The Smartest Guys in the Room Are About to Get Burned Again

If you want to know where the next market shock might come from, listen to Dan Rasmussen . The Verdad Advisers founder and author of The Humble Investor and American Uprising joined AInvest’s Adam Shapiro on Capital & Power for what might be the most candid breakdown yet of the risks hiding in plain sight — from private credit’s leverage time bomb to an AI spending bubble that could rival the dot-com era.

Rasmussen’s credentials make him hard to dismiss. A Harvard-trained historian turned fund manager, he’s built a billion-dollar firm on one guiding principle: never trust the “smartest guys in the room.” He’s the rare investor who combines data, humility, and a historian’s memory for how every “new paradigm” eventually rhymes with an old disaster.

His warning starts with the froth in private credit and private equity. “There are no innovations in lending,” he says. “Debt that yields 10 to 12 percent is going to default a lot more… probably 25 to 30 percent whenever any sort of crisis comes.” Pension funds and endowments, he argues, are treating high-yield private loans as if they were investment grade — a dangerous illusion. The “really scary dumb stuff,” as he calls it, stems from the belief that anything backed by private equity sponsors is safe.

Rasmussen believes the private equity reckoning has already begun. “Private equity can’t sell the assets that they have… they can’t get distributions,” he says. The next shoe to drop will be valuation markdowns. “Maybe it’s worth 60 cents on the dollar of what they’re telling me it’s worth,” he warns, adding that with many portfolio companies carrying “eight to ten or maybe even higher times EBITDA of debt,” equity could be “kind of worthless.”

This isn’t just an institutional problem — it’s creeping into 401(k)s and retail products, giving everyday savers leveraged exposure to fragile, over-indebted small businesses. “Private credit and private equity sound great because they’ve got the word ‘private’ attached to them,” Rasmussen says. “But fundamentally, what they are is levered exposure to very small, risky businesses.”

Then there’s AI — the latest reason everyone says “this time is different.” Rasmussen isn’t buying it. “Will all this AI spending pay off? Because the amount of AI CapEx is insane.” He draws parallels to railroads and telecom: both transformed the world but wiped out investors along the way. “Often the rewards go to the customers, not to the companies that massively spent their own money to build this stuff.” And yet, he admits, “Betting against any innovation by U.S. large-cap tech companies… has been just about the stupidest thing you could have done.” His takeaway: humility first, conviction second.

Rasmussen also points to a quiet but massive shift beneath the global financial system — the rise in gold prices and what it signals. “Central banks outside of the United States are shifting away from the dollar,” he says. If foreign capital retreats, “the implications… are quite substantial.”

So what’s his playbook? • Favor international developed markets, especially Japan: “You can buy assets at a big discount to book value, which provides a margin of safety.” • Hold short-term cash, not long-term Treasuries. • Keep some gold — and be ready to buy when panic sets in. His mantra: “Don’t be cautious now and then terrified when the crisis comes… You’ve got to be cautious now so that you can be aggressive when everyone panics.”

Rasmussen’s blunt humor underscores his realism. Asked about emerging markets, he quips: “If there’s a U.S. military base in the country, then you’re safe to invest there.”

In a world where private credit is being sold as the new safe yield and AI spending is being hailed as destiny, Rasmussen’s voice cuts through the noise. His message: nothing is new, risk never disappears, and humility is the only real edge left.

Listen to the full Capital & Power episode with Dan Rasmussen — before the next “can’t-lose” investment starts to lose.