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| By Jim Nelson |
There’s a major storm ripping through Wall Street.
It’s not oil’s climb to $100.
Nor is it the software stocks that recently licked the boot of AI.
It’s not even the chaos of war, tariffs or inflation.
It’s private equity and debt markets.
Companies like KKR (KKR), Blackstone (BX) and Apollo Global (APO) have made billions by making investments in private markets and then letting investors grab a slice through funds created from those assets.
Unfortunately, when those investors started taking their money back out of those funds — which has only intensified as we see a flight to safety right now — the whole house of cards collapsed.
To many, this has started to feel like a small version — at least for now, a small version — of the ’08 Financial Crisis.
That one started for different reasons. But the outcome for this sector of the investment world looked eerily similar.
Two top names playing in this field back then: Lehman Brothers and Bear Stearns.
Of course, there’s a big difference.
The Financial Crisis was kicked off by improper and dubious ratings of risky mortgage-backed assets.
This time seems to be, in part, caused by the MASSIVE amount of debt being piled up to fuel the AI buildout.
As you can see above, Blue Owl is an asset manager with the worst overall performance since these fears started creeping up.
And it is also one of the largest investors of AI data center debt and equity.
From Business Insider:
“Last year, the Wall Street investment and credit firm (Blue Owl) raised nearly $10 billion for digital infrastructure, primarily for ownership interests in data center projects. The company has also expanded its lending to the sector.”
That’s caused concern amongst its funds’ investors. From that same article:
“In the fourth quarter, two funds in Blue Owl's credit portfolio saw elevated withdrawals.
“Blue Owl Technology Income Corporation, a roughly $3.5 billion fund, received redemptions totaling 15.6% of its net asset value — more than three times the fund's quarterly withdrawal limit of 5%.
“Another fund, Blue Owl Credit Income Corporation, saw roughly $1 billion of redemptions totaling about 5.2% of the fund, which was also in excess of its 5% withdrawal cap.
“Although the redemption requests were above the funds' exit thresholds, Blue Owl met them.”
Good on Blue Owl for allowing investors to get out. Unfortunately, the company has decided to continue investing in AI debt anyway.
So have many of the other names listed above.
Will this really end up like the Financial Crisis?
I’m not going to make that prediction. But I work closely with someone who just did: Nilus Mattive.
In fact, Nilus says this could be way, way worse.
And this isn’t the only threat the could spiral markets and economies out of control.
Of course, he has solutions. You can read about what exactly Nilus is predicting and how to protect yourself against it here.
But he also shared one already earlier in the week …
In a similar comparison, Nilus found that gold had a similar sell-off to today’s during the Financial Crisis. But it doesn’t point to what you might think.
Your startup ace, Chris Graebe, is also all-in on gold. Though, in his typical way, he has a unique way to play it … one without mining or drilling a single hole in the ground.
Our regular goldbug, Sean Brodrick, shares a different way to play this market chaos. He names three commodities that don’t shine yellow as the best way to play the Iran War.
Oil’s Next Stop as Iran War Continues
None of them were oil, if you can believe it. That’s why Bob Czeschin decided to let us know about where the black gold will head next.
Michael A. Robinson also has his eyes on the resource world … but not this one. He’s looking to our moon and the company that’s helping the “3 Kings” get back to it.
That’s it for this week. Have a great weekend!
Jim Nelson
Managing Editor, Weiss Ratings Daily
