RT mert | helius.dev (@0xMert_)The largest source of systemic risk in crypto is not in cryptobut crypto will suffer the most because it is *the most connected system of value*, meaning most prone to contagionthe biggest risk is the downstream effects of what I will call the Larry Ellison trade:> Be Oracle (cloud company)> Sign 300B GPU deal w OpenAI> Oracle stock goes up> OpenAI raises round> Oracle CEO Larry invests handsome since stock up from the above GPU deal> OpenAI now has the money to pay the above ...

Core Insights - Veteran investor Howard Marks warns of investor complacency and carelessness in the credit market, highlighting recent bankruptcies but refraining from labeling the situation as a systemic issue [1][2]. Group 1: Market Conditions - The recent bankruptcies of First Brands and Tricolor indicate potential issues within the credit market, but Marks does not see these as signs of a broader systemic problem [2]. - Marks emphasizes that defaults are a normal occurrence, suggesting that a few dozen defaults in a year should not be surprising [3]. Group 2: Investor Behavior - Rising markets often lead to increased risk tolerance and carelessness among investors, creating an environment conducive to potential wrongdoing [4]. - During market upswings, negative factors are often overlooked, while downturns tend to exaggerate negatives and downplay positives [5]. - Marks notes that good times foster complacency and aggressive bidding for assets, which can lead to failures in a challenging environment [6].

Core Viewpoint - The tension between large banks and private credit firms is escalating, particularly regarding systemic risks in the US insurance industry due to private financing and regulatory concerns [1][5]. Group 1: Regulatory Concerns - UBS Chairman Colm Kelleher highlighted the "lack of effective regulation" in the insurance sector, suggesting it leads to a "looming systemic risk" as small rating agencies proliferate [1]. - Kelleher compared the current situation to the 2007 subprime crisis, indicating that there is significant rating agency arbitrage occurring in the insurance business [2]. Group 2: Private Capital Response - Apollo CEO Marc Rowan countered Kelleher's claims, asserting that 70% of Athene's assets are rated by major agencies like S&P, Moody's, and Fitch, thus challenging the notion that ratings are the primary concern [3]. - Rowan acknowledged that while Kelleher's concerns about systemic risk are valid, the focus should not solely be on private letter ratings but rather on the movement of assets to jurisdictions like the Cayman Islands, which lack robust regulatory frameworks [4]. Group 3: Industry Dynamics - The insurance industry, a significant institutional investor, has increasingly invested in private credit assets, with private equity firms establishing captive insurance lenders or partnering with large insurance providers [2]. - Both Rowan and Ares' Michael Arougheti agreed that larger players in the industry tend to be more reliable, indicating a preference for established firms in navigating these risks [5].

Group 1: Risks in the US Insurance Industry - UBS Group AG's chairman highlighted risks in the US insurance sector due to weak regulations and a surge in private financing [1][4] - The chairman noted a significant increase in private debt investments by US life insurers, with nearly one-third of their $5.6 trillion in assets allocated to this sector last year, up from 22% a decade ago [3] - Concerns were raised about the potential systemic risks to the banking system stemming from the rapid growth in private debt investments by insurers [3][4] Group 2: Rating Agency Concerns - The chairman pointed out the emergence of rating agency arbitrage in the insurance business, drawing parallels to the subprime crisis of 2007 [2] - Smaller rating agencies are increasingly used by insurers, which may lead to inflated assessments of creditworthiness due to commercial incentives [5] Group 3: Wealth Management Landscape - The chairman criticized Switzerland's declining status as a wealth management hub, facing competition from Hong Kong and Singapore [6] - Hong Kong's private wealth under management is projected to nearly double to $2.6 trillion by 2031, potentially surpassing Switzerland as the largest cross-border center [7] Group 4: UBS's Strategic Moves - UBS is currently integrating Credit Suisse following its acquisition in early 2023 and is negotiating with the Swiss government regarding proposed regulatory changes that could impose up to $26 billion in new capital requirements [8]

Core Insights - The artificial intelligence sector has seen significant financing activities, with U.S. AI companies issuing over $200 billion in bonds this year, driven primarily by major firms like Meta, Alphabet, and Oracle [1][3] - The bond issuance related to AI now accounts for over a quarter of the net supply of corporate debt in the U.S., indicating a shift in market dynamics [3][4] - There are growing concerns regarding the sustainability of capital expenditures and potential systemic risks associated with the massive debt accumulation in the AI sector [3][4] Group 1 - The issuance of bonds by AI companies has reached $1.8 trillion, with Meta planning to issue an additional $30 billion in corporate bonds [1][3] - Meta's latest bond offering saw subscriptions reach approximately $125 billion, setting a record for U.S. corporate bond issuance [3] - The current investment phase in AI is leading to significant cost pressures, with Meta indicating that its capital expenditures for next year will be substantially higher than in 2025 [3] Group 2 - Analysts from Barclays noted that AI bonds have become a significant driver in the U.S. corporate bond market this year, altering previous market dynamics [4] - Concerns have been raised about concentrated risks and the sustainability of capital expenditures due to the long-term nature of the bonds issued by tech companies [4] - Fund managers warn that reliance on capital markets for financing rather than internal cash flows could lead to broader risks, especially if an AI bubble were to burst [4]

Market Risk Assessment - Goldman Sachs CEO 不认为 First Brands Group 和 Tricolor Holdings 的倒闭会在信贷市场引发系统性风险 [1] Leadership Perspective - David Solomon 对 First Brands Group 和 Tricolor Holdings 倒闭后出现的担忧不以为然 [1]

KKR co-founder Henry Kravis tells @flacqua he's not worried about systemic risk in private credit, against warnings that the collapse of Tricolor and First Brands in the US could signal wider trouble https://t.co/cnRClLp4qv https://t.co/2bkEeULqKH ...

There's a lot of talk. Well, globalization is is ending. I don't buy that.I just think it's being rewired. It's being rewired around security that's being rewired around resilience. And obviously regional blocks.Asia is a perfect example of that. We are very big believers in Europe. A lot of a lot of our competitors and other they're rushing off to Asia.We're big in Asia, too, but don't give up on Europe. Europe has a lot to offer. And just this year alone, we've put over $25 billion to work in in Europe.Th ...

crypto will end up being more important than AIwhich means it still has asymmetrical upsidethe reason is that coordinating machines (AI) is downstream of coordinating humans (crypto)(current sentiment was obvious, see below post, it will also bounce back quick)mert | helius.dev (@0xMert_):The largest source of systemic risk in crypto is not in cryptobut crypto will suffer the most because it is *the most connected system of value*, meaning most prone to contagionthe biggest risk is the downstream effects of ...

Brazil’s government sees the recent spate of blowups in the nation’s corporate credit markets as isolated cases that do not pose a systemic risk, sources said https://t.co/WQM3YnOeVw ...