Most important take away

Three major forces dominated Q1 2026: the Iran war driving oil above $100 and interest rates toward the critical 4.5% threshold on the 10-year Treasury, AI disruption crushing software stocks to valuations below the market multiple for the first time in decades, and private credit funds facing unprecedented redemption requests (up to 41% at Blue Owl’s OTIC). However, widening credit spreads are creating new opportunities, with Blackstone and Goldman each closing $10 billion+ institutional credit funds, signaling that distressed pricing is beginning to attract capital.

Summary

Stocks and Investments Mentioned

• Energy sector (+37% in Q1): Occidental (+58%), Valero (+52%) — entirely war-driven; expect sharp declines if ceasefire holds.
• Software/InfoTech (-9% in Q1): Adobe (-31%), ServiceNow (-32%) — PEs now below market multiple due to AI fears around seat growth and pricing power erosion.
• Health insurance: UnitedHealth (-18%), Centene (-20%), Humana (-32%) in Q1. UNH bounced 10% after Medicare Advantage final pricing came in at +2.5% for 2027 (vs. preliminary +0.09%), though investors had hoped for 5%.
• Consumer discretionary (-9%): Booking Holdings (-21%), cruise lines, and homebuilders hurt by higher rates.
• Financials (-10%): Alternative asset managers (private equity companies) down 25%+ across the board. Safety plays outperformed: CBOE (+12%), CME (+8%), Chubb (+4%).
• Utilities (+8%) and Consumer staples (+7%): Classic defensive plays benefiting from flight to safety.
• Meritage Homes (MTH): Eisman continues to own. Recommended in January near tangible book value (~$74). Now trading at ~90% of tangible book. Long-term thesis intact — profitable homebuilder buying back ~11% of shares by year-end — but vulnerable if 10-year Treasury exceeds 4.5%.
• Private credit funds: Blue Owl’s OCIC (21.9% redemption requests), OTIC (41% requests), Carlyle’s CTAC (16% requests), all capped at 5% actual redemptions. Moody’s moved OCIC and entire BDC industry outlook to negative.
• Blackstone Capital Opportunities Fund 5: Closed $10B oversubscribed opportunistic credit fund (institutional only). Goldman also lined up $10B+ for a new direct lending drawdown fund — signals that widening credit spreads are creating attractive entry points.

Actionable Insights

1. Watch the 4.5% 10-year Treasury level: Over the past 4 years, equities have sold off when the 10-year breaches 4.5%. It reached 4.4% in Q1. If the Iran conflict continues and oil prices climb further, this threshold could be breached, triggering further equity weakness.
2. Software stocks may be approaching value territory: With PEs below the market multiple for the first time in decades, software is deeply out of favor. However, the AI threat to the SaaS pricing model (reduced ability to raise prices, slower seat growth) is real and ongoing. This is a sector to monitor for potential mean reversion, but the structural risk from AI has not been resolved.
3. Private credit distress is creating opportunity for patient capital: Widening credit spreads mean new loans are potentially more lucrative. Institutional players (Blackstone, Goldman) are already deploying capital. Retail investors should watch for when credit spreads get “sufficiently wide” to become attractive — Eisman plans a future masterclass on this.
4. Meritage Homes is a long-term hold if you can tolerate rate risk: Trading below tangible book value with an 11% buyback program underway. The thesis works as long as rates stay manageable, but rising rates from the war are a direct headwind to the spring selling season.
5. Energy longs are pure war trades: The 37% Q1 energy rally reverses quickly on ceasefire news (oil dropped 15%, S&P rallied 2.5% on the ceasefire announcement). Position sizing should reflect the binary geopolitical risk.
6. Avoid private equity stocks for now: All publicly traded PE companies were down 25%+ due to underwater software acquisitions (2018-2022 vintage) and associated private credit exposure. The “volatility laundering” through infrequent valuations masks real losses.
7. AI layoffs are an emerging macro theme to track: Companies like UPS (48,000), Intel (24,000), Citi (20,000), and others have announced significant AI-related workforce reductions. This trend could impact consumer spending and broader economic growth.

Chapter Summaries

Iran War Update: Trump threatened Iran’s infrastructure over the weekend, then announced a two-week ceasefire at the last minute. Oil dropped 15% and equities rallied on the news. However, VP Vance called it a “fragile truce,” Iran accused the US of violating terms, and the Strait of Hormuz remains closed. The ceasefire’s scope (whether it includes Lebanon) is a key sticking point.

Private Equity Growth Primer: PE grew from $4T (2016) to nearly $9T (2025). Much of the growth was fueled by “volatility laundering” — infrequent private valuations created artificially smooth returns, boosting Sharpe ratios for institutional investors. The strategy worked during low-rate periods but the illusion of low volatility is just that — an illusion.

Private Credit Update: Blue Owl’s OCIC saw 21.9% redemption requests; its tech fund OTIC saw 41% (both capped at 5%). Carlyle’s CTAC received 16% redemption notices. Moody’s moved OCIC and the entire BDC industry outlook to negative. On the positive side, widening spreads are making new credit deals more attractive, with Blackstone closing a $10B oversubscribed fund and Goldman lining up $10B+ in commitments.

Q1 Market Recap: S&P down 4%, NASDAQ down 7%. Winners were energy (+37%), materials (+9%), utilities (+8%), consumer staples (+7%), industrials (+4%), and real estate (+2%). Losers were healthcare (-5%), communication services (-7%), infotech (-9%), consumer discretionary (-9%), and financials (-10%). The quarter started fine but deteriorated as AI disruption fears, private credit stress, the Iran war, and rising rates compounded.

Software Sector Deep Dive: AI threatens the SaaS model by potentially replacing software outright and, more realistically, eroding pricing power. Seat growth and price-per-seat assumptions — the core of software valuation models — are both at risk. Software PEs have been cut in half and are now below the market multiple for the first time in decades.

Viewer Q&A: Eisman clarified he has no long or short positions in private credit. He reiterated his long-term thesis on Meritage Homes while acknowledging rate sensitivity. He discussed whether podcasts could have prevented the 2008 crisis (conclusion: no — by mid-2007 the toxic assets were already on bank balance sheets, and in 2005 when intervention was needed, only anecdotal evidence existed).