In 2007, investments in risky US mortgages went sour as homeowners struggled to pay. Funds run by Bear Stearns, BNP Paribas and other banks either had to freeze the ability of investors to take out their money, or liquidate the funds completely.
These problems were the canaries in what proved to be a very deep financial coal mine. As nervousness spread, even banks eventually stopped lending to each other for fear of not getting their money back, creating a so-called “credit crunch”. That caused a global financial crisis.
Fast forward to today.
Several funds which lend money have declared losses or restricted investors’ ability to take out their money. BlackRock, Blackstone, Apollo and Blue Owl have all faced demands for billions of withdrawals from private credit funds - institutions that provide an alternative to traditional banks.
Link is paywalled. Can you post the text from the article?
Here’s an archive link.
Why do we not just arrest the billionaires who caused this and seize their money?
this is a little bit hyped though, most investors can take their money out, the funds have just applied the rules. These are unlisted funds, so withdrawals are mostly capped at 5% a month. Retail investors and unlisted funds are a stupid idea though.
Quite a few are trying to take their money out to arbitrage the listed funds, which are now “undervalued” compared to the unlisted funds
That said, there’s a lot of opaqueness in BDC’s so eyes wide open. However I recently went long on Ares capital (a small amount), MAIN is the biggest but still overvalued IMO. Id give Blue Owl a miss, at least until the dust stlettles.
It’s very obvious that we are very likely headed towards a global recession, driven by the problems Trump has created in the gulf.
Of course financial institutions are preparing for the eventuality, and that alone can cause a financial crash if it accelerates.It’s extremely difficult to estimate the risk or chance, but the fact that (almost) everybody is aware, makes the risk bigger, because for some weird reason, everybody preparing for a financial crisis doesn’t make it less likely because people are prepared, but instead makes it more likely because nobody does anything when the uncertainty passes a certain threshold. And at that point the economy collapses.
Yeah, Trump didn’t help, but I think it’s more to do with a decade of private equity dropping trillions of dollars into industries that never return any value.
…or just raping them for the assets.
Ah yes, leveraged buy-outs.
We’re either going to look back on this period of time as absolute insanity in 4K. Or, we will have all long been culled by killer drones.
I hope for the former.
It’s extremely difficult to estimate the risk or chance, but the fact that (almost) everybody is aware, makes the risk bigger, because for some weird reason, everybody preparing for a financial crisis doesn’t make it less likely because people are prepared, but instead makes it more likely because nobody does anything when the uncertainty passes a certain threshold. And at that point the economy collapses.
It’s because everyone is primarily concerned with making sure they’ll turn out okay, or is too committed to the failing investments that they keep doubling down. Consider the story of the big short: guys who saw the crash coming said it was coming, and when no one listened they made bets on how bad it would be.
Our best case scenario is that we survive and get something like a worldwide Glass-Steagall act that prevents investment banks from also being retail banks.
Our best case scenario is that we survive and get something like a worldwide Glass-Steagall act that prevents investment banks from also being retail banks.
Why would it be a good thing to separate retail banks and investment banks?
When the banks were combined prior to the Great Depression they would use deposits from the retail side to fund investments. When investments lose money, and customers come to withdraw funds, the bank is unable to cover its obligations and can fail. When you combine that with banks lending money to each other, a single bank (if it’s big enough) can start a cascading failure.
Glass-Steagall was passed in 1933. Prior to that the US had had a financial crisis every decade or so. 1933-2000 was an incredibly stable period financially speaking, there were a number of small banking scandals but nothing that threatened the whole economy. In 1999 congress repealed it and Clinton signed the repeal, and 9 years later was the 2008 financial crisis. And we’re back on track for one every decade again.
I think this was the plan* all along. This is why all the techbros went fascist. PE was just more quiet about it.
The Epstein class wants a global crash so they can buy up what they don’t already own for pennies on the dollar. Life becomes a subscription service supported by full governmental capture.
- I don’t think there was any actual conspiracy - the people all just saw the same opportunity to wreck things and jumped aboard the let them eat cake boat.
The goddamned traitors at the heritage foundation and Federalist society have lots of blood on their hands too
Seems appropriate: Monster Crash
The thing that kicked off 2007 was that CDOs ended being largely made up of crappy mortgage bonds which caused their massive trillions in debt “value” to dissappear when the underlying bonds failed which was tied to people not paying their mortgage on crappy adjustable mortgage loans.
After getting bailed out with a shit ton of tax money, the banks agreed not to repeat the same mistake by ensuring their trillions of debt trading doesn’t depend on a single point of failure, so they’ve diversified it across multiple markets (like how a CDO was otherwise supposed to work)
This type of warning shows up every now and then because the vulnerability is still there (since nothing really changed), but its much harder to knock it down without causing some type of collapse in multiple areas first.
Right now, I think its estimated that private credit makes up about 40% of their investments into the AI boom, which is 1 trillion dollars exact. That’s proportionally less than what CDOs were with mortgage bonds, but it’s still entirely possible that a couple of hits in some businesses sectors could collapse the system.
Iran actually succeeded in affecting multiple supply chains due to their strait closure, including AI, so if they continue on that path it might actually happen.
Several funds which lend money have declared losses or restricted investors’ ability to take out their money. BlackRock, Blackstone, Apollo and Blue Owl have all faced demands for billions of withdrawals from private credit funds - institutions that provide an alternative to traditional banks
Those are some…interesting names. Could these be attempts to pull the rug before an AI crash? I’m genuinely asking as I have no clue how funds work
Its not a rug pull, most of these investment companies function just like banks, but instead of giving out loans, they invest most of the money that their clients(people like you and i) put into them into the stock market, and give the clients a cut of the profits. Just like banks, most of the capital these funds manage is not directly available, its in stocks, options, bonds, etc… Say you want to cut your losses that the from your investment with that fund, thats no problem! They’ve got some cash reserves, and can immediately give you your money, and sell the shares later, you know run a minimal loss. But if more people start doing it, the fund will gradually become less powerful, less appealing and it will start to turn a loss that can not be recuperated with the profits off selling shares they own. How appealing/powerful they are directly depends on how much money they manage, because who trusts someone that says "yoo i can make you a lotta money man, gimme like a 100 bucks, whilst being broke and homeless.
Then, why invest your money in these funds, well, for one, they are enormous, can make much bigger investments and make much more money, and in turn you get a bigger cut. Secondly ivesting is very risky, but thesr guys have a litteral army of trained professionals that know more about this stuff than you and i will ever. They sell a security guarentee, like yeah we can invest your money, make a tiny bit of profit, but in turn, if something goes wrong you wont lose your life savings. Many even sell a warranty returns of 95 to 100% of the money you invest into them.
So to round things out, its not a rug pull, but its also not good. People do not trust the current economy and think its too volatile and think that whatever stocks their life savings are can at any moment plummet in the coming years. They think its much safer to take the money out and put it in a bank somewhere, thus shrinking the economy and exasturbating the problem. It is the meme, it is a recession indicator.
Edit : explanation was kinda garbadge, updated it to make sense
Its intentional. Don’t think for a second the powers that be couldn’t stop it.
it won’t be like last time
It will be way smaller and the consequences will be milder, right?
Insert Anakin Skywalker deadpan stare
