Fire, Already...

Submitted by QTR's Fringe Finance

As I’ve been writing about, private credit has been under immense stress for months, with liquidity strains, redemption pressure, and growing questions around valuations all surfacing at once. And now with things on the verge of imminent collapse and literally all of f**king Wall Street already on notice, one former major banking CEO has decided to offer up the King Solomon-like revelation that he believes things could get worse from here.

But, obviously, what he doesn’t realize is that the deterioration he’s warning about isn’t ahead of us. It’s already here.

“At some point there needs to be a forcing function or a reckoning that causes you to come to grips with what your balance sheet really is worth,” former Goldman CEO Lloyd Blankfein told Bloomberg this week. He continued: “The analogy I like to give is you accumulate tinder on the floor of the forest and eventually a spark will come. But the longer between intervals where there’s a spark that sets it on fire, the more that accumulates.”

Blankfein’s metaphor of tinder piling up in a forest misses one crucial point: the smoke is already in the air. When Blankfein warns that a spark will eventually force a reckoning in private assets, he’s describing a future event. But the market isn’t waiting for ignition, it’s already reacting. The forcing function he anticipates is not some external shock still to come it’s already unfolding inside fund structures, redemption queues, and valuation disputes. As I’ve written, it’s psychology.

And the psychology has shifted. The bid is no longer blind...(READ THIS FULL COLUMN HERE).