First Principles with Andy Constan

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First Principles with Andy Constan examines the biggest developments in markets and the economy through the foundational frameworks that drive them. Each month, Andy breaks down the mechanics behind inflation, interest rates, liquidity, growth, and market structure to help investors understand not just what is happening, but how the underlying forces behind markets actually work.

Episodes

  1. 18 Jul

    It Only Happens at Bottoms | The Options Extreme That Showed Up at the Highs

    On the Latest First Principles, Andy Constan explains what the options market is signaling about the AI and semiconductor boom, why he believes earnings expectations have outrun the size of the economy, and where the next risks may emerge. We discuss speculative call buying, single-stock volatility, AI capital spending, consumer dissaving, the Fed put, Kevin Warsh's monetary policy framework, and the looming reset of US tariffs. Andy Constan on X https://x.com/dampedspring Damped Spring Advisors https://dampedspring.com Topics covered: Why parabolic moves in AI infrastructure and semiconductor stocks may reflect a speculative bubble What rising single-stock volatility and unusually low market correlations reveal beneath a calm index Why out-of-the-money calls became more expensive than puts and what that says about investor positioning How investors can hedge concentrated stock gains by selling calls and buying protective puts Why the AI bubble may be hiding in earnings expectations rather than traditional valuation multiples Andy's economic pie framework and why projected corporate profits may exceed the GDP available to support them How AI competition, open-source models, job displacement and subsidized token usage affect the return on AI investment Why capital spending and consumer dissaving are supporting economic growth, and where those drivers could weaken Whether the Federal Reserve could eventually buy equity ETFs and the inflationary consequences of a permanent Fed put How lower short-term rates and a smaller Fed balance sheet could rebalance Main Street and Wall Street Why expiring Section 122 tariffs could create a near-term shift in inflation, growth and the federal deficit Timestamps: 00:02 Why the options market is flashing a warning on AI stocks 04:02 Extreme stock dispersion beneath a calm market 08:49 The signals of a speculative call-buying frenzy 13:00 How to hedge a stock position without calling the top 18:36 Why earnings expectations may be the real AI bubble 23:00 The economic pie cannot support every company's forecasts 27:00 AI job displacement and the widening gap between winners and losers 31:59 How capital spending and consumer dissaving are sustaining growth 36:00 When the return on AI investment starts to matter 40:26 Could the Fed buy stocks in the next financial crisis? 44:53 How Kevin Warsh might respond when markets and employment collapse 48:58 Lower rates, a smaller balance sheet and wealth inequality 52:59 The tariff deadline investors may be overlooking Learn more about the Excess Returns podcast network: https://excessreturns.co No information discussed in this podcast should be construed as investment advice. Securities discussed may be held by the hosts and guests, their firms or their clients.

  2. 16 Jun

    The $700 Billion Shift | What Happens When Buybacks Turn into Issuance

    In this episode of First Principles, we break down the changing structure of markets as the IPO window reopens, AI CapEx accelerates, and corporate buybacks shift toward new equity supply. We discuss what the SpaceX IPO says about capital markets, whether AI spending can create disinflationary growth, why the consumer is still holding up, and what could challenge the current market bubble. Andy Constan on Xhttps://x.com/dampedspring Damped Springhttps://dampedspring.com/ Damped Spring Substackhttps://substack.com/@dampedspring Topics covered: Why IPOs are central to the purpose of public markets How Andy evaluates whether the SpaceX IPO worked Why issuers may want IPOs to trade higher after pricing The shift from stock buybacks to new equity issuance Why AI CapEx is changing the supply and demand for shares How hyperscaler spending is being funded through cash, bonds, and stock The economic test for whether AI investment pays off Disinflationary productivity growth versus labor displacement Why the current economy is still supported by consumption The role of wealth effects and consumer dissaving Why falling oil prices may not eliminate inflation pressure What Andy is watching in Fed policy, tariffs, AI CapEx, and equity issuance How Kevin Warsh could approach rates, QT, and the Fed balance sheet Timestamps:00:00 Intro and key themes04:18 How Andy reads the SpaceX IPO08:27 Why underwriters and regulators want IPOs to work13:00 Why issuers may want IPOs to trade higher17:05 From stock buybacks to new equity supply21:06 The 600 to 700 billion dollar shift in share supply26:42 The economic test for AI tokens32:09 Can AI create disinflationary productivity growth?38:10 Is AI CapEx holding up the economy?41:00 Wealth effects, dissaving, and the consumer45:52 Oil prices, war, and inflation49:07 Jalen Brunson, incentives, and long-term value52:00 Fed policy, tariffs, and what matters this summer55:36 Kevin Warsh, QT, and the Fed balance sheet58:42 Closing thoughts

  3. 21 May

    How to Invest During a Bubble Regime - Practical Lessons from Market History

    In this episode of First Principles, Andy Constan explains how investors should think about portfolio construction, risk management and alpha during a bubble regime. We discuss why bubbles create FOMO, why low volatility can make investors take the most risk at the worst time, and how long-only and active investors can prepare for the other side without trying to call the top. Andy Constan on X https://x.com/dampedspring Damped Spring https://dampedspring.com/ Main topics covered: Why bubble regimes require a different investor mindset The phases of a bubble: change, escalation, parabolic move and pop Why calling something a bubble does not mean calling the top How FOMO and buyer’s regret lead investors into major mistakes Why investors should know whether they are more vulnerable to chasing or panicking How Andy thinks about the market portfolio beyond just stocks and bonds Why stocks-only portfolios are less diversified than many investors realize How low-volatility uptrends cause investors to lever up at the wrong time Why rebalancing rules may need to change in a trending bubble market How cash, dollar-cost averaging and lump-sum investing should be evaluated through investor behavior Why many alpha strategies stop working as well in bubble regimes Why momentum can work better than mean reversion during bubbles How contagion spreads after bubbles pop and where future alpha may appear Timestamps: 00:00 Why bubble regimes feel low risk 00:59 Setting up part two on bubble positioning 02:07 The phases of a bubble 05:23 Why a bubble regime is different from a normal bull market 07:23 How investors should shift their mindset 10:29 Why knowing yourself is harder than it sounds 14:00 Can a bubble resolve without popping? 17:13 Why long-only investing should mean more than stocks 24:21 Lowering maximum exposure in a bubble regime 30:23 How 60/40 investors should think about rebalancing 33:20 Cash, lump sums and dollar-cost averaging 42:31 How active investors should adjust alpha strategies 46:16 Why mean reversion can fail in bubbles 49:41 How contagion spreads through markets 54:06 Preparing for post-bubble opportunities without calling the top

  4. 13 May

    Root Conditions. Escalation. Peak | Andy Constan on What Investing Through Five Bubbles Taught Him About AI

    First Principles with Andy Constan launches with a deep dive into market bubbles, AI, semiconductor stocks, and the financial conditions that can turn powerful technological change into a dangerous investment regime. Andy explains how bubbles form, why they are almost impossible to time, how today’s AI boom compares to past episodes like 1987, the dot-com bubble, housing, and the bond bubble, and what investors should watch as expectations, financing, and FOMO build. Andy Constan on X https://x.com/dampedspring Damped Spring Advisors https://dampedspring.com/ Topics covered: Why bubbles are easy to identify in hindsight but nearly impossible to define in real time The difference between an expensive market and a true bubble regime How new technologies, easy money, regulation, and exogenous shocks can create bubble conditions Why AI may rhyme with the internet boom without being an exact repeat The role of ChatGPT, Microsoft’s OpenAI investment, and semiconductor earnings expectations What the 1987 crash, Japan, housing, bonds, and dot-com bubble can teach investors today Why human nature, FOMO, and “keeping up with the Joneses” make bubbles so powerful How the late-1990s Fed response to Long-Term Capital Management helped fuel the final phase of the tech bubble Why tech’s current size in the economy and market may limit how far the AI boom can grow How AI capex, hyperscaler spending, buybacks, debt issuance, and IPO supply could determine what happens next Timestamps: 00:00 Intro and the challenge of identifying bubbles 04:32 Expensive markets vs true bubble regimes 09:57 The five bubble episodes Andy compares to today 14:35 Root conditions, escalation events, and the peaking phase 19:20 Why the 1987 crash may also have been a bubble 24:25 The late-1990s setup and the Netscape Navigator moment 28:00 Crisis analogs, easy financial conditions, and today’s AI parallels 32:20 Long-Term Capital Management and rocket fuel for the tech bubble 36:11 Why tech’s market share matters more today than in the 1990s 43:18 Policy mistakes, subsidies, and how governments feed bubbles 47:42 Semiconductor earnings expectations and valuation risk 53:45 The AI capex chain and where the money has to come from 58:42 IPOs, corporate debt, and the financing risk behind the AI boom 01:02:27 What investors should do differently in a bubble regime

  • 4 Episodes

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First Principles with Andy Constan examines the biggest developments in markets and the economy through the foundational frameworks that drive them. Each month, Andy breaks down the mechanics behind inflation, interest rates, liquidity, growth, and market structure to help investors understand not just what is happening, but how the underlying forces behind markets actually work.

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