Is US Stock Market Wealth a Reflexive Risk?

The global economic and geopolitical order has long been balanced by the United States. Today, however, that traditional stabilizing role is in flux. The drivers of market uncertainty, typically resulting from changes in monetary policy and the economy, are increasingly linked to US politics. Fiscal strain, tariffs, and hyper-partisanship are sources of unpredictability reverberating across markets worldwide. In this context, it was a pleasure to welcome Alex Kazan, Partner and Co-head of the Geopolitical Practice at the Brunswick Group, back to the Alpha Exchange.Our conversation explores just how we got to a point where the US is exporting risk to the rest of the world. Alex argues that this is not solely about Donald Trump but more the result of structural forces that have been building over time. The advent of social media and the technology that maximizes attention by algorithmically parsing individuals into one camp or the other and the twin shocks of the GFC and Pandemic have deepened partisanship and led to an erosion of institutional trust.On the international front, Alex points to the growing willingness of policymakers to weaponize economic tools like tariffs, sanctions, and export controls. This policy volatility, he argues, has redefined how multinational firms think about resilience, supply chains, and risk. In this new environment, economic strategy and foreign policy are fused, and companies must learn to negotiate not just with markets, but with Washington itself. Finally, we turn to the global stage, where U.S.–China relations remain a critical axis of uncertainty. Alex offers a nuanced view: while risks of escalation remain, the very ambition and unpredictability of U.S. policy may also open space for recalibration—a potential “grand bargain” that could stabilize the system.I hope you enjoy this episode of the Alpha Exchange, my conversation with Alex Kazan.

Loyal listeners, I hope your recent days have gone well, even if they are becoming shorter. On my mind – and where I hope to engage your interest for 20 odd minutes – is the topic of risk and uncertainty.The SPX is at an all time high and it is also highly concentrated with volatile and richly valued but uncorrelated tech behemoths. That’s very unique. Whether you are an AI bull or bear, one thing we must acknowledge is the unique degree of index concentration and the risks that accompany it.The exposure of both US households and foreign investors to the SPX is at an all-time high. There’s a reflexive element here. The massive increase in market cap for corporates is the currency that funds the epic capex. For consumers, facing a tepid labor market and ongoing cost of living challenges, stock market wealth matters a great deal.I also discuss the surge in volatility in gold and the advent of prediction markets. I hope you enjoy the discussion. Be well.

The distribution of asset price returns is a subject of much study in the literature of empirical finance. We know, of course, that equity returns are left-tailed, subject to the occasional violent plunge. But other asset classes are different, and in this context it was a pleasure to welcome Ben Hoff, Global Head of Commodity Strategy at Société Générale, to the Alpha Exchange. Ben describes commodities as a dual system — one that exists both physically and financially. This duality means real-world frictions such as storage, transport, and substitution shape risk and return in ways financial models often miss. Unlike equities, where the volatility risk premium (VRP) is structural and macro-driven — investors chronically overpay for protection against crashes — the commodity VRP is episodic and micro-driven, emerging only when the physical system’s natural buffers are overwhelmed. Ben likens the commodity ecosystem to a CDO structure of risk absorption. The first-loss tranche is “optionality in time,” where storage smooths shocks by shifting supply forward. The mezzanine tranche cures through space and form, rerouting flows across geographies or substituting between products. Only when those defenses are depleted does the equity tranche — financial volatility — take over. This hierarchy explains why volatility in commodities is less persistent but often more explosive when it surfaces. We also explore how the financialization of commodities — benchmark indices, systematic flows, and vol strategies — has created visible “signatures” in pricing, yet the underlying markets remain driven by physical constraints and optionality. Ben’s takeaway: commodities are inherently antifragile, making their risk premia complex, localized, and highly path dependent. I hope you enjoy this episode of the Alpha Exchange, my conversation with Ben Hoff.

They say that diversification is the only “free lunch” in markets. Scatter your bets around and you’ll realize a reduction in volatility that helps you manage risk. That’s been happening at an epic scale in US equity markets: the 1m correlation among stocks in the S&P 500 is (to quote Dean Wormer from Animal House) zero point zero. But I’d argue that today’s index and the trillions of dollars that track it are enjoying a run of low correlation among stocks that is unsustainable. It’s not if, but when the next correlated risk-off episode materializes.Effective risk management requires a healthy imagination and a willingness to carefully evaluate blind spots. In the aftermath of largescale drawdowns and spikes in measures like the VIX, a consistent realization by investors is that the degree of “sameness” in assets was underestimated. It took us until 2008 to recognize that the substantial run up in housing prices was linked to a common underlying driver: the vast supply of mortgage credit. There was a hugely under-appreciated source of correlation that failed to make it into how securities and risk scenarios were modeled. Today, amidst these record low levels of correlation among stocks in the S&P 500, are we similarly missing a hidden yet shared connection that exists in the ecosystem of companies all engaged in the pursuit of AI riches? Is the stunning wealth already generated being recycled today in the same way that mortgage credit was recycled in 2006?I hope you enjoy this discussion and find it useful. Be well.

It was a pleasure to welcome David Puritz back to the Alpha Exchange. A colleague of mine from 25 years ago and now the CIO of Shaolin Capital Management, Dave has some excellent insights to share on uncorrelated investing broadly and on the current state of convertible bond trading, risk, and liquidity, specifically. When he last joined the podcast in 2021, the Fed was still at zero, five-year yields were 75bps and Dave warned investors to avoid long-duration, low-coupon converts. The epic drawdown in bonds in 2022 made that call quite prescient.We talk about some of the pricing dynamics within converts, where Dave sees the risk of being wrong as especially high. Here, he points to the pricing of high implied vol underlyings that can suffer from vol compression that is not offset by a tightening of credit spreads. Overall, he sees many areas of the converts market with little margin for error. On the risk management front, Dave states that in order to get a position to a fully desired sizing, the first purchases generally need to be made at the wrong price. In fact, he says, “you want to be wrong” on your earliest purchases and be averaging in at lower levels. In this context, we explore the notion of cheapness and finding value in the convert space. Dave differentiates between fundamental value, value in beta and technical value.With deficits soaring and the traditional stock-bond hedge broken, we also talk about Dave’s thinking on hedging fiat currency risk. He argues that Bitcoin—once dismissed as too volatile—is increasingly functioning as a digital form of scarcity, a portfolio hedge alongside gold in a world of relentless money creation. He also shares some very interesting insights onBitcoin-linked equites like miners and the potential applications to AI.I hope you enjoy this episode of the Alpha Exchange, my conversation with Dave Puritz.

In this discussion, I share my thoughts on the backdrop for both SPX realized and implied volatility, as I explore the question of whether there is value in optionality. We have 3 things going in terms of realized vol at the index level. It’s low, it’s especially low on SPX down days, and it’s remarkably stable. My take is that the combination here can play tricks on how we think about risk. We are prone to letting our guards down. Next, I share a 5-part framework for addressing the question, “is insurance worth it?”. I find that certain proxy hedges like HYG provide excellent value at current ultra-skinny option premium levels. Next, I review the GOAT (Great Opportunities and Threats) portfolio which overlays gold and bitcoin as diversifying assets and index put spreads as insurance on a base portfolio that is long the SPX. The risk-return characteristics of the GOAT are decidedly better than those of the SPX in 2025. I also explore the pricing of SPX vol skew and how it is a headwind for collar hedging trades. Lastly, the topic of correlation is on my mind, especially as it is an input into structured derivatives trades that often cost too much. I hope you enjoy the discussion and find it useful. Have a great week.

On this episode of the Alpha Exchange, I had the pleasure of reconnecting with Ken Rogoff, Professor of Economics at Harvard and former Chief Economist at the IMF. In our conversation, we explore themes from his latest book, Our Dollar, Your Problem, a valuable retrospective, and analysis of the rise of the U.S. dollar as the world’s reserve currency and the vulnerabilities that accompany it. In our discussion, Ken reflects on the privileges America enjoys from dollar dominance, namely lower borrowing costs, financial system centrality, and sanction power—while warning that such advantages are not guaranteed forever.We also explore the lessons from past debt and currency crises and the fragility of fixed exchange rate regimes. Here Ken shares firsthand experience as a policymaker who was among those whose advice was sought for how to address many of the prominent FX vol episodes of the 1990’s.We turn to the main point of his book – that there are risks that come with assuming low interest rates will persist indefinitely and that our policy instability may be quietly undermining the dollar’s status as the reserve currency. Ken underscores that debt sustainability is as much about politics as economics, and that weakening of central bank independence may threaten the dollar’s safe-haven role. The main message: periods of calm often mask deep vulnerabilities and complacency about fiscal deficits, global dollar reliance, and policy credibility can quickly give way to instability.I hope you enjoy this episode of the Alpha Exchange, my conversation with Ken Rogoff.

It was a pleasure to welcome Kris Kumar, founder and CIO of Goose Hollow Capital, back to the Alpha Exchange. Kris presents a compelling argument that traditional economic frameworks centered on consumption are becoming obsolete as AI-driven capital expenditure emerges as the dominant growth engine. With companies spending $400 billion annually on AI infrastructure, he contends we're witnessing a fundamental shift from consumption-led to investment-led economic dynamics, requiring investors to recalibrate how they analyze market drivers and policy transmission mechanisms.Kris draws parallels between current AI investment patterns and historical tech bubbles, noting critical differences in financing structures that could alter unwind scenarios. He explores the unique challenges facing monetary policymakers as AI disrupts labor markets while tariff policies create inflationary pressures, potentially rendering traditional Fed tools less effective. The discussion also covers emerging market opportunities, particularly in Latin America, where countries benefit from AI-related commodity demand while offering superior real interest rates.I hope you enjoy this episode of the Alpha Exchange, my conversation with Kris Kumar.

As the summer winds down, and there’s so little daily motion in the SPX, the realized vol spike of April feels further in the rear view. I often suggest that periods of calm in the market can cloud our thinking about risk. Sometimes markets get caught in low vol moods and this is one of them. But low realized volatility should not be viewed as an all clear. A good case can be made that the backdrop is becoming definitively worse. I argue that the price of insurance is a good deal versus the totality of risks. Options are valuable in light of a building of uncertainty in the economy, in Fed policy, in tariffs, in US debt, and in a dangerous escalation in not just global affairs but in the US political civil war.

On this episode of the Alpha Exchange, I was joined by Ben Hunt, Co-founder and CIO of Perscient. Ben has built his career around one powerful idea: that the stories we tell—whether in politics, markets, or everyday life—shape our behavior far more than we realize. In the mid-2000s, entering Wall Street from outside its traditional ranks gave him a rare vantage point. He wasn’t steeped in the bullish narrative flow that dominated the industry. With an outsider’s perspective—and an ability to read the “language” of mortgage-backed securities—he was able to see flaws at the heart of a $10 trillion asset class well before the global financial crisis hit.In our conversation, we explore how understanding narrative structure can illuminate risk in ways models cannot, and why being outside the story sometimes lets you see it most clearly.  In this context, we chat as well about Ben’s creation of the Epsilon Theory, a widely read exploration of how narratives drive markets. I have personally found his writing thought provoking. On markets, Ben is not optimistic that our political system is up for the challenge of reigning in the unwieldy debt and sees the potential for some combination of higher rates and a lower dollar as a result. Today, through Perscient, a venture he co-founded, Ben is applying AI-driven tools to map and measure narratives in real time, helping investors see the hidden storylines moving markets.I hope you enjoy this episode of the Alpha Exchange, my conversation with Ben Hunt.