Last Call: January 2026 | AI Capex, Private Credit Problems and the Unstable Market

Episode Summary

Executive Summary: This episode launches Last Call as a more idea-driven market recap, using clips and fresh interviews to examine instability vs. uncertainty, trust in markets, private credit risk, options-flow mechanics, AI CapEx in the Mag 7, and whether investors should raise cash or rotate into alternatives as valuations stretch.

Main Topics: Show concept and format (Priority: 5/5): The hosts introduce Last Call as an alternative to conventional market recap shows, focusing on unique perspectives, actionable ideas, and a lighter tone rather than just repeating monthly market moves. Instability vs. uncertainty in markets (Priority: 5/5): Lizanne Saunders' distinction is used to argue that the current environment is less about generic uncertainty and more about unstable policy, geopolitics, and market narratives that create K-shaped outcomes and volatility. Trust breakdown and hard-asset demand (Priority: 4/5): Tony Greer and Grant Williams are used to frame gold's strength and reserve-asset shifts as symptoms of eroding trust in institutions, cross-border financial systems, and U.S. policy actions like frozen Russian assets. Options flows and market microstructure (Priority: 5/5): Brent Kachuba explains how growing options volumes, especially zero-DTE and single-stock options, can force dealer hedging and create 'quant quakes,' jump risk, and intraday market spasms. Private credit narrative risk (Priority: 5/5): Ben Hunt shows how Perscient narrative data captures surging concern about private credit exposure, retail access, and valuation marks, suggesting the sector has entered a bubble-reality phase where the market is asking what happens when the music stops. AI CapEx and the changing Mag 7 (Priority: 4/5): Kai Wu argues that the Mag 7 are becoming more capital-intensive and utility-like, and historical base rates suggest heavy CapEx cycles often lead to underperformance, despite the possibility that AI could be transformational. Raising cash and forward-looking allocation shifts (Priority: 4/5): Aswath Damodaran's clip supports a more cautious posture: trimming overvalued winners, holding cash or other less-correlated assets, and recognizing that almost everything is increasingly correlated with equities.

Key Arguments: The show is designed to be an 'idea recap' rather than a standard performance recap, making complex investing conversations more usable for investors. The current market backdrop is better described as instability than uncertainty because policy, geopolitics, and narratives are shifting in ways that can trigger abrupt market reactions. Trust erosion is helping explain persistent demand for gold and other hard assets, especially after actions like freezing Russian reserves raised questions about asset safety. Growing zero-DTE and short-dated options activity can mechanically amplify market moves through dealer hedging, creating dislocations even when the underlying news seems minor. Private credit has become ubiquitous in advisory channels and media attention; rising narrative concern suggests investors are becoming more wary of hidden risks and illiquidity. Historical data suggests companies with the highest CapEx often underperform, making the current AI infrastructure buildout a legitimate risk even if AI ultimately proves revolutionary. A disciplined way to respond to stretched valuations is trimming exposure gradually and moving proceeds into cash or genuinely uncorrelated assets rather than forcing new equity purchases. Small caps and international equities may be benefiting from rotation and a weaker dollar, but durability will depend on earnings growth rather than just valuation or FX tailwinds.

Data Points: Market move threshold for SPX on FOMC day: about 40 bps expected movement - Brent Kachuba said the zero-DTE straddle was pricing only 40 basis points of SPX movement into the Fed meeting. Average daily SPX move: about 65 bps - Used by Brent to show that the market was pricing in unusually low event risk. Sandisk year-to-date return: up 120% - Brent used this to illustrate how expensive call options and extreme momentum had become in a single stock. Sandisk risk reversal percentile: 82% - In Brent's options chart, Sandisk call pricing versus puts was at an 82nd percentile reading. Spiders IV rank: 7% - Brent highlighted how cheap index options were relative to the prior year, indicating complacency at the index level. Mag 7 capex to sales ratio: from 4% in 2012 to around 15% today - Kai Wu showed that the group's capital intensity has increased sharply over time. Meta capex as a share of sales: 35% - Kai cited Meta as the most aggressive spender among the Mag 7. Microsoft capex as a share of sales: 28% - Kai contrasted Microsoft with Meta and noted continued upward guidance. AT&T capex at dot-com boom peak: 21% - Used as a historical comparison for today's AI infrastructure spend. Permanent portfolio best year: 1979, up 40% - Mentioned during the discussion of cash, diversification, and alternative assets.

Pivotal Quotes: "I think it's more than just a nuance in terms of the distinction between those two unwords, uncertain and unstable." — Lizanne Saunders: Used to define the show's framework for interpreting current market conditions. "You've been deluged with everything private credit. You can't escape it. And it's definitely reached that sort of bubble reality." — Ben Hunt: Explaining why private credit has become a major narrative and risk theme. "What they're morphing into is appears to be more utility-like, so very CapEx heavy." — Kai Wu: Describing the Mag 7's shift from asset-light to asset-heavy business models.

Implications: Listeners should watch narrative shifts, options-driven microstructure, and hidden private-credit risks, while recognizing that valuation discipline and diversification may matter more as correlations rise and mega-cap AI spending accelerates.