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Daniel Gamboa, Matt Harris
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Learn from market history www.backtestpodcast.com

  1. The Rail Revolution: George Stephenson and the Birth of Railways (Part 1)

    2D AGO

    The Rail Revolution: George Stephenson and the Birth of Railways (Part 1)

    Every so often a technology arrives that changes everything. For over 5,000 years, the fastest a human being or a ton of freight could move overland was the speed of a horse. Then, in the span of a single generation, that constraint was gone. We are living through one of these revolutions right now, sparked by artificial intelligence. When you look at other revolutions in history, nothing quite compares to AI… except for rail. This is the first episode of our Rail Revolution series. We start with the technology breakthrough in this episode before turning to the markets it unleashed in our next episode. It’s the story of how steam power and the railway were born, and why that story rhymes so closely with the AI buildout happening right now. We begin in 1700s England, a country running out of wood and forced underground for coal, where flooding mines created the desperate problem that the steam engine was invented to solve. From there we trace a century of breakthroughs including Newcomen’s atmospheric engine, James Watt’s separate condenser, Richard Trevithick’s high-pressure locomotive, and the incremental improvements in iron technology. We tell the story of George Stephenson: born dirt-poor in a colliery village, illiterate until 18, with no patrons and no formal training. We follow him from his first locomotive through the Stockton & Darlington, into a brutal Parliamentary cross-examination engineered by the canal lobby to break him, and on to the Rainhill Trials and the opening of the Liverpool & Manchester Railway, which was a national spectacle with a great tragedy that could have derailed the growth of railways. Why did the railway take decades to arrive when the technology was ready years earlier? What does it actually take to commercialize a working invention? And what allowed a self-taught underdog to pull it all together? Stay tuned for our next episode: the railway works, the dividends are real, and the fuse is lit. George Hudson and one of the largest investment manias in history. Chapters (04:48) Life in 1700s England: the wood crisis and the desperate need for coal (08:13) How a steam engine works: vacuum, pistons, and Newcomen’s atmospheric engine (15:13) James Watt’s separate condenser and the partnership with Matthew Boulton (16:41) Richard Trevithick, high-pressure steam, and the first locomotive on rails (21:49) The iron problem: why cheap wrought iron unlocked the railway (22:56) Meet George Stephenson: from illiterate colliery boy to the Stockton & Darlington (29:51) Liverpool’s canal monopoly and the fight for a Parliamentary bill (38:02) George crushed in Parliament (48:49) The Rainhill Trials (53:00) Opening day 1830: spectacle, the Duke of Wellington, and the Huskisson tragedy (1:04:48) Takeaways: the total product and the three ingredients of a tech revolution References George and Robert Stephenson: The Railway Revolution by LTC Rolt (link) Richard Trevithick: Giant of Steam by Anthony Burton (link) The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention by William Rosen (link) History of Railway Mania by Gareth Campbell (link) Papers on Technology and Financial Manias by Andrew Odlyzko (link) Visualizations of the Newcomen and Watt steam engines, and the Puffing Devil locomotive by Michael De Greasley (link) AI Could Be the Railroad of the 21st Century. Brace Yourself by Derek Thompson (link) Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages by Carlota Perez (link) Crossing the Chasm by Geoffrey Moore (link) Sponsors Big thanks to EQT Corporation for helping us bring you the stories of market history and how they apply today. To learn more and explore the latest data on energy affordability, go to eqt.com/energy-affordability. Note: this show is for informational purposes only and isn’t investment advice. Backtest hosts and guests may have investments in the companies discussed. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.backtestpodcast.com

    1h 9m
  2. The 80s on Wall Street: Howard Marks and Bruce Karsh Cultivate Cycles (Part 5)

    APR 7

    The 80s on Wall Street: Howard Marks and Bruce Karsh Cultivate Cycles (Part 5)

    The final chapter in our 80s on Wall Street series bridges the story from the rise of high yield bonds and leveraged buyouts to the birth of modern distressed debt investing. At the center of it are two legendary investors: Howard Marks and Bruce Karsh. Howard Marks grew up in Queens, studied finance at Wharton, and trained under the Chicago School’s efficient market hypothesis before watching the Nifty 50 collapse early in his career. He learned that it’s not what you buy, it’s what you pay. He eventually moves into high yield bonds and becomes one of the first institutional investors in the market. Bruce Karsh was a rising star as a lawyer before stepping out to work for Eli Broad analyzing investments and structuring transactions. His work on the Johns-Manville asbestos bankruptcy planted the seed of an idea that would evolve into distressed investing. By 1988, the two had found each other at TCW in Los Angeles with a shared philosophy around investing at the right price, tracking the market cycle, and finding good companies with bad balance sheets to invest in. By 1990, with high yield default rates above 10%, Drexel bankrupt, and collapsing demand for bonds, Howard and Bruce were on their way to building a reputation as legendary credit investors. Chapters (02:50) Context on Howard Marks and Bruce Karsh (06:45) Howard’s early career: Wharton, the Chicago School, and the efficient market hypothesis (10:32) The Nifty 50: one-decision stocks and their collapse (15:26) Howard moves to bonds and Bruce Karsh goes from law to investing (19:47) Howard meets Milken and discovers high yield bonds (25:22) Howard builds Citi’s high yield portfolio and moves to TCW (30:34) Bruce Karsh’s distressed debt thesis and joining TCW (39:42) The Howard Marks investment philosophy: market cycles and probabilistic thinking (42:39) The 1989-91 crisis: S&L collapse, FIRREA, and the high yield market meltdown (52:18) Deploying capital in the crisis, TCW’s 45% returns, and founding Oaktree References Howard Marks Investor Series with Bruce Karsh (link) Howard Marks Memos, The Complete Collection (1990-2025) (link) The Most Important Thing by Howard Marks (link) Mastering The Market Cycle: Getting the Odds on Your Side by Howard Marks (link) Acquired with Howard Marks and Andrew Marks (link) Junk Bonds: How High Yield Securities Restructured Corporate America by Glenn Yago (link) Beyond Junk Bonds: Expanding High Yield Markets by Glenn Yago, Susanne Trimbath (link) Sponsors Big thanks to EQT Corporation for helping us bring you the stories of market history and how they apply today. To learn more and explore the latest data on energy affordability, go to eqt.com/energy-affordability. Note: this show is for informational purposes only and isn’t investment advice. Backtest hosts and guests may have investments in the companies discussed. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.backtestpodcast.com

    1h 12m
  3. Bob McNally on Oil Price Volatility, OPEC, Energy Markets, and the Strait of Hormuz

    MAR 17

    Bob McNally on Oil Price Volatility, OPEC, Energy Markets, and the Strait of Hormuz

    Oil is one of the most important commodities in the world. Despite that, it’s probably one of the most misunderstood and underappreciated markets even by sophisticated market participants. Especially when you consider that oil is about a third of global energy, more than 90% of transportation energy, and the price of oil directly impacts everything else in the economy. But that’s not the whole story. As our guest Bob McNally so eloquently points out, part of what makes this market so fascinating and so complex is how volatile oil prices can be and how often the load-bearing assumptions of market participants break down. Arguably the entire history of oil is the history of our repeated attempts to manage its price volatility. And no one understands that better, or has been right more often during times of crisis, than Bob McNally. In this episode, we sit down with Bob—founder of Rapidan Energy Group, former White House energy advisor to President George W. Bush, longtime hedge fund analyst at Tudor Investment Corporation, and author of Crude Volatility—to add historical context to the crisis in the Strait of Hormuz, to better understand how oil markets work, and to shed light on the psychology of market participants and policy makers. You can find Bob on X (@Bob_McNally) and LinkedIn. You can find Rapidan Energy Group at https://www.rapidanenergy.com/ Chapters (01:38) Variant perception and Bob’s Iran call (08:19) Why the market misread Hormuz (10:56) Why oil prices are uniquely volatile (17:06) The Texas Railroad Commission: OPEC before OPEC (23:00) Spare capacity and the swing producer (30:38) How the U.S. lost the swing producer role (38:11) How OPEC took over market management (49:50) How shale changed the oil market (54:11) How policy makers make decisions during energy crises (1:01:28) Second and third order effects from the current crisis References Crude Volatility: The History and the Future of Boom-Bust Oil Prices by Robert McNally (Link) “Ships stranded by Strait of Hormuz closure” 60 Minutes on CBS, March 15 2026 (Link) Chart: oil supply shocks and spare capacity since 1955 (Link) Oil Market Black Swans: Covid-19, the Market-Share War, and Long-Term Risks of Oil Volatility by Robert McNally (Link) A Crude Predicament: The Era of Volatile Oil Prices by Robert McNally and Michael Levi (Link) Sponsors Big thanks to EQT Corporation for helping us bring you the stories of market history and how they apply today. To learn how EQT is unlocking energy to power AI, go to PoweredByEQT.com. Note: this show is for informational purposes only and isn’t investment advice. Backtest hosts and guests may have investments in the companies discussed. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.backtestpodcast.com

    1h 8m
  4. The 80s on Wall Street: Fred Carr Bankrolls the Boom (Part 4)

    FEB 26

    The 80s on Wall Street: Fred Carr Bankrolls the Boom (Part 4)

    In the first three parts of this series, we covered Michael Milken building the high-yield bond market, Ross Johnson triggering the RJR Nabisco bidding war, and KKR winning the biggest LBO in history. But there is a missing piece to the puzzle: where did all the money come from? The answer leads us to Fred Carr, a largely forgotten figure who may be the most important person in 1980s finance that almost nobody has heard of. A scrappy outsider from Watts, Los Angeles, he first rose to fame as the hottest mutual fund manager in America during the go-go years of the late 1960s before flaming out spectacularly with the Enterprise Fund. His second act was even bigger. In 1974, Carr took over a near-bankrupt life insurance holding company called First Executive Corporation and transformed it into a powerhouse. He pioneered single premium insurance products that offered higher yields than competitors, built a revolutionary sales incentive model, and earned top-tier safety ratings that unlocked massive institutional capital flows from pension plans and municipalities. First Executive became the largest buyer of high-yield bonds in America, participating in 90% of all Drexel underwritings between 1982 and 1987. But when the junk bond market collapsed, the same concentration that fueled Carr’s rise became his undoing. Along the way, we explore how insurance companies work, why the end of the Great Inflation broke every financial business model in America, how regulatory gaps allowed risk to build invisibly, and why the California aftermath of First Executive’s collapse became very relevant to one of the biggest financial institutions in modern finance. Chapters (01:36) Set up to sources of capital for the junk bond boom (07:11) Fred Carr’s origin story: from Watts to Wall Street outsider (12:16) The go-go years and the Enterprise Fund’s meteoric rise and fall (19:30) First Executive: taking over a near-bankrupt insurer and starting over (23:23) The Great Inflation breaks insurance: why old business models stopped working (27:22) The Milken-Carr flywheel: high-yield bonds meet single premium insurance products (39:03) First Executive becomes a junk bond giant: growth, ratings, and warning signs (48:56) The collapse: Drexel’s bankruptcy and its consequences for the junk bond market (1:03:15) Seizure, conservatorship, and the wild aftermath with Apollo and Credit Lyonnais References The Fall of First Executive: The House That Fred Carr Built by Gary Schulte Perceptions and the politics of finance: Junk bonds and the regulatory seizure of First Capital Life, Journal of Financial Economics, 1995 (link) Dangerous Dreamers: The Financial Innovators from Charles Merrill to Michael Milken by Robert Sobel (link) Junk Bonds: How High Yield Securities Restructured Corporate America by Glenn Yago (link) Sponsors Big thanks to EQT Corporation for helping us bring you the stories of market history and how they apply today. To learn how EQT is unlocking energy to power AI, go to PoweredByEQT.com. Note: this show is for informational purposes only and isn’t investment advice. Backtest hosts and guests may have investments in the companies discussed. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.backtestpodcast.com

    1h 13m
  5. The 80s on Wall Street: KKR and The RJR Nabisco Battle (Part 3)

    FEB 13

    The 80s on Wall Street: KKR and The RJR Nabisco Battle (Part 3)

    We pick up where we left off in Part 2. Ross Johnson, CEO of RJR Nabisco, presents a management buyout bid for $75-per-share—a number he’s certain will get the deal done without competition. Instead, as soon as the board issues the customary press release announcing the buyout bid, RJR Nabisco is in play as the most prized buyout target on Wall Street. Ross Johnson alienates not one, but two major players on Wall Street: Henry Kravis from buyout specialist firm KKR and Jeff “Mad Dog” Beck from junk bond specialist Drexel Burnham Lambert. It turns out $75-per-share is far from a winning bid. What follows is the most dramatic LBO fight in history: bear hugs and tender offers, bank exclusivity plays, bidders posturing and bluffing, interlopers wanting to plant their flag in the LBO game, and directors getting ambushed in the hallways by bankers hunting for an edge. Chapters (01:04) Recap: Ross’s $75 management bid frames as an “inside raid” (03:30) The board meeting and the press release that put RJR in play (06:31) Kravis takes it personally: why KKR has to enter the fight (07:54) Meet Drexel’s “Mad Dog” Jeff Beck (and why he matters) (14:33) The stock becomes a battlefield: arbitrage, piling in, and momentum (17:11) KKR goes on offense: the $90 tender offer and the greed narrative (25:30) The auction gets hot: new bidders, higher prices, and board pressure (42:28) The final vote—structure, certainty, and the aftermath of the deal (45:54) Lessons learned References Barbarians at the Gate: The Inside Story of America’s Most Notorious Corporate Takeover by Bryan Burrough, John Helyar (link) RJR Nabisco: A Case Study of a Complex Leveraged Buyout, Financial Analysts Journal, 1991 (link) Junk Bonds: How High Yield Securities Restructured Corporate America by Glenn Yago (link) Dangerous Dreamers: The Financial Innovators from Charles Merrill to Michael Milken by Robert Sobel (link) Sponsors Big thanks to EQT Corporation for helping us bring you the stories of market history and how they apply today. To learn how EQT is unlocking energy to power AI, go to PoweredByEQT.com. Note: this show is for informational purposes only and isn’t investment advice. Backtest hosts and guests may have investments in the companies discussed. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.backtestpodcast.com

    49 min
  6. The 80s on Wall Street: Road to RJR Nabisco’s LBO (Part 2)

    FEB 4

    The 80s on Wall Street: Road to RJR Nabisco’s LBO (Part 2)

    In 1987, America is riding one of the greatest bull markets in history—until it all comes to an abrupt end on Black Monday, October 19th 1987. Portfolio insurance, a fragile strategy built on unrealistic market assumptions, helps turn a selloff into the single worst day in stock market history. Ross Johnson, the CEO of RJR Nabisco, watches as his stock price gets cut in half in a day… even though the business and the economy are fine. Over the next year, he tries everything from asset sales to share buybacks to convince the market there’s a lot more value at RJR Nabisco than they’re giving him credit for. Nothing works. Meanwhile, leveraged buyouts are hot on Wall Street but that’s the one solution Ross Johnson isn’t willing to try. He’s a brilliant political operator who can manage board members, who loves perks, and hates constraints. But above all, he can’t stand that the market keeps pricing RJR Nabisco like a doomed tobacco company. That frustration overcomes his aversion to LBOs, and he makes his move on October 19th, 1988—exactly one year after Black Monday. Chapters (00:43) Welcome + recap: from junk bonds to the LBO era (03:35) 1987 at the top: bull market euphoria, Berlin Wall optimism, Fed hikes (05:24) Portfolio insurance: Black-Scholes in the wild and the “mechanical” selling logic (09:58) Black Monday: the crash day and why it shocked everyone (11:35) RJR’s stock collapse: the bargain that changes the story (11:45) Meet Ross Johnson: perks, power, and the 80s CEO archetype (28:17) LBOs 101: the mortgage analogy + why leverage can create value (31:54) ERISA & pensions: Prudent Man Rule clarification unleashes institutional capital (41:22) KKR’s rise: Henry Kravis, fund economics, and the LBO machine (52:03) Ross’s playbook: buybacks, tobacco overhang, and the $75/share MBO spark References Barbarians at the Gate: The Inside Story of America’s Most Notorious Corporate Takeover by Bryan Burrough, John Helyar (link) RJR Nabisco: A Case Study of a Complex Leveraged Buyout, Financial Analysts Journal, 1991 (link) Junk Bonds: How High Yield Securities Restructured Corporate America by Glenn Yago (link) Dangerous Dreamers: The Financial Innovators from Charles Merrill to Michael Milken by Robert Sobel (link) Sponsors Big thanks to EQT Corporation for helping us bring you the stories of market history and how they apply today. To learn how EQT is unlocking energy to power AI, go to PoweredByEQT.com. Note: this show is for informational purposes only and isn’t investment advice. Backtest hosts and guests may have investments in the companies discussed. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.backtestpodcast.com

    1h 7m

  7. JAN 22

    The 80s on Wall Street: Michael Milken Makes a Market (Part 1)

    The 1980s were an iconic decade on Wall Street. Michael Milken and his team at Drexel were key players in sparking the wave of buyouts that were emblematic of the era. Before all that, in the early 1970s, a young Michael Milken joined Drexel to focus on low-grade bonds. He had discovered the research of W. Braddock Hickman, which concluded low-grade bonds could generate attractive investment returns, and he became obsessed. He was ambitious, smart, and an outsider when he got to Wall Street. Within a decade, he would be at the center of it. In this episode, we tell the origin story of the high-yield bond market—and how Michael Milken, from a backwater desk at Drexel, turns a stigmatized corner of finance into the most powerful funding engine on Wall Street. At first Drexel focused on trading “fallen angel” bonds. Then they moved aggressively into underwriting new high-yield deals, and created a flywheel: more issuance, more buyers, more liquidity—all underpinned by a rigorous knowledge of the market that no one else could match. Along the way, we pull out lessons that rhyme with modern cycles: why market “infrastructure” matters as much as the math, how scar tissue from the last decade warps risk-taking, and how a productive innovation can—at scale—start to fuel excess. Chapters (04:06) Wall Street in the 50s/60s (07:25) Michael Milken’s background (11:24) Intro to bonds and market structure (12:56) Braddock Hickman research and the logic for high-yield bonds (18:34) Michael Milken lands at Drexel (23:42) The 1970s, stagflation and brutal markets (30:41) Michael Milken almost leaves Drexel then he gets capital to manage and doubles it (49:13) Expanding the market by creating new high-yield bonds from scratch (57:48) High yield fuels the rise of leveraged buyouts and corporate raiders References Dangerous Dreamers: The Financial Innovators from Charles Merrill to Michael Milken by Robert Sobel (link) The High-Yield Debt Market: 1980-1990 by Richard Jefferis, Jr. (Federal Reserve Bank of Cleveland) (link) Junk Bonds: How High Yield Securities Restructured Corporate America by Glenn Yago (link) Innovations in Finance, Medicine, and Education with Michael Milken, Capital Allocators Podcast by Ted Seides (link) Sponsors Big thanks to EQT Corporation for helping us bring you the stories of market history and how they apply today. To learn how EQT is unlocking energy to power AI, go to PoweredByEQT.com. Note: this show is for informational purposes only and isn’t investment advice. Backtest hosts and guests may have investments in the companies discussed. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.backtestpodcast.com

    1h 14m

  8. 12/23/2025

    The Shale Revolution: EOG, OPEC, and Profits from Shale Oil (Part 3)

    In Part 1, George Mitchell unlocked shale gas. In Part 2, Aubrey McClendon fueled the boom with a capital and land machine at Chesapeake. In Part 3, we tell the story of one of the operators who makes shale production stick. EOG Resources led by CEO Mark Papa cultivates a unique (and uniquely secretive) culture of rigorous capital allocation and constant technical experimentation. We follow Papa and his lieutenants Bill Thomas and Gary Thomas as they see what others miss: shale’s success in natural gas will eventually create a glut that will crash prices. EOG must pivot to oil or stall. From a dramatic 2007 offsite where Mark tells his team to stop looking for natural gas, to early experiments in the Bakken, to a quietly assembled position in the Eagle Ford, EOG’s edge leads it to become a top US oil producer. But before they can enjoy their success, the market turns again. On Thanksgiving day 2014, Saudi petroleum minister Ali Al-Naimi announces to the world that OPEC won’t cut production to balance global oil markets. Oil prices collapse by 60% over the next 12 months and the shale boom faces its first true stress test. We unpack why so many companies break—and why EOG doesn’t—ending with the playbook that helped shale survive: low cost operations, productivity gains from technology, focus on premium wells, and operating discipline built to survive boom-bust cycles. Chapters (04:56) Two questions: will shale oil work and can shale production be profitable? (07:28) The operators: Mark Papa, Bill Thomas, and Gary Thomas at EOG (08:16) The history of EOG (11:32) The 1990s oil & gas market (13:34) Two forces converge at Enron in the 1990s (20:03) Being the low cost operator in commodity businesses (21:55) Four things that define EOG (29:32) The commodity supercycle of the 2000s (33:03) EOG pivots from natural gas to oil (45:55) EOG announces the Eagle Ford discovery (55:25) The commodity supercycle and the zero interest rate environment (57:21) OPEC surprise on thanksgiving 2014 (1:08:04) Lessons learned References Saudi America: The Truth About Fracking and How It’s Changing the World by Bethany McLean (Link) Crude Volatility: The History and the Future of Boom-Bust Oil Prices by Robert McNally (Link) The Accidental Oilman by Lawrence Strauss, Barron’s, October 2011 (Link) The Frackers: The Outrageous Inside Story of The New Billionaire Wildcatters by Gregory Zuckerman (Link) Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages by Carlota Perez (Link) This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.backtestpodcast.com

    1h 12m
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About

Learn from market history www.backtestpodcast.com

Information

  • Creator
    Daniel Gamboa, Matt Harris
  • Years Active
    2025 - 2026
  • Episodes
    20
  • Rating
    Clean
  • Copyright
    © Daniel Gamboa
  • Show Website
    Backtest

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