Private Credit Problems Ending the Party – Ed Dowd

• Private Credit Problems Ending the Party – Ed Dowd
  by Greg Hunter’s USAWatchdog.com
  Wall Street money manager and financial analyst Ed Dowd of PhinanceTechnologies.com warned at the end of January that the “Credit Destruction Cycle” was showing up in something called private credit.  Dowd was worried about extreme risk in the economy, especially with all the growth in lending in the last two years coming from private credit.  Has this gotten better or worse?  Dowd says, “It’s gotten worse, and it has spread.  The number if credit funds that have gated their investors keeps growing.  This is important because high net worth individuals, insurance companies and pension funds put millions of dollars in these private credit funds and now they want to redeem them, and there is a gate.  The last two years of loan growth in the economy was from banks loaning to private credit. . .. There have been earth shaking events in private credit land.  That started a cascading effect of people becoming worried about their private credit fund.  Then, redemptions started, and some funds like Blue Owl have taken massive hits.  They had to gate their fund.  Apollo gated their fund.  Black Rock gated their fund, and KKR has gated their fund.  So, there is a lot of gating going on.  Basically, this is the beginning of the credit cycle rolling over.  This starts in the most egregious sector, which looks like private credit. . ..  So, the credit market is starting to end the party, and we are going to see this cascade throughout the whole economy.”
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  The Iran war just turbocharges the entire negative global scenario.  Dowd says, “You layer on top of this the Iran war and that only hastens the whole thing unless there is a quick resolution.”
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  Isn’t Iran getting creamed financially speaking?  Dowd says, “Financially speaking, yes, but we have no way to know what’s going on or who they are negotiating with.  It’s kind of an information black hole.  There is propaganda from our side and their side.  My hope is that this is resolved as quickly as possible without troops on the ground.  If we got that, and the Strait of Hormuz is opened rather quickly, there would be a rally in our markets, but the forces bearing down on the economy are going to happen regardless.  There will be a temporary relief rally, but what I am predicting is still going to roll through the system.  If there is no quick resolution, then this will hasten everything because there will be global demand destruction.  This will hasten a global recession that I see coming no matter what.”
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  Dowd put out a report forecasting what’s coming in 2026.  Any way you cut it, not many will escape the pain, and there is a lot left to come in Dowd’s 2026 forecast.  Dowd says, “I am in a very conservative mood.  Our call from our economic report is risk assets are going to be under pressure.  Cash is king in this scenario. . .. We think inflation is going to be coming down.  Even though we call this an oil price shock,  it’s not an inflation shock because demand destruction will eventually come.  Inflation will go up in the near term, but inflation will roll over as everything else will roll over price wise, especially the housing part of the CPI.  That is already under pressure.  Rents have been coming down, and home prices always follow.  It is now cheaper to rent a house than to own a house.  Home prices are going to come down, and that will cause a recession in and of itself.  You throw a bursting AI bubble on top of that and a Chinese economy that is going into the tank this year and you get a global recession. . .. Let me remind you, private credit already started to have its problems before the war even started with Iran, and private credit is the canary in the coal mine.”
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  Dowd is still forecasting gold to hit $10,000 per ounce in the next few years (2030) and is also still bullish on silver long term.  Dowd goes into detail about the severe problems China is facing with its economy and does not see how it can be a global financial superpower anytime soon.  This is fascinating analysis on China’s financial situation that everybody should listen to.  (Order the full China report here.)   Like Martin Armstrong, Dowd is also a big fan of stocking up on food and water in case of supply chain disruptions.

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