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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 [https://www.amazon.com/George-Robert-Stephenson-Railway-Revolution/dp/1445655217]) Richard Trevithick: Giant of Steam by Anthony Burton (link [https://www.amazon.com/Richard-Trevithick-Giant-Anthony-Burton/dp/1854108786]) The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention by William Rosen (link [https://www.amazon.com/s?k=the+most+powerful+idea&adgrpid=185990026786&hvadid=779525328642&hvdev=c&hvexpln=0&hvlocphy=9190314&hvnetw=g&hvocijid=4805470761817255870--&hvqmt=e&hvrand=4805470761817255870&hvtargid=kwd-314819113186&hydadcr=22562_13531169_8388&mcid=823e6d7079a933bfbab620318c8537e0&tag=googhydr-20&ref=pd_sl_4ze9j520rn_e]) History of Railway Mania by Gareth Campbell (link [https://www.railwaymania.co.uk/]) Papers on Technology and Financial Manias by Andrew Odlyzko (link [https://www-users.cse.umn.edu/~odlyzko/doc/bubbles.html]) Visualizations of the Newcomen and Watt steam engines, and the Puffing Devil locomotive by Michael De Greasley (link [https://youtu.be/QltRwiu4U2Q?si=GBOT-mZN3-tXICiC]) AI Could Be the Railroad of the 21st Century. Brace Yourself by Derek Thompson (link [https://www.derekthompson.org/p/artificial-intelligence-could-be]) Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages by Carlota Perez (link [https://www.amazon.com/Technological-Revolutions-Financial-Capital-Dynamics/dp/1843763311]) Crossing the Chasm by Geoffrey Moore (link [https://www.amazon.com/Crossing-Chasm-3rd-Disruptive-Mainstream/dp/0062292986/ref=sr_1_1?adgrpid=187088772395&dib=eyJ2IjoiMSJ9.3eJnK4Q0eLDZRpRlwx_p5HhHB33mAh-BxQ0ZnqECJfOPAJV9HM5ZUEDIH9_ZPBEcq7NHaSNAniMQehdz1pgo9G0NeAdpYw3b39CnutKJhwhtahk-anri3QREO6fw5HBcTxQQUAE9UShRsc8YKU2crzdzExNDf59k_cOgslyQJH8e9aLw-3B0RLe6C-R7u5rfOnCzA28zKzqnoVCwTScIb9joLTmLMGS0MTR4Fe_1o4c.uJcIs1QboFVQvDTpI2rCkBNdJE2etlTM-nwRcZEEj0U&dib_tag=se&hvadid=779670855521&hvdev=c&hvexpln=0&hvlocphy=9190314&hvnetw=g&hvocijid=10671971543336036660--&hvqmt=e&hvrand=10671971543336036660&hvtargid=kwd-298995268976&hydadcr=24159_13539982_2336988&keywords=crossing+the+chasm&mcid=072beece5ae43bfbbd40cf5f89bb43ac&qid=1779116406&sr=8-1]) 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 [http://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 [https://www.backtestpodcast.com?utm_medium=podcast&utm_campaign=CTA_1]

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 [https://www.youtube.com/watch?v=kR7oodru0TQ]) Howard Marks Memos, The Complete Collection (1990-2025) (link [https://www.oaktreecapital.com/docs/default-source/memos/the-complete-collection.pdf?sfvrsn=58102966_5]) The Most Important Thing by Howard Marks (link [https://www.amazon.com/most-important-thing-Howard-Marks/dp/9353022797/ref=sr_1_1?crid=3G9J3JRKT4B6S&dib=eyJ2IjoiMSJ9.BGKQUNLoM2PgdS5JhCE_a_p0-ycBvE5pI6rrAxFpPm-u63iWbq-x29O509rqgykg5NFXIq-N-sBIuawxuvdhkc6QK7aJ7EE9qaEKPJu3iCIZG9oKoc7KQoDDjtumh_jI9-5pRCC8t_ACxIqKRtqh_JUC1-Yv0RbElt2Vp6ouXHvS32benLmB1_qb2hKlUBigiboLKtztDf0goL3IdSNqRSZMRYFiHfYa9x9e41tzkOQ.RIfVh20Scm0TZ9vLuLMk5TjIw40h3w6EgFKlpH6VHeY&dib_tag=se&keywords=the+most+important+thing+howard+marks&qid=1772224202&sprefix=the+most+importan%2Caps%2C168&sr=8-1]) Mastering The Market Cycle: Getting the Odds on Your Side by Howard Marks (link [https://www.amazon.com/Mastering-Market-Cycle-Getting-Odds/dp/1328479250/ref=pd_sbs_d_sccl_2_1/130-7508975-0763827?pd_rd_w=jWTma&content-id=amzn1.sym.aa738fbd-ad05-4d11-aae2-04b598db6305&pf_rd_p=aa738fbd-ad05-4d11-aae2-04b598db6305&pf_rd_r=6DGG4MB46SRN0CRCDCKB&pd_rd_wg=eZ195&pd_rd_r=83b2faa0-7ed8-48af-a3d1-074f44718e9f&pd_rd_i=1328479250&psc=1]) Acquired with Howard Marks and Andrew Marks (link [https://www.youtube.com/watch?v=k9xXpsoRG18]) Junk Bonds: How High Yield Securities Restructured Corporate America by Glenn Yago (link [https://www.amazon.com/Junk-Bonds-Securities-Restructured-Corporate/dp/019506111X]) Beyond Junk Bonds: Expanding High Yield Markets by Glenn Yago, Susanne Trimbath (link [https://www.amazon.com/Beyond-Junk-Bonds-Expanding-Markets/dp/0195149238/ref=sr_1_1?crid=UA4CAISLGSKN&dib=eyJ2IjoiMSJ9.Tm0konjB0tCBCoQmfrFsKw.ZmoexGzpvmjkHjrRcx1u9vWMV3qO1v1P_G3oH8_qC9k&dib_tag=se&keywords=Beyond+Junk+Bonds%3A+Expanding+High+Yield+Markets&qid=1772487575&sprefix=beyond+junk+bonds+expanding+high+yield+markets%2Caps%2C134&sr=8-1]) 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 [http://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 [https://www.backtestpodcast.com?utm_medium=podcast&utm_campaign=CTA_1]

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 [https://www.amazon.com/Crude-Volatility-History-Future-Boom-Bust/dp/023117814X]) “Ships stranded by Strait of Hormuz closure” 60 Minutes on CBS, March 15 2026 (Link [https://www.youtube.com/watch?v=hOWRrk0kRMY]) Chart: oil supply shocks and spare capacity since 1955 (Link [https://x.com/bob_mcnally/status/2031076199464648940?s=46]) Oil Market Black Swans: Covid-19, the Market-Share War, and Long-Term Risks of Oil Volatility by Robert McNally (Link [https://www.energypolicy.columbia.edu/publications/oil-market-black-swans-covid-19-market-share-war-and-long-term-risks-oil-volatility/]) A Crude Predicament: The Era of Volatile Oil Prices by Robert McNally and Michael Levi (Link [https://www.foreignaffairs.com/world/crude-predicament]) 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 [http://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 [https://www.backtestpodcast.com?utm_medium=podcast&utm_campaign=CTA_1]

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 [https://www.hbs.edu/ris/Publication%20Files/First%20Capital%20Life_8364ec6a-d3a0-4754-b898-a7c4c81b5175.pdf]) Dangerous Dreamers: The Financial Innovators from Charles Merrill to Michael Milken by Robert Sobel (link [https://www.amazon.com/Dangerous-Dreamers-Financial-Innovators-Charles-ebook/dp/B07FR3JRX3/ref=tmm_kin_swatch_0?_encoding=UTF8&dib_tag=se&dib=eyJ2IjoiMSJ9.g0doJh2u8Ze030sGWSiwAv4sbQ-3Dvb55iVuXqDSCdEi09xQT3jrFH92kFIz7kI6n-Tl5D_E0-pqySKt2I4WLzNFYsSUFZQ37pQwEI8J7RxP6Z3wwZr9vh5pTsXZy5zb7LM7S7CSaI5AXM6lnxcfEP96byROWSru-0mL2vzu909ksKSl28ziHYKLvdbHfRJErmC0vd4_imuJekmsYXpxcHOceOlQakhEQ4zyFdn1HTc.t1tw39X-HJjLJNZgGd1XZTTuh_sU0SRCxyyid8RWlfE&qid=1767985826&sr=8-1]) Junk Bonds: How High Yield Securities Restructured Corporate America by Glenn Yago (link [https://www.amazon.com/Junk-Bonds-Securities-Restructured-Corporate/dp/019506111X]) 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 [http://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 [https://www.backtestpodcast.com?utm_medium=podcast&utm_campaign=CTA_1]

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 [https://www.amazon.com/Barbarians-Gate-Fall-RJR-Nabisco/dp/0061655554/ref=sr_1_1?crid=2FBDTSPBQJSEB&dib=eyJ2IjoiMSJ9.BPv9WXExJdcllGNfpQ3JpwCF9p1feUT__1uuKiNpFjrP_jMkTRo-S9-pgWFtpbVLdJlD-RIpdRQ-y3wDDcFweqh7kbq0Dm-tmRPPLJtvC4HPRA4HQv_IQLzIgBPYmgBRzvdow9RUqmskUND064svJLqttOWea_C7nBW0p5Ga3S2SXg-ayBlX0Rnm4ujXG_DMAXUw5kpZWrgvAzKlXDHOIpNYU656i_lCH6Puy5VnbSg.De9pWH81igCG4P-rm4xHGLoSm0Z3Fmvm_4NSQ5AxVk0&dib_tag=se&keywords=barbarians+at+the+gate&qid=1769214507&sprefix=barbarians%2Caps%2C154&sr=8-1]) RJR Nabisco: A Case Study of a Complex Leveraged Buyout, Financial Analysts Journal, 1991 (link [https://people.bath.ac.uk/mnsrf/Teaching%202011/RJR%20case%20study.pdf]) Junk Bonds: How High Yield Securities Restructured Corporate America by Glenn Yago (link [https://www.amazon.com/Junk-Bonds-Securities-Restructured-Corporate/dp/019506111X]) Dangerous Dreamers: The Financial Innovators from Charles Merrill to Michael Milken by Robert Sobel (link [https://www.amazon.com/Dangerous-Dreamers-Financial-Innovators-Charles-ebook/dp/B07FR3JRX3/ref=tmm_kin_swatch_0?_encoding=UTF8&dib_tag=se&dib=eyJ2IjoiMSJ9.g0doJh2u8Ze030sGWSiwAv4sbQ-3Dvb55iVuXqDSCdEi09xQT3jrFH92kFIz7kI6n-Tl5D_E0-pqySKt2I4WLzNFYsSUFZQ37pQwEI8J7RxP6Z3wwZr9vh5pTsXZy5zb7LM7S7CSaI5AXM6lnxcfEP96byROWSru-0mL2vzu909ksKSl28ziHYKLvdbHfRJErmC0vd4_imuJekmsYXpxcHOceOlQakhEQ4zyFdn1HTc.t1tw39X-HJjLJNZgGd1XZTTuh_sU0SRCxyyid8RWlfE&qid=1767985826&sr=8-1]) 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 [http://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 [https://www.backtestpodcast.com?utm_medium=podcast&utm_campaign=CTA_1]