A Tidal Wave Of Useless "Oh Shit" Moments

"Experts" who dress like Andy Bernard from The Office are now pointing out what we all knew 6 months ago.

While I’ve been warning about private credit since October of last year, publishing it as 1 of 10 sectors I would definitely avoid heading into the new year—other “serious” asset managers, the kind who dress like Andy Bernard from The Office and charge 2-and-20 to rediscover obvious risks six months later than a balding former bartender with tattoos, are just now catching up.

In private credit, it has now become a tidal wave of warnings and “oh shit” moments and, of course, everyone started speaking up only after psychology in the sector has broken and redemptions across the board have bricked and blue screened like a Commodore 64 trying to run Microsoft Flight Simulator 2026 on multiple monitors.

First you had Apollo come out and literally say “all” marks across the entire industry were “wrong”. Then, bond king Jeff Gundlach drew direct parallels to the subprime mortgage market before the 2008 financial crisis and warning that the risks are widely misunderstood. Just days ago, Jamie Dimon also described, in his latest letter, how the area could become a serious problem.

What changed is not the underlying reality, but the tone. And that’s exactly the point Howard Marks is making in his latest memo published April 9, 2026: the risks in private credit didn’t suddenly appear—they were always there. Investors, other than me picking my wedgie and spilling Dorito crumbs and Mountain Dew Baja Blast drops on my keyboard while eating Taco Bell, just weren’t paying attention. Shucks.

Marks is one of the most respected voices in investing, best known as the co-founder of Oaktree Capital Management and for his widely read investment memos that focus on risk, market cycles, and investor psychology. His writings are followed closely by institutional investors and even figures like Warren Buffett, who has publicly praised Marks’ insights for their clarity and consistency.

Marks begins in his letter by placing private credit in historical context. Credit markets have evolved over decades—from high-yield bonds in the 1980s to structured products in the 1990s, to the explosion of “alternative investments” in the 2000s, and finally to the rise of private credit and direct lending after the Global Financial Crisis.

Each phase expanded access to capital and created opportunity. But each also followed a familiar pattern: innovation, enthusiasm, overcapitalization, and eventually, disappointment.

As Marks reminds readers, “Extreme upsurges in the popularity of novel forms of investment – those commonly labeled ‘bubbles’ – invariably have certain features in common.” That framing is essential: he’s not saying private credit is uniquely flawed—he’s saying it’s behaving exactly like every hot financial trend before it.

Direct lending, the centerpiece of today’s private credit boom, followed that script almost perfectly. In its early days, it offered strong returns, tight protections, and attractive yields because there wasn’t enough capital chasing deals. Lenders had the upper hand. But success attracted attention—and attention attracted money.

That influx of capital is where Marks sees the turning point. As more firms entered the space and more money flooded in, competition increased. And when lenders compete, standards fall. Yields compress, protections weaken, and risk quietly builds beneath the surface.

One of Marks’ most important points is that private credit hasn’t been properly stress-tested. Most of the industry was built after 2008, meaning it has largely operated in a benign environment—low rates, steady growth, and supportive markets. Many managers—and many investors—have never experienced what happens when conditions turn.

This creates a dangerous illusion. Private loans appear stable because they don’t trade frequently. Their prices don’t swing day to day like public bonds. But Marks emphasizes that this is not because they are less risky—it’s because the risk isn’t visible. As he puts it bluntly, “Direct loans embody no less credit risk than liquid credit instruments… It just isn’t reflected as readily in prices.”

In fact, that lack of transparency may have made things worse. Investors interpreted smooth returns as safety, which encouraged even more capital to flow in. This, in turn, accelerated the cycle: more money, more competition, weaker deals.

Marks suggests that the industry may have reached a point where too much capital was deployed too quickly and at too low a standard. Some managers, he implies, accepted more money than they could prudently invest, leading them to stretch on terms or borrower quality just to put capital to work.

Now, early signs of stress are appearing. A few high-profile bankruptcies in 2025 caught investors off guard and raised concerns about underwriting quality—and even potential fraud. These weren’t enough to trigger panic, but they cracked the narrative of safety.

At the same time, liquidity issues have started to surface. Investors in certain private credit vehicles, particularly those marketed to individuals, have found that they can’t withdraw their money as easily as expected. Redemption limits, which seemed theoretical in good times, suddenly became very real.

Marks hints at how these cycles tend to end, noting that when excess builds, “the flaws, potential pitfalls, and unfulfillable promises… invariably lead to disillusionment and loss.” It’s not a prediction—it’s a pattern.

Another emerging risk comes from sector exposure. Specifically, software companies. A large share of direct lending has been concentrated in private equity-backed software firms, often acquired at high valuations and financed with significant leverage.

Now, the rise of artificial intelligence is calling some of those assumptions into question. If AI disrupts parts of the software industry, it could weaken business models, reduce valuations, and erode the “equity cushion” that protects lenders.

Marks is careful not to say that widespread credit deterioration has already occurred. In fact, he notes that many companies are still performing adequately. But markets don’t move purely on fundamentals, they move on sentiment. And as I have been writing non-stop over the last two months about psychological sentiment in private credit collapsing, Marks too believes sentiment has begun to shift.

• April 6, 2026 - Barings caps redemption requests after 11.3% withdrawal requests

• April 2, 2026 - Blue Owl hit with “unprecedented” redemption requests

• March 31, 2026 - WSJ reports that software exposure among private credit funds is larger than disclosed

• March 27, 2026 - Cracks in private credit reach UBS Real Estate fund, forced to suspend withdrawals

• March 24, 2026 - Ares restricts withdrawals on its Strategic Income Fund after redemption requests hit 11.6%

• March 23, 2026 - Apollo caps withdrawals on its $25 billion Apollo Debt Solutions vehicle after redemptions hit 11%

• March 19, 2026 - Stone Ridge’s Alternative Lending Risk Premium Fund gates redemptions after overwhelming redemption requests

• March 16, 2026 - Apollo co-president says that “all” marks in parts of the private markets industry are “wrong”

• March 11, 2026 - Morgan Stanley and Cliffwater cap redemptions in $8 billion, and $33 billion funds, respectively

• March 6, 2026 - BlackRock begins limiting withdrawals from its $26 billion HPS Corporate Lending Fund

• March 3, 2026 - Blackstone faces “record” redemptions from its flagship private credit vehicle, investors sought to redeem 7.9% of fund’s $82B in assets

Marks captures this behavioral swing clearly: “in real life things fluctuate between pretty good and not so hot, but in the minds of investors they go from flawless to hopeless.”

Marks also highlights the role of individual investors in this cycle. The recent push to market private credit products to retail and retirement accounts adds another layer of risk. Marks argues these investors may not fully understand the complexities—especially around liquidity and leverage.

And if you ask me, or anyone with 5 brain cells that they can rub together, of course fucking retail doesn’t understand the complexities. This is literally Wall Street just dumping more noxious unintelligible jargon-laden dogshit on mom and pop investors.

Dress it up with glossy brochures and a “private markets” label, and suddenly illiquidity risk and opaque leverage structures are supposed to feel like premium features instead of red flags. The reality is these products are engineered for institutions that can absorb shocks and negotiate terms, not for retirees who might need their money next quarter and are on a fixed income buying bread every week.

But sure, let’s pretend gating withdrawals and marking assets to fantasy valuations is all part of a “diversification strategy”.

Said another way, Marks notes that history shows that when complex, illiquid, and leveraged products are widely distributed to less sophisticated investors, outcomes tend to be poor. Marks draws parallels to past cycles, including the conditions that led to major financial disruptions.

His broader message is not about predicting a crash. It’s about recognizing patterns. Investment manias don’t require fraud or catastrophe, they simply require too much optimism and too little skepticism. And hey, anybody have any ideas where the hell this unlimited spigot of optimism coming from anyways?

And that, in Marks’ view, is what has characterized private credit in recent years. Investors saw strong returns, believed they were low-risk, and piled in—without asking enough hard questions.

As Marks puts it, “the new thing rarely pays off as expected, especially if invested in unskeptically while it’s raging.”

And as Marks is figuring out what way is up, yet another multi-billion dollar private credit fund is in the midst of going tits up. Carlyle’s flagship private credit fund (CTAC) is facing heavy investor withdrawals, with redemption requests hitting about 15.7% of shares—over three times its 5% limit. The $7B fund, heavily exposed to direct lending (41%), is now restricting withdrawals according to the WSJ this week.

And only now are critical questions being asked in this sector that is already under irreversible stress…and by more people than me and my traveling circus freak show of conspiracy theorists and doomsday preppers on my blog (terms of affection).

And as usual, the warnings don’t show up at the start of the cycle, they wander in late, like someone realizing the house is on fire because it’s finally warm enough to notice.

On the bright side, if the “experts” in the industry remain this euphoric and this consistently behind the curve, my tiny little rag here should provide me with excellent job security. Sure, I’m currently batting 0-for-100 on actual apocalypses—but in this field, that still puts me comfortably ahead of the people insisting the smoke is just “seasonal haze.” And to think, all I had to do was actually open my eyes and try and be honest with the investing public. Not Wall Street’s strengths. Go figure.

QTR’s Disclaimer: Please read my full legal disclaimer on my About page here. This post represents my opinions only. In addition, please understand I am an idiot and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning. Contributor posts and aggregated posts have been hand selected by me, have not been fact checked and are the opinions of their authors. They are either submitted to QTR by their author, reprinted under a Creative Commons license with my best effort to uphold what the license asks, or with the permission of the author.

This is not a recommendation to buy or sell any stocks or securities, just my opinions. I often lose money on positions I trade/invest in. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. None of this is a solicitation to buy or sell securities. I may or may not own names I write about and are watching. Sometimes I’m bullish without owning things, sometimes I’m bearish and do own things. Just assume my positions could be exactly the opposite of what you think they are just in case. If I’m long I could quickly be short and vice versa. I won’t update my positions. All positions can change immediately as soon as I publish this, with or without notice and at any point I can be long, short or neutral on any position. You are on your own. Do not make decisions based on my blog. I exist on the fringe. If you see numbers and calculations of any sort, assume they are wrong and double check them. I failed Algebra in 8th grade and topped off my high school math accolades by getting a D- in remedial Calculus my senior year, before becoming an English major in college so I could bullshit my way through things easier.

The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I did my best to be honest about my disclosures but can’t guarantee I am right; I write these posts after a couple beers sometimes. I edit after my posts are published because I’m impatient and lazy, so if you see a typo, check back in a half hour. Also, I just straight up get shit wrong a lot. I mention it twice because it’s that important.