Excess Returns: The Moment Common Knowledge Changed | Last Call Podcast Hosts: Jack Forehand, Justin Carbonneau, Matt Zeigler
Featured Guests: Andy Constan, Ben Hunt, Brent Kachuba, Eric Pakman
Date: March 28, 2026

Episode Overview

This “Last Call” episode of Excess Returns dives into the far-reaching effects of the escalating Iran crisis and oil shock, approaching the topic from three unique angles: macroeconomics (with Andy Constan), market narratives (with Ben Hunt), and underlying flows and positioning (with Brent Kachuba). The episode concludes with a data-driven examination of U.S. employment trends from Eric Pakman. The hosts aim to break down the immense uncertainty currently gripping markets, question how much is priced in, and leave listeners with frameworks for navigating what even the experts describe as “unknowable” territory.

Key Themes & Discussion Segments

1. Macro Impact of the Oil Shock (Andy Constan, DamSpring)

[05:01–21:22]

• Elasticity of Demand: Andy explains that demand for oil is extremely inelastic, even amid significant price surges. Historical analysis shows that only extreme shocks (like the 1970s) dented demand—most supply-side shocks simply make everything else more expensive by diverting spending away from other goods.

  • “If you're paying 35% more for oil … it's essentially a necessity. The real question is, where does that GDP come from? And it most likely comes from reduced consumption of other things.” — Andy Constan [06:56]

• Inflation and Central Banks: A 30% spike in oil prices adds roughly 1% to headline inflation, but this is “transitory” if oil stabilizes. The real danger: central banks, already battling sticky inflation, are hamstrung—unable to ease even as growth falters.

  • “It is very difficult for central banks to offset the negative growth impact… They’re just not going to be able to. They’re just not willing to ease.” — Andy Constan [09:43]

• Scenarios for Oil Prices: Andy sketches out a range of outcomes—an ongoing high-price environment, a swift resolution driving prices back to pre-crisis levels (~$60/bbl), or escalation. He argues that “the upside for assets is okay,” but the potential downside if oil stays high or surges is severe for global growth and equities.

  • “Oil says assets are going to perform much worse than assets say... That’s the essence of the mispricing.” — Andy Constan [16:46]

• Is it Priced In? Andy believes some, but not all, of the risk is priced in: upside in equities is limited, and the best risk/reward is in oil itself—shorting oil if it falls (“from $80 to $60, that’s a 33% move”).

  • “It was a tough bet for me to make before the war. It’s even tougher today… I don’t love the upside at $60 oil, but … a meaningful recovery if tensions end.” — Andy Constan [16:00]

• Tactical Positioning: He advocates patience and buying on washouts across assets, staying flexible and humble.

2. The Narrative Shift & the "Common Knowledge Moment" (Ben Hunt, Epsilon Theory)

[21:23–35:09]

• “Common Knowledge Game” Defined: Ben illustrates with the parable of “The Emperor’s New Clothes”—real change occurs not when facts emerge, but when everyone knows that everyone knows them. The Iran/Strait of Hormuz crisis marks such a shift for markets.

  • “It’s not that we know something, it’s that we all know that we all know… The world will never be the same once that happens.” — Ben Hunt [24:14-27:13]

• Strait of Hormuz as the Fulcrum:

  • “Oh my God, the strait … means everything for the global economy… The fulcrum point for the global economy is the supply of energy through the Persian Gulf, period, full stop.” — Ben Hunt [28:47]

• Market Consequences:

  • Exporters (like the U.S.) are advantaged; importers (Europe, Japan, much of emerging markets) are suddenly at enormous risk.
  • Unusual behaviors: The dollar is strong, gold isn’t rallying—what matters now is not traditional safe havens, but the simple dynamic of exporter vs. importer status.

• Portfolio Moves: In response, Ben rotated his model portfolios out of non-U.S. equity exposure (oil importers) and became overweight U.S. energy stocks.

  • “When the world’s common knowledge shifts, this is an investment theme that lasts for a long time.” — Ben Hunt [33:33]

3. What the Flows Reveal (Brent Kachuba, SpotGamma)

[35:09–51:28]

• Options Flows and Oil as an Inflection:

  • Brent zooms in on technical levels and how options activity is shaping market behavior. The $100/barrel level in crude is a psychological and practical “line in the sand”:

    • “If crude breaks $100 I think VIX goes to 50, and then I think the equity market probably has some very, very ugly days.” — Brent Kachuba [39:12]

  • The rare recent tight correlation between oil and volatility (VIX) signals heightened, systemic risk.

    • “On a normal day, no one in the equity market cares about oil at all. Now, we’re brothers in arms here.” — Brent Kachuba [40:22]

• J.P. Morgan Collar as Structural Support:

  • Brent spotlights a huge options position (the J.P. Morgan “collar”) set to expire at the end of March. Its presence creates a “pin” in the equity market, explaining some current market resilience.

  • “That strike is really going to dominate the equity flows… unless oil goes over a hundred.” — Brent Kachuba [44:20]

  • Post-expiry, if volatility breaks out and oil moves further, markets could finally reflect the full “bad news.”

• Key Levels to Watch:

  • Crude oil over $100: “all bets off,” potential for a major market drop.
  • Crude under $90: could trigger a relief rally in equities.

4. U.S. Employment Behind the Headlines (Eric Pakman, Data for the People)

[54:54–69:57]

• Jobs Data Beneath the Surface:

  • Eric highlights his research showing that recent U.S. job growth is almost exclusively in healthcare, masked by headline figures.
  • “We were seeing like basically a jobs recession forming in the middle of 2024, outside of health care. And then we’re just waiting for that health care shoe to drop, which it finally did last month.” — Eric Pakman [58:47]
  • He flags coming regulatory changes (Medicaid funding cuts) as a looming threat to these jobs.

• Labor Force Participation as the Real Indicator:

  • Comparing unemployment rates in Perry County, AL (structurally declining, 5% unemployment due to low participation) vs. Clark County, NV (Las Vegas, 5% with high participation), Eric demonstrates why simple unemployment rates are misleading.
  • “If the labor force is growing, there will be more tax revenue … Employers like it, especially manufacturing plants. ... If you have a labor force going in the opposite direction, you can start what I call the cycle of structural decline.” — Eric Pakman [64:48]

• Striking Statistic:

  • “There are only 8% of all counties in structural decline in 2010 and now there's 32% of all counties in structural decline as of the end of 2025.” — Eric Pakman [68:55]

Notable Quotes & Memorable Moments

• “It’s a moment nobody knows anything. So we’re going to try to learn something, right?” — Host Jack Forehand [03:27]

• “The common knowledge game… what changes things is not what you know, it's what we all know that we all know.” — Ben Hunt [24:14]

• “We’ve been taught since the great financial crisis to buy the dip and it always mean reverts… let’s hope that’s the case, because I don’t want the world to end this way for sure.” — Brent Kachuba [42:28]

• "If you're the person that's saying, oh I know for sure this isn't priced in... that's a bad place to be in—you're probably way, way overconfident." — Jack Forehand [53:08]

• "The more my uncertainty goes up...the more things I hold." — Matt Zeigler [54:17]

Timestamps Guide

• [05:01] Andy Constan: Macro mechanics of oil shocks, inflation, and central bank constraints.
• [10:51] Scenarios for oil prices and economic consequences.
• [16:00] Is risk “priced in”? Positioning in oil vs. equities.
• [21:23] Ben Hunt on "common knowledge moments" and the Iran crisis.
• [24:14–27:13] The game theory of narrative shifts, real-world market implications.
• [32:40] Ben Hunt’s portfolio response: out of importers, long energy.
• [35:09] Brent Kachuba on structural positioning, $100 oil, and options market pins.
• [39:12] The crude/VIX correlation, why $100 oil is so critical.
• [44:20] J.P. Morgan collar and market support dynamics.
• [54:54] Eric Pakman on what the employment data actually hides.
• [64:48] Why labor force participation is the true economic signal.
• [68:55] The explosion of "structural decline" in U.S. counties.

Final Reflections & Takeaways

• Uncertainty Rules: All guests and hosts stress humility—nobody can predict exact outcomes given the number of moving pieces.

  • “High level of knowledge, low level of confidence… anything other than that is dangerous right now.” — Jack Forehand [71:47]

• Diversification is Key: In the face of “unknowability,” having a diversified portfolio is the only logical defense.

  • “You need a bunch of, hopefully at least somewhat uncorrelated assets.” — Matt Zeigler [54:38]

• Narratives Dictate Markets: Sometimes the story “everyone knows” has more impact than the data itself; investors must recognize when such inflection points hit.

• Structural Risks Are Mounting: From the oil market to the jobs market to the geographic distribution of opportunity, the old equilibrium is no more.

Useful Links:

• damSpring.com — Andy Constan
• Epsilon Theory / PanOptica.com — Ben Hunt
• SpotGamma — Brent Kachuba
• dataforthepeople.com — Eric Pakman

For more deep dives and market insights, subscribe to Excess Returns and visit their Substack.

Summary prepared for those seeking nuanced, real-talk analysis on the intersection of geopolitics, markets, and investing strategy in unprecedented times.