The Eternal Promise of Easy Money
Back in November of 2023, I did an interview with Greg Greenberg from InvestmentNews on the topic of private credit.
The resulting article (found here - “Rising rates have advisors sprinting toward private credit”) ended with my note of caution:
No matter how far private credit outpaces other alternative investments in terms of popularity or asset accumulation, Jon Swanburg, president of TSA Wealth Management, is avoiding them altogether. That’s not because of their credit quality today, but because of the direction it may move in the future.
“I worry that issuers are going to continue lowering their lending standards to get the new inflows of cash put to work,” Swanburg said. “Given the limited regulation, the opacity of the underlying loans, and today’s high interest rates, I wouldn’t be surprised to see some sizable blowups in the years ahead.”
For two years, this statement looked pretty dumb. Private credit continued to outperform with low volatility and seemingly minimal risk.
And then, at the end of 2025, the blowups started. We are now a few months later, and the headlines for private credit haven’t gotten any better.
I have no idea what happens next for private credit. It may recover, and today’s fears will have been for nothing. Or it may continue to fall, and funds will collapse under mountains of defaults.
Either way, I’m certain there will eventually be a new hot trade that promises higher returns and less risk. And when your friends and neighbors are getting rich piling into that new trade, my best advice is to ignore the temptation.
Don’t bet on it and don’t bet against it. Just ignore it.
A well-constructed portfolio, built around your actual financial goals and grounded in assets you understand, doesn’t require chasing the trade of the moment. Investors who sidestep the excitement, absorb a little short-term embarrassment for being “too cautious,” and stay focused on the long game tend to arrive at their destination in much better shape than those who couldn’t resist the eternal promise of easy money.
A note on liquidity:
The other issue with the private credit trade is that illiquid investments are being packaged in semi-liquid products for retail investors. Nobody sees this as a problem when times are good. But when times are bad, it causes trouble.
A good rule of thumb is to avoid any investment that promises to be more liquid than its underlying holdings.
Dog updates:
Another day, another opportunity for my wife to bring home a new foster dog. This one is named Puggy, and she is available for adoption through Jenni’s Rescue Ranch.
Thanks !