In The Big Short, the real edge wasn’t speed or sophistication — it was recognizing a risk the market refused to see. Danny Moses says that feeling is creeping back in as 2026 begins. Markets, Moses argues, aren’t wildly overvalued — but they’re dangerously unforgiving. “There is very little margin for error,” he said in an exclusive interview with Benzinga.
With valuations stretched and indices dominated by a handful of mega-cap stocks, it wouldn’t take much to trigger a correction — or a rotation out of growth and into value-oriented sectors like Consumer Staples and Energy.
That shift may be healthy over the long term. In the near term, Moses warned, it could cause real “dislocation and indigestion,” especially given how concentrated index leadership has become. To justify current prices, markets will need continued earnings growth and margin expansion — not just optimism.
The Blind Spot Is Credit
Asked what feels most like a Big Short-style blind spot today, Moses didn’t hesitate: credit markets.
There are no systemic cracks yet, he said. But recent corporate bankruptcies like First Brands and Tricolor showed how little stress it takes to ripple through credit. That matters because a significant amount of market growth — particularly around AI — is “predicated on access to debt.”
If AI demand and supply move closer to equilibrium, or if power and energy constraints slow expansion, Moses expects the impact to reverberate well beyond tech stocks.
It Always Comes Back To Leverage
When forced to choose between leverage, liquidity, or valuation, Moses was blunt: “It’s always leverage at the end of the day.”
Liquidity and valuation, he said, are downstream effects. What’s different this cycle is where leverage lives. Much of it now sits outside traditional banks, in private credit and private equity — giving markets a false sense of security.
That comfort may be misplaced. Banks still lend to those private vehicles, and companies still rely on functioning credit markets to access liquidity and support valuations. The rapid growth of private credit — often with looser covenants — hasn’t faced a real stress test yet.
Just like last time, the risk isn’t obvious.
It’s sitting quietly in the blind spot — until it isn’t.
Image created using artificial intelligence via Midjourney.
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