Odd Lots: Lots More With Charlie McElligott on This Week's "SaaSpocalypse"

Podcast: Bloomberg Odd Lots
Hosts: Joe Weisenthal & Tracy Alloway
Guest: Charlie McElligott, Cross-Asset Macro Strategist, Nomura
Date: February 6, 2026

Episode Overview

This episode dives into the multi-faceted meltdown observed across global markets in early February 2026, a week nicknamed the “SaaSpocalypse” due to the dramatic selloff in software stocks. Hosts Joe Weisenthal and Tracy Alloway are joined by recurrent guest Charlie McElligott to unpack the catalysts behind the rout, the domino effect linking sectors like crypto and metals, and structural shifts amplifying risk and volatility. The conversation is lively, insightful, and candid, providing a roadmap for understanding both immediate market moves and the deeper macro forces at play.

Key Discussion Points & Insights

1. Market Environment: The "SaaSpocalypse" Unfolds

• Setting the Scene (01:33 – 03:33)
  • The week saw a synchronized rout: crashing gold and silver prices, a “slaughter” in software stocks, and Bitcoin falling below $66,000.
  • Crypto, private credit, and tech valuations came under fire; Tracy jokes about wanting to base her "ENT personality" on campaigning for a strategic pork reserve as a lighter aside to the market carnage.

2. Proximate Catalyst: Why Now?

• Complex Feedback Loops (03:34 – 07:27)
  • McElligott rejects the idea of a single catalyst, describing a “world of thousands of macro factor variables” and his own role as an “ambulance chaser… grave robber… carpet bagger.”
  • Key moment: "I try to reverse engineer car accidents... locate consensus positions that tend to then crowd in positioning when trend trades develop. Requirement being low volatility." (Charlie, 03:56)
  • Overcrowding in secular growth, AI, mega cap tech trades due to lower perceived policy volatility and “lazy narratives.”
  • Shifts in global macro themes—weak dollar positioning, upside data surprises, less dovish Fed chatter—trigger monetization and risk-off flows across asset classes.

3. How Crowded Were the Trades?

• Leverage at Extremes (07:27 – 10:06)
  • McElligott discusses Nomura and industry data showing leverage and gross exposures at near record levels.
  • “Grosses were too damn big. It’s like the guy that used to run for mayor. When you see grosses being that big and you see prices bending off the curve and you see the thesis behind it… now I’m pumped to tie in the bitcoin read.” (Charlie, 08:25)
  • Goldman Sachs’ prime brokerage data: equity hedge fund grosses at the 100th percentile over five years.
  • Risk models, including trend and risk parity, amplified exposures, creating strong feedback loops when trades unwound.

4. Debasement, Bitcoin, and the Metals Selloff

• Unpacking the Thesis (10:06 – 13:23)
  • Debasement/de-dollarization theories drove gold and silver up—yet Bitcoin failed to follow, upsetting “shapeshifter” asset narratives.
  • "Bitcoin is trading like software, it's trading like SaaS, which is going through an existential crisis right now for really justified reasons, especially with regards to valuation." (Charlie, 11:32)
  • Overlapping investor bases between SaaS, crypto, and retail "bros" compounded liquidations.
  • AI CapEx and buyback shifts: Big tech burning through “cash that made them preferred,” which in turn undermined the buyback bid that had suppressed volatility for years.

5. Credit’s Role and the Backdoor Systemic Story

• Software, Buybacks, and Credit Spreads (13:23 – 16:02)
  • As tech firms shift from buybacks to CapEx, demand for funding rises—pushing more supply into credit markets with spreads “too tight.”
  • “The magnitude of that supply in the investment grade market is simply going to widen spreads… Tech is a big part of that.” (Charlie, 13:23)
  • Oracle successfully executed a $25B investment-grade deal, but OpenAI might need to raise $100–200B imminently—a cause for skepticism.

6. Accelerated Disruption and the VC / SaaS / Crypto Web

• Pressure on Private Valuations (15:10 – 18:03)
  • The “concentric circles of VC boys and tech boys and SaaS bros and Bitcoin bros… is just a circle.” (Charlie, 16:01)
  • Anthropic, Claude, and generative AI are rapidly eroding margins and job security, creating relentless forced selling of restricted shares and a liquidity crunch in both public and private tech.
  • This contagion affects private credit, especially lenders holding software paper with “tricky valuations and not a lot of buffer room.”

7. Why Is Correlation Still Low?

• Market Structure and Volatility Regimes (19:55 – 24:07)
  • Tracy observes that while typical crisis periods see correlation “go to one,” realized (and implied) correlation still seems low.
  • McElligott attributes this to the dominance of market-neutral, multi-strategy hedge funds. Their risk-adjusted positioning leads to “reverse dispersion,” with as many stocks up as down, rather than broad-based selloffs.
  • "It's not just you stop out of your net longs or your crowded longs. Right. It's that you're also, you know, theoretically an equal dollar amount on the short side being covered." (Charlie, 22:36)
  • Amplified by retail activity—leveraged ETFs behaving as “synthetic negative gamma,” mostly concentrated in AI, tech, and crypto exposures.

8. Stop-Losses, Systematic Flows & Feedback Loops

• Momentum Over Mean-Reversion (27:05 – 32:36)
  • Systematic models reinforce trends via leverage; the “lower vol, add leverage” cycle both fuels rallies and sets up for crashes.
  • “All of modern anybody who’s like on a VAR model is actually a momentum trader. Right? You have to deleverage when volume goes higher, by and large.” (Charlie, 29:46)
  • Retail mentality described as “financial nihilism”: “You seek out the movement you want, the stuff that’s moving.”
  • Crowd unwinds proceed first in non-core, high-Sharpe trades (e.g., Japanese bank longs as a JGB proxy), then waterfall across related strategies.

9. What Stops the Bleed?

• The Cycle of Hedges and Systematic Buying (32:52 – 35:16)
  • The unwind is checked once gross exposures shrink, hedges are monetized, and dealers have to reverse their own positions, sparking relief rallies.
  • “People then have to monetize their hedges… Then we create more delta to buy… And volume starts rolling over and the systematic, the volume supply people come… that’s de facto buy the dip.” (Charlie, 33:36)
  • Flows into yield-enhancement vehicles—selling equities optionality, capping upside, but providing yield—act as the new “fixed income.”
  • The cycle repeats, driven as much by assets supply and institutional conditioning as by macro fundamentals.

Notable Quotes & Memorable Moments

• On Crowded Trades:
  “By and large the grosses were too damn big.” (Charlie, 08:25)
• On Shifting Narratives:
  “Bitcoin kept going lower and I started seeing… Bitcoin is trading like software. It's trading like SaaS, which is going through an existential crisis for really justified reasons.” (Charlie, 11:32)
• On Buybacks as Market Support:
  “Buybacks are like 7 to 8x the largest source of demand for equities over the past 15 years, and it’s a volume suppressor.” (Charlie, 12:20)
• On Flow-Driven Markets:
  “These flows that when kind of the coast is clear, they just come in and it’s just Vega supply and it just smashes volume back down.” (Charlie, 35:16)
• On the Market Structure:
  “All of modern anybody who's on a VAR model is actually a momentum trader… You have to deleverage when vol goes higher, by and large.” (Charlie, 29:46)
• On the Retail Mentality:
  “It’s that financial nihilism that we’ve spoken about… You seek out the movement you want, the stuff that’s moving.” (Charlie, 30:16)
• Hosts having fun:
  "It's all the boys and bros." (Tracy, 15:59)
  "It's not a Venn diagram, it's just a circle." (Joe, 16:01)
  “So flows before pros, but now the pros are chasing flows and that's hurting the bros.” (Tracy, 32:36)

Important Timestamps

| Time | Segment Description | |-----------|---------------------------------------------------------| | 01:33 | Market context: simultaneous rout across assets | | 03:34 | Charlie's take on catalysts and consensus positioning | | 08:25 | The measurement and dangers of crowding/leverage | | 10:06 | Bitcoin, debasement, and why narratives failed | | 12:19 | Buybacks, CapEx, and shifting tech funding priorities | | 13:23 | Tech's new credit risk and implications for spreads | | 15:10 | AI’s impact on SaaS business models and market overlap | | 19:55 | Correlation puzzles explained through fund structures | | 27:05 | Stop losses, feedback loops, and momentum dynamics | | 32:52 | How market selloffs “bleed” stops, and what ends them | | 35:16 | The new “fixed income” in equity options and flows |

Tone and Takeaways

The conversation is simultaneously technical and irreverent, with plenty of market jargon and banter, but always returns to sharp macro and market structure analysis. McElligott’s style is self-deprecating (“ambulance chaser”), colorful, and data-driven; his explanations bridge theory and real-world flows.

Summary takeaway:
This week’s bloodbath across software, crypto, and metals wasn’t driven by one event but rather by a confluence of overextended positioning, squeezed narratives, and deeply interconnected flows across different risk assets and funding markets. Structural market forces—leverage, momentum, systematic models, and the shift from buybacks to CapEx—are combining to turn what used to be idiosyncratic corrections into sector-wide crises. Relief will come when exposure is wrung out, hedges unwind, and systematic “buy-the-dip” flows resume—but new risks remain ever-present in an over-levered market.

For a deeper dive into real-time market moves and finance memes, Charlie McElligott remains one of the best to follow, and this episode offers a master class in both market mechanics and colorful podcast storytelling.