The $3T Problem No One in Real Estate is Paying Attention To

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Dave:
You’ve probably heard how the subprime mortgage crisis crashed the housing market in 2008. Luckily, that’s not happening in 2026, but there is a $3 trillion market sitting in the shadows of the financial system that almost no one in the real estate investing world is talking about, and it is starting to crack. And if it does, it could cause massive damage to the economy and the housing market. So today we’re diving into what’s known as the private credit market. And we’re going to break this all down. We’re going to talk about what private credit is, where the money comes from, who’s at risk, and what it actually means for both commercial and residential real estate. Stick around for this one because this stuff really matters.
Hey, everyone. Welcome to On the Market. I’m Dave Meyer. And today we’re talking about something that has been in the news more and more recently. It’s called Private Credit, and it’s a part of the financial system that we don’t really talk about that much here on the market. And frankly, it’s not even talked about that much in the mainstream financial news. But recently, if you’ve been paying attention, you probably noticed that there’s some cracks starting to show in this part of the market. We’ve had big name CEOs like Jamie Diamond saying that there might be some cockroaches in this part of the financial system. And when someone as big as Jamie Diamond, the CEO of Chase starts to say something like that, we should probably all start to pay attention. Because even though private credit is not mainstream, it is intricately woven into the financial system.
And if problems start to emerge in private credit markets, it can spread. It can spread not just to other banks or to the stock market, but directly to commercial real estate and actually to residential real estate as well. And I’m not trying to be a fear monger, but the more and more I dig into this private credit, the more concerns I have about what’s going on here. And that’s why I did a lot of research for this episode because I want to make sure everyone in the on the market community understands some of the risks that exist in the market today because of what’s happening with private credit. So in this episode, I’m going to explain just what private credit is, why it’s getting so big, some of the cracks that are starting to emerge. Then we’re going to dig into where private credit and real estate intersect.
And I told you a little bit, it’s definitely commercial real estate, but if you have a DSCR loan or you’ve heard about DSCR loans, this will impact that area as well. And we’ll talk about what you should be looking for in the next couple months to make sure that you are up to date on what’s going on here and to protect yourself accordingly. So with that, let’s dive into it. We’re going to start with just the basics, what is private credit? Credit is just a loan, right? So private credit is basically debt issued directly to borrowers by non-banks. So instead of going to Chase or Wells Fargo or any of those other banks, you go to an individual or you go to a hedge fund or you go to a group of people who have pooled their money together to lend directly to businesses or individuals.
So this kind of lending actually should be familiar more to real estate investors than most people because if you’ve gotten a DSCR loan, that’s usually a form of private credit. If you’ve taken out a hard money loan, a lot of times those are private credit. You’re not going to a bank. You’re going to a group of individuals who have pooled their money privately, not in a public bank, and lent them out to individuals. So hopefully this makes sense, right? It’s a pretty straightforward concept. Private credit has been around for a long time, but it really has started to take off and has made up more and more of the financial market, more and more of the credit market after 2008. Because after 2008, there were more and more banking regulations introduced into the system because after we saw the chaos that came from subprime credit, these horrible loans that were being given out, Congress and the Fed basically made new rules, making it harder for banks to give out risky loans.
But a lot of those businesses, a lot of these individuals still want loans. And so instead of going to banks to get these loans, they go to private credit markets. And I just want to make clear that this isn’t just like an individual. It’s not me, Dave, going out to buy a house, although that is a form of private credit. When we’re talking about sort of these big institutional lenders, private credit lenders, they’re usually lending to like mid-size companies. If a software company wants to build a new data center or they want to hire a bunch of new people or a manufacturer wants to go and build a new plant and they’re maybe too small for the public bond market, they can’t get a bank loan, or for whatever reason they want private credit, that’s what a lot of this market is made up of.
And it’s gotten bigger and bigger. Just for example, back in 2007, the total size of the private credit market globally was about $300 billion. Fast forward to 2020, just 13 years later, it nearly 7Xed to $2 trillion. Five years later, it’s estimated to be about $3 trillion globally with about $1.3 trillion in the United States. And by all estimations, that is going to grow even more. By 2029, I found some reports that suggested that it’s going to grow from three trillion up to five trillion at 66% growth by 2029 in just the next three years. So it’s gotten a lot bigger. It’s basically 10x growth since the financial crisis, and it is bigger than other parts of the market. It’s bigger than the high yield bond market in the United States. And so there’s a reason that we need to be paying attention to this because even though it’s not as big as mortgage-backed securities market, and we’ll talk about that later, but it still matters a lot.
We are talking trillions of dollars here, and anytime that we’re talking about sums that big in a globally interconnected economy, it is going to matter. So that’s the size of the market. Now let’s just talk about briefly who’s supplying this money. Yes, it can be private individuals, but when we say private credit, it’s not necessarily you and me, individuals putting out money. It’s a lot of times it’s pension funds, right? Or it’s insurance companies or college endowments or sovereign wealth funds, right? All of those has sort of historically been the drivers of private credit. But in the last couple of years, we’ve had more and more what is known as retail investors. That’s like you and me, right? So the individual people who are managing a Robinhood account or who are just putting their money in index funds or just normal people are putting more and more of their money into private credit because frankly, the returns are pretty good, right?
You can get 10, 20% sometimes in a private credit account that’s cash on cash return. So more and more of those retail investors put their money into these funds and that really matters. And we’re going to get back to that soon. So that’s who’s supplying the money. And again, they’re investing in all sorts of stuff. Everything from helping private equity companies go out and buy new businesses, they can help manufacturers, they can help real estate investors. It really is kind of the Wild West, which as you’re going to see throughout this episode is both a benefit to these businesses, but also comes with risk because there really is nothing inherently wrong with private credit. People have been lending to each other for centuries, right? There’s nothing inherently wrong with that. It is liquidity that is needed for businesses to grow and for the economy. But like with any type of credit, any type of debt, it does come with risk, right?
We saw that in the great financial crisis that if debt is not used responsibly, if lenders are giving out loans recklessly, it can create huge problems. And when we’re talking about the private credit market, it can specifically go bad in two ways. The first is the most obvious, which is just defaults, right? If these lenders are giving out money to businesses or individuals who are using it to grow their businesses, but those businesses don’t grow or don’t perform, they don’t pay on their loans, that can cause huge problems, right? It’s just like if you took out a mortgage and you didn’t pay it and defaulted on that, if that happened in mass like it did in 2007, 2008, that can cause widespread problems. And so the same thing is true in private credit. If there are defaults, there will be problems. But there’s another way that this can go sideways and it’s not as obvious and it’s actually mostly psychological because loans are illiquid assets, right?
You can’t just go out and ask for it back from the borrower. You have to wait, right? So let’s just imagine here for a second that I, Dave, become a hard money lender. I raise a bunch of money from 10 of my friends. We raise a million dollars and we’re going to go lend it out to flippers. If I go and give these loans to flippers and those flippers are paying their mortgages and they’re paying their loans, I can’t just go to the flipper and be like, “Actually, I need that money back.” Even if my nine friends that I went and raised money from are like, “Dave, I really need my money to go pay my own mortgage or to pay for a wedding or send my kid to college or whatever,” they can’t get their money back. It is an illiquid asset. That’s just what it is.
That’s the nature of debt. But if you have all these investors who all of a sudden start wanting their money back, like if all nine of my friends at once said, “Hey, Dave, we need our money back,” that can create issues. It’s exactly like a bank run, except that it’s in a private market that is not regulated. It does not have liquidity requirements like banks. So this is the second way that it can create issues, right? You have defaults or you have a liquidity crisis, basically a run on this capital. And if you can guess why we’re even talking about this, why I’m doing this episode today, it’s because signs of troubles are starting to emerge. Now, if we look at the default rate, it’s actually not terrible. The headline number that you see published is about 2%, which isn’t crazy. But the issue with private credit is that there aren’t the same reporting requirements that you see with banks.
And so we don’t exactly know what is going on. And I actually found some research that shows that the true default rate, which actually digs into who’s kicking the can down the road, what lenders are sort of trying to mask, what defaults are going on, it’s actually closer to 5%. And so that’s actually pretty big because similar to what’s been going on in the commercial real estate market where lenders are working with borrowers to try and restructure loans and kick the can down the road to stem off a bigger crisis, the same exact thing is happening in private credit. In private credit, the term you should know is payment in kind loans. This is a key warning signal, at least in my opinion, about what distress could be happening in the market. Again, we don’t really know, but payment in kind loans is instead of the borrower paying back the lender with cash interest, which is what they’re supposed to do, they basically add interest to the loan balance.
This is kind of like just tacking on more payments to the end of your mortgage. Basically, you owe more next quarter than you did this quarter, and maybe your business turns around and you’re able to start making those payments. I think that’s the idea, but I’m sure you can see that if that doesn’t happen, a debt spiral can continue, right? You’re just adding more and more and more debt. That’s not good for the borrower, but it’s also not good for the lender because they’re not getting paid back. And these payment in kind loans are increasing. They were about 7% back in Q4 of 2021. Q3 of 2025, the last quarter I could find data for, they’re up to 10 and a half percent, right? We also see an increase in what are known as bad payment in kind loans. Basically, debt is added after the original deal was signed because the borrow hit trouble.
That’s actually 52% of payment in kind loans that’s up from 37% in 2021. And so we basically are just starting to see a lot of performance issues with these kinds of loans. And this is happening for all sorts of reasons because the economy is slowing down, businesses overshot their expectations, but it’s also coming from loosening underwriting standards, which should get anyone who understands what happened in 2008, a little bit of pause because that’s what happened then. Basically, lenders were giving out loans that they probably shouldn’t have been giving out. And we’re starting to see some shades of that in this private credit market right now. We are seeing the rise of what is known as a covenant light loan. These kinds of loans, basically they have something called covenants, which are basically rules that the borrower has to follow to stay in good standing with their lender.
But basically what we’re seeing is more and more of these loans, at least over the last couple of years, have had fewer of those rules. And that means it’s easier for the borrower to go get money, which is maybe beneficial to them. But what it means for the lender is they have less opportunity to stem off big issues with their borrowers before they get serious. And again, those types of covenant light loans are increasing. Now, what I’ve said so far is kind of theoretical, but we are starting to see this actually play out publicly, right? If you haven’t heard, basically in February 2026, some of this came to a head. It’s not a huge thing. I don’t want to overdramatize it, but there is a big private credit fund called Blue Owl. They had a liquidity crisis. It’s actually pretty interesting because the loans in their portfolio were actually largely performing, but they had promised their investors that they would be able to get money out.
They would get that liquidity that I was talking about at least quarterly. Unlike a bank, these private credit funds, they can set their own rules, right? So they can say, “Hey, you can’t actually just ask for your money every day, but once a quarter, if you want your money out, we’ll give it to you. ” And so they have rules like that. And that’s what Blue Owl had promised was quarterly redemptions, but they actually suspended them back in November, and this started to create more of a panic. It started around this merger that they were proposing. It was going to create a markdown on some of their investments, but basically investors got spooked. They started asking for more and more of their money back, essentially creating a bank run on this individual fund. And then finally, in February of 2026, they basically said, “You know what?
We’re not giving money back right now. We can’t do it. We’re going to cancel our previous agreement.” And this was legal according to them. They were able to do this. But basically now they’re saying, “We’re going to give back money. We’re going to allow redemptions as we see fit.” They’re basically saying the company, Blue Owl, has decided we’re not going to honor these quarterly redemptions that we had originally said we would, and now you kind of just have to wait for your money back if you’re going to get it back at all. And I want to just reiterate here that this didn’t really happen because all of their loans defaulted. They were having a couple of issues, but investors got spooked and it created that second form of problem that we were talking about before, which is psychological. People did not want to keep their money in this fund.
They said, “Hey, if they’re going to slow down redemptions, I want to be the first to get my money out. ” And so they all asked for it at once and that created an issue. Now that is just one bank, but we’re seeing it start to spread. Blackstone, one of the biggest funds in the world, they actually saw a record 8% redemption request in a single quarter in early 2026 that was $3.8 billion of redemptions that were asked for. That’s a record. That’s Blackstone. Black Rock had to activate its 5% redemption limit for the first time ever. People were asking too much and they said, actually in our rules, we can say it only can redeem 5% at a time. They activated that for the first time recently. Then we saw Morgan Stanley restrict redemptions at its private credits fund. So we’re starting to see this spread.
Now, it is not emergency yet, but what I want everyone to remember, the key thing to see here is that the stress that we’re starting to see in private credit, because this is going to matter for what we talk about next, is that it’s actually structural right now. It’s about liquidity, not necessarily about credit. Now there could be credit problems, and personally, I think there probably are more than we know about, but the stress that we are seeing to date is more about liquidity. The loans largely performing, this is a liquidity mismatch. People want their money out and they are not able to get it out. We are essentially having a very small, a very slow motion bank run on private credits. So that’s what’s happening now. But again, to me, it’s kind of starting to smell a little bit fishy. And if it does get worse, it has big implications for the economy.
This stuff really matters. This is a massive market and it also really matters for real estate, not just commercial real estate, residential as well. And we’re going to talk about where private credit and real estate intersect right after this quick break. Stick with us.
Welcome back to On The Market. I’m Dave Meyer. Today we’re talking about the private credit market, what it is, what’s been going on recently, and now I want to turn our attention to where private credit and real estate start to overlap. The main area where we see a big overlap and probably the more obvious area that you might be thinking about is in commercial real estate. Private credit is getting bigger and bigger in commercial real estate. We’re actually seeing that in some segments of the market, like non-agency closings. We’re actually seeing that non-bank lenders are lending more than banks. They’re providing 37% of the capital banks at 31% of the capital. So private credit is a really big part of the commercial real estate market. As commercial real estate has struggled in the last couple of years, people have been increasingly turning to private money either to get bridge loans, to get extensions or to do purchases.
And so these industries are really intricately tied together. Now, as you probably know, there is a lot of issues in commercial real estate right now. And a lot of commercial real estate debt is coming due in the next couple of years. We actually saw last year commercial mortgages. It was about a trillion dollars. They’re expecting about 1.7 trillion more to mature in 2026. That’s actually about 30% of all commercial real estate due in a two-year window. That actually makes sense. People really dramatize that, but because commercial real estate, usually on a three, five, seven year time cycle, you’re always having like 30% of the debt coming due in the next couple of years. That’s always true. So don’t get freaked out about that. But the issue here comes up with refinancing, right? Because if all of these operators, whether it’s retail or office, which is getting smashed or multifamily, which people are saying is now about down 20% off 2022 peaks, if all these operators have to go out and refinance in the next year or two, and there is an issue in private credit where some of that money is not available, it is going to make it harder and harder for people to refinance.
They’re already contending with higher interest rates, right? I think a lot of commercial operators have been kicking the can down the road thinking the Fed would come and save them. We’d have much lower rates than we do right now. I’m recording this sort of towards the end of March and mortgage rates are going up, right? We have fears of inflation due to the war in Iran. Now, if you add a tighter credit market on top of that, then things can get a little bit dicey because only the best assets are going to be able to attract credit, right? Banks are still going to lend to commercial assets that are performing, but if those funds cannot lend because their investors don’t want to give them money, right? Remember that if you are a private credit fund lending out to multifamily operators, you have investors of your own, right?
You have either individual retail investors like you and me or a pension fund or an insurance fund, they’re putting their money into XYZ private credit fund, right? So if XYZ private credit fund is not getting as much money from its investors, or those investors are demanding their money out of the market like it’s happening with BlackRock and Blackstone and Morgan Stanley and Blue Owl, some of the biggest ones in the world, if they have less money to lend out, that’s going to spill into the commercial real estate market because there’s just going to be less money going around into this market and that can create even more additional stress for the commercial market. Remember, real estate is highly dependent on credit. And if any part of the credit market starts to tighten up, we are going to feel it in real estate. And so it is too early.
I am not saying that this is happening just yet, but when I read about these private credit funds starting to get higher redemptions, and if that starts to spread, commercial real estate will feel it. It is going to lead to more distress in the market. It will probably lead to more foreclosures in this market. I am not going to extrapolate and speculate and say how bad it will get because this isn’t happening yet, but this is the main reason why I want everyone to be paying attention to what’s going on in the private credit market because if this starts to spread, if it starts to get worse, if private credit markets start to dry up, or if we start to see delinquencies go up in those kinds of markets, commercial real estate will get hit and so will residential markets. Not in the same way, but a lot of times when we talk about commercial real estate on the show and the risks that are associated there, we make a point to say that the residential market is different, right?
It is not going to be impacted in the same way. And in a way that is still true. I do think that commercial real estate is much more susceptible to issues in private credit than the residential market, but you’ve probably seen the rise of what is known as a DSCR loan. This is called a debt service coverage ratio loan. It’s basically a loan for residential properties that is underwritten similarly to commercial real estate. So it’s basically, it’s underwritten on the strength of the deal, not the borrower’s personal credit worthiness. This is not something where you’re submitting your tax returns and your W2 statements and they’re calculating your DTI. It’s basically, if the property covers a basic mortgage and expense ratio, that’s that debt service coverage ratio, they’ll qualify. And it has become a really popular financing tool for residential real estate investors for good reason.
It’s a good loan. I actually think it’s a smart thing for investors to do if it’s done well. But as of right now, they are largely private credit funds, right? Non-bank lenders are the ones originating DSCR loans. They’re often bundled into sort of non- QM securities and then sold to private credit funds. That’s how it’s done at scale. Sometimes it’s done just individually, right? Private individuals create DSCR loans or 10 investors pool their money together to make a small credit fund. Maybe it’s not securitized, but they are largely private credit. And so again, we don’t know if this is happening, but if we start to see this psychological element take off where fewer and fewer people are putting their money into private credit, or the real issue is if we start to get a run on private credit. Now these companies have ways of protecting against a run, but if faith is lost in the private credit system, we will likely see capital for DSCR loans start to dry up.
Now, that’s not it. That’s just future loans. But I’ve been trying to dig into this. We had Melody Wright on the show recently who was talking about DSCR loans and private credit, and I wanted to dig into this because I was curious if DSCR loans are underperforming. And unfortunately, the reality is that it is really hard to get that data because this is private, is not reported on by the Fed or by the Mortgage Bankers Association or Totality, like all of these big companies that track regular mortgages, mortgage-backed security delinquencies cannot track this stuff. They’re not required to report it. But I think you can just understand sort of intuitively that there probably is some stress here, right? We’ve seen loans that were originating in 2022, 2023, let’s just say in Florida, right? Even if that property hasn’t lost value, it’s probably not operating as profitably, right?
Property taxes, insurance have gone up at a time where rents are flat. And that means these DSCR loans that were at, let’s say 1.25 ratio might now be at 0.9% ratio. That doesn’t mean that people aren’t paying their loans, but it probably makes it harder for them to pay their loans, right? So you can imagine that the delinquency rate might be going up. Also, a lot of DSCR loans were written for short-term rentals, and we all know short-term rental industry has been struggling, and so they are probably struggling to pay those loans. Those DSCR ratios are probably lower than they were. We also started to see DSCR loans with lower and lower standards. Most of the time they require a 1.2% ratio, right? Then it was one. Now you see loans at 0.8. Now you see some, there’s something called a no ratio DSCR loan, which basically means you don’t even need debt service coverage ratio.
It’s just a private loan. Now, these aren’t that common. I am not saying that this is spreading like the subprime crisis, but you were starting to see that the DSCR loan could have some issues. Again, we don’t exactly know, but this is how it could spread into the residential market, right? You can see that if DSCR loans dry up, that can make it harder for people to buy deals. And if there’s distress in the DSCR loan market, that could mean more inventory coming on the market and potentially more foreclosures in the private sector. Again, we don’t know, this is kind of speculation, so I just want to call that out that this isn’t backed by hard data, but Moody’s Analytics, one of the biggest, most reputable analytics, economics, sources in the world, flagged DSCR loan defaults as a potential issue going forward with rental demand softening.
They called that out in specific markets like Austin and Nashville and places in Florida, but other people are paying attention to this. And so I think this is something that you should be paying attention to as well. Now, I know that a lot of what I’ve been saying here can be scary. So I do want to put this all onto perspective about what role private credit plays in the larger real estate ecosystem and how if, again, it is an if, if this starts to get worse, what might happen to the larger market? We’re going to get into that right after this quick break. Stick with us.
Welcome back to On the Market. I’m Dave Meyer. Today we are talking about the private credit market and potential trouble brewing there. Now, again, I just want to reiterate to everyone that we don’t know that this is a full-blown crisis, but it is something I really think that we should be keeping an eye on because of just the sheer size of it. I know that private credit isn’t something that is talked about that much, even in the financial media or on the show, but I kind of want to just put this in perspective for all of us. According to the Mortgage Bankers Association, the total size of the commercial mortgage-backed securities market, so these are like more traditional loans, is about $5 trillion. Right now, the private credit market, just as a reminder, as we talked about before, is about $3 trillion. So it’s smaller, but not that much smaller, right?
If you’re looking in the grand scheme of things, that’s not that small. If you look at the total residential market, it’s estimated to be north of $15 trillion. So just keep that in perspective. Compared to total mortgages in the residential market, it is relatively small, about 20%, but it still matters. The actual comparison that I think is the most interesting here is that when you look at the total size of the subprime mortgage market in 2007, like right at the peak, that was about 1.3 to $1.5 trillion. So that’s a lot smaller, right? If you’re just looking at the total size of the private credit market, it’s about double that of the subprime mortgage market peak. Now, I don’t want people to freak out about that because we need to keep this in perspective as well, because the subprime market was just sort of integrated in that much bigger mortgage backed securities market, right?
In 2007, the sort of mechanism that created all this struggle was that banks were holding mortgage backed securities on their balance sheets, but they were also highly leveraged. They were relying on the short-term repo market to fund these things. And when that froze up, the collapse was really rapid. Now, the difference in private credit is that the risk, at least theoretically, sits with equity investors in funds. It’s not on the bank’s balance sheets. That is at least the theory, but if you dig into it a little more, you see that US banks have lent a lot to private credit funds. Estimates are a couple hundred billion, so that is not as clean of a break. It’s not as clean as a separation between the banks and private credit as some people might want, but I think it’s true. There isn’t this as systemic a risk, at least in the banking crisis, even if private markets go south.
So I think that’s something to remember and take some souls is even if this does get worse, that it might get isolated into just the equity holders. Only investors are going to get hurt. It’s not like the banks are going to get hurt so badly that credit dries up across the entire economy economy and creates this lasting recession like we saw in the financial crisis. There is one thing though that I think makes private credit potentially even more dangerous than the subprime crisis. And I’m not saying in scale, but basically in 2007, this subprime crisis, for those people who are looking, I was not, I was in college at the time, but people who were looking at this, the information is public. Mortgage backed security is traded on public markets. People could see this and you could see prices move in real time and the collapse sort of happened because of that.
With private credit, there just isn’t the same disclosures. We really just don’t know. And that’s sort of what worries me about this is that it could get really bad before it’s really even brought to public attention. Now I think if you look at Wall Street Journal or other places that are reporting on this, I think they are trying to dig into this and I am grateful for that, but that is just something to keep an eye on is that in theory, the banks aren’t tied up. In theory, the losses that could come from private credit, and again, still it could. They would be isolated to equity holders. They’re not highly leveraged, but that’s just in theory. We don’t actually know it’s all private. And so this is why I think it’s so important to keep sort of a hawk eye on these things. It can and will impact real estate if it gets worse.
And we just don’t really have any formal reporting mechanisms to know if and when that is happening. And so this is something that I am going to keep a very close eye on and will report on in the future. I wanted to do this episode to explain to everyone what private credit is and how it interacts with our industry so that when I present more information about this in a few weeks or months and sort of give you updates on this, same way I update you on delinquencies and inventory and all that, I want you all to know what I am talking about. So hopefully that is what’s going on. Now, before we get out of here, I just want to say that I call these things to attention, not because they are predictions. I think this is sort of like the difference between what I try and do and what a lot of influencers do is they say, “The market’s going to crash.
Here’s why.” I try to assess risk and upside, right? And I am just trying to tell you that I see additional risk in the market because of what’s happening in private credit. I am not saying that it is going to be a disaster. I am not saying that there is going to be a run on private credit for sure. In fact, most people who know a lot about this more than me believe that there is going to be some risk. There’s going to be some negative parts of the private credit market, but it will probably be contained. The people who are giving out sloppy, bad loans, these paid in kind, heavy covenant light loans, they’re probably going to take some losses. They might not get the same investment from their LPs. They might need to write down some of these loans and that will have some impact on the market, but most people believe that it will not spread, that it will be contained to those individual funds that made bad loans and it won’t spread to the rest of the market.
If that happens, probably will impact real estate a little bit, but probably won’t be super dramatic. To me, the biggest risk is if you have something like that we’re talking about, combine with some other big economic shock, right? If you see some big macro shock like stagflation, which I think there is risk of, I’ve been talking about that for a year or so, and I think the risk of that is only going up. If you have a deep recession, if you have more black swan events like the invasion of Iran, like if you have more of these things happen at once, people can spook because remember, this is not necessarily only about bad loans, it’s also about psychology. And so that’s the thing we need to really watch for. Is psychology changing at the time when the private credit markets are already a little bit weak?
That’s where I think this could really start to spread. So although no one really fully knows the true quality of the collateral sitting in these private credit funds, we don’t really know how big of the risks there are. It is not yet an emergency. It’s just something to keep an eye on. Hopefully this episode has helped you understand a different part of the financial system that we normally don’t talk about here on the market, and we’ll give you the basis to understand what could happen in our industry in the coming months or years should this industry take a turn for the worse. I will, of course, make sure to update you on this as I get information about that, but until then, I’m Dave Meyer. This is On The Market. Thanks for watching.

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