January 2026 Random Ramblings

Summary

• Walker is “quite cautious” on markets after a “face-ripping rally” — recording January 22, 2026, he estimates the Russell up 8-9%, maybe 10%, on the month and the S&P up ~3%, driven by low-quality stocks. The Greenland episode crystallized it: Trump threatened tariffs on countries including U.S. allies over Greenland and discussed taking it by force; the market opened down Tuesday, which Walker thinks closed roughly 1.5% lower—“it wasn’t even that”—then ripped back Wednesday as Trump backed off. “When things are euphoric is right before things can get weird.”
• The real tail risk is that the “TACO” trade — Trump Always Chickens Out — is now the most popular bet, and it works right up until it doesn’t. “At some point you write a check and there is no taking it back”: even a walked-back Greenland threat could damage the U.S. brand and sales and could lead people to dump U.S. Treasuries; when the event is no longer walk-backable, “it’s not the market’s down three, it’s the market’s down 20.”
• Responding to weird-markets pushback: “markets are up 30% since April 2025” is not a rebuttal — “you are describing beta,” not alpha. Alpha would have been shorting March 1 and going max long April 7 at the tariff bottom; cherry-picking Facebook at $100 in late 2022 or JPMorgan at 8-9x earnings in spring 2023 doesn’t demonstrate systematic mispricing either. Nvidia buyers in early 2023 may have taken “crazy risks you don’t know about” — “what if AI had been three years too soon” and gone the way of the metaverse?
• “You can’t say hey Andrew everyone can use AI so I can generate alpha. No, it’s a tool” — there is no edge in something everyone has, like modern graphite “woods” in golf or modern tennis rackets. The interesting question is whether AI amplifies or detracts from specific investors: it may make the fundamentals-strong, body-language-weak manager “increasingly obsolete” while amplifying the one who reads management body language.
• Style drift is the investment sin that “makes me want to slap people”: the CPG-veteran fund manager whose fifth holding is an oil company drilling off the coast of Africa “not only” has no edge but “might have negative edge” — probably the sucker at the table. Walker turns it on himself: his worst losses came from borrowing others’ theses outside his core skill set, where research becomes “confirmatory diligence rather than your own thinking and your own diligence.”
• The power-law stat compounder bros used to love (“40 stocks drove the vast majority of 50 years of returns”) may be overstated by a size effect. Walmart compounding a “terrible” 4%/year for 20 years still accounts for a decent chunk of index return by dint of starting weight, while the 480th-largest company that rises 20% and gets acquired at a 75% premium contributes “literally 0%” — despite the obviously better stock.
• A change of mind with tradeable consequences: the investor with a long-standing libertarian streak now thinks engineered vices — hyper-potent cannabis, phone-based sports betting, free-to-play gaming — may warrant state limits, creating regulatory tail risk in DKNG and Robinhood. “DraftKings makes all their money on parlays”; a parlay crackdown could remove its most profitable revenue source, and a post-crash clampdown on zero-day options “I don’t think it’s impossible” — some of the alpha in these names may just be payment for that risk.

Deep dive

1. Euphoria plus Greenland: the TACO trade is priced for perfection

• The market tape as of January 22, 2026: after Trump’s Friday after-market threats to tariff countries including U.S. allies over Greenland, Walker says using force to take Greenland would be potentially “the start of World War II, certainly the end of the NATO alliance.” The market opened down Tuesday; he thinks it closed roughly 1.5% lower, then immediately qualifies that “it wasn’t even that,” before ripping back Wednesday as Trump backed off. Month-to-date he estimates the Russell up 8-9%, “maybe 10%,” the S&P ~3%, with “really low-quality stuff that’s really ripping and driving this market.”
• His core worry isn’t this episode but the structure of the bet: “based on my feed… everyone is betting on TACO,” and a friend calling for a Monday crash (“there’s no off-ramp”) was met by only roughly a 1%-1.5% down day, which Walker says was not a crash. But he thinks there is a point where “you write a check and there is no taking it back.” Even a reversed action can leave the damage done: people may already have changed their strategies, the U.S. brand and sales could suffer, and holders might follow through on dumping U.S. Treasuries.
• The tell of the moment, as he sees it: threatening to take Greenland by force sends the market from 100 to 98, and saying never-mind sends it to 105 — “you can drive the market even higher when you say, hey, we’re not going to do this crazy thing.” When the event is no longer walk-backable, “it’s not the market’s down three, it’s the market’s down 20.” His posture: be on the other side with cash, even while admitting “everyone’s getting rich but you.”

2. Weird-markets rebuttals: beta isn’t alpha, and hindsight isn’t systematic

• The two most common responses to his weird-markets theory both miss the point, he argues. “Markets are up 30% since April 2025” is “literally describing the movement of the indices. That is beta.” Alpha would have been the trade: short March 1, cover and reverse to max long on April 7 at the tariff bottom.
• Single-stock examples — Facebook at $100 with “Jim Cramer crying on TV” in late 2022, JPMorgan at 8-9x earnings in spring 2023 — are “more interesting,” but “you can’t just cherry-pick a past example… you have to be able to say there was a systematic reason for the mispricing,” and an active manager had to load the boat at the time.
• The counterfactual that carries the point: early-2023 Nvidia buyers may have been “taking on crazy risks you don’t know about” — in another world ChatGPT is a bust and AI “turned out to be the metaverse all over again.” What if AI had been three years too soon?

3. AI is a modern tennis racket: universal tools confer no edge

• To “we can use AI too,” Walker’s answer is a sports-equipment analogy: golf “woods” are now graphite and carbon, and yes, modern clubs help you hit farther and straighter — “but it is not alpha because everyone else plays with modern woods.” Same with rackets: “there is no edge to having the modern racket because everyone’s playing with it.”
• The subtler, live question is amplification. Twenty years ago, the fundamentals-strong, body-language-weak investor might have had a big edge over the reverse combination; if fundamentals are getting neutralized by AI, that investor might become “increasingly obsolete,” while the body-language reader’s “skill set might actually be getting amplified by AI.” Tools do not create an edge for everyone, but they may amplify particular investors’ existing talents.

4. Style drift and the sucker at the table — including in the mirror

• The letter-season pattern that makes him “want to slap people”: a manager with eight years at Coca-Cola and five more running a consumer packaged-goods company for a private-equity firm, four of whose top five holdings are emerging CPG companies — and whose fifth holding is “an oil company drilling for oil off the coast of Africa.” There, “not only do you have no edge, I think you might have negative edge” — “you’re probably the sucker at the table.”
• The recurring letter pattern he reads: core longs up 8%-30%, but one outside-the-skis position down 30%-40% cancels everything — and “for four years in a row, your biggest loser has been this offshore oil company.” He says it seems the manager may even be doubling down.
• He applies it to himself: layering someone else’s well-diligenced thesis onto his own book means “you do confirmatory diligence rather than your own thinking and your own diligence,” and “those have generally been my worst losses.” Standing invitation: “if you see me investing in something and you’re like, hey, that’s not Andrew’s core skill, you can call me out.”

5. Power laws may mislead, and vices are a tail risk he now takes seriously

• The compounder-bro stat — roughly 40 stocks driving the vast majority of 50 years of returns — may have its importance overstated because starting size matters. If Walmart were the index’s largest company and returned a “terrible” 4% per year for 20 years, it would still account for a decent chunk of index return; meanwhile, the 480th-largest S&P member could rise 20% and then be acquired at a 75% premium, nearly doubling, yet contribute “literally 0%” to the index’s 20-year return despite being the much better stock. He acknowledges that finding the best company and holding it for 20 years can be great and tax-efficient, but wonders if power laws are overstated. Nathan’s Famous, which he was briefly involved in, announced a buyout the day before recording at a “probably disappointing” premium; over 20 years, however, its franchise-royalty stream, dividends, and modest growth made it “a home run.”
• The change of mind: his long-standing libertarian default — legal adults should generally be allowed to choose their vices — is cracking. Today’s cannabis is “so potent and so strong and so engineered” compared with what people smoked at Woodstock in the 1970s; online gambling and free-to-play gaming like Candy Crush are “so finely tuned to addict you”; and phone-based sports betting removes the friction of driving to a casino, letting people bet on “the next ball or the next strike” and burn serious money without thinking. His dictator-for-a-day rules: gaming is legal everywhere, but online gaming is not; cannabis is legal, but it cannot be made so strong that one product delivers 500 hits of the old stuff. He compares this with different alcohol contents and licensing for beer and wine versus liquor.
• The investing translation: DraftKings, which has been hit somewhat as prediction markets rose, along with prediction markets and Robinhood, may deliver returns and probably some alpha, but “some of that alpha… is actually paying you for the tail risk” of government intervention. Walker says, “DraftKings makes all their money on parlays” — $10-to-win-$1,000 or $10-to-win-$1 million bets, “very popular among the youths and some of my friends,” from which the book takes a huge cut. A parlay crackdown could therefore remove its most profitable revenue source. For Robinhood, does zero-day options trading “really create economic value? Probably not”; markets seem to be moving toward 24/7 trading, which he calls “actually a really bad idea,” and post-crash restrictions on trading or zero-day options are “not impossible.”