Tom Bilyeu

Barclays lost 147 million, and Fifth Third Bank, one of the largest banks in the Midwest, lost 178 million.

These are big companies funded by private credit loans that all blew up in the span of just a few weeks.

And every one of those losses landed on the balance sheets of institutions that millions of Americans depend on.

US banks have lent $300 billion directly to private credit providers.

That's Moody's data.

The same banks that hold your deposits, that back your mortgage, that underwrite the bonds in your index fund, they've all lent money into private credit and are subject to whatever is about to happen to that industry as the structural fragility collides headlong with an unstable economy.

To put it bluntly, this exposure means that stress in private credit will not stay limited to private credit.

If defaults rise and fund values drop, the banks that lent those funds take losses.

If pension funds face capital calls on their private credit commitments during a downturn, they may be forced to sell their liquid holdings, stocks, bonds, the stuff in your brokerage account, to meet those obligations.

Private credit stress becomes public market stress.

your 401 doesn't need to hold a single private credit loan for you to potentially get hit.

The Financial Stability Oversight Council has explicitly warned that a sustained increase in private credit defaults could create financial instability through the entire system.

Roughly 12% of Blue Owl's OBDC2 portfolio was invested in software companies.

Across the private credit market, software and SaaS businesses were some of the most popular borrowers over the past five years.

The thesis was pretty simple, recurring revenue, high margins, predictable cashflow, great collateral.

But that thesis was built before AI started devouring the economics of enterprise software as a category.

If AI disrupts the business models these loans were unwritten against,

and there are serious reasons to believe it will, then the collateral underneath billions of dollars in private credit loans is worth less than the day the loans were made.

That's a slow burning fuse on top of everything else we've just walked through.

Now I'm not saying this is guaranteed to be 2008 all over again.