Posted by JumpCrisscross 3 hours ago
^ Encase the link also responds with this for you:
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You don't have permission to access "http://www.marketscreener.com/news/us-private-credit-defaults-hit-record-9-2-in-2025-fitch-says-ce7e5fd8df8fff2d" on this server.If your business is light on free cash flow (ie everyone in AI at the moment) buckle up as there are storm clouds ahead. If you’re running a business that relies on external cash (VCs, loans/bonds, etc) to keep things going things will get very ugly.
It’s not an either/or, it’s just a question of who was participating in the boom while preparing for storms ahead vs those all in on the boom.
What implodes in the period ahead are things that are massively over leveraged and can’t absorb a hit without doubling down again with more funding/loans and such. These are the folks and companies that get wiped out.
Just make sure you can unpark it, else you're SVB.
In actuality, the CPI is lower than inflation because technological advancement, automation, and economies of scale (due to globalization etc) are driving consumer prices low. In other words, if factories are still producing things like they were 20 years ago, the CPI would have been much higher, and that higher number is closer to what should have been the inflation number.
I.e. you started out with 2e-20 % of the total money, and after 5 years you now have 1e-20 % of the total money, then whatever happened to CPI, you've been diluted and you would probably have been better off investing in something else other than cash.
That makes sense in theory, but in reality what "total money supply" is is a complete can of worms and basically impossible to measure
This is an impossible counterfactual to test. In reality, tracking value across time requires adjusting for immeasurable preferences. This is why inflation is really only a useful measure for personal purposes across periods of years. It’s only macro economically interesting across a generation and close to meaningless longer than a human lifespan.
The thing is one really needs to understand what "real yields" mean when investing in bonds, i.e. it means your purchasing power with respect to cheap commodities tracked by the CPI is preserved, but it doesn't necessarily mean "value" (whatever that means in the abstract) is retained.
CPI isn't a measure of commodities. And "CPI" is a bit of shorthand, given there are pretty much as many measures of consumer and producer prices as there are economists.
> it doesn't necessarily mean "value" (whatever that means in the abstract) is retained
This is what any measure of inflation ultimately seeks to measure. Purchasing power is intrinsically tied to the basket of goods and services its measuring. That basket varies across people and time as preferences vary.
Banks bailed out the hedge funds in '98, then the taxpayer bailed out the banks in '08, then the government bailed out the taxpayer in '20... now monetary policy from the fed has to prevent the government from defaulting.
Honestly thrilled to hear it. The AI bubble needs to burst so we can find out what's actually useful, start requiring real business models again, and get rid of all the noise and waste.
Well, the good news is that's what good public policy is for, to blunt the impact of the damage with strong anti-trust enforcement and careful cash injections to weak-but-critical areas of the economy to help stabilize in rough times.
Now, hang on for just one moment while I crawl out from under this rock and take a look at who we have entrusted to set our public policy.
The game that all the AI companies are playing is to be the last dog standing at all costs, because that kind of dominance is a money printer.
It’s like hoping for the apocalypse thinking you’re of course the hardcore survivalist. When in reality you’ll get eaten first.
I'm sure someone somewhere could make a trade off of this article and this signal is definitely for them.
I have been actively trading in the market for a little over a year now, and while winning on a short position is probably the most satisfying trade for me, the overwhelming majority of those trades are losses and at this point I mostly treat them as hedges. I suspect that is true for most market participants as well.
- position has significant negative carry (what you're talking about there)
- stock/bond prices are nominal and the government constantly prints the denominator so prices tend to go up even if there's no actual growth
- for equities there is a genuine long term positive drift over time even if the denominator doesn't change
So yes, it's hard to make money going short and timing is everything
If you are the manager of a mutual fund you can take useful action on signals like this if you can figure out what they mean. Most people don't have enough money to be worth trying to take action.
Don't get me wrong, if you don't have a job things are bad. If you have a job but it isn't giving good raises, or it is a worse job than you are qualified for things are bad. However things are not hopeless for the majority of people even when things are really bad, and you can get through it.
This is, however, one of many indicators of an overall wobbling system. It would be a good time, not make the line go up, but to look for ways to stabilize the economy as a whole.
Which is unfortunately a hard question. One could theorize that we should do different things than the thing we've been doing for the past year or so, but of course there will be many who say that we just haven't done it hard enough yet.
Page 22 (French but it's just numbers, you can read it). <https://www.eib.org/files/publications/thematic/gems_default...>
And it is especially so when money given is not their own, but instead they get to take cut. Which these funds can do. They might even just take promises that you will pay in future and even allow adding the interest on top of loan amount. Numbers look good, bonuses look good.
Fundamentally this can only last so long and now is the time it starts to blow up.
Things will stay the way they are for as long as people want them to. The economy and money is fundamentally made up. It’s so funny when these types come out and start talking about made up fundamentals as if they are physics.
2008 Financial Crisis was triggered by Oil prices. There were lots of problematic structural elements that were fine if nobody looked close. Oil was just the sideway hit on the building to knock it over.
Just takes a nudge to collapse. And here we go again.
Not by the subprime mortgages given to anyone with a pulse?
It was interconnected derivatives and structured products linked to banks that caused a liquidity crisis in the former to cause a crisis of confidence in the latter.
Meanwhile: "In the letter, Morgan Stanley said the fund wasn’t designed to offer full liquidity because of the nature of its investments, and that credit fundamentals across the underlying portfolio have been broadly stable. The bank's shares fell 2% in premarket trading Thursday" [1].
[1] https://www.wsj.com/livecoverage/stock-market-today-dow-sp-5...
Wait what? Your thesis is the GFC was caused by a liquidity crunch/bank run? Isn't that... not true?
Isn't the proximal to distal chain of events government encouraged subprime loans -> inaacurately valued MBS -> exponential, unregulated derivative instruments -> leveraged contagion. What does market confidence have to do with any of that?
It's absolutely proximally true and it's not just my thesis. From Wikipedia: "The first phase of the crisis was the subprime mortgage crisis, which began in early 2007, as mortgage-backed securities (MBS) tied to U.S. real estate, and a vast web of derivatives linked to those MBS, collapsed in value. A liquidity crisis spread to global institutions by mid-2007 and climaxed with the bankruptcy of Lehman Brothers in September 2008, which triggered a stock market crash and bank runs in several countries" [1].
> government encouraged subprime loans -> inaacurately valued MBS -> exponential, unregulated derivative instruments -> leveraged contagion
The subprime crisis shouldn't have been bigger than the S&L crisis [2]. What turned it into a financial crisis was the credit crunch that followed. That crunch was caused by folks running on banks that had sponsored these products.
On "inaccurately valued MBS," note that the paper marked AAA mostly paid out like a AAA security. It would be like if you were perfectly good for your word and I lent you money, but then I wanted to sell on that debt to a third party who didn't trust you at a 50% discount. What does "properly valued" mean in that context? It's ambiguous in a dangerous way. (In this analogy, you wind up paying back the debt at face value. But years later, albeit on schedule.)
Oil was more of the outside force that put a shock to that weak system.
I don't remember oil getting expensive back then, but it's a long time ago.
But it was swept under the rug, it was hidden by market constantly going up.
Ponzi schemes can hide in a market going up, because nobody is trying to pull money back out.
Suddenly everyone wanting their money, and the shortfall suddenly become apparent.
Oil prices suddenly made everyone try to pull money out, and 'woops there is nothing here'.
Every industry’s leadership is full of trumps, many more palatable personally, many far better spoken, many even with better politics but none fundamentally are any actually better for society. They don’t understand their company, the products it makes, they have utterly no care for anything besides the quarterly stock price and their lack of care costs real people their jobs and ruins the products we use every day.
And, they are why every company is ripping the copper out of its own walls instead of actually building a business that will last.
Of course this is going to increase prices, but then they can blame China / Russia / Iran whoever is the scapegoat at that time.
“Pay” is doing a lot of work there. My house is half equity half debt. The debt gets to be paid off with inflated dollars. And I pay no capital gains on the appreciation. I can, however, tap it for liquidity if I need it.
Classically, yes, particularly when that wealth is closer to productive capital. In modern economies, the rich also hold a lot of debt, which lets them benefit from inflation.