Nick Nemeth (Mispriced Assets)

@beaverd No more boomer communism

@NickNemo17 Sad to learn but in the context of boomers finally being boomer'd it is a little pleasant

TLDR: I am a recovering alcoholic with no fund, no credentials, and no lobbyist. I rebuilt myself from nothing. Then I broke into finance with no degree, no pedigree, and no permission. I parsed SEC filings for a $31.5 billion private credit fund called Cliffwater. Not because anyone asked me to. Because nobody else would. The filings are public, but they are buried in footnotes that are not indexed, not searchable, and not structured for analysis. I have been told by fund managers that nobody even attempts this. Billions of dollars in pension capital, and the people who manage money for a living do not bother to read the filings. So I read them. Every loan. Every amendment. Every semi-annual PIK disclosure. 2,330 positions. I hand-researched fifty. I found 189 loans where borrowers are paying interest with more debt instead of cash. I found over 50 loans that are not generating enough cash to service their debt at all — carried at par on the books of a fund that has never reported a losing month in 41 months. The fund's Sharpe ratio is 3.75. Bernie Madoff — who was fabricating returns and could pick any number he wanted — ran a 3.5. He got caught because the numbers were too smooth by Markopolos. The greatest quant fund in history, Renaissance Technologies, runs a five or six. Cliffwater is claiming risk-adjusted returns that would be impossible even if you insider-traded with perfect information every single time, because the volatility of the underlying markets would still prevent it. Nobody asked questions. Bloomberg confirmed 14% redemptions 48 hours after I published. S&P cut the fund's outlook to negative this week. Cash on hand fell 76% in six months. This is not an isolated fund. This is the structure. $9.4 trillion in private equity. $3.5 trillion in private credit. They all pay their own valuation agents. The valuation agents decide what the funds are worth. No valuation agent has ever been fired for saying the number was too high. The marks produce the NAV. The NAV produces the fees. The fees come from pensions. The pensions come from firefighters and teachers and nurses in Oregon and California and Illinois who will never read a private placement memorandum in their lives. Wall Street ran out of rich people. The endowments were full. The sovereign wealth funds were tapped. So they went downstream — to 401(k)s, to retirement accounts, to interval funds sold to people who have no idea what they own. 1. Direct the SEC and FSOC to examine Level 3 fair value practices across interval funds and BDCs. 2. Require that valuation agents be independent of the funds they mark. 3. State publicly that the current self-marking regime creates systemic risk. 4. Mandate position-level mark disclosure for every fund that accepts pension capital. There are two ways this ends. It breaks all at once like 2008 and we fix it. Or it rots slowly like Japan: one fund blows up, six weeks of quiet, another one, and nobody connects it for a decade while a generation of retirees gets destroyed. I am not asking anyone to take my word for it. I am asking them to read the filings. If you know someone in the administration, a regulator, or anyone on a legislative committee, please send this to them. One person learned this from a one-bedroom apartment. Your government can too. The will is what is missing.

@RichWheelahan @LowAlphaHighVol It’s generally in there but see articles tab on markedtofantasy.com It’s the convo

@NickNemo17 @LowAlphaHighVol Show us the methodologies and the corresponding criticism (please).

@Dirtdawg888 The process was something else. Thank you

@NickNemo17 Damn dude, good job, you just made my brain spark

@bl4ckp3ngu1n I think less of the Epstein route more of the general circle. Not everyone with correspondence was a you know what But elites are around elites for what it’s worth

@NickNemo17 I’ll do that, but already saw the connection with Epstein. They all know each other, and I saw other Brazilian bankers on Jeffrey’s mails. It is the same scheme

@NickNemo17 only a spiritually bankrupt alcoholic who went far down the scale would be as obsessive as this. friend of bill, followed.

@bl4ckp3ngu1n You should dig into the history of Kevin Warsh

@NickNemo17 absolute correct and it is much worse, but they don't care. all books are cooked and they know. do you want one example from Brazil? please read this article, it is only one case. reuters.com/business/finan…

@christi10006880 You can’t that’s why they’ve gotten away with more. $TPG has an undisclosed minority stake. Not really shortable either on that but makes me question them

@NickNemo17 Are you short Cliffwater?

@NickNemo17 Keep at it ! You're headed for hero status 👏

@CorpFinScum 😭

@NickNemo17 How does a tldr need a tldr?

@AsyncCollab lol yes. I hope more people see the “adjusted EBITDA multiple” like and know. Could’ve laid that out better

@NickNemo17 Now look into the self-reported EBITDA downstream of it all.

@PatrickStoa @MrJulius007 @SKmacro Ares. Yes it misleading. The fact they have it in their marketing docs means that people fall for it. Which says a lot

@NickNemo17 @MrJulius007 @SKmacro Who made this chart? I assume ”risk” in this chart is not actual risk of loss, but price volatility. But, volatility is useless with mark to manager opinion. In other words, if a private credit fund made the chart, it is misleading.

@HardYackaMacka @PatrickStoa @MrJulius007 @SKmacro Everything you don’t like is AI

@PatrickStoa @NickNemo17 @MrJulius007 @SKmacro They didn't, nick got tricked by an AI edit of a chart that Ares put out

@Nomaticcap @HardYackaMacka @SecScottBessent @POTUS @SECPaulSAtkins @SenatorTimScott @SenWarren Yes but also they just use the same JPEG. “I don’t like it” = AI

@HardYackaMacka @NickNemo17 @SecScottBessent @POTUS @SECPaulSAtkins @SenatorTimScott @SenWarren That's fine if the information is real

@largebrownbat I think I would have to join the dark side to do it through capital. Sounds fun tbh The pen is a mighty weapon though

@NickNemo17 Raise, start a fund, publish short reports on these companies, and run a Sharpe up higher than the alleged ratios of the companies you report on. If there's no political will to regulate them, go soldier of fortune mode and kill them yourself

@LeveredLong_ I’ve got a pretty good gig but am never close minded

@NickNemo17 DM me for a job…

@MoMoMacro I think he’s got a lot on his plate and is not surrounded by people that ask: “Why exactly is this happening?” So much read and react.

@NickNemo17 Bessent knows exactly what he's gotta do... Get that long end down so Powell has cover to cut. The curve is the only thing that matters right now. Everything else is just noise.

@SKmacro @MrJulius007 Yeah it makes no sense. And it works. Says something.

@NickNemo17 @MrJulius007 Short-term returns and their standard deviation when you mark your own assets is kind of 🤡

@LowAlphaHighVol Agree but their actual methodology is crazy. It’s incredibly circular logic and very low altitude

@NickNemo17 The valuation agents are not useless because they may or may not be conflicted. Even if they were excellent why would anyone expect them to be more accurate than say analysts who can't even come to a consensus on publicly listed mega caps? Valuation is hard, and subjective.

@HardYackaMacka @brianj345 You want me to tell you twice so you can’t understand again?

@NickNemo17 @brianj345 rage bait with no substance. Actually put the numbers up, I've just been proving you wrong Lol

The $35B is Apollo consolidated equity. Athene standalone is ~$13-14B against ~$315B in assets. That's 23x. "It's IG assets" is a credit quality argument. Ok. multiply throughout insurance. The funding side (capital calls x surrenders), is the bear case.

@HardYackaMacka @brianj345 I already did. Educate yourself

@NickNemo17 @brianj345 tell me