Private Credit & the Coming Quiet Panic

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My aunt Millie, who believes everything she reads on Facebook, keeps asking me about “all this trouble in the market.” She’s invested in something called a BDC, which, as far as I can tell, is a way to lend money to companies that banks won’t touch. She thinks it’s like a savings account. It’s never a good sign when your relatives are asking about complex financial instruments. It usually means the instruments are about to do something unpleasant.

This whole private credit thing… it’s not getting the attention it deserves. Everyone’s fixated on the AI hype, which, let’s be honest, feels like a very expensive magic trick. But underneath that, this quiet panic is building in a corner of the market most people don’t even know exists. It’s the kind of thing that doesn’t make headlines until it’s actively ruining your day. These firms are basically lending money to companies that are already a little… precarious. Lots of software companies, apparently. Which, given the current obsession with algorithms, feels a bit like lending money to a robot with a gambling problem.

Goldman Sachs, in their annual letter—which I always skim because it feels like reading a ransom note—mentioned it. David Solomon, who seems perpetually annoyed, pointed out that the credit cycle hasn’t been “repealed.” A remarkably dry way of saying that debts still need to be paid. He’s right, of course. It’s just that everyone seems to think this time is different. They always do.

And it’s not just me noticing. Blue Owl Capital, another one of these firms, is down nearly 40% this year. They’ve basically told investors, “Please don’t ask for your money back, we’re a little short.” It’s like a bank run, but for people who can afford to lose a lot more money. They’ve sold off assets, which is always a reassuring sign. It’s like pawning the family silver to cover your losses. Blackstone and Morgan Stanley are doing the same thing, capping withdrawals. It’s all very orderly, very contained. Until it isn’t.

The real problem, as far as I can tell, is the sheer scale of it. We’re talking about over a trillion dollars in these private loans. That’s a lot of money tied up in companies that may or may not be able to pay it back. And if those companies start to default, it could spread like a particularly nasty cold through the financial system. The IMF has warned about it, which is like the fire department showing up at a barbecue and calmly suggesting you might want to consider a fire extinguisher.

Then you throw in the AI thing. All this spending on data centers, on servers, on… well, on the future. It feels like a bubble. A very expensive, very shiny bubble. And if that bubble bursts, it’s going to take a lot of companies down with it. And then, just for good measure, there’s the war in Iran and the rising oil prices. It’s like a financial trifecta of unpleasantness.

I’m not saying the sky is falling. I’m just saying I’m building a little cash cushion. It’s not about making money, it’s about avoiding the inevitable scramble when everyone else realizes they should have done the same. My aunt Millie, bless her heart, still thinks her BDC is a safe investment. I’m not going to tell her any different. Some illusions are best left undisturbed. Especially when they involve your relatives and a lot of other people’s money.

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2026-03-21 07:32