Episode summary
Labor Market Cracks, Wild Fed Credibility Data and Semis Running Out of Pie | Last Call
Excess Returns
· · 1 hr 4 min · Hosts: Matt Zeigler, Jack Forehand · Guests: Andy Constan, Ben Hunt, Brent Kochuba, Eric Pachman
Summary
The episode argued that the biggest market story in June was the SpaceX IPO, but the more important lesson was how flows, positioning, and index mechanics overwhelmed fundamentals. The hosts said the stock’s violent move after listing reflected ETF buying, anticipated index inclusion, and short-term options activity more than any traditional valuation debate. Brent Kochuba added that the name’s options volume quickly normalized after the first retail frenzy, though the setup still looked crowded into July expiration.
On semiconductors and AI, Andy Constan argued that future earnings growth is oversubscribed: too many stocks are priced for massive expansion, while only a few businesses can capture most of the spending. He said the winners have been the firms supplying compute and chip capacity, especially the equipment makers in what he called the “Fab Five,” even as the companies buying that gear may not ultimately earn attractive returns on all the capex. The panel also treated semis as a cyclical industry, not a permanent straight line.
The macro discussion centered on Fed credibility, labor quality, and inflation risk. Ben Hunt said the narrative around Fed credibility has flipped from a year ago, helping explain why gold has weakened and the dollar strengthened. Eric Pachman argued headline payrolls obscure a fragile mix of low-wage job growth and declining higher-paid professional jobs, while crack spreads rather than crude alone may be the better inflation warning signal.
Key takeaways
- Andy Constan said future earnings growth is “oversubscribed,” with too many stocks chasing too little pie.
- He argued the real AI winners are the firms selling chips, memory, and equipment, not necessarily the hyperscalers funding the buildout.
- Ben Hunt said the Fed credibility narrative has improved sharply versus June 30, 2025, which helps explain weaker gold and a stronger dollar.
- Brent Kochuba said SpaceX options were initially dominated by huge longs and then quickly sold against, with volume normalizing after the first frenzy.
- Eric Pachman said job growth is being driven by lower-paid healthcare and service work, which may look resilient in headlines but not in household purchasing power.
- He warned that crack spreads, not just crude prices, could be the bigger inflation shock if refining bottlenecks persist.
Notable quotes
“that future earnings growth is overs subscribed. There's too many people that too many stocks that expect massive earnings growth and there's just not enough pie for all of them to be successful”
“The issue is the rate of change is unsustainable, right? Like how how much longer can you keep going up in the cues at 2% per day, right”
“The crack spread does not lie. It is the truth. It is telling you is the right type of oil making it to the right place”
“The losing credibility narrative has gone away from this time a year ago. and the gaining credibility narrative, the dark blue on this on this map, it's now positive”
“the vast majority of job growth within healthcare and social assistance has been in social assistance”
How the episode opens
That future earnings growth is overs subscribed. There's too many people that too many stocks that expect massive earnings growth and there's just not enough pie for all of them to be successful. This is a wild chart, right? The losing credibility narrative has gone away from this time a year ago. and the gaining credibility narrative, the dark blue on this on this map, it's now positive.
The issue is the rate of change is unsustainable, right? Like how how much longer can you keep going up in the cues at 2% per day, right? That that is not sustainable. Uh it all gets priced in at some point.
The crack spread does not lie. It is the truth. It is telling you is the right type of oil making it to the right place. This is XS Returns. You're watching Last Call. This is the show where we look back over the month that was in an attempt to look forward, joined as I'm Ziggler, joined as always by Jack Forhan. Jack, how's it going?
It's going well. Uh my my private jet has pretty much been parked this month, Matt. I've been working so much.
You know, the thing uh we got off into the video, but uh hasn't been happening in reality. hasn't been happening in reality and the way reality feels. Did I just introduce that we're talking about the last quarter?
Is that where my brain is right now? The last month was the last quarter of life, right? It's it's all the same thing at this point, isn't it?
I mean, did anything different happen in the last month than the last quarter? I mean, they seem like the same thing.
I'll tell you what happened, and then we're going to get into it in a second here.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- spacex ipo
- ai semiconductors cyclicality
- fed credibility
- options flows and volatility
- labor market quality and wages
Companies and tickers mentioned
- SpaceX
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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