Private Credit Cracks, The AI "Boogeyman" & Why Crypto is for Boomers | The Real Eisman Playbook Episode 49

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Hey, it's Steve Iseman.

So today, we're going to interview two guests,

two old friends, Glenn Shore, Dwight Collins.

I call this depth and breadth.

Glenn is the analyst at Evercore,

who covers the investment banks, asset managers,

alternative asset managers, companies like that.

And Dwight is the head of sales at Autonomous,

which is a boutique firm that specializes in financial companies.

So Glenn has great depth on the companies that he covers.

And Dwight basically covers everything.

So depth and breadth.

And what are we going to talk about today?

We're going to talk about the topics that are on everybody's minds,

which is what in the world is going on in private equity and private credit.

People are literally freaking out.

Some of these stocks like Blue Al or Down 30, 40, 50% this year.

People are wondering what this is going to be.

A terrible credit cycle.

They're worried about the fact that companies like Blue Al and Apollo

might be overexposed to lending to software companies.

Everybody's worried about what's going on with AI and software.

And so we're going to explore that.

We're going to explore what's going on a little bit in payments.

And we're also going to explore some of the sectors that have gotten hurt

from rumors about AI.

Hi, this is Steve Eisman.

And welcome to another edition of The Real Eisman Playbook.

And today we're going to be discussing with two guests,

Glenn Shore of Evercore and Dwight Collins of Autonomous,

about everything that's going on in the financial services sector because

well, there's a lot going on in the financial services sector this day.

So before we just talk, Glenn,

ever tell everybody what you do, Dwight, tell everybody what you do.

Go ahead, Glenn.

Sure. Thanks, Glenn Shore.

I work at Evercore for the last 13 years.

I've been a sales side ounce for 27 years, trying to follow in the

footsteps of the great Steve Eisman.

I cover most capital market-sensitive financial companies.

So from the big banks and the big brokers to the traditional asset managers,

to the trust banks and the private markets asset managers.

Dwight Collins with Autonomous,

go ahead of the US business, also run our sales desk.

I've been an autonomous for going on,

similar to what you just noted, 13 years.

Glenn and I go way back as the UNI Steve.

So always a pleasure to be here.

All right, so let's talk about the most boring aspect of what's going on in the

world. Private equity, private credit.

Let's just do the fact first because not everybody knows.

Tell everybody what happened to Blue Owl last week because private credit has been going

through a period I would say over the last year where people just,

the business has exploded.

It's now 1.8 trillion in total size.

People worried about, you know,

are the loans going to be bad if there's a recession, etc.

But last week there was specific news on Blue Owl that freaked people out.

So why don't you just tell everybody what happened first?

Sure, and I'm sure it was a busy Friday for you.

No doubt, no doubt.

And it takes a little more background than that,

but I'll try not to like go too much history, but go wherever you want to go.

So first, the derivation of this is for fun.

That is about 1% of their total assets.

But the market is taking of weight.

Is this a window into everything private credit?

Because if you look back in September, October, November, there were a lot of headlines

coming across the tape on private credit having issues.

We actually had bank loans.

Some broadly syndicated loans that a couple

turned out to be fraud.

Try color first brands.

Correct.

But those weren't private credit.

No, bank loans.

But the natural reaction was to shoot the private credit stocks.

Anyway, anyway, because there's this notion that some people have,

that private credit, those loans do take on more risk to get more yield.

And that, if and when we start to get into a credit cycle,

that they'll have worse losses.

And so that's the background for some of the moves

that we've seen.

So there's a BDC,

business development corporation, which is public.

Correct.

Which is basically a bond fund, a loan fund.

If it has a stock ticker, but when you peel back the onion,

it's just a bond fund.

Correct.

And so it has a bunch of private loans in it.

And this is run by Blue Wow.

Run by Blue Wow.

And lots of managers have BDCs, both public and private versions.

And this one particular fund has been around for like, over nine years.

And the plan was always, and paying like, let's just call it round numbers,

nine or 10% type yields.

And basically, you know, we haven't had a credit cycle in about 17 years.

So these funds were all performing great, right?

I like, nine, 10th percent yield and no losses,

sounds like I keep about nine or 10 percent of the yield.

Right.

So now we're getting to a tighter period of time,

and people are a little worried,

interest rates come down a little bit,

and people are more concerned about credit for lots of reasons, tariffs,

AI, the economy in general.

So any little wobble that goes on in the credit markets,

people look to, to private creditors, maybe they're the ones that are left holding them back.

And unfortunately, if you have these environment,

where there's really low losses,

and then there are some losses,

it could be a normalization to a still low level.

But that could be an increase in losses of 100 percent.

Correct.

It's on a percentage basis.

Correct.

Or it could be we're on our way from 1 percent to 10 percent losses if you want to be extreme.

Right.

And so without knowing, people are very in the mood to shoot first and figure it out later.

So anyway, so they decided, maybe we will.

We will, yes, thank you.

Decided, let's move, let's merge this little BDC, this, you know,

$1.7 billion fund.

That's 1% of assets.

Let's merge it into the big BDC, which is private.

Now, the problem is they wanted to do that at a discount

because the stock was trading at a discount.

Well, they were going to move 1.7 trillion of a public entity,

billion that sells, whose assets are sort of sensibly at par.

And they were going to move it into a larger entity whose assets are being discounted by 20 percent.

So if the merger went through,

those people who's had the 1.7 billion in assets,

just got hair cut 20 percent because of the merger.

You got the end, the end conclusion is correct,

is that they said, hey, I got great news for you.

We're going to give you $0.80 for the dollar and people are like, what?

And so they're like, just kidding.

And they call that off because it got some really bad press.

It was ill times.

And their defense, they started the process when things were closer to par.

And when things drifted below because of first brands at all,

and public BDCs were trading at $0.80 on the dollar,

they were like, let's just push through on the merger when,

maybe with that of hindsight, they should have called it on.

And they freaked out and they canceled the merger.

So the cancel the merger.

It goes away, things recover, we move on.

That was like late last year.

Correct.

Last week, they decided we have a solution for this OBDC2 thing.

Let's sell off a bunch of the assets and return some money.

Because remember, these funds, you can get, if you redeem,

you can get up to 5% of your money back a quarter, right?

And so they said, all right, they decided, let's sell 35% of the assets.

And they got par for them.

They sold them to three pension plans in one insurance company.

They got, they got their mark 99.7.

So they got their par for them and they said,

we're going to give you, instead of 5%,

we'll give you 30% of your money back.

Right.

We'll accelerate some of that.

And then we'll work out of the rest of the funds.

So we won't give you the 5% redemption anymore.

No more, no more quarterly redemption.

But we just gave you 30% of your money back.

Correct. So we accelerate that.

And these assets pay down.

They have coupons, they have majorities,

short enough duration, two, three, or type loans.

You stick with us.

And over the next, you know,

a couple of years, you'll wind up getting your money back.

They thought they were doing a good thing.

They really did.

And the market, no likey.

The market said, wait, you got par.

You obviously sold the stuff that you can sell.

You sold the good stuff.

I'm going to assume that you can't sell that stuff.

Right.

So now it's a bucket of crap.

I don't want to own it.

And so that what started the,

you know, the amount of money.

And one more wrinkle to it.

Yeah.

There were four buyers.

So there was, um,

owners, which is a Canadian pension.

There's another Canadian pension.

There was CalPERS.

So those are, that's

arm's length transaction.

But the fourth buyer was Kovary Insurance.

And, um,

blue owl controls.

The asset management arm of Kovary Insurance.

So one could argue that some of the loans were basically sold to themselves

at par that, and they set that price.

So, so I tell you what, the press went bonkers on this.

And so did some investors.

And I'm not sure if this was the only entity,

and you didn't have any transparency to pricing,

and there wasn't a third party verification,

I could see people getting upset.

I actually don't, I don't have a big issue with that.

Okay.

They don't, they don't, they don't own the insurance company.

They don't control the insurance company.

They own the insurance company's asset management arm.

They bought, they bought it.

The insurance company's asset management arm.

And so they manage the money.

They have an IMA investment management agreement for, for them.

And I say, so what?

These pension plans are not giving away money.

They're not paying a price that they shouldn't pay for these assets.

They're paying.

They have the three.

Correct.

So they're, they're buying, let's go back to the market.

What they're really unhappy about is they thought they sold the good assets,

and they didn't sell the assets that they couldn't get their mark for.

Right.

Not saying they're bad.

I'm saying the markets, that's what the market was worried about.

Right.

And so I don't think that part of it.

I know it got a lot of press.

I don't, I don't have much of an issue with that.

I don't think, I don't think you can go stuff assets into your entity,

into a regulated entity, and think that's not going to be a problem at some point.

In other words, Apollo, a couple of weeks prior,

bought in ARI, which was their commercial mortgage

rate that was trading at like a 25% discount.

They bought the entire nine billion of assets in,

and they put it in the entire thing into the insurance company,

they own, and it got some press,

and then noticed not one person in the commercial mortgage loan market

said a peep because they thought the assets were worth part,

and they took it in a park.

Okay.

That's why, what are you hearing about all this stuff?

I mean, you must be able to phone all day long about this.

Yeah, I mean, I guess a couple of quick things.

A great logical end.

Yeah, I think it was, it was a 10-year-old fun, right?

And the idea was always to IPO it, merge it, or run it down.

And it's not like there was a performance issue.

They're doing the right thing.

I think it's more the perception issue,

which is acute for AL, and the ALS in general,

because it's all about flows, right?

And AL in particular, very dependent upon retail flows.

I think you kind of have to separate a little bit like,

is there a credit issue versus like, is there just a general flow problem?

And I think that's one of the concerns no doubt is that,

as these headlines, you know, emerge in another one today,

not that it's necessarily related now, but this MFS,

this UK mortgage company.

Oh, what happened?

I don't know what happened there.

Another case, somewhere to try color in first brands,

where it was a fraud,

double pledging of assets.

This is in the UK.

This was in the UK.

So today, it went,

the judge ruled it, and solvent.

Apollo had some exposure,

Jeffries,

wells, some of the headlines had so it had all these stocks.

But I bring it up just in the sense of like,

there's general concern around like, is there more to come?

And I think as it pertains to AL and some of the ults around,

yes, particularly the retail sensitive ones,

just around flows, right?

What is that dynamic?

You know, as the retail investor, like, I don't want to touch this.

Right.

And all of a sudden, I want my money back.

And there's a surge of redemptions and it limits the inflows.

I also found interesting, you know,

some of the statistics out there that is that something like 20%

of private credit is basically to buy out of software companies.

And so the private credit world is over,

is over indexed to software.

And as we all know, every single day,

basically software stocks go down and people are freaking out.

And that's one of the other words.

Yeah, can I add something to that?

I do this myself.

The entire world does this.

We should define when we're talking about private credit,

what we're talking about versus the issues right now

that we've been talking about are direct lending.

Direct lending is a real component of private credit,

but it's one strategy within private credit.

Direct lending is making a direct loan

to a sponsor back to a private equity-backed company.

Right.

To buy it to buy a company.

Correct.

That piece of the business, so if Blue Al or KKR

or Blackstone or whoever was going to buy a software company,

somebody else is going to lend them the money to buy it.

Correct.

By the way,

at an LTV of like 35 percent.

Right.

So they have a lot of equity cushion.

They lend the money for someone that's buying the company

on the equity side.

And that piece of direct lending is over indexed to tech and software in general

because that's where the growth has been for the last five years.

So again, direct lending.

So BDC is in direct lending funds.

That is their business.

And that's why we're talking about this now.

But there's a much bigger pie included in private credit.

There's real estate credit.

There's infrastructure debt.

And there is asset-backed finance that is mostly investment-grade

backed by real assets that are under the private credit for a letter word.

But they're actually pretty good shape.

And they have different characteristics.

It's a good point because one of the things that often comes up

is like, if you're worried about private credit,

you should really worry about private equity.

Ding, ding, ding.

Yeah, because it's a zero.

If you're worried you're going to lose 10 cents on that loan,

the equity is probably a zero.

Well, zero.

Exactly.

And that's private equity's company.

Yeah.

Yes, okay.

Just for the viewers to understand,

the direct lending business is basically KKR.

I go buy a company, whether it's software or infrastructure.

I put up X amount of equity and I borrow the rest.

And maybe I borrow it from Blue Al.

But if the company that I own

can't pay back the loan,

then of course, the equity that I own is worthless.

Yeah.

So if I'm worried about the loan side,

I should also worry about the private equity side

because the equity goes first.

And let me even give a numeric example.

And two different things.

One software and one food company.

Okay.

Friends, beef jerky company that I aspire to launch one day.

So my beef jerky company is pretty straightforward

running the mill company.

I mean, someone goes to buy it

and they think it's worth $150 million, please.

They will put up $100 million of equity

and the lender,

Blue Al, Apollo, whoever, will lend 50.

And the 50 sits in the top of the capital sack,

meaning any money that gets paid out gets paid out to the lender first.

And you need to lose almost all of that equity

before the lender loses a penny.

Got it.

Okay.

Okay.

So Dwight, how much pushback are you?

What are you hearing from your,

like you talk to clients all the time, investors,

like, well, what are you hearing from those people?

People must be hysterical.

I think it's,

you know, Warren Buffett always talked about three buckets

when he thought about investing.

The yes bucket, the no bucket, and the two hard bucket.

And I think for the Alts right now,

it kind of falls into that two hard bucket.

Right.

They are hard.

A lot of moving pieces, obviously,

we talked about to the credit angle.

We talked about the flow angle and the complexity

of the institutions, right?

There's a lot of different,

a lot of different assets that they're invested in,

a lot of different assets they lend into.

If you pull up a, you know, press release of an orange report,

takes a little while to get through.

There's, it's complicated.

It's got a lot of different sources of revenue

and some of those sources of revenue are,

oh, they just all over the place.

And while good companies, I think in this environment

where you're just dealing with this daily kind of inflow of headlines,

it falls into that, you know, kind of Buffett too hard,

kind of category.

Okay.

So you're not finding any clients willing to step up the plate

to buy these stocks, right?

I think towards the end of last year,

there was hope around,

particularly as you thought about kind of a capital market super cycle.

And you looked at the performance of Goldman and Morgan

and a lot of the M&A boutiques.

And you looked at the kind of disconnect versus the Alts.

It was kind of this, whoa, shouldn't they,

particularly the private equity ones,

or the ones more geared towards private equity,

geez, they seem like a good opportunity,

just given the realization kind of pipeline.

I think as we got out of the gates in early 2026

and, you know, the group continued to stumble and became a,

all right, I just, I need to back away.

Okay.

Okay.

All right, let's move on.

But go ahead.

I don't think we should.

Okay, let me do one thing before we move on.

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The stocks trade as if the private markets

aren't a thing anymore.

That no one will put money into these products anymore.

And I do think it's important to think about

direct lending approaching a potential credit cycle.

And I say potential because the losses really aren't there

despite these frauds that we just said.

But even 17 years in credit cycle maybe things slow

even though the banks are telling you they're not.

Right.

Direct lending are bullet maturity meaning

you don't get your money back as a lender

until the maturity of the loan.

So you get a coupon and then hopefully you get

your money back at the end.

People feel less good about that

and in the retail channel.

I could see those flows slowing more than just this quarter.

There are so many other assets,

classes and strategies across private markets

that I do think the stocks are acting

like those things will never be a thing again.

Any either and they're wrong on that.

They're just flat out wrong.

It doesn't mean there couldn't be slowing

in different products but let me just give you a for instance.

86% of companies in the United States

with a hundred million or more of revenue

are private.

They are staying private much longer

than they ever were before

because they can continue to finance

in the private markets or by banks

in ways they couldn't before

and the lending spreads are pretty tight.

So you don't need to go public and deal with it.

It's like us if you can finance yourself

and grow your business without having to add on that cost

and annoyance.

So and then mutual funds have overnight deposits.

Banks have overnight deposits.

These a lot of these funds have long duration capital,

insurance companies, long duration capital,

pension plans, long duration capital,

some wealth funds, long duration capital.

If you're going to finance your data facility

for the next 30 years

or you're going to get government financing

which all have huge deficits

that want to finance their defense budgets,

they must be financed with the help of private markets

because it's long duration.

Correct.

Money.

That's it.

And so there is some baby out

with the bathwater that goes on

picking price at times like this is so impossible.

No one cares.

They're in the too hard bucket like Dwight said.

Right.

But make no mistake about it.

They will rise again.

They will generate a ton of capital flows again.

Go back last thing.

056 and 7 ventages and private equity

stunk for a lot of managers

and people thought it was the end of private equity.

Go read the newspapers.

And then private equity quadrupled since then.

Right.

So direct lending is having this moment

particularly in the wealth channel

where no one wants to touch it and it has outflows.

And we will have some credit losses.

I'm just saying like look at the entire

of what these companies do.

Totally great.

So Dwight, let's turn to you

because there were some headlines last week.

I mean, I was looking at my screen

and I was tapping it

because some of the price moves was so insane.

For certain types of stocks that don't like, for example,

tell us what happened last week about AI

with respect to insurance brokers and wealth management.

Well, it was insane.

It was.

Sucks like that don't move like that.

And obviously the AI boogie man is fully out there.

Yes.

You know, I think for financial investors,

we saw that first hand last year

with how the info services

a company's traded and that's put in that bucket,

you know, LSE,

faxat,

S&P,

Moody's,

you know, names of that ilk.

Where there became real fear around,

you know, disruption and disordination.

That obviously spread significantly in 2026 so far.

Last week there was,

you know, the scare on the insurance brokers.

Oh, tell everybody what that scare was

because I think I actually completely understand.

Yeah, I think open AI had approved.

It's a company I believe at a spain

that had launched some AI insurance app.

And it was approved on open AI's platform.

Okay.

But I think really we're at this stage

where anything kind of AI related

could be even a quick press release

is having, you know,

the significant ripple effects.

I mean, the insurance brokers

were down like 10, 12% that that.

Huge amounts across the board.

Huge to those stocks.

In all stocks,

if they moved 2%, it's big.

Yeah, it's tricky, right?

And you saw it also with some of the retail brokers

where there was another kind of AI-related headline

that hit Schwab,

LPL Financial,

Raymond James,

and the group more broadly.

It's tricky, right?

Because, you know, I think for a lot of us,

you look back at, you know,

the release of,

say for example, the iPhone.

And at the time,

it's like, okay,

this is, you know,

amazing new technology,

you know,

and then it's not until years later,

you realize like, whoa,

there was a lot of disruption

that kind of came with it.

I think, you know,

some estimates are 15 to 25 different business sectors

were disrupted ultimately.

You think about, you know,

Blackberry, you think about the GPS side,

the Garmin's, the Tom Tom's,

you think about, you know,

the rise of Uber and Lyft

and how yellow taxis, you know,

went away, you think about, you know,

what the camera did with the iPhone

and how Kodak essentially disappeared.

So I think there is,

this realization that there's something real here.

But we don't really know what it is.

But we don't know what it is.

And I think using some of the recent examples,

that's why I bring up the iPhone,

this kind of real fear around like,

you know, do I have my head in the sand

in a year from now or two years from now?

Like there is real disruption risks to these businesses.

And I think that's why you kind of have this panic fear.

Now, that being said,

I think as we think about, you know,

insurance brokers or retail brokers,

I mean, largely these AI,

you know, platforms are tools.

They're tools for the broker.

They are tools for that financial advisor.

I mean, insurance brokers sell very complex insurance

without a doubt into the commercial.

And this is not a,

we're not talking about auto insurance,

you know, Aeon, Marshmack,

they service commercial insurers.

I mean, they may have AI tools.

But they're the ones who are going to be selling

the insurance for the big insurance companies.

So I didn't understand those headlines at all.

Yeah, I agree.

I mean, I think again,

you've got to have to separate the fear

from like what, you know,

what could ultimately be the reality.

And I think a lot of these companies talk about like,

yes, we're partnering with AI companies,

you know, we're using a lot of the platforms

to make our brokers,

to make our advisors,

you know, even sharper.

And I think that's the tricky part is around

how much is like business enhancing

versus how much of it is business to shop thing.

I struggle to see the true disruption risk

for the retail brokers and for the insurance brokers.

Or for Visa and MasterCart,

which also were down last week.

Yeah.

You agree on that, Glenn?

Glenn, what do you think?

Well,

I've had my moments during this AI.

Oh, wait.

I don't know, like potential hysteria,

but at least somewhere between awakening and hysteria.

And there are certain moments that do remind me

of the financial crisis.

There are some moments that do remind me of pre-pandemic.

And I'll take a minute to talk about that.

And then there's things that I very much agree with.

So hear me out.

We won't go through the whole story.

But there were two people in my life

that knew exactly what was happening

in the mortgage landscape.

And it was you.

And it was my buddy Andrew Hoyn and John Paulson.

And they were sitting at the table

telling me what's happening.

And I was grasping it.

And I knew it was real,

but I couldn't get the whole thing.

I didn't understand the full leverage.

And sure enough,

things happened and things melted down.

And thankfully, the government was able to step in

and stop the bleeding

because the financial system was melting.

And by the way,

you had the people that were close to the action

telling me.

And I'm capable of understanding.

And I was close,

but I couldn't fully digest it.

In the pandemic,

I remember watching what was going on

through November, December of 19.

And in January,

a couple of days before my kids went back to school,

we had a family dinner with another family.

And I said,

you guys might not be going back to school.

You guys might, we're not,

we might be working from there.

On that same exact day,

I called my son who was in college.

And I told him to get out of a plane to come home

because he said,

if you don't get out of a plane to come, you're not coming home.

So my family and the other family

laughed their butts off at me.

Made fun of me.

They went back to school.

And then four weeks later,

they were home.

And so,

imagine what a biologist in Wuhan

was what they knew in January

before March 12th when all the companies sent us home.

So what I would say is when I'm seeing all this AI stuff

and when we read some of these well-written papers,

go talk to anybody that's an actual software engineer,

anybody that's downloaded,

called and bought themselves an iPad mini

and that has been coding

when they've never coded it in their lives.

And you asked them how they feel about AI,

they sound like the biologists in Wuhan before.

I'll challenge that a little please.

Some of the people that, I mean, I've been reading a lot,

there's no question that AI makes it a lot easier to create software.

What I think people are missing is that

there's a lot more involved

in a company buying a software product

than someone just showing up and say,

here's my software product.

I mean, it's got to be integrated into the company.

It's got to be used.

It's got to be tested.

I think the cost of software is coming down,

but that doesn't necessarily mean

these companies are being disintermediated.

That's a very, very good point.

And actually, that's huge for private credit, by the way,

because when we go back to our capital stack,

and we go back to the duration of these loans,

all they need to do is be paid back at maturity.

And remember, these companies that they're lending to,

this is not venture capital.

They're lending to high margin, high free cash flowing companies

with built-in revenues.

Right.

And you just got to make it to the finish line

and get your money back.

And you get par.

Okay.

But to your point on,

at minimum, my AI feels amazingly

efficiency-producing for lots.

And for the companies that we all cover,

they're going to save a lot of money.

But it also is the flationary.

And it will cause some jobs in places.

And so then that's an impact on the economy.

And that's what you've seen some of these reports.

All right.

Let's move on to Bank M&A.

Where do you stand on Bank M&A?

Hope it happens.

It needs that.

I think for the wait in 30 years.

We have.

I think for the last big M&A cycle,

we think about big juicy premiums.

And this is kind of, you know,

that was going back to the 90s.

Yeah.

Yeah.

Or the early, the early odds.

And so I think for a lot of kind of

grizzled financial or bank investors,

rather, you know, you think about those,

those golden hay days where it's, you know,

that 30% premium,

you break out the coverage map.

And like, oh, it makes total sense.

I think there had been real hope

that we could kind of get back to that environment,

particularly in a much more relaxed regulatory environment,

particularly with capital positions,

in a good place for a lot of the banks.

But so far, it's, you know,

while we've had activity,

it just really hasn't had,

it hasn't been a tsunami.

It hasn't been a tsunami.

And it really hasn't been the juicy premiums

that you would have hoped for.

Oh, I'm not actually hoping so much for the juicy premiums.

I'd rather have like decent prices

where the combined company

is worth a lot more several years from now.

But I'm actually surprised

that there hasn't been more bank eminent.

Why do you think that is?

It's a good question.

I don't know.

You would have thought

given the regulatory environment,

given the fact that,

you know, we're obviously approaching midterms.

You know, you kind of had a good two-year window

to do something.

And you had an environment where,

you know, you had rising equity markets,

management optimism was quite high.

I would have thought you would have seen more.

And important in terms of the

the lack of regulatory environment,

it's the time to close deals.

I mean, that has shrunk considerably.

Right.

You're talking about a much easier post.

As opposed to two years.

Exactly.

By the way, I thought that

the most hysterical conference call last year

was when First Horizon reported third quarter.

Everybody who owns First Horizon is about,

literally 100% of the people

who invest in First Horizon are invested

because I think the company is going to get sold.

And so the CEO gets on and he says,

I'm a buyer.

And everybody goes, you're a buyer.

What do you mean you're a buyer?

You're a seller.

And the stock just got created.

So there's your answer to your question.

Right.

The answer to your question is

everybody likes to be the survivor.

They want to be the buyer.

They want to be the CEO.

They want to be the CEO.

That human component is unfortunately big.

The board's apparently don't have enough teeth

because if you just thought about timing wise,

the economy's good still.

There are some teetering parts

at the bottom of the K curve.

But all I know is it certainly seems like

rates are going to go down, not up.

It certainly seems like credit

can only get worse, not better.

It certainly seems like we have a window

to get deals done that may or may not

with the next administration.

Right.

And yet absolutely should be now.

And yet.

Slow, slow, slow, slow.

It's been actually I've been disappointed.

I mean, you would have thought

30 years of pen, I mean,

America, thank God, finally got sold.

So if America could go, anybody could get sold.

I do think more broadly,

you're going to see some interesting M&A,

not just within the banking sector.

I mean, there's a lot of assets,

good assets that are, you know,

arguably quite cheap at this point.

I think, well, if you think about just what's happened

in the, whether it be the info service space,

you think about, you know,

some of the AI disruption fears

that we just talked about

and how stocks have gotten cremated,

you think about just kind of where the ulcer trading.

Like there's a lot of optionality

that I think exists

and there's a lot of companies

that are sitting on a lot of capital

where if you think about where we're headed,

maybe over the next, you know,

kind of five to 10 years,

it's an interesting time

to look at a lot of different things out there.

And I suspect the bankers are busy

drawing up pretty unique combinations.

Yeah, if you think about it,

and I know Glenn will probably touch upon it,

JPM's company update,

they did earlier this week,

but you think about what Jamie Diamond

talked about in terms of the payment space.

And I forget to say quote,

but it was something like,

we're getting our ass kicked in payments.

JPMorgan is getting kicked in payments.

Yeah, and he brought up a number of different kind of fintechs

of the stripes and the chimes and the pay pals.

But like, I don't know,

he got roughly probably 40 billion

in excess capital, JPMorgan.

Yeah, they're too big to buy a bank,

not too big to buy something else,

whether it's an asset management or in payments.

So your impression from the day?

Oh, yeah, it's abundantly clear.

Ascent, wealth management

are high on the list of things to do.

And believe it or not,

private markets are squarely

in as part of that conversation,

wealth outside the US.

And they painted the picture in very clear words.

They are looking at everything.

They're looking, they're kicking the tires

and looking at every pitch book

that anyone wants to show them.

You could see them buying a payment company.

It's possible.

They would love to.

But they, well, I think it's actually,

I think it's complex to figure out

what fits well within their platform.

Right. By the way,

one thing I think people don't understand

is that when finance company A

buys finance company B

and they have different technology platforms,

one thing we've all learned over the years

is the merger of those two companies

and merging the technology platforms

can be a nightmare.

And so what you're saying is,

JP Morgan might want to buy

a payment company,

but maybe when they dig,

you know, dig under the hood,

they realize that the technology merger

might be too complicated.

And let's remember this company,

the reason why they have the highest

multiple in bank land

is because they're great.

Yes.

They put up the best returns.

They put up organic growth.

He specifically said

to that $40 plus billion of excess capital,

I could over the next four years deploy all of it organically

and produce more organic growth

and just keep doing what we do.

Right.

We look at everything.

I'd love to buy an asset wealth

and I'd love to buy payments,

but it's going to be really good

if we're going to buy it

because we can do it on our own.

We're not going to mess that up

and we've done a few of those

and we want to make sure it's right.

Let's turn to another hot topic.

Crypto.

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Okay. Robin Hood.

Coinbase.

This is not your wallet.

This is your wallet.

This is your wallet?

What do you hear?

Before we even get to like what these stocks have been obliterated.

What are you hearing from your investor?

I think there is science.

There is a little bit of confusion

around where we stand on the Clarity Act,

which is the next step

in terms of regulation of crypto.

So we had the Genius Act pass,

which called late last year,

the hoping that we get the Clarity Act

passed at some point early this year.

Now Coinbase's CEO had pushed back on some of the language

within the right up of the Clarity Act

that sparked our concern.

What can you explain?

The banks are pushing back

because they feel they don't want Coinbase

to be able to pay interest on their accounts.

What is that all about?

Yeah, it has to do exactly right with the yield.

And I think it's kind of going back to the drawing board

in terms of trying to figure out ways around it.

Can I get the caveman version?

Please.

We can do the caveman version.

I know you like the caveman.

I want the caveman version.

And I only know the caveman version.

Please give us the caveman version.

In a thimble, what I know.

If stablecoin

can't pay interest,

it's only so much of a threat for payments and deposits.

Right.

If there's a work around

that you can get rewards,

AKA interest,

Right.

Then it becomes a tighter competition

to bank payments and more importantly deposits.

And most, you know,

29% of deposits in the United States

pay zero interest.

If all of a sudden comes along,

better technology,

better product, real-time settlement.

I can pay interest that has a yield to it.

That has yield to it.

Right.

And the bank's objection is,

you know, we got deposits

and we're federally guaranteed.

And you're going to pay interest

and you're not federally guaranteed.

Why is that kosher?

And that's a risk to the system.

Yeah.

And the banks and the bank regulators

should fight on their behalf for this.

And the crypto industry is like,

free market.

What happened to capitalism?

This is better for the consumer.

This is better for the car.

It's a real conversation.

Okay.

No, I think he sums it up well.

The caveman.

Good caveman.

Good caveman.

I think it's really not deposit.

It's the lobbying groups that are,

you know, kind of fighting this out right now.

Okay.

That is,

derailing.

So I think as long as there

is that uncertainty around

passage in ultimately what it looks like,

it has taken a little bit of the,

you know, certainly a lot of the air

out of the crypto environment right now.

So I have an alternative theory that I had George Noble

on recently.

And he had a thesis about crypto,

which I thought was kind of funny,

but maybe he's right,

is that crypto is no longer cool.

Like all the people who used to, like,

gold is cool again.

Not gold.

Okay.

Prediction markets.

They're all in the prediction markets.

And so all those people who used to trade

crypto religiously are now on, you know,

trading like what President Trump's going to say

in the next hour.

Sure.

And so crypto,

the way he put it was,

crypto is for boomers.

Yeah.

I can't imagine a worse down,

worse put down.

And so maybe that's part of it.

But but crypto acts just horrible.

It does.

And I think, you know,

unfortunately, it is hit Robin Hood hard.

Now Robin Hood, as we all know,

is not purely just crypto.

What percentage of Robin Hood is crypto?

Do you know?

I would say, I don't know the exact percentage.

I would say it's a lot smaller than any of us would think of.

And you can see that in terms of

when they reported most recently,

and they talked about their kind of,

organic net new assets,

I mean, it was, it's still growing mid 20s.

They talked about February being, I think,

26% of them not mistaken.

I mean, the growth is robust.

And when you talk about prediction markets,

I mean, this had been a side project for Robin Hood

last year.

And the matter of weeks they spun it up.

And it's a major line item now for them.

And where's Coinbase and all this?

I mean, crypto is big for Coinbase.

Crypto is big for Coinbase.

And I think when people want to think about the

differential between the two,

it's really around the diversity of the platform.

And obviously, through Robin Hood,

you know, you have a lot.

There's a lot to offer.

There's a lot of innovation.

And I think, you know,

right now, obviously, there's a reluctance

to be involved in both.

And if there is a preference,

it's certainly towards Robin Hood.

Okay.

Well, let's move to payments.

An exciting space.

You had Ken Sahaski out of you.

I know.

He's killed it still.

Yeah, I'll, he talked a little bit about.

I mean, the insanity of the payment space,

I mean,

which we call it a circle,

when when public at 31,

went to 260,

got as low as 50.

And when I reported this week,

it was up 35% that day.

I mean, that's not for the faint of heart.

Well, you, you, you, I mean,

I have a very simple thesis that I,

that I discussed with Ken on, on the podcast,

which is if you're a long-term investor,

yeah, which is what I am.

The only thing you can buy in payments

is Visa and MasterCard.

Because you know that nobody's going to disenfranchise them.

Sure.

And everything else is, as I like to say,

peacock today,

fed us to tomorrow.

And then maybe peacock again.

So that type of stuff you can trade,

you know, hedge funds will, you know,

into the quarter out of the quarter.

But if you're just looking to buy something

and sleep at night,

it's Visa and MasterCard.

And like, don't talk to me about anything else.

I want to where you, where you stand on that.

Yeah, I think for, you know, for a long time,

I mean, Visa and MasterCard have always been thought of as generally,

kind of 1A1B in a portfolio.

Right.

And then it was a matter of kind of what else within the group,

you know, it was interesting.

And for a long period of time,

it was kind of paid, you know, behind Visa MasterCard,

there was PayPal and then there was Block

and then there was Fyserve and then there was maybe FIS.

Right.

You know, throwing a little Audi in.

But as time has gone on,

obviously, we all know what has happened to,

you know, Fyserve.

We know what happened to FIS and to PayPal.

They both killed each other.

They've killed each other.

Right.

They've all killed each other.

And so I think there's real reluctance to try to figure out,

you know, where the trends are moving within payments,

where is kind of a safe bet.

And to kind of bring it back to, you know,

the iPhone discussion I brought up around disruption,

like just look at what Apple pay is doing.

It's killing them.

It is, you know,

and you think about the PayPal,

I mean, PayPal, the majority of their gross profit

is driven through the core button.

Right.

And when you think about the competition

versus the core button,

it's kind of like,

why would I use the core button

when it's just so simple with Apple pay?

I tap, boom, move on.

And they can't be fraud

because it's looking at my face.

Yeah, exactly, exactly.

So I think there is a part of also

where do we move, you know,

going forward in terms of trends, right?

What's the, you know,

you talked a little bit about disruption

is, is Visa Mastercard.

And I think that always exists there,

but I really have a hard time seeing it.

But it's thinking about, you know,

other means of payment

and where that other disruption comes

that being said,

I think there is going to be interesting options

in terms of M&A.

Well, you saw PayPal, people thought,

maybe that's going to be my bad.

You know, there were some headlines

earlier this week

where potentially Stripe was,

was evaluating PayPal some more articles

out today saying that's not going to happen.

There's an activist investor

and now involved in Pfizer.

So I mean, there are some interesting assets

that present an opportunity

for other companies looking

to kind of build out that, that business line.

But, but my view from a,

from a, just a, you know,

an investor perspective.

After Visa Mastercard,

it's like, you need to be able to write dissertation

on some of these companies.

It's so complicated.

And I got better things to do with my life.

So I just, I'll just stick with my visa.

Call me when something happens.

Yeah, and it goes back also a little bit

to the kind of the two hard bucket.

Two hard.

And given how, given how the group is traded,

given the kind of the black box nature

of a lot of these companies,

yeah, the valuation kind of looks appealing

in some cases, but,

yeah, I'll chalk it up to kind of two hard for now.

Right?

Okay.

Let's finish up.

Glenn, what do you want to talk about?

Any final thoughts there?

I find it interesting.

So I got my point in about private markets

not being dead forever.

You did.

You got, you, you're being into death.

Good.

I like to.

I do find it interesting

that on your same screen

that has all your quotes on it,

you can see the private market's getting

pummeled.

The stocks, the stocks.

Right.

You can watch at the top of my screen,

I have HYG and high yield spreads.

They haven't been ever.

Tighter than ever.

Haven't changed at all.

Right.

I have every one of my bank CEOs telling me,

Kami's pretty good.

The consumer's pretty good.

Right.

And I have every brokerage firm saying

capital markets cycle is awesome.

Right.

Can all those things coexist?

Can that really happen?

Can spread high yield public

high yield spreads?

They tight and private markets get pummeled.

Can the deal count are really all get out

with the financial sponsors not participating?

Like it just feels like an unsustainable set of certain things.

It's not actually that dissimilar when,

you know, last year when,

you know, this year's been a crazy year.

But last year we had a bull market,

tech stocks were up and gold is up.

And that debt shouldn't exist at the same time.

It's like two different groups of investors

that don't even know they each other exist.

Sure.

Dwight.

Another fun one for you.

I'll bring up that you always used to love discusses me so far.

So far.

So here's a little tidbit for you.

So far just recently.

Tell people what so far does first.

There are fintech effectively start off

as doing student loan lending largely

more often doing a ton of personal loan origination.

I want to say, you know,

at various points last year kind of putting up 70%

type growth year on year in terms of in terms of long growth

in terms of long growth, in terms of originations.

A lot of it they will put on balance sheet.

A lot of it they'll also put through securization markets.

Right.

So on the securization side.

I'm right about this today.

Go ahead talk talk to me talk to me.

One of the more recent securizations,

the 2025-1 just triggered the cumulative net loss,

the CNL trigger.

So you got it.

So let's calm down for a second to your world.

Please try to translate that into English as much as you can.

Okay, so for this is technical in the ABS markets

when you hit a trigger that is a cumulative net loss.

So I think in this case,

it depends I believe on each securization.

In this case, that trigger is I think 2.6%.

So if losses get cumulative above 2.6%,

so fine no longer gets paid from that securization.

It's the pay down to preserve the principle of the senior trotches.

Because you're protecting the securization investor.

Yeah, right.

This is bad.

It's one data point.

And it also speaks a little bit to Glenn's point around.

You have all these things happening in the environment.

He had also when he looked at the HYG,

the high yield index, like it's not budging.

You know, can that really be?

And then I think in so-fies case, again, just one data point.

But as an ABS investor, you're probably looking at that saying.

That's bad.

That's bad.

That's bad.

And I think I believe it is the first time

that so-fies has triggered a C.

I think it is.

Yeah, okay.

Bigger picture, right?

When you-when you're-all you do is make loans for a living.

You keep making loans and you get capital.

You got to put it to work.

We're 17 years into a credit cycle.

Seven, it's amazing statement.

17 years, no credit cycle.

And as much as everyone has a job,

and we had wage inflation during COVID,

and their spending is high,

and all the banks tell us everything good,

I think we're seeing little phrase

that maybe it's 1% loss is rising to 2% who cares.

It's normalization, bull market for life.

But if you have the ability to asset allocate wherever you want,

raise your hand if you want to buy someone's old loan book.

Raise your hand if you want to buy someone's old private equity book.

Raise your hand if you want to buy

or put new money to work today.

It feels like we're at a moment where the asset

allocates are starting to be like, maybe I just chill out for a little bit.

So I'm going to be very interested to see how the next year plays out

in terms of new capital raising,

where's it goes, how defensive of a stance.

I think people that have the ability are going up in quality,

that is the statement of direct landing on why you're seeing retail start walking away,

because you haven't actually seen bad losses.

They just think they're coming,

and we're seeing a little bit of phrase,

and so people are trying to move first

with before they get caught.

Guys, thank you.

That was great.

Appreciate it.

We'll do this again, of course.

Let me give just some conclusions that I've drawn from interviewing both Glenn and Dwight.

We started out talking about private lending, private credit.

This is Glenn's area of expertise because he covers the companies.

And he thinks at least at this point, the fears are overblown.

He makes a very interesting point.

Glenn points out that despite the fact that the private equity stocks,

like Blue Owl, KKR, and Apollo have gotten the obliterated this year,

and partially obliterated last year,

the credit spreads, which is a sign of how much the fixed income markets think there are problems.

Credit spreads are at all time tights or narrow.

They're showing no fear at all.

So despite all the fears about the overexposure of private credit to software,

at least so far, the fixed income markets are pretty complacent about it themselves.

The other thing Glenn pointed out is that when private equity finances these software type companies

or buyouts, the companies that are being bought out have a lot of equity in the deal.

It's like 75% equity, 25% debt.

So a lot really has to go wrong for the debt to go bad.

I thought that was a very, very interesting point.

We then moved on to Bank M&A, which has been a real topic of mind for the last year.

Dwight pointed out that even though there should be a lot of Bank M&A, there's only been some.

It's been a lot slower than people have hoped, including me.

And it's probably because Bank CEOs still like to be Bank CEOs, and they don't want to sell too

quickly. And then we moved on to payments where we basically came to an old conclusion of mine,

which is the only long-term investments in payments these days is Visa and Massacard.

Everything else is just a trade. So I hope you enjoyed. It was a great interview.

And please send in questions if you have any, which I'll be happy to address.

This podcast is for informational purposes only, and does not constitute investment advice.

A host and guests may hold positions in stocks discussed.

The King's Express are their own and not recommendations.

Please do your own due diligence to consult the license financial advisor before making any investment decisions.

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