Is A Private Credit Meltdown About To Take Down The System? | Chris Irons

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**Chris Irons** (1:00)
You don't need to be a statistician or an actuary or, you know, a CFA level 3 to know that the front page of the Wall Street Journal is now every day showing another private credit fund under stress. And so, you know, I think we're on the doorstep of a credit event.

**Adam Taggart** (1:22)
Welcome to Thoughtful Money. I'm Thoughtful Money Founder and your host, Adam Taggart. With the US at war with Iran, oil prices spiking, private credit likely imploding, and payrolls sinking, it's perhaps understandable that some investors are worried that the world is going to hell. To put everything in perspective for us today, likely using more than a few F-bombs himself, is Chris Irons, author and publisher of QTR Fringe Finance, which has become one of the most popular financial newsletters around. Currently sitting at number 27 in the list of top 100 financial sub-stacks worldwide. Chris, thanks so much for joining us today.

**Chris Irons** (2:00)
Happy to be here. Thank you.

**Adam Taggart** (2:02)
Well, it's really fun to have you back, Chris. I really enjoyed your inaugural appearance on this program. Suffice to say, a lot has happened since then.

**Chris Irons** (2:10)
Yeah.

**Adam Taggart** (2:14)
And you made a great statement last time about stocks being pornographically overvalued. I want to ask you in a bit if we're still at that stage. But before, I just kind of gave a brief litany of some of the headline worries that are out there right now. From your perspective, just how bad are things? Is it really all that bad or like most things in life, is there more nuance at play?

**Chris Irons** (2:36)
I mean, how bad are things or how bad do they look? Because they don't look that bad, right? Like nominal price of the stock market continues to go higher. The valuation, I mean, we've come off a little bit here, but we're pretty much as stretched in terms of valuations as we've ever been historically. I don't know if the question is, things are bad in the sense that the way things look aren't the way that things are. That's the story we're kind of seeing in private credit right now. You've got a whole sector full of mismarked books and level three accounting that needs to be adjusted, and it's starting to be adjusted. And as that's happening, you're seeing people rush for the egg that's in concert together, and you're seeing redemptions getting gated. And bigger and bigger. Last week, it was a $26 billion fund. Yesterday was a $33 billion fund getting 7% redemptions. And so this is kind of hitting the fan in private credit. The overall market is the same deal. It's like, how does it look? Well, it's inflated from money printing, and it's being bid up by the passive bid and the optioned market and money printing, essentially. The passive bid sprays retirement capital to a market-weighted index, and that propels the indexes higher, despite the fact that market breadth may show 70% decliners to advances. If the 30% that are advancing are the right names, the index goes higher. And so, you know, how are things? I mean, most people would say like, oh, things are good. But under the surface, you have things like the cryptocurrency sector, which could arguably be, it doesn't matter if you're bullish or bearish, but it's probably the tip of the spear if you wanted to make the argument that one whole sector could be worth nothing. So you have a lot of a trillion or two trillion dollars in market cap there that could theoretically go to zero or at least theoretically doesn't have a floor or a bottom from any fundamental perspective.