Nomatic

Joe Kent on why we actually went to war with Iran.

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.

Tough question.

tradfi private credit is cracking on-chain lending protocols are the next opportunity or the exit liquidity? here's what's happening and why syrupUSDC is the most interesting case study right now the macro context first — private credit is under more stress than any point since 2008 → blue owl permanently gated redemptions on its $1.6b OBDC II fund in february after a 200% surge in withdrawal requests. attempted merger would have crystallized 20% haircuts. shares dropped 9% → UBS projects private credit defaults climbing up to 3 percentage points in 2026 — worse than leveraged loans or high yield bonds → 15% of private credit borrowers can no longer cover interest payments per goldman sachs → PIK usage (paying interest with more debt instead of cash) is rising across the sector — 8% of BDC investment income now comes from PIK → morningstar DBRS: 61% of private credit borrowers showing margin compression over the past year → jamie dimon used the "cockroach" analogy — when you find one problem, more are nearby → gundlach called private credit the "top candidate to start the next financial crisis" this matters for defi because the narrative is shifting. tradfi institutions are now actively looking at on-chain credit markets — not as experiments but as potential distribution channels for risk they can't easily offload through traditional structures defi should not be exit liquidity for tradfi's problems which brings us to maple's syrupUSDC — the largest on-chain private credit product at ~$2.66b in deposits (63% of maple's $4.59b AUM) ➢ current 30d apy: ~4.8% ➢ yield source: overcollateralized institutional lending (120-170% collateral ratios, avg 160%+) ➢ borrowers: trading firms, market makers, crypto-native hedge funds ➢ collateral: btc, eth, liquid assets held at anchorage, bitgo, copper ➢ loan terms: fixed-rate, fixed-duration (typically 30 days), 5-9% borrower rates ➢ protocol fee: 15-20% of borrower interest (no separate management/performance fees to depositors) ➢ zero lender losses since may 2024 launch across $12b+ in cumulative originations yield decomposition: where does the 4.8% actually come from: → primary: overcollateralized crypto lending (this IS the base yield, no points or incentives since drips ended) → secondary: collateral staking enhancement (maple stakes posted btc/eth via liquid staking, passes portion to lenders) → tertiary: futures basis trading and selective defi liquidity provision → zero t-bill or treasury exposure — entirely crypto-native yield for context: aave usdc supply pays ~2.33%, compound runs 2-3%, vanguard money market (VMFXX) pays 3.76%, ethena susde fluctuates 3.5-5.1% the spread over fed funds has compressed from 500+ bps at launch to ~115-120 bps today. yield dropped from 21.3% total in 2024 (including drips rewards) to 4.8% net. that's a real normalization what must stay true for this yield to persist: → crypto borrowing demand must stay healthy bull markets drive rates, downturns compress them → collateral ratios must hold october 2025 flash crash saw lowest ratio touch 136% (normally ~156%), 9 margin calls all cured within 3 hours → instant withdrawal buffer must remain funded ($200m+ reported) — contractual max is 30 days but typical processing is under 5 minutes since april 2025 → maple's underwriting must continue performing — the 2022 defaults ($54m across orthogonal, babel, auros) were under the old unsecured model that's been completely replaced the risk stack you need to understand: → the core foundation lawsuit is real. core alleges maple breached an exclusivity agreement and misappropriated confidential info while building syrupBTC. injunction was granted blocking syrupBTC launch. maple returned 85% of btc principal. maple says it doesn't affect syrupUSDC but it raises questions about governance and asset segregation → centralization risk: admin keys, upgradeable contracts, protocol pausability. this is not a permissionless lending market → no deposit insurance. period → us investors excluded (no KYC required but automated AML screening + self-certification of non-US status) → yield compression could continue if fed cuts further and crypto borrowing demand softens, the 115bp spread over risk-free could narrow to the point where the risk premium doesn't compensate composability is where syrupUSDC actually differentiates: → aave v3: collateral-only, 73% LTV standard, 90% LTV in e-mode. $750m+ inflows within 6 months of listing → pendle: PT-syrupUSDC (fixed-rate) and YT-syrupUSDC (leveraged floating yield), pools exceeding $125m → morpho: leveraged looping (deposit → borrow USDC → mint more syrupUSDC → repeat) → kamino (solana): leveraged looping at up to 5-8x → drift: yield-bearing perpetual futures margin: earn ~5-8% on collateral while trading → cross-chain via chainlink CCIP on ethereum, solana, arbitrum, base the blue owl parallel is worth sitting with. a $1.6b tradfi fund gated redemptions permanently. syrupUSDC processed $67m in instant redemptions during the october 2025 crash without breaking stride. on-chain composability and real-time collateral monitoring are genuine structural advantages over opaque tradfi credit vehicles but .. and this is the part that matters, maple still operates as a centralized underwriter with full discretion over loan origination, borrower selection, and collateral management. the "decentralized" part is the deposit rail. the credit decisions are fully centralized the question for allocators is whether 115bps over risk-free adequately compensates for smart contract risk + centralization risk + no deposit insurance + regulatory uncertainty + the lawsuit overhang. in 2024 at 21% total yield the math was obvious. at 4.8% it requires a more honest conversation about what you're actually being paid for what's your threshold? at what yield does the risk-adjusted math stop making sense for on-chain private credit vs just parking in a money market fund

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