Private Credit
Private credit redemptions are up. Why? Bad loans at private credit firms made investors realize a little late that NOT marking debt to market value is a drawback, not an advantage. That led to loss of investor confidence and redemption requests ballooned. Private credit has a gating process that allows only 5% redemption per quarter. The next redemption is in June. If the 5% redemption request is greater than Natural Repayments + New Inflows, then private credit is cooked. And that is becoming increasingly likely.
CAFOs
Concentrated Animal Feedlot Operations (CAFOs) account for 90-99% of meat produced in the US (stats vary based on the source but usually north of 90%). As the name suggests, animals are concentrated in ridiculously small areas and treated in inhumane ways - all so we can consume them. Humans can do better than that.
Mark to Market
All assets fluctuate in price based on market value…except private equity assets. And therein lies fraud. Because private equity assets are privately owned, there is no SEC oversight (only applies to stock markets). Therefore, they grade their own report card as to the valuation of their assets. Phalippou has valiantly fought this for over a decade. The recent Harvard debacle is another cautionary note. Buyer beware.
Valuation
Any asset can be valued, thanks to the Capital Asset Pricing Model (CAPM). But people make three mistakes, two common and one uncommon:
Most never value an asset using CAPM because they are not aware of this wonderful approach (usually introduced in Finance or an MBA course).
Even when they learn in school, most do not internalize its importance or apply in their personal life.
The uncommon one? Among the few who do use CAPM, they likely don’t add specific risk premium to the risk free rate of return in the formula. This causes them to assume 100% of the returns of a specific asset without discounting it by the risk it may carry.
As an example, if you have an asset (such as a house) that returns 10% year on year versus let us say an S&P 500 mutual fund that also returns 10% year on year, then you may falsely assume that both assets are equivalent in returns - an incorrect assumption. The S&P 500 is a well diversified portfolio as it invests in the top 500 firms in the US whereas you are assuming too much risk by investing all your money into one asset i.e. a house. In other words: eggs in different baskets are less risky than all eggs in one basket.
Failing Empire
Empires fall. That is inevitable and not an enlightening observation. What is interesting is that the fall hastens when the populace becomes weak, lazy, and starts electing insipid tyrants. The US is well under way on this journey.