Andrew Milgram

Because after the financial crisis, the federal government adopted, correctly, I think, the perspective that they wear the ultimate risk in the banking system.

And so he who wears the risk makes the rules.

They said, look, we're wearing this risk.

We don't want anything above...

X leverage in the system.

So we want that out.

That allowed the private credit market, which has always been there, but really to flourish in the aftermath of the financial crisis.

And there's been an immense amount of capital that has gone into the space

Where there is over allocation, there will be mistakes.

And I think we see those mistakes rearing their head today.

According to Fitch, about 82% of the private credit market exists in the single B minus and lower credit quality space.

Look, we have 40 years of data that tells us how various credit quality equivalents perform.

Triple Cs, for instance, default at about a three year, 30% cumulative default rate.

So the largest portion of private credit, according to Fitch, is in triple C equivalent.

Show me a private credit manager who reports something north of a one and a half percent default rate.

How's that happen?

Well, one of two things is true.

Either in the aftermath of the great financial crisis, we have some private credit managers have invented a new way to underwrite credit, which avoids all losses, risks and defaults, or they are misleading you about what the actual default rate is.

And how do they do that?

Well, defaults are the most easily manipulated statistic in the world.