Private credit crisis: the AI funding gap Goldman warns about

0:00Goldman Sachs, probably the most respected investment bank in the world, just dropped a warning that should terrify every single retail investor, certainly the ones in America. And what they're saying, it's not about the stocks, it's about the financial plumbing that's quietly breaking down underneath this AI revolution we're in the midst of. There's a $1.5 trillion funding gap, but that's not just it. The people who are supposed to fill that gap, they are collapsing.

0:31So in the next few minutes, I'm going to show you exactly what Goldman insiders are seeing because this is not being shared with you. Goldman shares this with their institutional clients, the guys with billions of dollars who well need a leg up clearly, whereas you and me are left in the lurch and left in the dark. Now, I read this information because I've got this guy here, Albert, and Winston back there. They got great connections to Goldman Sachs research and I believe that you deserve the same level of information that institutional investors have access to because right now your retirement is at risk and most importantly you need to learn how to protect yourself and potentially profit from what's coming. This is not a doom and gloom video in any way, shape or form. I want to show you the opportunity.

1:17If you're wondering who the heck I am, my name is Felix Prehn. Winston back there. This is Albert. I'm an ex-investment banker. These guys just hang about and make us all feel better. And I've seen how Wall Street really works from the inside. And I founded the GOAT Academy where we've taught over 20,000 students so far. I've co-founded TradeVision.io where we give you access to the best data and news. And our mission here is very simple. Give every investor the same information that Wall Street uses to make money and explain in a way that actually makes sense, which is the important part.

1:52Now, what I'm about to share with you, Wall Street probably would like it that you don't understand it because when you're confused, it's easier for them to make money. And this is not something that you're going to figure out on your own. It's just not going to happen. Even these two black brains back there, they're probably not going to figure this out because it is just not intuitive.

2:09So, here's what happened. On November 19th this year, literally a day ago, probably few hours ago the time you're watching this, the head of Goldman Sachs's Delta One desk, a guy named Rich Privorotsky, he put out a note that should have made headlines, but it didn't because most people don't understand what Delta One is, and they definitely don't understand what he was warning about.

2:36So, let me explain this. The Delta One desk at Goldman Sachs, these are the people who see real-time market flows. They trade derivatives, structured products. They see where the smart money is moving before anybody else does. And when the head of that desk issues a public warning, well, public to his customers, it's like a fire alarm. And you don't just stop to ask questions. You actually just pay attention.

3:01And here's what he said in a quote. And I've got the quote on the screen here. And you can see why mainstream media doesn't understand it. It says, "While we're all laser focused on Oracle, CDS's," again, nobody knows what that means, "Nvidia, maybe what we should have been watching was OWL and COF." Clear as mud, right?

3:23So if you're like most people, you're thinking, "Felix, what the hell does that mean?" Well, let me translate. Oracle, well, that is Oracle the company, data centres. Nvidia, well, you know what Nvidia is, and everyone's watching these two stocks. They're the sexy stocks right now. They're the ones making the headlines. They're the ones that everyone's talking about. But OWL and COF, what the hell is that? Well, OWL is a company called Blue Owl. COF is Capital One. These are private credit companies, consumer finance companies. And according to Goldman, we should be terrified about these stocks.

4:05Why? Because while everyone's watching the penthouse party with AI stocks, the foundation of the building is cracking. And when that foundation goes, you remember 2008, everything else comes down with it.

4:21Now, before I depress you, I want to show you that on a miserable day like yesterday. Yesterday, the stock market looked like this. So, heat map here on TradeVision. You can get a free trial of TradeVision by the way. There's a link down below. And then if I look at one of my accounts here, say swap my watchlist, you can see the stocks I hold. And what do you see? Well, you see green numbers. Not huge green numbers. Well, actually there's one 70% up. That's quite a big green number. That's actually up a lot more. We did a video on that yesterday.

4:55And what I'm showing you is that on a miserable day where Nvidia's down, Microsoft's down, Amazon's down, Tesla's down, Palantir's down, AMD is down, CrowdStrike, everything is down. Well, not quite everything. And how am I in these stocks and not in some of the ones that are down a lot? Not because I'm cleverer than you. It's because I have a strategy. I have a strategy that I nicked off Wall Street basically. My old boss taught me some of it. My mentors taught me the rest of it. And they all had something in common. They all work for investment banks and hedge funds.

5:26And it's a strategy that retail investors don't really understand. And I call it very grandly, very simply really, I call it the Wall Street Protocol because that's really all it is because Wall Street literally has a protocol and essentially what we do is we follow the money. Now I'd love to teach that to you. Can't do it in this video because it would make this video insanely long.

5:49But what I will do, I will run a live training for you on Saturday and there'll be a link down below this video, felixprehn.org/training. And I'm going to crack that into your brains so that you can have beautiful looking portfolios with some big winners even on a day where everybody else is crying about the stock market because there is always money to be made in the stock market. That's my humble opinion. So check that out and then obviously get yourself a TradeVision trial as well because it's the best thing since sliced bread. If you want to be informed of what's going on out there, you want to get the news that actually matters, then this is your new friend.

6:29But let's go a little deeper and if you got no attention span for this sort of thing because it's a bit complicated, well, there's a free workbook as well. There's a link down below to that as well. And that'll help you understand this and help you explain it to somebody else.

6:44So, first of all, Blue Owl Capital, it's one of the biggest players in private credit. And they did something that should have, they blocked investors from pulling their money out of a $1.8 billion fund. So, you want your money back. They say, "Sorry, you can't have your money back until next year." The really scary part is that when that fund finally allows investors to get their money back, they're probably going to lose about 20% of their money. Just like gone, poof, up in smoke.

7:14Because the entire private credit sector is down somewhere between 6 to 9% this year. I've seen some reports that say it might be minus 22% but I'm looking more at 6 to 9. I don't mean to, still terrible, but I don't need to exaggerate things. It's scary enough.

7:31And while private credit is tanking, consumer finance is also showing cracks. The American consumer is literally drowning in debt and defaults are massive. Last year already they were up 34%. Those are write-offs. We're seeing charge-off rates which basically means stuff that's never going to get paid hitting almost 5% here. That's concerning because that's a sign that regular Americans are struggling to pay their bills.

8:03And maybe you're thinking, Felix, okay, that sucks, but I don't really own these credit card companies or private finance, so why should I care? Well, here's the connection to AI stocks. And by the way, auto loan defaults are also terrible. AI will only work, will only change the world, and only make loads of money for the guys winning, your Googles, your Metas, your Microsofts, if the AI infrastructure gets built out. Now that's going to take $2.9 trillion just by 2028.

8:37Now the Microsofts, Googles, Amazon, Metas can come up with $1.4 trillion of that. We have a gap of $1.5 trillion that they need to borrow. Where are they going to borrow that? Well, private credit is going to fund a huge part of that. Maybe a bit of bonds, a bit of other markets, a bit of government, but private credit is meant to finance this.

9:04Now, this is not some rumour. This is what every bank in the world agrees on. These numbers are just factually accepted by everybody. So, do you see the problem? The biggest chunk to fund this infrastructure is coming from the very people who are struggling and Goldman Sachs people are smart enough to connect the gap and are going, guys, there just isn't enough money out there.

9:31So it's like this. Imagine building a house. The AI boom is like the fancy penthouse everybody wants to live in at the top but that penthouse sits on a foundation and that foundation is credit, private credit. Now imagine that foundation is cracking. Imagine it's showing stress cracks. Imagine the engineers are saying, "Hey, we got a problem here." That's where we are right now. Goldman Sachs are your engineers.

9:56So, everyone's looking at the penthouse admiring the view, talking about how amazing it is. But the foundation is breaking. And here's the really crazy part. This isn't speculation. This isn't me making up stuff. Meta, you know Meta, Facebook. They literally just secured $29 billion in a deal to borrow money to finance the data

10:19Centres. Where do they get the money from? Private credit. Private credit is the thing that is under stress. It is like what we saw in 2008. So the tech companies are already tapping this fund. They're dependent on these guys already and this sector is under stress.

10:38Now I'm not saying the AI revolution isn't real. I'm not saying AI isn't going to change the world. It is. But what I'm saying is that the funding for that revolution has got some serious problems. And if the funding dries up, the whole thing slows down or it stops.

10:53So you can have the best business idea in the world, but you can't get funding, you can't execute. You can't get compute power. Your software, well, where is it going to run? Where you going to get the money to build the data centres? Where you going to get the money to buy the chips? Where you going to get the money to build the infrastructure?

11:10Well, could be revolutionary your idea, but how revolutionary is it going to be if you can't execute? That's what Goldman Sachs is warning about. They're saying, hey, everyone's watching the AI stocks, but the real story is the funding mechanism, and that mechanism is breaking. And this isn't sexy, I get it. This isn't going to get a gazillion views, I get it. But those of you who've got the patience and the understanding of this, you're in a better position than everybody else to make decisions because you need to always understand the weakest link.

11:40When the weakest link breaks, what happens to the rest of the chain? So, what's the outcome here? Well, Goldman CEO, literally the CEO, not some lowly analyst, he's saying prepare for a correction. He's saying we're going to go down 10 to 20%.

11:57Now, if the S&P goes down 10 to 20%, you know what happens to your tech stocks? They go down a lot more. I did a video on that the other day about the concentration of the S&P. Now, he's saying it isn't going to happen tomorrow. He doesn't know exactly when. He's thinking late 26.

12:13Maybe right, maybe not. But David Solomon is someone you might want to pay attention to. And it really is all about this AI frenzy. And it is about the risk of basically not enough money out there.

12:26And then Goldman Sachs really tries to cheer us up and they say, look, we think the stock market over the next 10 years it's going to give us maybe 6.5%. Maybe just 3%. We think that stocks will underperform bonds. Do you understand bonds? Put it in the comments if you do. Nobody does really. Let's be honest about it. It's a boring instrument that's been out of fashion for a really long time.

12:51Why has it been out of fashion for a really long time? Because we were living in a 0% interest rate world. Now, we're not living in that world anymore, and it doesn't look like it's going to come back any time.

13:01So, over the last 10 years, we got 13% per year in the stock market. The stock market has been very good to us. We get a lot less. Well, what do you need to do? Well, you could be in bonds if you understand them or you could maybe be in stocks that perform regardless of the market. Look at some of these guys here. I'm not promising returns. Obviously, I'm just saying there are stocks that are doing well on days where everybody else is crying.

13:30Now, you might then say, well, isn't the government going to bail us out? Yeah, probably. They're going to bail out private credit if it cracks, like they bailed out the banks in 2008 and so on. But it'll happen once the stress and the pain in the market is so big that we can't bear it anymore. So they're going to do it after this stuff breaks.

13:54Right now you hear warning signs. Next you're going to get some pain in the market. You're going to lose some money and then you're going to get the bailout. And the problem is that retail usually bottles out here and then the bailout is just for the guys on Wall Street. So shareholders did not get bailed out in 2008. Banks got bailed out.

14:18So you want to change your position before the crisis. You want to actually buy during the pain and you want to benefit from the bailout. That's basically 1, 2, 3. Now that's a little bit complicated, I get that. That's probably one of the reasons you want to take your learning to the next level. Join me on Saturday and we walk through that in a bit more detail.

14:38How do we protect ourselves right now? Well, don't be overexposed to AI hype stocks. You probably aren't too much exposed to private credit, I would imagine, right now. Consumer finance is also something we might want to be careful of. And then we might want to be in some defensive sectors. We might want to have some cash. We might want to have some quality bonds. We might want to have some quality dividend stocks.

15:01Out with a friend who's a pretty well-off individual and he was like, we're 60% in bonds right now. I'm like, wow, that's quite a lot, why is that? He said, well, he's got a really good private banker and they're saying they're waiting for the correction and then they're going to sell all the bonds and the correction of the profit and then they're going to buy stocks. That's what they're waiting for. That's what the smart money is doing.

15:23I'm not telling you to do that but I'm just saying that's what they're doing. Why are they doing that? Because they got the advanced warning from people like Goldman. They're giving you warnings to prepare. Not to you. They're giving it to their Wall Street chums. I'm sharing it with you so you're not left out.

15:40Now, if you bought bank stocks during the 2009 collapse, you made 10x returns. I didn't buy bank stocks back then. I bought bank debt back then. You did tremendously well. Why? Mentors got insiders.

15:55In 2020, if you bought quality stocks at those 30 to 40% discounts, you doubled or tripled your money. What about now? Well, you want to prepare so you can buy during the panic. You want to be positioned for the next cycle, but you also don't want to be entirely in cash because inflation is going to have you.

16:14My goal here is not to scare the bejesus out of you. My goal here is to show you this is a genuine warning from the smartest minds on Wall Street. And I appreciate most people aren't prepared for what's coming. So there are levels to this, how you prepare yourself. I've given you access to some on a higher level, but if you want to dive deeper and you want to really understand how do we position ourselves in any market, how do we make money if the market keeps going down, how do we make money if the market rebounds, then come and join me on Saturday live, unadulterated.

16:47Phoenixfriends.org/training. Sign up. It's free. Make sure you're on time because we do fill up. And don't ignore the warning. Don't just say, oh, it'll be fine. That's what people always said. That's what people said in 2007. That's what people said in 1999. It didn't turn out that way for a lot of people. And then those people had to work years longer often or cut back their retirements to a level they didn't really want.

17:11But also, don't panic. Don't watch the doom and gloom all day long. It doesn't really help. Watch stuff that actually teaches you things. Watch stuff that elevates your skill level. To me, that's what this is all about.

17:21You got some value out of this. Go and grab yourself your free seat for the live training. And secondly, get yourself some good news. And we put out on Trade Vision only the news that moves the market.

17:34If you want to see the key news here, literally the key stuff on the big S&P stocks, or on the big NASDAQ stocks or on any one of your watch lists. So, say if I look up my watch list and I just want to see the news that impact what I'm holding, like I hold Kroger and Johnson and Johnson right now. So I can now see what's going on with those stocks. I can just see that. I can also see, well, how do those guys perform.

18:00This was that portfolio yesterday. Now there's a little one winner down here. That was actually the really good one. VRA up 17%. But that's a tiny stock. So let's make that mono size. So here you go. You can see that portfolio. So now I've got my portfolio. I see how it's performing. I've got all the news for that portfolio live and I can get live notifications for those stocks.

18:20I just toggle on my mobile alerts. You see that here? Just toggle that thing on there and then I'm going to get them on the real thing and therefore I will be the best informed investor out there and I'll see the stuff as it happens when it happens. It looks just like that. You see that? That's how it pops up. Not for every stock in the world, only for the stocks that I select, only for the stocks that I care about, only for the important stocks to me. So, you can get that at phoenix.org/tradevision.

18:47And I wish you a fruitful week ahead. All the best. Remember when I told you about CTKB stock on November 14th? Well, that stock rallied an entire 24% in just 2 trading days. Now, I'm not promising that will happen.