1. In a large saucepan over medium heat, whisk together the sugar, cocoa powder, cold water, cayenne pepper, and nutmeg until smooth.
Bring to a gentle boil, whisking often, then reduce heat and simmer for 2–3 minutes (this blooms the spices and thickens it slightly).
Slowly pour in the milk while stirring constantly—heat until steaming hot but not boiling (about 5–7 minutes).
Remove from heat and stir in the vanilla extract.
Pour into your favorite mugs, top with a generous dollop of whipped cream, a light dusting of cinnamon and nutmeg, and pop in a cinnamon stick for stirring (and that extra aroma!).