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US private credit defaults hit record 9.2% in 2025, Fitch says

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Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#391

Post by elliotec »

pocksuppet wrote: post #363
Aboutplants wrote: post #257

Earlier quoted context omitted.

Time to short them?

It's never the time to short a company, even a really bad one. You have only 100% upside, infinite downside, and you have to time it perfectly. A short can be a part of a combination strategy where you go long on one company and short on a related one, but you still have to be really careful. If DB stock increases 50% before it crashes, would you be forced to sell at the top and lose all your money?

> never the time to short a company

> can be part of a combination strategy

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#392

Post by lotsofpulp »

yoyohello13 wrote: post #327
Buttons840 wrote: post #324

Earlier quoted context omitted.

The free market solution to this seems to be making it easy / easier for competitors to arise. Then, when private equity does this, the customers, and workers, just hop ship to a competitor that's better managed and the original clinic goes under. I don't expect this happens in reality though. In general the things that happen in a healthy free market are NOT happening in our society.

This completely discounts the work involved to find service providers you trust. I spent a long time finding a Doctor I trust, finding a Vet I trust, etc. I don't want a "free market" solution where I need to switch providers every 6 months because some rich dude is being a dick. This is the problem with so many market focused solutions. They discount the burden put on the consumer.

Participating in a market is work, the only way a market (or life in general) works is if you hold your counterparties accountable.

> I don't want a "free market" solution where I need to switch providers every 6 months because some rich dude is being a dick.

Nature does not have a mandate that good quality services and products be available at low prices at all times. The rich dude being a “dick” was a tired vet owner who wanted to sell their equity, just like anyone else who sells their SP500 shares or their house.

The only thing that can be done is encourage government policies to ensure more sellers exist.

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#393

Post by pocksuppet »

elliotec wrote: post #391
pocksuppet wrote: post #363

Earlier quoted context omitted.

It's never the time to short a company, even a really bad one. You have only 100% upside, infinite downside, and you have to time it perfectly. A short can be a part of a combination strategy where you go long on one company and short on a related one, but you still have to be really careful. If DB stock increases 50% before it crashes, would you be forced to sell at the top and lose all your money?

> never the time to short a company > can be part of a combination strategy

Never hold a net short position.

You may hold a short position as part of a net neutral or net long position with extreme caution.

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#394

Post by joquarky »

at_compile_time wrote: post #286
newsclues wrote: post #263

Earlier quoted context omitted.

The Mars family is doing that with the vets.

They also own a large part of the pet food industry. Given how much health is affected by diet, that's a huge conflict of interest.

Why can't they find something more interesting to do with their lives? They are wealthy enough to do anything and they choose to keep hoarding more and more.

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#395

Post by aardvarkr »

rd wrote: post #241
chii wrote: post #228

Earlier quoted context omitted.

It's why as a retail investor, never buy things that would otherwise have not been available to you (but was to those "elite"/institutional investors previously). Think pre-IPO buy-in. Investors in the know and other well connected institutional investors get first dibs on all of the good ones. The bad ones are pawned off to retail investors. It's no different with private credit and private equity. These sorts of de…

This can't be a to-die-on rule though. Retail would've never bought GOOG, or TSLA, or AAPL if that were the case. Maybe I'm just being pedantic.

Survivorship bias and the corporate finance world of today is completely unrecognizable from the world of Google and Apple. Just look at the resulting performance of the SPAC craze

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#396

Post by adam_arthur »

JumpCrisscross wrote: post #129
npilk wrote: post #107

Earlier quoted context omitted.

What's odd is according to the article, this index estimated an ~8% default rate in 2024. So maybe the stress test was measuring something different? It's weird to think the stress test would find a lower loss rate during a severe recession than in the most recent year with data available.

> maybe the stress test was measuring something different? The Fed is measuring the loss on bank loans to the private-credit lenders. A 10% portfolio loss shouldn't result in those lenders defaulting to their banks. By my rough estimate, one can halve the portfolio loss rate to get the NBFI-to-bank loss rate. So a 10% portfolio loss means we're around a 5% expected long-run loss to the banks. Which is still weirdly h…

The 9% of borrowers defaulting stat cited in the title is not the same as 9% of the loanbook defaulting.

As stated in the article, 9% is the number of borrowers that defaulted, which was concentrated in smaller borrowers (thus smaller loans).

And then, again, you can say probably half of the dollar amount of those defaults are recoverable.

Bond defaults spiked to around 6% in aggregate in 2008, to use a worst case example.

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#397

Post by georgeecollins »

pocksuppet wrote: post #363
Aboutplants wrote: post #257

Earlier quoted context omitted.

Time to short them?

It's never the time to short a company, even a really bad one. You have only 100% upside, infinite downside, and you have to time it perfectly. A short can be a part of a combination strategy where you go long on one company and short on a related one, but you still have to be really careful. If DB stock increases 50% before it crashes, would you be forced to sell at the top and lose all your money?

This is sensible advice for most people. I see some thoughtful quibbles but I wish you weren't down voted. If you are a normal retail investor, please listen to pocksuppet.

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#398

Post by creamyhorror »

skeeter2020 wrote: post #340
pseudosavant wrote: post #329

Earlier quoted context omitted.

This is exactly what happened at a SaaS company I previously worked at. It was an awesome company with ~1500 employees, turning a small profit. Private Equity comes along, buys it with ~$2B in debt. Sticks the SaaS company with a $100M+ annual interest payment. Round after round after round of layoffs ensued. Then interest rates went up... and it got even worse. I think they are under 500 employees now. They basicall…

This was driven home to me at SaaS company with > $80M ARR when the new CEO was parachuted in by the PE owner said in an all-hands "and we're close to cashflow positive when we account for our interest payments..." How can a software company generating this much subscription revenue NOT be making money? When it's servicing the > $500M the PE firm used to buy it. The rest of the playbook was boringly predictable: cut…

The way I see it, it's literally simply the PE paying the existing owner for the privilege of squeezing the value out of the business and its customers in the short term (or in the ideal/theoretical case, running it more sustainably and making higher profits). Management's job becomes to extract high profit in the short term, not to keep the company running profitably.

So, logically, selling to PEs/operators who are known to do this is basically the owners selling out and taking the cash. The consequences are clear to anyone who's been watching.

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#399

Post by Spooky23 »

Buttons840 wrote: post #324
o-o- wrote: post #247

Earlier quoted context omitted.

> Banks are lending to private equity firms to fund purchases of businesses. Yes some businesses are SaaS but here's the real problem: Many businesses' sole purpose is _leveraged buy-outs_ which really is the devil in disguise. It goes like this: A VC specialising in veterinary clinics finds a nice, privately owned town clinic with regular customers and "fair" prices, approach the owners saying "we love the clinic yo…

The free market solution to this seems to be making it easy / easier for competitors to arise. Then, when private equity does this, the customers, and workers, just hop ship to a competitor that's better managed and the original clinic goes under. I don't expect this happens in reality though. In general the things that happen in a healthy free market are NOT happening in our society.

You’re confused because you are treating free-market and capitalism as the same thing.

Capitalism is about who owns the assets, free markets are about how they are transferred. They don’t require each other. State owned enterprises can participate in the free market, an example are municipal utility companies. Private enterprises can operate without a free market, an example would be Lockheed Martin, whose defense business is mostly cost plus contracts.

The US hobbled the free market with deregulation since the 1980s. We encourage monopolies with strange reactionary legal precedent, use tax and other policy to establish price floors on residential units and health procedures.

The behavior that these firms are able to carry on with in veterinary, dental, dermatology, hvac and plumbing is anti-competitive and predatory.

Re: US private credit defaults hit record 9.2% in 2025, Fitch says

#400

Post by klodolph »

pocksuppet wrote: post #363
Aboutplants wrote: post #257

Earlier quoted context omitted.

Time to short them?

It's never the time to short a company, even a really bad one. You have only 100% upside, infinite downside, and you have to time it perfectly. A short can be a part of a combination strategy where you go long on one company and short on a related one, but you still have to be really careful. If DB stock increases 50% before it crashes, would you be forced to sell at the top and lose all your money?

“Shorting” a company does not just mean short selling stock. Instead, it means having a short position, which you can use without unlimited downside.

The easy way is to buy puts. Maybe your next question is, “who is selling puts?” And that’s a good question, but you don’t really care, because you can buy your puts on the open market and when you do that, you get protection from credit risk.

There are other reasons why this isn’t a good idea but “unlimited downside” is not one of them.

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