Dear Reader,
I saw this movie before. The ending was ugly.
It was 2007. The first tremors shook the ground. People ignored them. The smart money didn’t.
Now? The ground is shaking again.
Risky lenders are collapsing, and Wall Street insiders are seeing the exact same "cockroach" warning signs that triggered the last massive financial meltdown.
Wall Street is suddenly pushing these dark, unregulated "private credit" deals into average 401(k)s—a classic signal that the smart money is secretly bailing out.
These private markets have no real pricing, meaning when the panic starts, your investment could be slashed to zero before you even know what hit you.
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In September, an auto lender named Tricolor went bust. They made loans to risky customers. Often with zero paperwork.
A few weeks later, First Brands went down too. They sold auto parts.
It feels eerie. Like a ghost from 2008 walking through the wall.
Jamie Dimon sees it. The head of JPMorgan Chase. He said his antenna goes up when this happens. He said when you see one cockroach, there are probably more.
He’s right. The cockroaches are scurrying.
And the average guy? The retail investor? He’s the one standing in the dark when the lights go out.
The Private Credit Trap
They call it private credit. It sounds fancy. It’s not.
It’s just investment firms lending money directly to private companies.
They bypass the banks. They bypass the rules. They skip the deep due diligence banks have to do.
It’s fast money. It’s dark money.
Tricolor played this game. First Brands played it. A British firm named Market Financial Solutions played it.
They collapsed in February.
The big players are scared. Tyler Gellasch runs Healthy Markets. It’s an investor trade group.
He said the most sophisticated institutions in the world are asking themselves a hard question.
How risky is this bucket of loans?
If the big guys don’t know, how does a dentist in Ohio know? He doesn’t.
That’s the trap.
The Top of the Market
Wall Street loves a sucker.
When they package this risky stuff for retail clients, watch out.
John Mousseau is a chief investment officer. He said when they sell this to retail, it almost always marks the top of the market.
It’s the signal to get out.
Some of these private credit deals are wild. Double-digit returns. Crypto gambling.
Yet, big names push them. State Street. WisdomTree.
Even worse, the rules changed. Last August, an executive order gave individual investors more access to these "alternative" markets in their 401(k)s.
They opened the gates. They invited the sheep into the wolf’s den.
Because private credit is dark, you don’t see the big guys pulling their money out. Until it’s too late.
The Storm is Brewing
The smart money is getting nervous.
In March, Marc Rowan spoke up. He’s the CEO of Apollo Global Management. He predicted a shakeout in private markets. He said it won’t be short-term.
Then BlackRock made a move. The biggest player of them all.
They cut the value of one of their private loan funds to zero. Zero.
Blue Owl Capital took a hit too. Their shares dropped nearly a third in a few weeks.
Management is scrambling. They are trying to convince people their loans are solid.
Lloyd Blankfein ran Goldman Sachs. He said retail clients shouldn’t be in private markets. He said it smells like the eve of the great financial crisis.
He doesn’t feel the storm yet. But he hears the horses whinnying in the corral.
The Illusion of Safety
Some guys say relax.
Jack Ablin is a strategist at Cresset Capital. He thinks the fears are overblown.
He says the bad loans are just old loans. Loans from before 2022. Now interest rates are high. Companies can’t refinance. They struggle.
He thinks the quality is better than people say. He’s not losing sleep.
Maybe he’s right. But I don’t buy it.
Private markets don’t have price discovery. They aren’t traded publicly. You can’t see the real price. It’s a guess. A best guesstimate.
When the selling pressure hits, that guess gets hard to make.
Mousseau said it best. The more people say this is overblown, the more you know there’s a problem.
The cockroaches are in the walls. The storm is coming.
Get educated. Get prepared. Don’t be the sucker left holding the bag.
Robert Kiyosaki
Editor, Money Power and Profit
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