Sand man person

Remember this scene in The Big Short? Jamie Shipley and Charlie Geller have bet everything against the housing market. They've been bleeding for months, wondering if they're wrong. Then they flip on CNN and see it: New Century Financial - the second-largest subprime lender in America - has filed for bankruptcy. "It's starting." That was April 2, 2007. New Century wasn't the crisis. It was 1% of the problem. But it was the first domino. 4 months later, BNP Paribas froze 3 funds citing "complete evaporation of liquidity." 18 months after that, Lehman was dead. I'd encourage you to watch that scene today. Because we JUST got our New Century moment in private credit: Blue Owl Capital - $307 billion in assets under management - just permanently halted investor redemptions at its retail private credit fund, OBDC II. Investors will NEVER AGAIN redeem shares from this fund. On January 25th, I wrote that private credit was showing cracks at the exact moment Wall Street wanted to open it up to your 401(k). 3 weeks later, here we are. The timeline follows a pattern anyone who's been around markets long enough recognizes: Through the first 9 months of 2025, OBDC II investors withdrew $150 million - up 20% year over year. Meanwhile, Blue Owl execs publicly assured investors there was "no meaningful pressure" on their asset base. But there was. And they're now facing a federal class-action lawsuit for saying otherwise. In November, they attempted a merger that would have forced OBDC II investors into a publicly traded fund trading at a 20% discount to NAV. Effectively confiscating a fifth of their capital. Blue Owl's own CFO conceded investors "could take a potential haircut." The stock dropped 11% in 8 days. They killed the deal. Now they've abandoned the pretense entirely. PERMANENT halt. Fire-selling $1.4 billion in loans across three funds. Investors get roughly 30% of NAV back through quarterly distributions - on Blue Owl's schedule, not theirs. One delightful detail: Blue Owl's co-CEOs have pledged $1.9 billion of their OWN company shares as collateral for personal loans - proceeds used, in part, to acquire the Tampa Bay Lightning. The stock is down 33% this year. That collateral has literally shed $260 million since January. Founders leveraging company stock for hockey teams while retail investors queue up for their own money. Wall Street's version of noblesse oblige. But here's what matters: This isn't about Blue Owl. Blue Owl is a symptom. The disease is a $3.4 TRILLION private credit industry built on opacity, conflicts of interest, and the polite fiction that illiquid assets can offer liquid redemptions. Morningstar DBRS reports the trailing default rate has risen to 4%, up from 2.8% a year ago. Downgrades outpacing upgrades. Outlook negative. UBS warns defaults could reach 13% if AI disrupts the software companies making up 17% of BDC loan portfolios. Payment-in-kind loans (where borrowers can't pay cash interest and simply pile it onto the debt) have surged past 11% of BDC income. When your borrowers are paying you with IOUs, the word "income" deserves quotation marks. And the government's response? Open YOUR 401(k) to private credit. Trump's executive order directed regulators to do exactly that. They want to "democratize" an asset class whose flagship retail product just permanently locked investors out. The KKRs. The Blackstones. The Apollos. Everyone loaded up on private credit is exposed. When the tide goes out, you find out who's swimming naked. In April 2007, New Century went bankrupt. Most of the financial world shrugged. 17 months later, Lehman made the point impossible to ignore. And Blue Owl permanently halted redemptions TODAY. AVOID PRIVATE CREDIT AVOID PRIVATE EQUITY Because it's starting...

BlackRock Private Credit CLO Fails Key Tests as Bad Loans Mount 👇🏼 Oops!

I don't understand how anyone can be impressed by this. Okay, wow, an algorithm spit out some images that look kind of real. Okay cool. The fundamental problem with AI content -- and why I will never be interested in an AI movie, no matter how realistic it looks -- is that I just have no interest in the stories that an algorithm tells. I don't want to watch an AI story any more than I want to sit around and listen to ChatGPT tell me about its hopes and dreams. If the story has no soul then it lacks the one and only thing that can make it worthwhile or interesting.

While there is an estimated $300 billion of private credit loans to software companies, there is more than $500 billion of private equity capital invested in those same companies subordinated in the capital stack. The typical private credit loan to sponsor-backed software companies is 30-40% LTV. So, in order to see material impairment in software private credit loans, the below private equity firms would need to see $500 billion+ of equity capital vapourized. I doubt that these firms will sit idly and wait for their investments to be disrupted by AI. But even if they do, it's doubtful that the private credit lenders will also do so once they get the keys handed to them. This scenario also ignores the fact that AI may be additive and accretive to software companies. In any event, an 80% impairment to all software companies due to AI, which is being priced in currently, seems like an improbable scenario but is currently assumed as baseline. This would be an extinction-level event for the private equity industry and decimate institutional portfolios.