저자: Kevin · 외국인
요약 보기
UBS의 주식시장 하향과 SocGen의 소비 우려가 제기되며, 프라이빗 크레딧 부실(배당 삭감, NAV 하락, BDC 주가 급락)이 은행·금융주로 전이되고 있다고 주장. 개인저축률 급락으로 소비가 지탱되기 어렵고, 고용 악화 및 PPI 상승으로 금리인하 기대가 후퇴할 수 있어 시장에 약세 요인이라는 입장. 다만 Netflix 매수 등 일부 기회도 언급.
다듬은 글
Coupon expires tonight at meetkevin.com. Well, folks, UBS just downgraded the stock market and SocGen is freaking out about the consumer and private credit is getting worse yet again. I literally said yesterday I didn't want to talk about private credit anymore. I'm tired, literally tired about talking about private credit.
And then guess what happens today? More cockroaches. Literally after I post that video, I get Mid-Cap Financial Investment Corp direct lending fund overseen by Apollo cuts its dividend and writes down its NAV. Okay, is that all the news for private credit? No. KKR will reduce its dividend after an increase in quote troubled loans and lower investment income.
Oh, don't worry, it's only a $13 billion portfolio with loans tied to private equity-backed mid-sized companies. Great. Oh, BlackRock as well? Yep, BlackRock TCP Capital now cutting its dividend. Fantastic. Again, at the same time as UBS is downgrading the stock market and then this is what we saw yesterday, of course.
Apparently around 1.4 bill- 1.3 billion US dollars are missing. Remember yesterday we talked about that multi-billion dollar mortgage lender of the United Kingdom now going bust. Well, apparently half of the money is missing. Well, I guess that's what happens when you double-count money. But anyway, what's going on with this consumer chart?
And forgive me, it's been hard to live stream mostly because of this nagging cough, so I haven't been. Um, this is what happens when you get the flu. Uh, telling you though, you know, I still still wanted to look at this market and go, "Hey, there's some opportunities." Like bought Netflix, you know, a few days back and wow, Netflix was rebounded really nicely after killing that Warner Brothers deal.
Netflix, I think, is now going to see a huge write-up in their EPS as well as a reduction in their PEG ratio, which is great. Strong balance sheet now again as well, not taking on 80 billion in debt. Nobody likes a debt right now. But, take a look at this. This was sent to me. This is a piece by SocGen and it's really interesting because there's been so much talk about private credit.
Uh and and we know there are massive problems there and and we you know, we we understand that when credit titans unfortunately corporate uh spend titans and then you end up getting things like layoffs, you know, uh how about, you know, Block laying off what? 40% of their staff? Jack Dorsey announcing this yesterday.
Now, he says that's because of artificial intelligence's efficiencies. You know, I I think there can be more than one reason. I think it's a, you know, provocative thing to say that um corporate efficiencies due to artificial intelligence are enabling these layoffs. Well, the reality is there are often also corporate liquidity concerns.
And so, uh when you combine corporate liquidity concerns, the need for cash with branding around artificial intelligence, it makes it easy to say, "Yeah, I'll just get rid of folks." Now, what's interesting uh about this also before we look here at the consumer issue is if you look at Block stock, it's up about 13%.
It was up as much as 20% in the after hours yesterday when this announcement was made. But, this is a reward signal to corporate entities, which is really bad for humans. When corporations are seeing stock skyrocket under the idea of layoffs, you know, other corporations start getting ideas, which isn't great.
It's also why you're getting more and more of these calls into private credit and more disaster coming out regarding private credit because if you start looking at, you know, private credit funds and you go to the day chart over here, Blue Owl down another 5%. TCPC BlackRock, look at this, sitting at $4.
That's down 50% from the end of 2023 over there at nine bucks, basically. Look at that, it's falling off a cliff. This is a disaster. All these public funds are are tanking. And the problem with this is as they're tanking, they're starting to take the bank index down as well, which has been at all-time highs and has been one of the elements that has been holding up the S&P 500.
JP Morgan, for example, also coming off those all-time highs. Why? Because there's a connection. Private credit is lent to by the big banks. So, private credit starts losing money and those non-bank intermediaries start losing money, then the banks often start losing money because they're making loans to those intermediaries.
So, what eventually happens is credit titans, corporate spending titans, you get more layoffs, and of course more layoffs lead to lower consumer spending. The problem with this is we don't exactly have any more room for consumer spending to go down. See, consumer spending right here on retail sales numbers and data that we have suggests that corporate, you know, consumer spending keeps going up.
And it has been. I mean, if you look at, you know, coming out of COVID here, it's basically this red line has pretty much been a straight up, right? But something very odd has started happening to the personal income section. And this is actually quite problematic because if you look here over history, personal incomes have gone essentially straight up.
You know, you had this V-shaped recovery over here during COVID. But you're noticing something much more risky right here. This is a flatlining of personal incomes while personal spending is increasing. Now, you might ask yourself, how is that possible? How is it possible for personal spending to keep going up while at the same time incomes are flatlining?
You're creating a wedge, basically. What's happening is the personal savings rate is going down. So, when they're both going up together, you have enough money to keep spending going up and savings at elevated levels, which is a good thing. Problem now is we're starting to see personal savings rates fall again.
Now, they're not quite yet as bad as what we saw in 2006. I'm going to pull up the numbers here. Personal savings rate. Uh but, a lot of people are looking and saying the trend that we're on isn't great. So, if you look at this, it's obviously a very noisy chart for the personal savings rate. And what I just really want to focus your attention on over here, uh is you've seen this recovery through uh February 2024, right?
This looks like a nice recovery from 2022, right? This looks good. But, the problem is if you actually zoom in all the way to where we sit now, we can see that recovery ended and has now started to collapse. Uh and it's collapsing relatively rapidly. In fact, starting on liberation day, we have had not an up day uh in the personal savings rate uh or month, rather, since this was calculated on a monthly basis.
So, that savings rate is compressing. That savings rate, unfortunately, can only compress so far. If we look at history, we've seen it go down to the high twos, typically, mid mid to high twos. So, we still have a little bit of room, but it's the trajectory that I think SocGen is worried about. Now, I want to show you what their concern is.
Of course, I just want to remind you that if you want to take your Bear Trax, remember you can use coupon code bare vacs. We're going to have that expire tonight at 11:59 p.m. We didn't raise the price last week cuz I got sick with flu and it takes like 2 hours to change the price. So, honestly, I apologize for that.
But, if you want to join and take advantage of it, remember ut, forget about that for a moment. Focus on this right here. Sock Gen is arguing that if we take another look, we are seeing an entirely unsupported spending and income trajectory. This, unfortunately, does not bode well. Consumer spending has only been sustained through a collapse in the savings ratio.
Another steep fall in the savings rate is unlikely from these very low levels, underpinning what in my view indicates that we are heading for an AI-related consumer crunch. And now, in this article, they end up comparing a little bit about how we had this inflationary productivity in 1999. Uh and the argument that they make is this may not be underpinned by that kind of inflation.
Uh instead, we might end up seeing real incomes hit a brick wall. And in that case, consumption will be zero or rise on a precautionary basis, which could cause overall consumption to fall. And unfortunately, the one thing still holding up the economy, of course, artificial intelligence cap ex, but that represents, you know, a few percentage points maybe of the overall economy.
It's the consumer. That consumer rolls over, this is where they get really concerned. Uh and so, they indicate there that I He writes, "I tend to side with Warsh on this one, at least in the near term." Essentially, this argument is we probably need to cut rates sooner rather than later to support the consumer and the labor market.
But, this is where we have problems. This morning, we had producer price numbers that were really freaking hot. Talked about those in depth this morning in the Alpha report when we broke them down. But, what we noticed this morning is that producer prices mostly came in substantially hotter because of trade.
If we excluded trade, we came in at 0.3%, which was at expectations. But, with trade, we came in at 0.8%, which wasn't great. So, even though red flags are starting to get signaled everywhere now. Private credit, banking sector starting to see downward pressure, consumer spending basically only subsisting off of a decline in savings.
There's only so much of a well that you could really grab into there. What you really need, according to SocGen, is rate cuts. And the market, in fairness, is still pricing in two rate cuts for this year. Under a Kevin Warsh, assuming he has a way of getting approved. The problem is, when you have PPI numbers like you did this morning, you really can't convince the board to cut rates.
So, you're really in a crappy position. If you cut rates, you end up stoking inflation potentially. If you don't cut rates, you continue to walk into the credit tightness bomb that we're walking into, the labor bomb that we're walking into, and unfortunately, the consumption bomb that we're walking into.
Now, next week, we do get some additional data. We get ADP jobs data on Wednesday. We get Challenger jobs data on Thursday, which will be like layoffs and that. And then BLS jobs on Friday. So, a week from today, we'll have a lot more color in the way of is the economy actually going to support rate cuts?
If we get another hot jobs report, the answer to that is probably no. And then we have to unprice rate cuts that are currently still priced in. If we look at the CME watch group uh for the Federal Reserve rate trajectories, we can see that the next Fed decision is in 19 days, and we're currently expecting a 96% chance of no movement.
But, if we go out to December, we can actually see that right now we are pricing in that we are going to get from 3.5 to a midpoint of three by the end of the year, which implies two additional rate cuts. We can see that we're left skewed here, suggesting markets are pricing in more than two rate cuts, which seems hard given the January jobs numbers that we had, and of course the inflation numbers that we just got this morning.
Even though we're seeing private credit problems. Look at this. Here was another one. Private credit firm Invictus calls investors to manage the exodus risk. This is exactly what they do before they start gating withdrawals and redemptions. There's a reason why these private credit funds are falling off a cliff.
Uh I made a little um chart actually over here. Private credit. Uh there we go. So, just so I can kind of keep track of We look at these. The KWEB index down 5.2% BlackRock down nine almost 6% again on Blue Owl. I think we're probably knocking on the door of lows here. Uh no, our lows were 3 days ago at $10.08, but we're coming right back down to there.
This is remarkable. And this comes after the OpenAI deal was announced. So, that OpenAI deal was announced with strings attached. You know, Amazon's $50 million is only going to be $15 million up front following $35 million with strings attached. So, liquidity is really tightening everywhere, and unfortunately, there's no other way to slice it.
That is bearish for the market. Now, if you want more of vin.com. In the meantime, I wish you all a wonderful weekend. Use that coupon before it expires, and we'll see you Kevin. Always great to get your take.
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