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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

#431

Post by solatic »

xenadu02 wrote: post #304
cs702 wrote: post #116

Trouble has been brewing in private credit for quite a while, but lenders and investors have been reluctant to write anything down, resorting to all kinds of "extend and pretend" games to avoid write-downs.[a] tick-tock, tick-tock, tick-tock... --- [a] https://news.ycombinator.com/item?id=47351462

Funny enough Chinese State owned banks have been doing much the same for quite some time. No one ever defaults, loans are extended as long as it takes. Presumably the threat of being called into the next party meeting to explain yourself is sufficient motivation for the people running the business to pivot as many times as it takes until they find a way to make money. Worst case the state swaps someone else into lead…

The larger you are, the larger the rounding errors are, the more money that can disappear due to a failure and explained away or extended or written off or whatever euphemism you want to pick. But the sum of rounding errors is less likely to itself be a rounding error. It works until it doesn't, and Evergrande collapsing with $300 billion in Chinese real estate debt will be a case study for years to come.

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

#432

Post by [deleted] »

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?

[deleted]

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

#433

Post by eru »

iwontberude wrote: post #401
klodolph wrote: post #400

Earlier quoted context omitted.

“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 wh…

And puts are highly manipulated by MMs so you have to really study the chain and how it behaves before you have a chance to buy the contracts at a fair price. MMs will flood the market with contracts and devalue yours even when the price is moving in your direction. I highly suggest people think twice about trading options, they are best used as hedges for large positions during particularly vulnerable periods.

Are you accusing market makers of manipulation?

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

#434

Post by eru »

pocksuppet wrote: post #393
elliotec wrote: post #391

Earlier quoted context omitted.

> 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.

What you are saying suggests that there's a single number (that can be positive or negative) that characterises your net short or long position.

That's silly.

You can build pretty much any kind of shareprice-to-payoff function with enough options and other instruments. And that's one dimension (a line) more than just a single number. You can get arbitrarily more complicated, if you want to.

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

#435

Post by dv_dt »

lumost wrote: post #120
JumpCrisscross wrote: post #94

Yeah, I'm going down a bit of a rabbit hole this morning. Turns out Wells Fargo's $59.7bn of private-credit lending is equal to 44% of its CE Tier 1 capital [1]. Meanwhile, Deutsche Bank got back to being Deutsche Bank while I was not looking [2]. [1] https://www.sec.gov/Archives/edgar/data/72971/00000729712500... [2] https://www.reuters.com/business/finance/deutsche-bank-highl...

With the current concentration of wealth and banking, it almost seems like there is an incentive for banks to ruin themselves when they end up in a little trouble. If the bank has trouble, shareholders/executives lose - if the banking system has trouble... then QE will solve the bank trouble.

IMHO, if QE solves the trouble, the Fed or treasury should be taking a bigger bite of ownership from the bailed out companies in exchange specifically to disincentivize taking risks with a bailout backstop.

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

#436

Post by meta_gunslinger »

dboreham wrote: post #405
WalterBright wrote: post #344

Earlier quoted context omitted.

A business owner lamented to me recently that it wasn't the taxes that were crushing his business, but the costly regulations that keep on coming. The harder the government makes it to operate a business, the less businesses there will be.

Fewer businesses. But that aside when people say regulations are costly without providing specifics typically they are upset they can't rip off the public, pollute the environment or perform other acts to the disadvantage of the population.

Very nuanced take, thank you for your insight.

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

#437

Post by AdamN »

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?

Infinite downside is theoretical. The bigger problem that I learned a long time ago is that the leadership of every company is fighting against the stock going down. So if you're long a company then your interests are aligned. If you're short you really need to have conviction that it's a winning bet because everything else is fighting you. Also, it's a short term play - the short eventually needs to be unwound. So you're not just making a bet you're making one that's losing you money over time.

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

#438

Post by mikkupikku »

bigstrat2003 wrote: post #381
mikkupikku wrote: post #239

Earlier quoted context omitted.

You're coping. Two years ago they could barely write software. These days they do it just fine.

They do not in fact do it just fine. That's why it's utterly laughable to suggest that they can lead to AGI. They can't even do the one thing they are supposed to be good at, even after years of effort.

I didn't say anything about AGI, nor will I except to say it's an incoherent quasi-religious topic that has next to no engineering relevance, at the very least until somebody can empirically test for it. Stop coping.

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

#439

Post by hyperflowerer »

AnimalMuppet wrote: post #211
irishcoffee wrote: post #188

Earlier quoted context omitted.

I appreciate your posts generally, you have a lot of good insights. Do you think replacing that 4T was a good call? I'm struggling to see how it was the right play.

I think it was a good call, yes. A deflationary collapse is incredibly damaging to the economy. The Great Depression was such a collapse, but there are others. The Panic of 1857, 1873, 1907... there's a long history of these. The Fed avoided that. And they also avoided causing inflation. It was an amazing job of threading the needle. (One could argue that they caused a decade of stagnation, but in my view that was mi…

I have really tried hard to figure out the counterfactual as being a good thing and it is just really hard to make the argument that we would have been better off with a deflationary collapse.

This is especially true from a global perspective. It would be a much more equal global economy but unimaginably poorer. The political consequences are unknowable but a deflationary collapse would not have had good political outcomes.

We largely shifted a nightmare into being a great time to be alive but take the good times completely for granted because we can't really know the nightmare we didn't see.

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

#440

Post by iamflimflam1 »

chubs wrote: post #407
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…

I don't understand: Who's lending the $2B in situations like this? Wouldn't they be worried that the above situation (company gutted, then going down the drain) is going to play out and they won't get their $2B back? Or is that the root problem with this whole YC submission: banks are being hit by defaults because of this exact problem?

That is the exact problem. The people who put up the $2B thought they were safe - after all they were putting up money to buy a successful profitable business.

Problem is they didn’t really understand the business and trusted the PE guys to keep running it well…

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