Excess Returns: Last Call – January 2026

Episode Title: AI Capex, Private Credit Problems and the Unstable Market
Hosts: Jack Forehand & Matt Zeigler
Guests: Ben Hunt, Brent Kachuba, Kai Wu, Aswath Damodaran
Date: January 31, 2026

Episode Overview

This inaugural episode of “Last Call” (a new monthly market review from the Excess Returns team) takes a non-traditional, high-level look at key investing themes and the latest data behind the headlines. Rather than rehashing monthly returns, Jack, Matt, and a lineup of expert guests discuss rising instability versus uncertainty in markets, the dangers emerging in private credit, what’s happening below the surface in option flows, the “AI Capex arms race” of the Mag 7 stocks, and fresh perspectives for long-term investors as 2026 begins.

Key Discussion Points & Insights

1. Market Instability, Not Just Uncertainty

Segment: Rearview Mirror

• The conversation opens with the challenge of distinguishing instability from uncertainty in today's markets.
• Referencing Liz Ann Saunders, the group notes that while uncertainty is ever-present (“I’ve never woken up to the front page of the Wall Street Journal saying we know everything, everything is certain.” – Liz Ann Saunders, 07:01), what we’re seeing now is true policy/geopolitical instability.
• Instability is increasingly driven by erratic policy, geopolitics, and volatile market narratives—destabilizing investor confidence, even as markets trend up.
• “The market keeps going up…but on the other hand, like, at some point, maybe the instability turns into something that actually does make the market unstable.” – Jack Forehand (09:05)
• The hosts highlight a rise in “what if” questions—previously stable stories like AI, robust earnings, and resilient corporations now face greater scrutiny and nuanced risk.

2. Breakdown in Institutional Trust and Precious Metals

• The demand for gold and precious metals is linked to rising systemic mistrust—between countries, institutions, and investors.
• Referencing guests Tony Greer and Grant Williams, the episode draws a parallel from historical crises (like the Suez Canal) to the post-2022 seizure of Russian assets, observing, “Trust…is not just between us or to things like the Fed. It’s across countries now, there’s not trust.” — Jack Forehand (12:06)
• This pervasive erosion of trust is fueling shifts in the flow of capital and reserve holdings globally, raising existential questions for the US dollar and cross-border finance.

3. Options Market Flows: Volatility & Structural Shifts

Guest: Brent Kachuba (SpotGamma)
Timestamps: 14:57 – 26:51

Highlights:

• Brent details the explosion in options trading volumes, especially in zero-DTE (“zero days to expiration”) contracts—both at the index and, increasingly, single-stock level.
• Exchanges are facilitating greater short-dated options trading, which amplifies market swings.
• Quote: “You have these kind of quant quakes, I would call them…these spasms driven by dislocations in the options market. And so those seem to be happening with more frequency now.” — Brent Kachuba (17:15)
• The options market’s implied volatility data provides insight into actual investor positioning—unlike analyst or commentator guesses.
• In current markets, single-stock options (esp. on AI names) show sky-high implied volatility and bullish sentiment; index options, on the other hand, are complacent and cheap.
• This divergence (“dispersion and correlation trades”) causes instability: options pricing can create abrupt market moves (“quant quakes”), particularly when expectations are too tightly set.
• Memorable moment: Brent explains how, for names like SanDisk (up 120% YTD in January), option prices are so rich that the risk of reversal or mean reversion skyrockets.

4. Private Credit: Bubble Trouble & Narrative Risk

Guest: Ben Hunt (Epsilon Theory, Perseant)
Timestamps: 27:05 – 39:36

Highlights:

• Private credit is now everywhere (“It’s the new mortgage-backed securities…You can’t escape it. It’s definitely reached that sort of bubble reality.” – Ben Hunt, 28:47).
• Using Perseant’s narrative analytics, Ben demonstrates that concern over private credit (esp. in interval funds and retail retirement accounts) has exploded in media sentiment—now two standard deviations above its historic norm.
• Quote: “However loud you think those concerns are getting, you’re underestimating it now…There’s a lot of smoke right now. And so the question is, where’s the fire?” — Ben Hunt (30:10)
• There’s a narrative clash in the media: Should retail have access to these illiquid products? Both arguments have intensity, but caution is gaining ground.
• The existential risk: If “the music stops” for private credit, the recent focus in financial media signals a classic late-stage bubble worry, not just a valuation concern.
• “What’s new today is…the, I think, very apt concern that this is what you see when a bubble starts to pop.” — Ben Hunt (37:45)

5. Raising Cash, Diversification Dilemmas & Mag 7 Overvaluation

Guest: Aswath Damodaran
Timestamps: 40:54 – 43:30

Highlights:

• Aswath, known for backing the Mag 7, is now raising cash due to a dearth of undervalued opportunities and elevated market risk.
• “I feel less willing to load into something that’s undervalued because… I’m wary. I’m not a market timer, but I’m wary about where we are at the market in terms of pricing.” — Aswath Damodaran (40:54)
• He sees increasing difficulty in finding non-equity, non-correlated investments—asset classes are converging in behavior and rising correlation with equities.
• He’s considering gold/collectibles defensively as “one of the few spaces…relatively uncorrelated with equities.”
• Memorable analogy: “The best day to fix the hole in the roof is when it’s sunny…Why would you not do it at the easy time?” — Matt (43:59)

6. The AI Capex Boom and Changing Nature of the MAG7

Guest: Kai Wu (Sparkline Capital)
Timestamps: 49:42 – 61:52

Highlights:

• Kai brings quantitative research showing that historically, companies with soaring CapEx underperform those with more disciplined spend.
• The Mag 7, once paragons of asset-light, high R&D business models, are rapidly becoming asset-heavy, with CapEx/revenue ratios surpassing those of traditional utilities.
• Quote: “You would have drawn Google a few years ago, maybe 10 years ago… What they’re morphing into is, appears to be more utility-like—very capex heavy.” — Kai Wu (53:07)
• Meta and Microsoft, in particular, are spending 28–35% of sales on CapEx (vs. utilities’ 21%), reminiscent of unsustainable spending booms in past tech cycles.
• Historical parallels with the railroad and dotcom booms: The biggest long-term winners so far weren’t infrastructure builders, but efficient end-users and application companies.
• Cautious optimism: While there’s a “non-zero” chance this time is different due to the transformative power of AI, strategic discipline is warranted. “There’s a chance these companies invent God…but you have to just play the odds as an investor.” — Kai Wu (60:13)

7. Forward View: Small Caps, International Value, and Cautious Optimism

Timestamps: 61:53 – 67:34

Highlights:

• Brief enthusiasm for small caps and international value, which have staged a comeback relative to the S&P 500—though the team expresses skepticism about the durability of such trends.
• The Russell 2000’s recent outperformance (unexpected and mostly due to financials and loss-makers) raises questions about quality and “what counts” as small cap in modern investing.
• Quote: “The Russell 2000 is a terrible index. It basically is financials and money losing companies these days. It’s not like you really should look at something like the S&P Small Cap 600…” — Jack Forehand (65:58)
• Concluding note: Rotation from US tech to other regions or factors will only last if underlying earnings eventually follow—currency moves and multiple expansion alone can’t sustain outperformance.

Notable Quotes & Memorable Moments

On Market Instability

• “I think it’s the instability piece that is unique in this backdrop…it’s leading to some of the bifurcation, some of the K shaped nature in this cycle. And I’m not sure that eases anytime soon.” — Liz Ann Saunders (07:01)

On Options Flow

• “When those expectations of movement are too tight, what can happen is then we get what’s called jump risk…you have to scramble to cover…that creates these jump risk and some of these spasms.” — Brent Kachuba (18:02)

On the Private Credit Bubble

• “What we want to show you here is that however loud you think those concerns are getting, you’re underestimating it now.” — Ben Hunt (30:10)

On Mag 7 CapEx

• “The companies that have the highest capex spend underperform the most in a monotonic fashion… the firms who are abstaining from the aggressive capital spending have tended to outperform.” — Kai Wu (51:08)

On Raising Cash

• “There’s no easy place for me to go. And I said, I’ve historically not looked at collectibles…I think that this might be a time where if you cash out on a stock, some of that money should find its way into things that are…relatively uncorrelated with equities.” — Aswath Damodaran (40:54)

On Small Cap Rebounds

• “The Russell 2000 is a complete bunch of garbage. It basically is financials and money losing companies these days.” — Jack Forehand (65:58)

Timestamps for Main Segments

• Instability vs. Uncertainty: 06:23 – 11:23
• Lack of Trust & Precious Metals Theme: 11:23 – 14:44
• Brent Kachuba (Options Flows): 14:54 – 26:51
• Ben Hunt (Private Credit Narratives): 27:05 – 39:36
• Aswath Damodaran (Raising Cash): 40:54 – 43:30
• Kai Wu (AI Capex and the MAG7): 49:42 – 61:52
• Forward View: Small Caps, Rotations, Portfolio Construction: 61:53 – 67:34

Tone & Style

The tone is conversational, witty, and sometimes irreverent (“this is not your grandmother’s market recap”). The hosts and guests blend humor, candor, and deep expertise, frequently poking fun at themselves and mainstream market narratives—without ever losing sight of their primary goal: helping long-term investors cut through market noise.

Final Thoughts

“Last Call” intentionally avoids the usual rear-mirror recaps. Instead, it offers listeners a dynamic blend of hard data, narrative analysis, and candid debate on the forces reshaping global markets in 2026. From the under-the-radar dangers lurking in private credit to the CAPEX arms race in AI, and the ever-shifting trust landscape, the show lays out a clear map for investors navigating risk, instability, and opportunity in the months ahead.