Hey trader,
The largest private credit fund in America just froze investor redemptions.
That was just the beginning.
They then started fire-selling $1 billion in assets.
Most retail traders don’t know and couldn’t care less about private credit. That is about to change.
I am going to show you how that contagion works and why this is just the first fund to fall. I am sitting on 55% cash right now for exactly this reason.
This fund blowing up puts a hard ceiling on the S&P 500 at 7,000 and threatens to drag the entire equity market down with it.
Losses in private credit do not stay in private credit. They jump into equities through the banks that sit on both sides.
Private credit is the shadow lending market underneath the financial system you follow every day. Funds raise money from investors and lend it directly to companies outside public markets with almost no transparency and no liquidity.
When those loans go bad, there is no exchange to sell them on. The money is just gone.
Billionaire hedge fund manager Boaz Weinstein just warned that private credit is "financial alchemy." He says the problems have just begun and will multiply by the quarter.
Jamie Dimon has already admitted JP Morgan holds what he called "corrupt" private credit-linked funds inside the bank. They are bracing for billions in losses.
The Fund Nobody Heard Of
The fund is called Cliffwater Corporate Lending Fund. The ticker is CCLFX.
It is what they call an interval fund. Investors can only redeem their money at specific scheduled windows.
Here is what happened. The fund blew through its capital and can no longer meet those limited redemption windows.
They are not letting investors get out at all. I told my audience this morning that Cliffwater is the tip of the iceberg.
Weinstein says losses will multiply by the quarter as more funds face the same redemption pressure. Here is why that multiplying effect matters for your portfolio right now:
- Cliffwater manages $33 billion and just imploded. If the biggest player in private credit is fire-selling assets, smaller funds with worse balance sheets will face the same pressure next.
- Jamie Dimon just admitted JP Morgan has what he called "corrupt" private credit-linked funds inside the bank. They are conducting emergency due diligence and expect to take billions in losses.
- You cannot have the stock market rally higher without a tailwind from bonds. Private credit liquidations will hit the bond market on top of the pressure it is already absorbing from every other direction.
The Ceiling Nobody Is Pricing In
I said it on today's broadcast. This market cannot go above 7,000 with private credit blowing up underneath it.
If this were priced in, we would be a lot lower. The market is not paying attention to any of this right now.
I have watched credit crises develop over my entire career. The losses always start in a corner of the market nobody follows.
Then they multiply.
Weinstein used the word multiplicity deliberately. One fund freezes redemptions today.
Three more face the same pressure next quarter.
The contagion spreads from private credit into the public markets through the banks that hold exposure on both sides.
JP Morgan is not the only bank with this problem. It is just the first one talking about it.
I carry 55% cash right now. I will be at 60% by month end.
The Genesis COG System tracks the macro forces that put hard ceilings on equity markets before the tape confirms it.
It identified the weekly deterioration across the broader market while most traders are still watching the S&P and missing the structural damage underneath.
You need to see what is pressing down on this market from above before it presses down on your account.
Professor Jeffrey Bierman
Creator of the Genesis COG System