Episode summary
It’s Only a Question of When | Nir Kaissar on AI, Private Credit and the Regime Shift Investors Miss
Excess Returns
· · Guests: Nir Kaissar
Summary
Nir Kaissar argues that the market is underestimating how sticky rates may be in 2026. He says the two-year Treasury has stayed near 3.5%, inflation is still around 2.5% to 3%, and that combination leaves little room for the Fed to cut unless inflation and expectations fall meaningfully. He also expects the incoming Fed chair to shrink the balance sheet, which could offset some of the economic stimulus already in the system.
On tariffs, Kaissar says the market has misread both their scale and who ultimately pays. He thinks tariffs have been used more as leverage than as pure punishment, and that healthy corporate margins have allowed companies to absorb much of the cost rather than pass it through to consumers. That feeds into his broader view on valuations: high profitability can support premium multiples, but it does not guarantee the S&P 500 can keep producing the kind of earnings-driven returns seen since 2015.
Kaissar is constructive on AI as a long-term technology but skeptical that the current leaders can all win. He compares the current period to the internet in 1995, arguing AI may be transformative even if today’s public-market winners later give way to new firms. He also warns that private markets, especially private credit and private companies staying private longer, reduce transparency and may shift more risk onto retail investors and the public financial system.
Key takeaways
- Kaissar expects no interest-rate cuts in 2026 and thinks the neutral rate remains near 3.5% unless inflation clearly cools.
- He says tariffs have been absorbed mostly by companies and exporters, not consumers, because US margins are still strong.
- He argues high profitability can support valuations, but S&P 500 returns likely slow because the 2015-2024 earnings surge is not repeatable.
- He views AI as analogous to the internet in 1995: transformative over time, but with today’s winners not guaranteed to dominate long term.
- He says private credit lacks the transparency and market signals that help investors and regulators see stress before defaults rise.
Notable quotes
“I actually don't think that's going to happen. I think and here's why I say that. Um first of all, I think the two-year Treasury yield has been very good at predicting where the Fed's going to go”
“As long as that high profitability is there, that profitability is going to put a floor on the premium valuations”
“I just don't see any world where that kind of earnings growth is sustainable long term”
“I think AI is going to be just as renumerative, maybe more”
“We don't have anything like that in the private markets. We don't know who the issuers are. We don't know what their creditworthiness is”
How the episode opens
The majority opinion is that interest rates are coming down because that's what Trump wants and now Wars is the is the uh is going to be the next chief. And I actually don't think that's going to happen. As long as that high profitability is there, that profitability is going to put a floor on the premium valuations.
The reason their premium is because the the the profitability in general is higher than normal. As long as it's there, it's going to put a floor on it. But that doesn't necessarily mean you're going to continue to see 13 14% returns from the S&P 500.
If you look at the returns from the S&P since say 2015, the vast majority has been driven by insane insane earnings growth upward of 40% annualized from a handful of tech companies that are dominating the market. I just don't see any world where that kind of earnings growth is sustainable long term. If you looked at previous crises, what you would see is the spreads widen ahead of the default rates going up.
And so we have a signal that says to us, hey, you know, not necessarily, but you might want to pay attention because alarms are going off. We don't have anything like that in the private markets. We don't know who the issuers are.
We don't know what their creditworthiness is. We don't know what the default rates are likely to be. You're watching Excess Returns, the channel that makes complex investing ideas simple enough to actually use, where better questions lead to better decisions.
I'm Matt Ziggler. Justin Carbano is in the co-host seat with me today. We've got Bloomberg columnist and opinion maker extraordinaire, founder of Unison Advisors.
It's near Kesar Near. Welcome to Access Returns.
Thanks, man.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai
- fed rate cuts
- private credit
- valuations and profitability
- concentration risk
Companies and tickers mentioned
- GOOGL
- GOOG
- Alphabet
- Bloomberg
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from Excess Returns
-
An AI Bubble Could Hit Stocks. Inflation Could Hit Bonds. How Do You Diversify and Keep Both? -
Tech Is Priced for a Boom. 86% of the Economy Grew 0.7%. What If AI Slows? -
Tech Is the Cheapest Since 2022. Walmart Is 46 Times Earnings. Where Is the Bubble? -
This $1.5 Trillion Manager Expects More Fed Hikes. So Why Is He Still Bullish? -
AI Stocks Cracked. Margins Could Be Peaking. So Why Is a Liquidity Expert Watching the Debt Wall? -
The AI Trade Is Cracking | Peter Boockvar on What to Own Instead
Excess Returns, this episode and its artwork belong to Excess Returns. Octagon is not affiliated with the show; this page is an independent summary.
