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Six months ago, I warned about private credit. This week, One Blue halted redemptions. |
If you're just getting concerned about private credit now, you're basically doing the same thing people did in September 2008 when they said, "Hey, maybe we should look into this housing market thing." |
The crisis was always going to originate in private credit. It's not regulated properly. We haven't known what's actually in most of this stuff. And it's been cracking since we hit our peak in liquidity. |
One Blue isn't an isolated event - it's the center of what's coming. |
We've been warning about this for six months in the TheoTrade Chatroom… but everyone was too busy chasing AI stocks and pretending leverage doesn't matter. |
One Blue halting redemptions is your Lehman Brothers moment for private credit. Not because they're systemically important, but because they're showing you how the dominoes fall. |
Here's what people don't understand about private equity and private credit: they're all circling around the same money. They're all involved in the same markets. They're all impacted by the same plumbing in the financial system. |
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Any weakness impacts everybody, all at the same time. |
Look at KKR - down from $170 at the height of the liquidity cycle. Even with $50 million in CEO purchases trying to defend the stock, it's still bleeding. Aries Management, Blackstone Asset Management - they're all getting hit because when the music stops in private credit, there aren't enough chairs. |
This is exactly like 2008 when Lehman collapsed and all the other banks froze up. They were all counterparties. They were all involved. The same dynamic is playing out now in private credit. |
But here's the part everyone's missing. |
Japan just changed their accounting rules to get rid of mark-to-market on insurance company bond holdings. Sound familiar? It's the same thing we did back in March 2023 with our bank lending program when we had the Silicon Valley Bank crisis. |
Every time we hit a crisis, we change the rules. We create new facilities. We find new ways to lend money. And at the end of the day, they're going to turn the money printer back on and flood the zone with capital. |
I've seen this movie before. |
These companies will take that capital and lever back up, and we'll be in the same situation in 18 months. We do this over and over again without shifting the guardrails. Then everyone acts shocked when it happens again. |
The pattern is predictable: Crisis hits. New rules get created. Money printer goes brrrr. Everyone levers up again. Rinse and repeat. |
We've been doing this since 2008 when QE started. Hell, you could trace it back to 1971 if you want to be thorough about it. |
Here's what happens next. |
Bank of America just announced they're buying into private credit - $25 billion. That's not coincidence. That's smart money positioning for the bailout they know is coming. |
When we get to "break the glass" style QE - and we will - you're going to buy every single bank possible. You're going to buy every high beta equity you can find. Because when they flood the zone with liquidity, everything correlated to the money supply explodes higher. |
We'll end up with the S&P at 9,000, the Fed's balance sheet at $10 trillion, and shorts will be asking "What the hell happened?" |
The setup is already in motion. |
We still have a liquidity wall heading at us at the end of this year. Thirteen percent of GDP needs to be refinanced in an environment where inflation is still rising. That's not a small problem. |
People are learning the hard way how liquidity cycles work. They're trying to will unprofitable tech companies back to all-time highs while the fundamental plumbing of the financial system is showing stress. |
Some might call me bullish. Some might call me bearish. |
I'm just pointing out how the plumbing in this system actually works. Don't be shocked when they print again. The private credit crisis is giving them the excuse they need. |
The only question is timing. But when One Blue is halting redemptions and Japan is already changing mark-to-market rules, we're closer to the printing phase than most people think. |
Position accordingly. |
And if you want to follow along on how this plays out, you can find me in the TheoTrade Chatroom. |
Stay Positive, |
Garrett Baldwin |
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