Is Blackrock giving us warning signs for private credit
Picking up the paper this morning, if you had been away from your screen for most of yesterday, one would have thought it a fairly uneventful day. The record shows that at the end of the day, the S&P 500 was largely unchanged. The Nasdaq 100 was down 0.5%, and the Russell 2000 was little changed. The yield on 10-year Treasuries slid one basis point to 4.23%. The US dollar barely budged, although still heading for its worst month since April last year.
The reality is slightly different. At one point yesterday, the Nasdaq fell almost 2% as Microsoft, usually reliable in its earnings, saw its share price drop by around 10% amid concerns about whether its artificial intelligence spending would justify the investment. In contrast, Meta rose almost 10% despite announcing major spending plans, suggesting it received greater approval from its shareholder base. It’s turning into a year for stock pickers, and one where the broadening of performance across sectors will continue and quite possibly within sectors.
In other news, oil rose to over $70 dollars a barrel on increasing threats from Donald Trump to invade Iran, warning Iran of a “massive armada” heading to the region. That has to be watched; a spiking oil price will spook the broader market at some point. The gold price, which has been a one-way bet for quite some time, hit a new high of $ 5,600 an ounce before collapsing by almost 10% by the end of the day. Retail investor flows into gold ETFs were beginning to suggest something of a greedy bubble was forming. Commodity prices, and with them commodity stocks, have been strong recently, partly due to the weakness of the US dollar. Consensus is very bearish on the US dollar, and you know what happens when consensus and complacency start to go hand in hand? The opposite happens; would I be surprised to see a dollar rally? Not at all.
We may hear shortly who the next chair of the Fed will be, and the money is that the Trump administration is preparing for the president to nominate Kevin Warsh. That is going to be a tough gig. Rumours are that Mr Warsh was seen leaving the White House yesterday.
Another story that caught my eye and may reignite fears about the private credit market after BlackRock announced a 19% drop in asset value in its business development company. Only recently, the fund reported that the investments were fully valued. This raises concerns that private credit funds may also be overvaluing assets. One remembers Jamie Dimon’s concerns last year in the growth of private credit, which has become one of the largest nonbank lending systems in the world and oneof the most important financial engines behind the AI boom.Picking up the paper this morning, if you had been away from your screen for most of yesterday, one would have thought it a fairly uneventful day. The record shows that at the end of the day, the S&P 500 was largely unchanged. The Nasdaq 100 was weaker by 0.5%, and likewise, the Russell 2000 was little changed. The yield on 10-year Treasuries slid one basis point to 4.23%. The US dollar barely budged, although still heading for its worst month since April last year.
The reality is slightly different. At one point yesterday, the Nasdaq fell almost 2% as Microsoft, usually reliable in its earnings, saw its share price drop by around 10% amid concerns about whether its artificial intelligence spending would justify the investment. In contrast, Meta rose almost 10% despite announcing major spending plans, suggesting it received greater approval from its shareholder base. It’s turning into a year for stock pickers, and one where the broadening of performance across sectors will continue and quite possibly within sectors.
In other news, oil rose to over $70 dollars a barrel on increasing threats from Donald Trump to invade Iran, warning Iran of a “massive armada” heading to the region. That has to be watched; a spiking oil price will spook the broader market at some point. The gold price, which has been a one-way bet for quite some time, hit a new high of $ 5,600 an ounce before collapsing by almost 10% by the end of the day. Retail investor flows into gold ETFs were beginning to suggest something of a greedy bubble was forming. Commodity prices, and with them commodity stocks, have been strong recently, partly due to the weakness of the US dollar. Consensus is very bearish on the US dollar, and you know what happens when consensus and complacency start to go hand in hand? The opposite happens; would I be surprised to see a dollar rally? Not at all.
We may hear shortly who the next chair of the Fed will be, and the money is that the Trump administration is preparing for the president to nominate Kevin Warsh. That is going to be a tough gig. Rumours are that Mr Warsh was seen leaving the White House yesterday.
Another story that caught my eye and may reignite fears about the private credit market after BlackRock announced a 19% drop in asset value in its business development company. Only recently, the fund reported that the investments were fully valued. This raises concerns that private credit funds may also be overvaluing assets. One remembers Jamie Dimon’s concerns last year in the growth of private credit, which has become one of the largest nonbank lending systems in the world and oneof the most important financial engines behind the AI boom.