. What do you think?
Matt: I mean, an actual... Yes, this is definitely the time. I’m going back to my vodka. Please introduce our first guest.
Jack: So our first guest is Aahan Manan, founder of Prometheus Macro. As I mentioned before, a great systematic macro firm. So here’s my conversation with Aahan.
Aahan, welcome to Last Call.
Aahan: Hey, thanks for having me on, Jack. Good to see you.
Jack: I was excited to talk to you because I would say— and I don’t know, you could tell me as someone inside the macro community— this seems to be one of the more challenging macro backdrops in a long time. On one hand we’ve got wars and oil shocks, and then on the other hand we’ve got this massive transformative technology with AI that people are looking through to the future. So is this a more challenging time for macro than normal?
Aahan: Yeah, it’s definitely... I think that challenging is almost an understatement. Especially if you’re macro or macro equity oriented, this is one of the most challenging backdrops because you have to deal with an inflation shock. Is there gonna be demand destruction or is this transformative technology just gonna override everything that’s classical macro? So it’s definitely a lot to take in as an investor today.
Jack: And even some variables that we can’t control, like when is the Strait of Hormuz gonna open? Obviously you’ve got a lot of people predicting that who probably are not qualified to predict that, but it’s like that’s another variable that none of us know.
Aahan: I’ve yet to find the qualified person on predicting that.
Jack: Yeah. I’ve just... I was talking to Matt at the beginning of the episode and this idea that— I mean, we’ve got a settlement, then we don’t have a settlement. We’ve got a deal, there’s no deal. It’s just been going on for months now. It’s just a very hard thing. As a systematic macro person, you almost have to put that aside, right? And say, “I can’t do anything about that. Let’s just look at what the economy’s actually telling me.”
Aahan: Yeah. And we found that that type of approach— kind of look through the noise and just focus on what the... So, just a backstory before I get into this particular thing. Basically what we do is we create systematic strategies across macro assets, take into account the nuances of individual macro assets. So even within macro, there are all kinds of different styles of investing you can do. You can create fair value strategies. You can trade assets on a relative value basis. You can trade price-based trends. There’s a whole ensemble of different macro strategies you can do, and so we have a variety of those different strategies we track.
And the single most successful set of strategies this year have basically been the strategies that have in some ways— there’s that meme on X where you have the bell curve and the two ends, the right end of the bell curve and the left end of the bell curve. They both say the same thing, and the mid-curve is making it too complicated. The most straightforward approach has really been to look at what the economy is doing and allocate in line with what the economy is doing, rather than getting too cute about the pricing and looking forward too much. And so basic macro trend following has really, really done well and kind of been able to navigate this by avoiding all of the noise that we’re seeing in markets from all this geopolitical craziness, for lack of a better term.
Jack: So getting into what the economy is doing, you’ve got your macro monitor here, your Growth Nowcast. So what is this telling you?
Aahan: Yeah. So we take a slightly alternative style approach. There are many different ways to come up with where we are in terms of the growth cycle. And typically what you basically have is you get more precise on the exact GDP number as your Nowcast gets low in frequency. But what we wanted to do is we wanted to have something that’s very fast and timely, and so we use some non-traditional income-based approaches to estimate where nominal GDP is on a daily basis. And so it’s not exactly to the print. It won’t be pinpoint on the print of where nominal GDP is at, but it generally, as you can see from the visualization, the red line is official nominal GDP, and the blue line is our daily Nowcast. So we generally tend to get the big muscle movements of which way GDP is going pretty decently using this measure.
And nominal GDP is running very, very hot. And that’s also consistent with the more precise monthly versions I alluded to earlier. And what you’re really seeing over there is a situation where the consumer continues to spend. AI CapEx continues to have the largest contribution it’s had to GDP growth in history. And the rest of the economy, the more cyclical parts, have been meandering, but not enough to stop those two segments. And so the combination of those basically gets you to a nominal GDP environment which is really, really strong.
Jack: Would you have expected... Like, one of the things people would expect maybe is with this oil shock to see some sort of demand destruction across other things, because people are gonna still fill up their cars. You haven’t seen any signs of that yet though, right?
Aahan: We haven’t seen any signs of that just yet. And I think that one of the things you really have to think about as an investor is that that logical sequence of demand destruction is totally right. But the timescale that it plays out on is very different from what is intuitively satisfying. And so when you think about demand destruction, it starts with the energy prices. It starts with energy and commodity prices, and then it slowly makes its way into the economy. The energy prices don’t all get reflected immediately. You see higher prices at the pump and whatnot, but even that transition happens over the course of a month. And so consumers don’t react as fast as market participants react. I think a lot of people expected the demand destruction to just happen in the next three prints of whatever your data series is. But I think the path to demand destruction is a much slower one, and you’ll first have to see measured inflation just stay high for a longer period. And then as people come to terms with the fact that, “Hey, these prices are really high and I have to keep rebalancing my consumption basket to pay for these really high-priced items,” you slowly begin to have that process of demand destruction. And so I think that the demand destruction makes sense, but it’s something that takes a lot longer than people are really expecting right now.
Jack: So on this idea of higher inflation, we’ve got your inflation nowcast here as well, and that’s somewhere where we have started to see some movement, unlike in growth, right?
Aahan: Yeah. The inflation nowcast. Virtually every fund and every sell-side institution runs some sort of inflation nowcast. And honestly, headline inflation for the most part is dominated by the energy component. But I think it’s particularly important to monitor the changes in that nowcast today because of what’s happening with oil prices. And so almost all the variation today is going to come from the marginal change in oil prices. And I think the important thing to recognize is that as those oil prices stay high— we’re looking at crude at about just under 90 bucks a barrel today— that headline CPI begins to translate into higher core CPI over time. And so what we have right now is some of the hardest inflation prints we’ve seen since the pandemic period. And prior to that, we haven’t seen this type of inflation since the early 2000s. And so we’re basically in an inflationary environment which is really, really challenging both for the consumer and for the Fed. We’ve definitely been keeping really, really close track of this particular metric both in terms of tracking the economy and also in terms of its impact for markets.
Jack: So this is really interesting, and this next slide gets at this four-quadrant thing you see a lot, which is we’re talking about which regime we’re in, but then you’re kind of taking it a step forward and talking about what works in that regime, right?
Aahan: Yeah. So what we do is we take a whole lot of fundamental macro data— data that goes into the inflation nowcast, data that goes into our growth nowcast, and a variety of other factors. And what we try to do is something that I found to be relatively unique, but then again every founder finds their work relatively unique. What we try to do is create a cross-asset macro market regime forecast. So every day what we’re doing is we’re basically saying, “Hey, what is the macro market regime going to be tomorrow?” And we do that by creating signals on a bottom-up basis for a variety of different asset classes. And so that macro market regime forecast basically allows us to create a range of expectations for asset classes on a very short-term basis. But the good feature about it is that, as you can see on the visual in front of you, the regimes tend to be pretty stable over time as well when a really big macro trend gets going.
So right now, what we’re seeing from those macro regime probabilities is that there’s a very, very high likelihood— and has been a very high likelihood— that we’re in a rising growth environment. That rising growth environment has had a bias towards rising inflation as well. And so in that type of backdrop, you typically tend to expect a mix of pro-growth assets, which are stocks and commodities, to outperform anti-growth assets, which are basically, for the most part, treasuries. Both nominal and inflation-linked treasuries tend to underperform.
Jack: How do we think about the sort of lasting nature of inflation? Like, if the Strait of Hormuz opens up tomorrow, do we still expect we’re gonna have inflation with us for a while?
Aahan: I think you have to. And the very simple one-line answer is unless oil prices tank, you’re going to have long-lasting inflation. Because we’re still looking at oil prices up roughly 60 to 70% this year. And when you’re looking at that price pressure, that price pressure has increased the price level. And then importantly, that might not continue to flow to headline CPI in terms of the energy component, but what happens is it starts to make its way up the supply chain. And so you’ll have a whole bunch of related goods start to— industrial prices begin to rise, motor vehicle prices begin to rise, and that begins to seep its way into, possibly, even wages rising because people will demand higher wages. And so I think that barring a complete reversal of the parabolic oil price move we had this year, you’re going to basically have a situation where we’re gonna have inflation at a higher clip than what we’ve been used to for the last couple years.
Jack: So this last slide gets into energy, and energy is obviously what’s driving everything right now. You’ve got an energy monitor here taking a look at behind the scenes with positioning. Can you talk about what this is and what it means?
Aahan: Yeah. So what we did was we wanted to basically understand when is a good time to own energy beta. And I think that when you think about owning energy, it’s very different from owning, say, an equity or a fixed income product. Like, equities and fixed income have positive carry and positive drift over time. You own them, and by and large, on any given month or any given quarter, you’re gonna see that those assets are up. It’s been less true for treasuries lately, but over time that’s generally what you see. When it comes to commodities, you don’t always have that, and why that is is because the risk premium tends to be more time varying. And I think a big part of that risk premium really comes from the fact that hedgers tend to be counter-cyclical pressures in the market. So what happens is you have a very large move in oil prices due to some sort of fundamental change, like we have today, and as a result, hedgers tend to come in to lock in those prices, depressing prices relative to their fair value. And that’s what creates the premium which allows you to own energy or any given commodity where there’s a very large hedging pressure.
And so what we’ve done is we’ve gone out and created a measure that allows us to quantify whether we are in a hedging dominant environment or we are in a speculative dominant environment. The idea being that the most risk premium is going to be available when hedgers are the marginal driver of prices. And so on the left-hand side, you can see we have this positioning measure, which basically helps us classify these periods, which is relatively good at explaining prices. And then based on the classification, we can create two conditional P&L profiles— one where hedgers are the dominant force in markets, and then one where speculators are. And what we find is that most of the risk premium and the positive drift for owning energy commodities comes when hedgers are the dominant force in markets, and that is the environment that we are in today.
Jack: Well, Aahan, thank you for coming on. You always have unique charts. Every time you come on, you’ve always got ways to look at the data that I haven’t seen anybody else doing. If people wanna follow you and your charts and Prometheus Macro, where can they go?
Aahan: If you’d like to follow us on X, we have the official Prometheus account. That’s @PrometheusMacro. I’m personally on X as well— it’s a less serious account, but I talk about a lot of macro stuff. That’s @AhanPrometheus. If you’re interested in our various services, you can go to prometheus-macro.com, and you can find a whole lot of stuff there.
Jack: Well, thank you, Aahan. I appreciate you coming on.
Aahan: Thanks so much, Jack. Great to see you.
Matt: So our next resident expert is Dr. Ben Hunt himself, Persiant, Epsilon Theory. You know the name. We’re talking about this narrative shift. We’re talking about this look-through. We’re talking about his World War AI thesis, which is basically at some point the look-through on the Strait of Hormuz and how we’re thinking about AI, the political issues and pushback about whether people want these data centers in their backyards— that’s gonna come to a head at some point. Listen to Ben break down the narrative of what’s going on now and what he thinks is gonna happen later.
Next up, we’ve got Ben Hunt, Epsilon Theory, Persiant. Ben, welcome to Excess Returns.
Great to be back here, Matt. Man, I’m feeling good. I just need a haircut. That’s— I’m looking at myself here in the camera and it’s like, “Man, you need a haircut.”
You’re looking good. You’re looking good.
Well— if you wanna go to the barber together, we can share an Uber.
Right. Yeah. I’m not gonna talk about you needing a haircut. I... No, no, no. That ship has sailed. Get a haircut and— get a real job. Exactly. All right. Me and George Thorogood will take that all the way to the bank.
You’re back. We wanna talk about— there’s an update on the World War AI piece you did, because we’re finally seeing this backlash really seeming to begin against AI in narrative space. So unpack what you’re writing about over at Persiant Pro. This is crazy to see visually.
Yeah. It is crazy to see visually, and that’s what we do. We read all the news in the world, and then we visualize all the narratives, the life cycle of these narratives as they run through, as they move through our media world.
Ben: And I wrote a note— it was at the tail end of last year— called World War AI. And it was about this phenomenon that was actually starting then, and looking forward to its natural evolution, which is: all right, all these AI data center projects get up and running. They need enormous amounts of energy. They need an enormous amount of resources, period, including capital as a resource. Where’s all that gonna come from? Because we are in a world where energy, capital, land, water— you name it— both atoms and fiat are increasingly in short supply. The numbers are staggering for what this is going to require. So how does that play out against all the other uses for energy and capital and land and everything else we want to do with those primary resources?
And one other thing— the AI use of this, the data center use of this, it doesn’t come accompanied with jobs, which has been the accompaniment of every other enormous productivity advance. You know, oh yeah, some jobs are in trouble because we’re increasing productivity, but it’s gonna create whole new sets of jobs. Well, you think that’s happening with AI? I sure don’t. So it’s both similar to enormous resource mobilizations we’ve had in the past, but also different because there’s not a lot of human jobs associated with it. So this was a note written about that, and I said, “Look, the only way to square this circle is to treat the AI build-out as if we’re fighting a war,” because the resource mobilization is similar to what we had for World War II. I mean, it’s that big of a deal. Now, I’m not particularly in favor of that. I’m not in favor of that at all. But the point of the note was that’s what’s coming, because if you don’t mobilize resources to that sort of degree, then you can’t do it. You can’t build out the AI infrastructure like our markets are shouting at us must happen.
Because think of this— if you don’t do it, if there’s no productivity revolution, if there’s no AI CapEx story to move our economy forward, well, look out below when it comes to the market and look out below when it comes to our economy. So that was the point of the note.
Now, what happened most recently, two things. First, in markets, the AI CapEx story, the corporate earnings story, has been the single pillar that has propelled the US stock market, all global stock markets higher. And that earnings part of the story— oh, earnings are great— and they were. The earnings are great in two places. They’re great in tech and everyone who supplies that AI CapEx edifice and energy. That’s it. That’s where the earnings are, and that’s where the story is.
And so from a markets perspective, we have never— and this is one of the things we visualize— we’ve never been more bullish about the AI build-out. Never. And it’s not because the bullish stories are at their loudest, it’s that the bearish stories are at their quietest. I’ll say that again. It’s not just that the bullish stories are loud, it’s that the bearish stories— they are silent. They’re dead. That’s in markets.
But in politics, when we look at the political narratives, the storyline around data center build-outs, the role of AI in our society, man, those negative stories, those negative narratives, they are spiking. They are absolutely spiking. So this is what I was writing about. You’ve got a market that requires the AI story to succeed and for the build-out to go, go, go. And you’ve got a political story that’s increasingly saying, “We ain’t behind this,” right? You get the kids booing at the graduations. You’ve got all these protests. You’ve got legislation that’s coming down the pike. This is a narrative battle for the ages, and my view is it’s absolutely going to dominate our world once we get through whatever the hell it is we’re going through with Iran and approaching midterm elections.
Matt: Which are an actual thing on the calendar. Perfect way to put it, Matt. So I like to say narratives get cashed out in politics, and that politics always trumps— no pun intended, I really don’t mean it as a pun— politics always trumps economics and markets, always. So we’ve got this car that’s going 90 miles an hour at a tight turn for the midterm elections, and it’s gonna be an even tighter turn in ‘28.
Ben: It’s gonna be an even tighter turn. This is where narratives collide, and this is what has enormous impact for both our political system and our markets right now. Walk us through a couple of things you’re seeing over on Persiant Pro. I wanna talk about what does it mean when you say the opposition to AI infrastructure led all 37 signatures in weekly movement?
Matt: Why is that such a profound indicator? And we’ll get that chart up here too. Well, right there, the opposition narrative. So we track a lot of them. And what we’re able to do is what we call resolution. So it’s not just, oh, there’s a story that AI data centers are bad. We’d say AI data centers are bad because X.
Ben: Oh, they use too much water. Or they use too much land. Or they’re making our electricity bills go up. And all of these have a different cadence. All of these stories have a different sourcing, a different life cycle, honestly. And what’s striking— in the same way it’s so striking about the bearish stories about AI CapEx going quiet— what’s notable about these political narratives is regardless of their focus, they’re all going up. They’re all going up. And so when you see this sort of broad-based rally in these negative stories about AI data centers, that’s worth looking at.
Now, when you dig into it, you can absolutely see— and we see this a ton with political narratives— that there is a push behind the narratives often coming from outside of the US because we live in this media environment where it’s never been easier to spread the infection, if you wanna think of it that way. Because the math is the math of virality and spread. So we’re absolutely seeing that. It’s absolutely part of a larger strategic competition, a geopolitical competition. It’s absolutely something that the protagonists on the corporate side want to address, shape, get ahead of. I mean, when you’ve got both Anthropic and OpenAI going out with close to trillion-dollar valuations, the story makes a ton of difference.
But it is that real 180-degree divergence— one end of the spectrum to the other end of the spectrum— on the political narratives here and the market narratives that is really, really striking. On the political side, the “oh, data centers are good for us” stories are quiet as a mouse. On the market side, “oh, we need to be a little bearish on this AI CapEx, will it earn out, is it overbuilding?” Those narratives are really quiet. I’ve never seen anything like it.
The other one that I wanna hit before I let you go, and this just shocked me when I saw it in the polling data about two weeks ago—
Matt: And it was this idea that five in ten Americans don’t wanna live next to a nuclear power plant, but seven in ten don’t wanna live next to a data center. And I don’t think people who are immersed in markets or thinking about this and hearing all the demand story understand just how much of a difference it is that we’ve now moved to where your average American, when polled, would rather live next to a nuclear power plant— which is only a 50/50 shot of disapproval— than the AI data center, which now 70% of Americans are opposed to. This comes home to roost. Unpack that reality and—
It comes home to roost in politics because while 70% of US consumers don’t matter for markets— because whatever percentage of our consumer spending is driven by the top 30% of consumers in terms of income— a solid K-shaped economy that we are.
Ben: A solid K-shaped economy. So the bottom slice of the K doesn’t matter for markets. They all vote. Matters a lot for politics, and that’s what I mean by it gets cashed out in politics. This is gonna be a very vigorously debated issue— and it cuts across party too. That’s the other thing about it. Oh, yeah. It’s perfect for a political entrepreneur on either side, which can be impactful, let’s just say, on political terms, and that translates into markets.
Ben, people wanna follow this. They wanna find you on the internet. Where should we send them?
Well, I’m Epsilon Theory everywhere, so you can find me on social media on Epsilon Theory. You can look up Epsilon Theory on the web. It’ll take you to our publishing arm, which is Panoptica. Sign up there. Get on the mailing list. We’ll show you what we’re working on. Come check out these charts and more.
Ben, thanks for joining us. Thank you, Matt.
Jack: So it’s always good to wrap up with what people are actually doing. We’ve talked a lot about what’s going on and what people should be doing or maybe things like that. What I love about talking to Brent Kochuba is Brent sees what people are actually doing. Like, if they’re buying a bunch of put options, Brent sees it. So here’s Brent talking about the flows that are driving the market behind the scenes and what he’s seeing.
So Brent, I feel like I’m kind of a broken record because every time we’ve been talking, I’ve been introing this with, “This can’t go on much longer, can it, Brent?” Like we— it’s like every time we think the market can’t go higher, the run can’t go longer, it just keeps going. Yeah. And not only does it keep going, the number of stocks which just seem to surprise— like Dell was today and is up 30% today— and you’re just like, “What?”
Brent: What’s going on. I had an interesting observation because you talk about these AI stocks now, particularly on FinTwit, and people are like, “No, you don’t understand, Brent. These valuations are still cheap, actually. Like, Micron’s still trading for 10 times earnings.” But it was the same analyst who a year ago, when Micron was at 90 or $100, didn’t say anything, to my knowledge. And now the stock’s up 800%, and now you’re gonna tell me how it’s fairly valued. I don’t know. I’m confused. I’ll put it that way.
Yeah. It’s a function of— these are a very cyclical company typically, and will be priced accordingly as a cyclical company. But if people decide the world has changed, and the AI demand is insatiable or something, and it’s not a cyclical company, then maybe they’re gonna justify some higher valuations, I guess.
Well, the names keep getting underpriced as well. If you see all the semi stocks blow earnings out, you don’t see the pricing into these earnings events change that much to reflect the possibility of higher outcomes either. So it’s a very confusing time. And the other reason that it’s confusing, Jack, as we’re gonna allude to here in these next few minutes, is options prices are getting bananas. And so historically, this is sort of a topping signal, and we’re getting into that extreme froth, I think, as we’re gonna touch on here. So I’m trying to weigh these two things out— the biblical change in the AI infrastructure trade, whatever that may be, and Brent’s call options indicator saying, “Watch out.” And that’s why I like to talk to you because you’re seeing what’s actually going on.
Jack: You’re seeing what people are actually doing. And earlier in this run, you weren’t seeing this crazy call buying necessarily, in previous episodes of The Options Effect we’ve done. But you’re starting to see that build up, obviously.
Yes. And so as so often happens, price action reinforces narrative, right?
Brent: So you feel better about the AI prospects and better about what’s happening there if the stocks are going up 20 or 30% at a clip. And the issue with that is that a lot of these options flows are short-dated, and now I’m starting to see signs of volatility traders stepping in because the implied vol has gotten so crazy in some of these names. So the price action can be driven by stuff that has nothing to do with fundamentals, I think, a lot of times. And so when people start to conflate those things, it’s interesting. But ultimately to me, what this is about is rate of change, and the rate of change in this stuff has gotten to be— I think “silly” is the word I’m going to use.
Jack: It is funny though, like when the market’s running up a lot, people will be like, “Claude Mythos will change the world in every way possible.” And then, like, as soon as it goes back down, it’s gonna be like, “What is Claude Mythos? I’ve never heard of that.” Like, it is funny. The story kind of follows whatever’s going on with the price.
Brent: Yeah. And you look at software stocks, for example, and the Citrini bottom as it’s referred to now— when he put out that article that made worldwide financial paper headlines in the software stocks, it was such a great moment to drop that paper because— it was peak fear, and you drop that article saying, “Yes, the software stocks are dead.” Well, those things are ripping right now. ServiceNow’s up 15% today, for example, and they’re all coming back, right? Because maybe AI isn’t gonna eat their lunch. So it’s a very tough and challenging place to navigate. But I do think the idea that people are using price action as their fundamental indicator is challenging when a lot of those flows are short-dated and levered option trades.
Jack: And talking about price action, as we look forward, you’ve got a chart here that shows this. We’ve got a lot of events coming up that could influence that price action.
Yeah, that’s exactly right. And so here as we stand right now, today is May 29th. Obviously we’re up on the day.
Brent: Trump is having a meeting in the Situation Room, which will determine our fate, I suppose, for today. But we’re looking like we’re gonna get seven days. And Jack, the other reason that I thought this was interesting is it gives me a chance to use my pen tool, which I always like to do now, as you know. We’re at six days, but look at this right here. Record streak— nine days is the longest ever. We’ve had two of those. And the other one, look at that date— not too long ago, right? So we’re kind of fresh off of a big winning streak, and it seems like today is gonna be seven days. So we’re starting to get into the longest streak of wins ever, which means we’re gonna get at least maybe one negative day.
But you were just talking about the number of catalysts coming up. And so this is interesting to me because the options market is screaming overbought, and you look at the number of signals coming up here. You’ve got CPI on the 10th, SpaceX I believe is on the 12th still. Then you’ve got FOMC and Warsh’s first FOMC, and then you’ve got VIX expiration on the 17th— that’s Wednesday. Then Thursday is gonna be what is likely to be the biggest options expiration ever, and then that’s the Juneteenth Friday holiday. So all of that is coming up in about 10 days, not next week but the week after. And so if you’re looking for a catalyst to sort of shift flows a little bit, obviously that’s a screaming flag.
OPEX in May, for example— look what happened there, right? We had OPEX and we just had this consolidation. That’s what it was, and then we can keep on the way. And so at a minimum it’s like this is that opportunity for a little correction or some consolidation coming up in here. I just think the correction may catch a few people off sides as these things can sometimes get violent as call prices just get a little bit overheated.
Is there anything interesting in the options market with SpaceX that you think about? Like in the stock market with what the indexes are gonna have to do, and what active managers are gonna have to do, and the forced buying, and all this stuff— people are talking about it all the time.
Jack: Is there anything interesting? I mean, obviously this is gonna be widely traded— these options are gonna be widely traded once they come out— but is there anything like ahead of it you think about?
Well we have stock up, vol up, right? That’s the current situation. I have some charts to show on that.
Brent: What does that mean? As the stocks go up, the implied vol of the options are going up. Historically it doesn’t work that way. Historically, stocks tank and vol goes up. S&P drops, VIX spikes, right? Same thing. But instead what we have is stocks are crashing higher. Now the big major indices have all changed their constitutions to allow for the SpaceX IPO to be added in. I believe the Russell says five days after the IPO they can start adding to their indices. I think the Nasdaq is two weeks if I recall correctly, and I’m not sure that the S&P has changed yet, but I believe they will. So what does that mean? They’re gonna cram SpaceX into their indices as fast as they can. And so where do you get the funding for buying SpaceX? Well, you gotta sell the other stocks, right?
And so when you look at the names that have to get sold, it’s obviously the Mag Sevens— but who’s a Mag Seven now? Maybe not quite a Mag Seven, but our major friend Micron, which is trading at options premiums that are hard to appreciate unless you’re an options nerd like me— that name’s gonna maybe have to get sold a little bit, right, to buy some. Now there are differences in terms of how many dollars have to get sold, but at a minimum you would think, okay, this is a moment for pause. Well, if something is crashing up, can it just simply pause and chill? I’m not so sure. I think there could have to be a good correction. But again, I know what I’m gonna hear out of this. We could have a 30% correction in Micron and it’s just back to where it was last week, right? So how much does that matter?
I was actually just thinking about this. We’re gonna need a new Mag 7 thing, right? Because SpaceX has to be included now. So we’re gonna need a whole new term, and I haven’t heard anybody talking about it, but they’re gonna have to come up with something. They’ll come up with some cute little acronym, or even punt Meta out. Something 8 or something. Or even get rid of Meta. And some of these other ones too that have run up have to go in too now, so I don’t even know. It might have to be the something 10 if these other stocks keep going up.
Well, the door’s open for you to come up with something clever, so you know, you should trade mark— I mean, I have to think about it. I could be a hero here, Brent, if I come up with the right thing here.
But in terms of the call buying, it’s sort of widely known. We should be getting a royalty fee from the Cboe for how often we talk about CORE 1M as an interesting indicator. I see it popping up all over more now. But generally when it goes below eight, you and I in our OPEX videos talk about, okay, that’s the bat signal that things are getting wild, and there’s just been so many crazy circumstances of markets having a violent downside spasm— I like to call them— because this is basically telling us that call prices on single stocks have just gotten over their skis and we need a correction. And so if you look back at the forward returns over time on this, they are negative. And so that’s the kind of big signal we’re watching here.
This is reminding me a little bit of July 2024, Jack, when Nvidia was the Micron of the moment, and it was just going up. It was up 180% from January 2024 to July 2024, and this is back when Jensen was signing ladies’ shirts and stuff like that. You remember those famous moments. Yeah. And into July we had a 10% stock market correction. I don’t know if you remember that. And so the reason I bring that up is— I know we’re supposed to keep these things short, but you know me, I keep talking. I wanna show you this, Jack. Because this was the craziest moment in July of 2024. This was the lowest CORE 1M reading we ever got. So that said that the call prices relative to the index— the SPX index prices— had been more stretched than they’ve ever been in history, or at least as far as this indicator was telling us.
And so when you go and say, “Well, what did the S&P 500 look like at that moment, Brent?” It is just a speed bump in the realm of buying things, but here is that correction, right— July of 2024. Interestingly, that’s OPEX that started this, but we dropped 10% from here down to August of 2024. Do you remember, Jack, what happened on Monday of August 2024?
I don’t know.
This was the most famous VIX spike that has ever spiked. Oh, that’s right. I do remember that, yeah. The VIX printed over 50 on June 13th, and then the vol options people on Twitter were like, “No, that’s not real. It didn’t print there. It was a function of the fact that spreads were $50 wide.” Like, that’s a suggestion of less risk. Right. But correlation freaking out before that to all-time lows, to me, was the upside energy that— energy doesn’t die, right? It just transmutes or whatever it is, right? Goes the other direction. And then you get this insane VIX spike, which was the low of the market. So these are the kinds of things that in my seat I put together and I’m like, well, maybe we’re not quite that crazy yet, but we’re starting to kind of sniff that crazy, I think, when you look at some of these metrics, and then you see those kinds of risk moments coming up ahead.
Jack: And then we’ve got one more chart I wanted to do quick here before we wrap up, which is this IV rank versus skew rank. Can you explain what both those are and what we’re seeing here?
Yeah, and we talk about this a lot in the OPEX videos. So what this is, is IV rank, and it’s zero to 100, and this is all of our data since 2024.
Brent: And this is for the S&P 500 stocks— so the top 25 stocks on the left, Nasdaq is on the right. What about the Y-axis? Call IV versus put IV is what we call the skew rank. So if it’s a put-heavy price, we’re down here, and if calls are rich relative to puts, we’re at the top of that chart, right? Does that make sense?
So— yes— if you’re gonna have the most extreme call prices ever, you would be up here because that means the IV is rich, so the options are expensive, and everybody’s piled into calls. If you’re gonna have a situation where we’re crashing, we would be down here. That would be put prices are really elevated, and then the implied vol is really elevated— so like tariff tantrum, Iran war back when that was a thing we all cared about— that would be showing up down there.
So what I did is I said, okay, for the top 25 stocks every day since 2024, plot them on this matrix. And that’s what you see here, and you can see there’s a general relationship. It kind of looks like historically you’re kind of this arc. And so usually when we’re in areas where call prices are kind of elevated, the overall IV is not that high, because we’re not— there’s not a lot of panic. It’s like people feel good about the market, but they’re not expecting insane movement higher.
And so the two features of this map that I wanna talk about right now— look at where the concentration is in these top 25 stocks. Nearly every single stock except for one, two, three, four, five of the top 25 are at 90 to 100 skew rank, right? That means calls are richer now than they’ve been in 90% of previous instances for all the top 25 names in the S&P 500, and it’s even a little bit more extreme in the Nasdaq. So everybody just wants calls. No one cares about puts.
The other thing that is really wild about this, Jack, is look at this concentration of all these names in the Nasdaq in terms of high IV rank. So you have a whole bunch of these names in the Nasdaq that are at their peak implied vol— so most expensive options ever— and they’re piled into calls. So what is this? This is stocks literally crashing higher. AMD, Micron, PANW, CLAC, Texan, all these kinds of names— they’re literally priced for crashes to the upside.
And so this is when I talk about the extreme call prices— you can’t get much more extreme than this. And this relates to the fact that that CORE 1M that we saw is like below eight now. And it relates to the fact that now I’m like, look, the trigger’s now set. We’re gonna have a spasm, in my view, at some point. We just need a catalyst. It could be a bad tweet. It could be someone doesn’t wanna use their AI tokens anymore. It could be an Iran war situation. All of those are kind of on the table over the next two weeks, along with SpaceX, CPI, FOMC, a whole bunch of things here in the next 10 days, right?
And so my reaction here is I wanna start legging into, piecing into, put options or downside-type trades for like August, September type expirations.
Well, Brent, thank you for coming back on. This is really great. It’s always good to see what’s going on behind the scenes.
Jack: I know before we go, you have a quick thing you wanna mention. I think you have a course related to options and poker, right?
Yeah, thank you so much for that opportunity. So we have an event called Trade Like The House. It’s gonna be on June 9th, 10th, and 11th. If you go to spotgamma.com/house, you can sign up for that.
Brent: We are looking at options dealer flows, but also we’re gonna be looking at trading methodologies and structuring your trade book and how you trade through the lens of poker. My business partner, Matt, is actually a ranked poker player. He’s playing in the World Series of Poker right now. So he’s gonna be doing a lot of that work, showing us how you can apply the poker idea or lens to trading. And so we’re really excited to present that. Again, that’s gonna be June 9th, 10th, and 11th— coming up here very soon.
I’ve got the worst poker face in the book, Brent, so I should probably go take the course.
Jack: Well, thank you again for coming on. Thanks, Jack.
So Matt, we’ve taken a look back at a lot of things, and now it’s time to take a look forward. So here’s the forward view.
I think when we look forward, what we have to talk about is the SpaceX IPO, right? I mean, it’s gonna happen before our next episode. Everybody is talking about it. Everybody’s indexes are falling over themselves to get into this thing. There’s gotta be— I don’t think anybody knows what it’s gonna be, but there’s gonna be some significant impacts to the market, both in terms of SpaceX but also the companies surrounding SpaceX. I don’t know what your take is, but this is just really interesting to think about— all of the things this is gonna mean.
Matt: This is a big, big boy of an IPO. And I think lots and lots of client conversations, lots and lots of manager conversations about how you’re thinking about this, how you’re dealing with it, because we’ve got the new rules. This thing is coming to an index fund near you. So we’re gonna see flows come in for this thing beyond just the IPO. We’re about to have months of SpaceX-induced chaos inside of portfolios and managers. If you own shares privately, if you’re a manager who owns shares, you’re looking at that S-1. You’re looking at this schedule of potential periods where you can unload shares, and you’re doing the math and the calculations on what metrics need to happen.
This is— I’m not gonna call it a mess, but there are a lot of details here that make this one of the most confusing ones ever. Are you feeling the same weight of the historic-IPO-at-the-top-of-the-market theme? Which I know is more suggestive than it is an actual thing, but have you been thinking about this at all? This is occupying a lot of stress in my brain, beyond the IPO itself, since everyone’s talking about that. It’s like, what does this actually symbolize in markets right now?
Jack: Yeah. I don’t have a great take on that. One of the interesting things for me is— and I’m a big proponent of index investing— but one of the things index people always go after factor people like me or active people, they’re like, “We have these emotion-free indexes that just follow their systems.” And then you have the SpaceX IPO, and these people are falling all over each other to get the thing in the index. Like, the idea that there aren’t humans behind the scenes making decisions here in terms of what SpaceX is getting in and what it’s not getting in is obviously ridiculous, because whatever their rules were, they’re all pretty much out the window, right? All the major indexes have made some degree of changes to get this thing in quicker.
Matt: Yeah. Well, if you’re gonna have potentially— we don’t know where it’s gonna come out of the gate at— but potentially somewhere between one-and-a-half to a $2 trillion company. That’s not a microcap. That’s not even a small company. This is a substantial addition to any of the major indices, and whatever index fund somebody owns or your mom owns in her 401(k) or whatever the situation is—
Jack: It blows away the biggest one ever, right? I mean, Saudi Aramco I think was the biggest one ever, but it wasn’t near this level.
Matt: Aramco is big. And one point on what I was starting to say before about this— because this is just for the size and sake of comparison— I don’t think I have sizes of these in front of me right now, but it’s basically like... I have a visceral memory of Visa in 2008 when they do that offering and we’re basically in the financial crisis. You have GM right after the crisis in 2010, which is Cash for Clunkers and all the other chaos that’s going on there. You’ve got... and granted, this is where it’s suggestive. It doesn’t guarantee a market top or something, but it’s like times of stress. Facebook in 2012, when Facebook was basically gonna be bigger than McDonald’s and sell ads— ended up being prescient in all sorts of ways. Alibaba in 2014, which was massive. That was an absolutely ginormous one. And then Saudi Aramco in 2019. And all these come before events of market volatility or in the wake of some type of volatility, and they suck all the attention out of the room around these prices.
None of those were adding the flow component of being chomped into an index overnight. And that’s the part that is just so mind-boggling to say, “We are going to introduce something that’s a massive addition to all these indices pretty much as fast as we can possibly cram it in there.” And that puts all sorts of pressure on not just the people buying— because this is a $75 billion raise. So the company’s gonna get $75 billion, but the market’s gonna get—
Jack: The cap’s gonna... Yeah.
Matt: Potentially a multiple on the capital raise that’s about to happen. And that’s bananas.
Jack: Yeah, just thinking about the mechanics— that’s really the interesting part. First of all, and who knows what’s gonna happen here, but if I had to guess, I would say this probably goes up a lot at the beginning. There’s gonna be a lot of forced buying in a lot of different directions. But then thinking also about what does that mean? Where’s that money coming from? Obviously you’ve got some other companies that are very, very large weights in the index that, for the active managers or the closet indexers, are also very large weights in their portfolios. And so are you gonna see selling pressure on an Nvidia or something like that as the money moves to SpaceX? I don’t know, and the market has ways of sort of confounding all of us in terms of how it handles these things. But it’s interesting to think about— rather than predicting it— what is this gonna mean in terms of what happens to SpaceX, but also what happens to all those other big companies in the index that are gonna probably have some money coming out of them?
Matt: It goes back to— we talked about this when we were doing our weekly recap this week too— where it’s the pie has to equal 100. So if you wanna make room, you have to take something else out. So as these indices think about how they’re gonna make room for potentially a $2 trillion company, they have to think about the companies that that basically borrows from, meaning takes market share away from to put room in that adds up to 100. They don’t necessarily have new dollars coming in. They’re not pre-IPO holders. That means they’re gonna have to buy this out of the available free float on the market. That creates a flow problem. Adam Butler has a wonderful tool basically mapping out some of the mechanics of this. We’ll put a link in the YouTube notes. You’ll wanna play around with this a little bit. But this idea that the index now has to make room somewhere for an absolutely massive addition— that has to come from free float. It cannot come from existing shareholders who basically own the company pre-IPO. They’re not turning around necessarily and selling stuff day one.
And as we’re talking— a lot of these fund managers or we’re talking to families and people who own private shares— you have to come up with a strategy on what you’re potentially letting go of in the IPO, if that’s something you’re doing, or how comfortable you are with the actual rules and regulations around when those people are even allowed to let anything out into the free float. Because it’s not like it IPOs and now I turn around after it jumps on the opening day and I get to sell my shares. It’s not gonna work like that, and that’s gonna make it even more confusing over probably a six-month horizon.
Jack: And then on the other side, you’ve got the active managers, some of which own it now and are effectively gonna be in violation of their mandates once it becomes public because it’s gonna be too large a portion of their portfolio. So that’s not a ton of people, but just thinking about how does that work? They’re obviously gonna have to—
Matt: There are a couple of very significant people who have that exposure and have been riding those marks really, really hot, but all of a sudden they’re in violation of their prospectus if they don’t unload some into that
Jack: offering. So they’re gonna have to be forced sellers. I would assume they get dwarfed probably by the index side of it, but still, it’s just interesting to think about— they’re gonna come out with this way overweight position, they’re gonna have to sell it. How does that play out? So I just think it’s one of the most interesting things I’ve seen in my career in terms of the mechanics of what goes on behind the scenes in the markets. I don’t think anybody should be trying to take advantage of it. I just think it’s interesting to watch.
Matt: This is a fascinating thing to watch. We’re gonna be talking about this way longer than we talked about the green shoe on the Facebook IPO. If you remember, you remember. If you were there, you know what I’m talking about. But there’s so many players too who have some type of vested interest in this thing actually working out in a favorable way, and I think that’s also really interesting here. Nobody wants, nobody really expects this IPO to fail dreadfully in any way, shape, or form. We’re assuming it’s gonna be oversubscribed. We’re assuming it’s gonna go up. We’re assuming all these things— colloquially “we,” not me and you. And it’s really interesting to think about what’s actually gonna happen and what’s actually gonna play out. This is like watching a team that you think is gonna be dominant in the championship go out, and you have all the assumptions that they’re gonna kick everybody’s butt. But the question is, what happens if any of this doesn’t happen, or if there’s some surprise injury or fluke problem? This is ripe for watching very, very closely.
Jack: The other thing that’s interesting is the supply issue at the overall market level, because you’re gonna have this— you’re probably gonna have two other trillion-dollar IPOs this year. Just thinking about how the market absorbs all of that. I mean, that’s not saying it’s the top or anything like that. But it’s just interesting to think about how the market absorbs all that supply. We’re gonna have the three largest IPOs in history probably back to back to back in the same year.
Matt: Yeah, and that’s part of where thinking about those— like the Saudi Aramco IPO, thinking about even Visa, GM, Facebook, and Alibaba— you wouldn’t have a run of competing size for these. And that’s the other part with the gauge. If you’re gonna have these companies taking this much oxygen out of the rest of the markets, if you’re gonna force a bunch of indexes to have some type of rebalancing to digest these things, we’re not just gonna do it once. We’re gonna try to do this three times. And oh, the Strait of Hormuz stuff too, but you know, fine. It’s all fine.
Jack: Hey, well, this will at least make us not talk about the Strait of Hormuz for a while, right? When these IPOs come out, at least give us something else to talk about.
Matt: Yeah, yeah. At least we’ll have something new to talk about in the sense that we’ll have more complexity mapped over the already insanely complex situation, right?
Jack: Yeah. And who knows? We’re not ones to tell what’s gonna happen. It’s so hard to figure it out. And then the only other thing is— when you think about the... one of the things I think that happened in the ‘90s is you saw these IPOs come out, but then eventually the lockups expired, and that became somewhat of an issue for the market too. So I’ll be interested— obviously the people who hold SpaceX can’t sell it when it first comes public. So it’ll be interesting to see— you’re gonna have some funds, I mean, I saw some of the numbers recently, like there are some funds with some crazy gains in this that are gonna have very, very large positions when this thing comes to market. So it’ll be interesting to think, when those lockups expire, what those funds will do. I mean, just for fiduciary duty and the gains they have, they’re gonna have to sell some of that probably.
Matt: Yeah. Those— if you haven’t read up on Rule 144 or any of these details, now’s the time to go and look at it. And if you have a fund that’s up big already because they have a 30-something percent weight of current valuation shares relative to their net asset value, you wanna look at this and you wanna know what that selling strategy is. Now’s the time to check it out. This is the window where you have to figure out what you’re gonna do, because those funds all have rules and all have expectations they’re gonna follow, and they have to consider what’s, in some cases, a grand slam for some of these people. Which, congratulations— we all dream of this moment, so hopefully they can get out with some of those gains, and I’m sure they will. Smart people.
Jack: I just wanna see the data centers in space, Matt. Just give me the data centers in space and I’ll be excited.
Matt: Reading that S-1, it did make me think that we’re approaching—
Jack: It was a little aggressive, wasn’t it? A touch aggressive you think? Maybe like a
Matt: small
Jack: amount.
Matt: It was—
Jack: I forget what the addressable market they put was, but it was quite large.
Matt: I remember. Well, you know, when you’re— this is what I’m saying. Excess Returns has been thinking of our total addressable market all wrong. I think our TAM, now that we’re going to build data centers in space, is basically space-time ad infinitum. Like, infinite space-time is the total addressable market of Excess Returns. Even non-sentient beings can enjoy Excess Returns. I would like to put that valuation on our company. Can we do that?
Jack: Yeah. If we bring the audience of space in here, obviously it changes things a lot in terms of our valuation.
Matt: Yeah. And the data centers— the data centers could be listeners. We can make stuff for them. Little data center jams.
Jack: The AI in the data centers will listen to us, I think.
Matt: It’s gotta consume its information somewhere. Where is it getting its updates on things? The data centers should be part of our client picture. That’s part of our total addressable market. And hey, read the S-1 too. This is a fantastic read. There’s so much in there that, again, touched on the aggressive side, as you said. I think that is a conservative framing of what is the actual statement on how this thing reads. But can a company own space? And how much is space worth? And where will it be? I mean, we’ve got a $600 billion company who’s about to go public at $1.5 or $2 trillion, and they did I think $19 billion that the SpaceX side of it did in business in 2025. So how’s your little valuation multiple, value investor heart feeling about these numbers?
Jack: I’m just thinking— call up Andreessen Horowitz because Excess Returns is worth a billion dollars now. That’s the valuation I’m starting with. I don’t know how much I’m raising or even what I’m gonna do with it, but that’s where we’re starting.
Matt: When your total addressable market is all of space and time, Jack, you’re still thinking too small. Three commas. At least four commas in this one.
Jack: Well, on that note, you should probably take us home before we go too far down this rabbit hole.
Matt: We’re already in trouble. Yeah,
Jack: we’re
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