Transcription
There is a $2 trillion time bomb buried deep inside America's retirement system. And Wall Street is praying you don't find out before it detonates.
Right now, literally right now, the biggest asset managers on Earth, Black Rockck, Blackstone, Blue Owl have locked investors out of their own money. Billions of dollars in redemption requests, basically I want my money out of your fund, denied. And here's the part that should make your blood boil. The fund managers who lost the money are the same people who get to decide what the losses are worth. They're literally grading their own exam and at the moment they're giving themselves an A because why not? So if you have a 401k, an IRA, an annuity, or a pension, there is a real chance your money is already trapped in this mess and nobody told you.
I'm Felix Pin. I'm an ex-investment banker and also the founder of the Goat Academy where over the last six years, my Wall Street mentors have taught well over 20,000 regular investors Wall Street's institutional strategies. Then those guys deliberately keep behind closed doors. That back there is Winston. Most importantly, he's got the smartest hound uh smartest nose for sniffing out when things are uh well, a little bit smelly. And this one is definitely a little bit fishy.
So, here's what we're going to cover. I'm not going to hold you hostage. I'm going to give you a four structure. First, what private credit is explained so simply, you know, Winston expl understands it. Second, the black rock, black stone, and blue owl meltdown and why your money might already be trapped in it. Third, I give you my three-step framework for spotting a financial crisis before they blow up. Something I learned from my mentors. And fourth, the doom loop um that could turn this into a full-blown recession. This is not a doom and gloom video, but we need to understand the worst case. And then finally, what are smart retail investors doing right now? And how do you protect and profit from this? Let's get into it.
And I appreciate this is a little bit of a heavy topic. So, I've done one better for you. I put together a little 25 page research report that under explains the whole thing in terms anybody can understand um what this is really about like the full thing broken down. And you can download that for free in our free community. There well over 30,000 people in there already. It's felixfriends.org/resource. It'll bring you into a community. There is a section in here which is called video workbooks. That's where I'm going to post it straight after I record this video. Uh there's a ton of research reports in there already. These are all completely free. If you want to also get access to our full dashboard on this because I've literally also built out all the data. We're going to pull it all together. you can keep tracking this. This is like $6 a week or something like that. Uh there's also a link down below to that. Um which we also put on the on the screen for you somewhere. But this is not about you joining that. Just I want to make sure you guys get all the information. You can take it away. You can read it so you really understand what the heck's going on here because it isn't it is not intuitive.
Okay, let's let's start with the basics. What is private credit? Forget the jargon for a second. Imagine you want to open a restaurant and you go to a bank. Let's say you go to Wells Fargo and you ask for a loan. Now, the bank looks at your credit score, your business plan, your collateral, and says, "No, thank you. You're too risky. So, what do you do instead?"
So, this is your restaurant business. Here is the bank, right? And the bank says, "No, thank you. Your risk is too high." So, you then go down the road and you go to a private lender and they look at you and they go, "Yes, we're going to lend you money." Now, where is the money coming from for the private lender? Well, a lot of that money is coming from the bank. I kid you not. They lend to the private lender who then lend to you even though they said no at the outset. But it also comes from pension funds, insurance companies, and regular retail investors. So why does it exist? Well, banks got very conservative after 2008. Banking regulations got tightened up because we had a Ponzi scheme of a housing market and private credit just sprouted up and it's grown to over $2 trillion. Moody says it's going to hit $4 trillion in the next three years.
But where it gets really interesting, and by interesting I mean terrifying. If you have a retirement account, these private credit funds charge a lot of fees, management fees, performance fees, origination fees, and they don't trade publicly. So we don't know what's going on behind the closed doors. There is no daily price. There is no ticker symbol. There is nothing, you know. So only the fund managers get to decide what the loans are worth. So let me say this again. The people who make the loan to you, the people who are lending you money, they are the same people who get to grade the loans. It's like letting a student, maybe you have a child, and say to them, "How about you grade your own exam? What grade do you think they're going to give themselves?" right now. If you sounds that if you think that sounds like a bit of a Ponzi scheme, put Ponzi in the comments down below because I certainly think it does. It sounds like 2008 all over, doesn't it?
Now, you might be thinking, Felix, I don't invest in private credit funds. Why should I care? It's a great question. Here's why. Over the last few years, Wall Street's been aggressively pushing private credit into retirement products, target date funds, 401k options, insurance linked products. So if you have a pension or a 41k annuity, very very likely there is already some private credit in there and you don't even know it. Reason number two, some of the biggest private credit firms, Apollo, Blackstone, KKR, they've bought insurance companies. So they take the premiums from regular people's life insurance and annuity policies and then they invest that money into the private credit funds that they own. So your retirement savings flow into their fund. So they collect collect fees on all ends and if the loans go bad, guess whose money is at risk? It's not theirs. It's yours. And then number three, and this is perhaps the most important and the real lesson from 2008. Even if you're not directly exposed, if the private credit market blows up, it does not stay contained. The banks have lent them. The stock market is affected. The job market is affected. Everybody is affected.
Now look, understanding that your retirement money might be trapped or that your portfolio could be hit is step number one. Step number two is knowing what to actually do about it. And that's exactly what we're going to teach you. So, if you want to learn how those lovely Wall Street professionals actually pick stocks and manage risk, so that those secret rules that they have, not the stuff you see on Reddit or YouTube, I'm going to do a live free training for you. And I'm going to teach you what I learned from my Wall Street mentors over the last 10 plus years, and it's free. And it's just part of our mission to elevate and uplevel the skill set of ordinary investors like you and me. And Winston is very much going to be behind that. So join us at Felix/training. That's on Saturday at 8:00 p.m. New York time. And it'll be fun. It'll be fun and it'll open your eyes to a whole new world.
So let's understand what's really happening right now. Let's start with the biggest asset manager on the planet, Black Rockck, right? They manage over10 trillion dollars. Yeah. With a T. Um they're sort of the um I was going to say death star of finance, but I guess uh champion of the little man is probably the way they they describe it. And they have a private credit fund. It's called HL Lend. It's $26 billion in size. And investors got nervous about what's going on in the private credit world. So they wanted their money back, which sounds like a reasonable thing, right? Does that sound reasonable? I think so. So about 10% of people wanted their money back. So that's $1 and $10. Um but the fund says uh sorry uh you can't do that. Uh so they only let half of that get withdrawn. 5% could get out. The other 5% denied. That is up to them.
Now Black Rockck's official statement and I I of course love and cherish Black Rockck. This is it. They say, "We're placing limits on liquidity, which is key to our strategy." So, we designed the trap. You walked into it and now we're telling you the trap is a feature. It isn't a bug and don't worry, everything is just fine. Right? But it gets worse because there are funds out there who are saying that everything in the fund is just fine. We are valuing everything at 100 cent per dollar, which is sort of like perfect credit score, right? 3 months later it got written down to well zero. Absolutely just evaporated in one quarter. Literally worth nothing. It's a bit like you know you go you take your car to a mechanic and he says your car is in perfect condition and then the engine folds out 3 months later. You probably wouldn't go back to that mechanic would you?
But there isn't just Black Rockck. There is also Blackstone who are also named after the happiest color in the world. Um, which apparently isn't a color. Someone's going to write that in the comments, aren't they? Some ninkan poop. Anyway, so Black Rockck is cockroach number one, which is not my phrase. This is how Jamie Diamond describes this. By the way, the JP Morgan CEO says private credit is a cockroach. Bunch of them. There's a Blackstone fund called um BCR. The name isn't important. Uh it's an $82 billion fund, just a little bit bigger, right? Um it's the biggest in the world now. 8% of people wanted their money out of that one. I guess they know what's going on. And um they actually let most of the money escape. I mean, sorry, get withdrawn. 7%. And they even added $400 million of their own money into the fund to allow these redemptions to happen. But think about what that signals when the fund manager has to put their own money in to stop investors from panicking. Is that really a size a sign of strength or is that sort of a well, you know, um now Blackstone's El President, he's called John Gray, another happy color. Um he defended the withdrawal limits that they have and he says it is a feature, not a bug. That's actually a que.
Now you might have also seen this one in the headlines. Blue Owl, Blue Owl Capital is to me the canary in the co mine. They have a very heavy concentration in software and technology lending. Sounds great, right? Until you realize that AI is disrupting the entire software industries. So, companies that were taking out loans to grow are suddenly finding that their business model is being eaten alive by AI. I mean, literally. So they saw 15% of the money wanted to leave their fund. 15%. That is not normal. What did Blue O do? Uh they basically said we'll give you your money back when we feel like it. We stopped making payouts. So um actually no they didn't quite say that like they said we're going to make periodic payouts which is sort of you know good luck getting your money back.
But it's not just Black Rockck, Blackstone, and Blue Out. The stocks of every major private credit managers have been getting hammered. KKR, Apollo, Aries. And I appreciate these are not household names, which is one of the reasons I put the main ones in in here. So, you can actually track and see what they're doing because this is a sentiment. This is a sentiment indicator like nothing else. And so, you can get access to that through our private community. It's about $620 a week. And I'm not going to run you through every one of these because it's going to get really really tedious.
So we've established private creditor is in trouble, right? Well done, Winston. But what I'm worried about is what comes next. There is something called the maturity wall. And it's exactly what it sounds like. Over the next couple of years, an estimated 1.3 trillion in corporate g debt has to be repaid. That means companies that borrowed the money during an era of zero interest now have to refinance but at much much higher interest rates. And if you think about it that like um you borrow $100 million and you pay 3% on that, right? Your interest payment was 3 million, right? Um now if you have to refinance at seven or eight% suddenly your interest payment is seven or eight million and for a lot of companies that's the difference between surviving and maybe going bankrupt. And what happens when those companies can't pay? Well, the c the private credit funds holding those loans, they take losses. The investors in those funds, including potentially your retirement accounts, are holding the back, right?
So, this is the part of the video I really want you to pay attention to. Please take notes or just go and download the research report at least and highlight stuff because what I'm about to share with you isn't just about private credit. It's a framework you can use to spot any financial crisis before it blows up in your face. I call it the three-step crisis detection framework, which sounds rather grand, but once you see it, you'll start recognizing the patterns everywhere because to me, that's what I learned from my Wall Street mentors. It's it's all about patterns, right? The way we pick stocks as patterns, the way we pick industries and sectors as patterns, the way we decide where to get out, it's patterns or patterns.
So, what is um pattern numero uno? Well, it is follow the fees, not the returns. Every financial crisis has one thing in common. Someone is making enormous fees regardless of what investors are making. Now, if we apply this to private credit, in private credit, the fund managers collect management fees on the total assets under management. They collect fees when they make a loan. They collect performance fees when things go well. When things go badly, they still collect the management fee. it gets paid no matter what. So ask yourself this. Does the fund manager make money even if I lose money? If the answer is yes, you've got what I call well economists, I'm one of those, they call it a misaligned incentive structure. Very fancy. It's a red freaking flack. Uh the fund manager is not motivated to do something for you. Let me break it down for you with an example. Say you have a fund and we're going to call it the the dark fund because they seem to all like those names. So the dark fund does what? The dark fund borrows money is what they do from banks and other people and they borrow at say 5%. Interest right and then they lend the money out to risky lunatic businesses and for that they charge 20%. Interest right? So, how much money do they make? Well, there's a great big beautiful profit here, which is 15%. Which is pretty pretty good, right? So, they pocket the 15%. But they don't stop there. There is also a 2% management fee. So, now they're getting 17%. And if the risky company pays back the loan, great, right? Dark Fund keeps its 17%. But if the risky lunatic business goes out of business and doesn't pay back, guess what? Dark Fund collected all the fees up front. They don't really care. You see what I mean? It's the borrower who put up the money. So this these guys's money while the profits of 15 and 2% are guaranteed to dark fund. So those guys are going to get paid no matter what, but the people lending the money are the ones who get screwed. And that might be you directly. That might be your pension fund. That might be a bank. Either way, it hits the market. And maybe you think it sounds a bit extreme. All right. Do you remember what happened in 2008? Mortgage brokers, the ones who were dishing out all the mortgages to people who had absolutely no money and no hope in hell of of of paying it back. What happened to them? Well, they got paid fees as soon as they did the mortgage. Doesn't matter that people couldn't pay them back, right? Or how about you know all the crypto exchanges when they were all collapsing. What happened to them? Well, they got paid per trade. Whether you were panicking, whether you were buying or you were selling doesn't really matter. Whether the token is worth zero or or something doesn't really matter. So, it's always fees. Follow the fees.
Step is um apologies Germanic um origins here. Um half the audio just left the room and the other half are only staying because Winston's snoozing very cutely. This guy is just on a 4hour hike. This is why he looks like that. Winston. Winston. Hey, are you still awake? Winston, are you paying attention? Not so much, right? A four-hour hike up and down some mountains.
So step number is the um trust me valuations. Whenever the person selling you an investment is also the person telling you what it's worth, run for the hills while you still can before you're as tired as this guy. And if you are buying something publicly listed, stocks or bonds, prices are set by millions of buyers and sellers every single day. Well, let's be honest about it by citadel a bunch of hedge funds. But you know there is there is still a price discovery. So you can look up the price of Apple stock right now, right? But in private credit there is no market price. The fund manager tells you what the loans are worth which essentially makes which this essentially means we made up numbers using a spreadsheet and you're just going to have to trust us. And when the big banks, the JP Morgan chasers, the Goldman Sachs start marking down the value of their loan portfolios, which they've just done, they started admitting that, you know, the emperor has no clothes. You know, this is actually serious. There's a quote from Jamie Diamond, the CEO of JP Morgan, and he says, I take a deep breath and say, watch out. Oh, now we feel good, don't we? Ray Dalia says, we're on the brink of a capital war. So, do you still trust the fund managers? If you do, or if actually if you don't write no trust in the comments. If you do, write yes trust in the comments. Be interesting to see how trusting our audience is. Now, maybe you still think I'm a I'm a lunatic spouting um doom and gloomer. Do you remember Enron? Do you know that Enron valued? So they put a dollar value on its own energy contracts which was the business the mortgage backed securities of 2008. Beautiful film made on that. Guess who valued them? The banks. The very banks that, excuse my writing, that created MBS's, you know, major BS valued them. There is no independent price discovery. If there is no independent price discovery, run for the hills because the hills are alive.
Step, and this is the big one. Write write this down. Watch what the smart money does, not what they say. That's my entire investment philosophy. I didn't come up with that. And people came up with that 50 years ago and they taught me. Jamie Diamond, the CEO of JP Morgan, the most powerful banker in America, in the world. Um, just ask them, they'll tell you. Uh, he has publicly compared private credit to the conditions before 2008. He's called the problem cockroaches and said some firms are doing some dumb things. Uh, and then he says, I take a deep breath and say, watch out. Now, here is the beautiful irony. JP Morgan's own private bank published a report saying private credit fears are overstated. So which is it? The CEO warning of a crisis or the bank telling clients everything is just fine. The answer of course is both. The CEO is warning his shareholders. He has an obligation to do that. And the bank is keeping its fee paying clients calm, right? Welcome to the wonderful world of Wall Street. And then you have the guy who built the world's largest hedge fund, Ray Dalia. and he says the current environment resembles the period before World War II. He's advocate hitting he's advocating gold as the safet asset and the guy is worth like $15 billion and he starts talking about gold. That's a bit odd, isn't it? And then you have the Fed who's refusing to cut interest rates and raising their inflation forecast. Again, all the data to this is always and forever in our dashboard. Look at that inflation data. Look at that inflation data. It's actually going up. That's not a good thing. That is not a good thing because it means higher interest rates will crush more and more of these funds and more and more borrowers. So the lesson not just for today but for every for every time is the smart money always knows first. In 2007, Goldman Sachs were selling those mortgage back securities to clients while they're betting against them. The lesson isn't that Wall Street is evil. It's that you need to watch their positions, not their press releases.
Now, what I learned from my Wall Street mentors, the guys who've literally worked in banking for decades, is the real danger in any credit crisis is not the first domino. It's the feedback loop, the doom loop, where each problem makes the next problem worse. And these are the same mentors that my students get access to inside go academy. Literally one-on-one sessions is what we run with people. It's incredible. So, let me walk you through exactly how the priv private credit doom loop works. And once you see it, you'll understand why this isn't just a Wall Street problem. It's a problem for you. It's a problem for me. It's a problem for everybody.
So, it starts with defaults. As we discussed, the default rate on private credit is about just under 10%. So, companies that borrowed at high rates cannot keep up payments, therefore you default, right? Step number two is the funds take losses and then they restrict your ability to get your money out. So, at first they pretend there aren't any losses because they're grading their own homework, right? But eventually the truth leaks out. Videos like this get made and investors start to get a little bit well, they start asking questions. They start asking for their money back, right? So the fund says no, you cannot have your money back. It is ours, right? Uh and then investors start to really panic and then you get to step number three. Uh which is um to meet even some redemptions as an in other words to hand some money back and they need to otherwise the headlines get really bad. The funds are forced to sell assets but there is no buyer for these loans. So they have to sell these at a huge discount and then suddenly the trust me valuations get replaced by actual market prices and those prices are really ugly. We're seeing 30 cents on the dollar. It's a fire cell. And then step number four, banks, the traditional ones, the Wells Fargo, the Wells for the the traditional ones, the Wells Fargo, JP Morgan City, they're connected to private credit. They lend money to these funds. They provide credit lines. Some of them even hold private credit assets in their own balance sheets. So when private credit funds take losses, the banks take a loss, too. Now, what happens when banks take a loss? This is step five. Are you getting this down? Let me know. Um, let me know if this is landing for you. Just write an L in the comments down below. And it's a lot of stuff. Uh, that's why there's that free research report. That's why there is a in our premium community also a whole dashboard on this, right? So when the banks take losses, what do they do? They tighten lending. They pull back on business loans, mortgages, consumer credit. So credit gets harder for everybody. And that leads to step number six. When credit tightens, businesses can't invest. So they stop hiring, they can't grow, consumers can't spend as much, the economy slows down. One of the reasons that we've got payroll data in here on our our dashboard, because this is so important, right? tells you what are businesses actually doing. By the way, there is an explanation for each one of these dashboards because I appreciate they are not u you know necessarily easy to understand. You just click on that and it explains to you what it actually means for every single one of those. Um, so click into that. It'll it'll make you felixfriend.org/ I actually don't know what the link is. There's a link down below to it. I I I'll make it really clear in the in the description or in the comment.
Now, when the economy slows, companies that were struggling anyway, they now start to fail. So, we get more defaults. And what happens? Well, you go back to step one and you repeat the same process just a little bit more quickly.
So, how bad could this get? Let's be realistic about it. Um, I want to be balanced here. Is this definitely going to be 2008? No. Nothing is certain. There are some legitimate arguments that the risk can somehow be contained. At least that's what JP Morgan says. And in 2007, people also said that subprime mortgages are only about 13% of the total mortgage market and it is contained. Don't worry about a thing. And we all know how the global financial crisis turned out, right? So, if this were a baseball game, and I'm borrowing an analogy because obviously I'm not a baseball player. Um, but I've looked this up and I'd say we're about on the fourth or fifth inning. The boom is over. The bust is clearly started in credit, but the worst, the seventh, 8th, ninth innings are still ahead of us.
So, what do you do about it? Well, guess what? Every crisis uh creates an opportunity. So, well, I've spent the last 20 minutes scaring you, and that's never my intention, but you have to understand it and and at least you could look at Winston. He was very sweet. Um, let me give you the good news because every crisis in history has created enormous opportunities. I remember making a lot of money um 2008, 2009 because I had some smart investment bankers who said, "Philix, you should buy that. that's gonna do a lot and it did. So, of course, I'm not a registered financial adviser. I'm not telling you what to buy or anything like that. But give you maybe a public example. In 2008, Warren Buffett invested 5 billion to Goldman Sachs at the height of the panic. And people who bought quality stocks at the bottom of that crash made 300, 400, 500% over the next decade. So, the question is not whether there will be opportunity. The question is whether you know how to find them.
So, here's what I want you to do. First of all, join me live on Saturday for a live training on exactly that. How do we find winning stocks in this situation? Um, but what you can do, and there's a link down below, felix/training. It's completely free. Now, if you want to take some action right now, something you can do right now, log into your 401k or your retirement accounts. Look at every fund that you invested in. If you see the words private credit, direct lending, alternative credit, senior secured, floating rate, or anything like that, dig a little bit deeper. You can also just take a screenshot, dump it into any AI like a Gemini or something and say, uh, does is this any of this related to private credit? Is there any exposure direct or indirect? And it'll give you a fairly good answer. I would generally speaking avoid chat GPT. I just think it's uh I was going to say evil and I think that's exactly the way I describe it but um Gemini seems to be all right. And then do the same for your target date funds, your annuity, your insurance funds, all that stuff. Just dump it all into something like Gemini and say uh is there any exposure here direct or indirect? And then remember that there is always a pattern to this. We have had credit downturns before and these patterns tend to repeat. Quality tends to win over risk. Blue chip companies with strong balance sheets and low debt tend to outperform. Cash is always king. Um, now you don't want to have a lot of cash because inflation is going to erode it. And no, Warren Buffett does not hold 300 billion in cash. He has it in debt instruments that paying quite a lot of interest. But if the credit crunch gets bad enough, the Fed will eventually cut rates. And what benefits from falling rates? Treasury bonds, which is probably why Buffett was there. And once you get out of the the valley of death, the high-risisk stuff comes back alive. But it can go down pretty nastily from where we are. So you might want to look at how much uh high-risk stuff you have currently. Think about what Ray Dalio is saying. He's screaming by gold, buy gold, buy gold. Again, I'm not telling you to do that, but there's some sense in that. But the most important thing is don't predict what's going to happen next. Nobody can. Be prepared for all the outcomes. know how to watch the institutional money and where it goes and don't be 100% in one thing. Right?
So, what have we covered here? Two trillion market showing some serious cracks. The big boys, the black rock, the black, it's the blue als investors ability to get their money back. Default rates have hit record levels. The smart money is issuing the uh warning bell and we might only be in the sort of middle innings of this this credit bust. So, follow the fees, not the returns, right? If the fund managers makes money whether you do or not, uh the incentive is to create a Ponzi. And the good news is that you already understand more about this situation than 95% of return investors. Knowledge is the ultimate hedge, but skills are what allow you to act properly. And we're going to instill those skills for you on Saturday at 8:00 p.m. New York time. Uh when I'll teach you Wall Street's I'd say secret buying rules. That's really what I would call them. They're just two or three. They're very simple to learn. I can teach them to you in under under two hours for sure. Hour and a half or so. You can ask me lots of questions. We'll do it live. And Winston says, "Uh, come and join us. Don't you Winston?" Winston, is there any energy left in that little face of yours? He's so He's so pooped. Uh, which is lovely to see. That's always our goal, by the way. If some people saying, "Oh, he must be really old or something." No. Every single morning, 7 a.m., he hits the mountains for a couple of hours um with his pack. usually a bunch of dogs and they're going nuts or they just go on a 3 4 hour hike and there are mountains here and waterfalls and porcupines and pigs and all sorts and and and he absolutely loves it and then he comes back like this, sleeps for a couple of hours and then he's uh in the afternoon he's full of beans again. Um, so there he is. I thank you guys for watching. You got some value out of this. Share it with some other people. You might benefit from it. I know it's not the sexiest topic in the world. Uh, you prefer me to say uh boom is here tomorrow. how to make a gazillion dollars by Tuesday. Uh, but we also have to be realistic with what's going on in the world and there is an opportunity in this. Uh, but you need to understand it. So join me Saturday, Felix at Oaklush Train. Thanks for tuning in.
Gold isn't just going up. It's doing something it hasn't done since the 1970s. And most people have no idea what comes next. Here is what nobody on YouTube is telling you. This gold move