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 Xhttps://x.com/dampedspringDamped Spring Advisorshttps://dampedspring.comTopics covered:Why parabolic moves in AI infrastructure and semiconductor stocks may reflect a speculative bubbleWhat rising single-stock volatility and unusually low market correlations reveal beneath a calm indexWhy out-of-the-money calls became more expensive than puts and what that says about investor positioningHow investors can hedge concentrated stock gains by selling calls and buying protective putsWhy the AI bubble may be hiding in earnings expectations rather than traditional valuation multiplesAndy's economic pie framework and why projected corporate profits may exceed the GDP available to support themHow AI competition, open-source models, job displacement and subsidized token usage affect the return on AI investmentWhy capital spending and consumer dissaving are supporting economic growth, and where those drivers could weakenWhether the Federal Reserve could eventually buy equity ETFs and the inflationary consequences of a permanent Fed putHow lower short-term rates and a smaller Fed balance sheet could rebalance Main Street and Wall StreetWhy expiring Section 122 tariffs could create a near-term shift in inflation, growth and the federal deficitTimestamps:00:02 Why the options market is flashing a warning on AI stocks04:02 Extreme stock dispersion beneath a calm market08:49 The signals of a speculative call-buying frenzy13:00 How to hedge a stock position without calling the top18:36 Why earnings expectations may be the real AI bubble23:00 The economic pie cannot support every company's forecasts27:00 AI job displacement and the widening gap between winners and losers31:59 How capital spending and consumer dissaving are sustaining growth36:00 When the return on AI investment starts to matter40:26 Could the Fed buy stocks in the next financial crisis?44:53 How Kevin Warsh might respond when markets and employment collapse48:58 Lower rates, a smaller balance sheet and wealth inequality52:59 The tariff deadline investors may be overlookingLearn more about the Excess Returns podcast network:https://excessreturns.coNo 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.