💰 The Cockroach Problem On Wall Street

OUR PARTNER: LONGVIEW TAX

A comprehensive guide for addressing the tax talent crisis

A labor shortage in tax is driving the need for a new skill set: one that blends technical tax knowledge with digital fluency.

Automation, AI and data-driven insights now define the role of tax professionals.

This new era of tax is not simply about adopting new tools, it’s about reshaping the skill set and mindset required to thrive in this field. Check out this guide for actionable insights into how to cultivate these skills with your team. See how advanced technologies can help bridge the tax tech gap to increase efficiency, ensure compliance, and drive better decision-making.

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THE MAIN EVENT
The Cockroach Problem On Wall Street 🪳

For the last decade, private credit has been one of Wall Street’s hottest trades.

Now it’s starting to wobble.

Lately, investors have been rushing to pull money out of large private-credit funds. One $33 billion fund run by Cliffwater saw redemption requests for 14% of its assets in a single quarter, forcing the firm to limit withdrawals.

That doesn’t mean the system is collapsing. But it does raise some important questions:

1. What exactly is private credit?

2. Why are people suddenly nervous about it?

What Is Private Credit?

At its simplest, private credit is lending done outside traditional banks.

Instead of going to J.P. Morgan or issuing bonds, companies borrow directly from investment firms like Apollo, Blackstone, KKR, Ares, and Blue Owl.

These loans are:

• Private: Not traded on public markets

• Higher yielding: Often paying 8-12% interest

• Less regulated than traditional bank loans

The typical players look like this:

Investors:

• Pension funds

• Insurance companies

• Wealthy individuals

• Retail investors via new funds

Borrowers:

• Mid-sized companies

• Private equity portfolio companies

• High-growth tech and software firms

The pitch was simple: banks pulled back on lending after the financial crisis, leaving a huge gap that private funds happily filled.

Why It Became So Popular

Private credit exploded for three reasons:

1️⃣ Higher yields

With interest rates near zero for years, investors flocked to anything offering double-digit returns.

2️⃣ The software boom

Many loans went to SaaS companies with recurring subscription revenue.

3️⃣ The “sticky revenue” story

Software subscriptions were viewed as extremely dependable. In fact, lenders got so comfortable that many loans were structured around annual recurring revenue (ARR) rather than actual profits.

The whole system worked beautifully… until recently.

What’s Going Wrong?

Several cracks are appearing at once.

1️⃣ AI is shaking the software thesis

For years, lenders believed software revenue was incredibly stable. Now that assumption is being questioned.

AI tools are making it easier and cheaper to build software internally or switch providers. That creates three problems:

• Leaner companies may buy fewer software seats

• New competitors can launch faster, fragmenting the market

• Pricing power weakens

If software becomes more commoditized, those once-reliable cash flows look less certain.

2️⃣ Some loans are getting marked down

Banks are beginning to cut the estimated value of certain loans, especially those tied to software companies.

If a loan once valued at $100 is suddenly marked at $85, it can trigger collateral calls or reduce lending capacity for funds.

3️⃣ Investors are asking for their money back

Large funds from firms like BlackRock, Blackstone, and Morgan Stanley have had to cap withdrawals because too many investors tried to exit at once.

Unlike mutual funds, these vehicles often allow only 5-8% withdrawals per quarter. So when redemption requests exceed that limit, investors get stuck waiting.

Why Wall Street Is Paying Attention

J.P. Morgan CEO Jamie Dimon has been warning about the sector for months. His concern isn’t one specific deal. It’s the pattern.

A few high-profile credit blowups have already appeared, including a subprime auto lender and a heavily leveraged auto-parts supplier. The losses themselves were manageable, but they revealed sloppy underwriting and aggressive lending.

Dimon’s broader point is that credit problems tend to show up in clusters. In his words, “when you see one cockroach, there are usually more.”

After a 14-year credit boom fueled by cheap money, lenders across the industry are now asking the same question: Where else might risk be hiding?

Banks are already responding by tightening lending and reducing exposure to some private-credit funds.

The Bottom Line

Private credit itself isn’t collapsing, as most loans are still performing.

But the industry has grown to nearly $2 trillion, and it increasingly relies on retail investors for funding.

That matters because retail capital tends to be far more reactive than pension funds or insurers. When headlines turn negative, withdrawals can accelerate quickly.

For now, the situation looks more like a slow stress test than a full-blown crisis.

But in credit markets, small cracks are worth watching.

MARKET MOOD
Oil Roars, Stocks Slip, Yields Climb 🛢️

Winners

Nebius ($NBIS) - Market Cap: $27.3B (Week-to-Date: +20.9%)

Nebius ripped higher after Nvidia invested $2B and basically stamped it with a giant “future winner” label. The deal gives Nebius early access to Nvidia’s next-gen systems and helps it build more than 5 gigawatts of AI computing capacity by 2030. When Nvidia blesses a partner like that, the market tends to reward it.

Mosaic Company ($MOS) - Market Cap: $10.0B (Week-to-Date: +19.2%)

Mosaic got a lift from both geopolitics and policy this week. Fertilizer prices jumped due to shipping delays in the Strait of Hormuz. With planting season approaching, even small supply hiccups can move the market, benefiting producers like Mosaic. The company also announced a rare earths partnership in Brazil, giving it exposure to minerals the U.S. wants sourced outside of China.

Oracle ($ORCL) - Market Cap: $457.4B (Week-to-Date: +4.1%)

Oracle did what Wall Street wanted: beat earnings, raised the big-picture outlook, and reminded everyone that its AI cloud business is still booming. While investors have been nervous about AI-related capex, Oracle showed demand is still real as its backlog swelled to a monster $553B. Turns out a half-trillion in future business makes it easier to look past massive data-center spending.

Losers

Campbell’s ($CPB) – Market Cap: $6.5B (Week-to-Date: -16.1%)

Campbell’s got hit after missing earnings, cutting guidance, and notifying investors that “defensive” does not always mean safe. Sales fell 5%, adjusted earnings dropped 31%, and analysts turned colder. Consumers are trading down to store brands, GLP-1 drugs are changing grocery habits, and old-school packaged food names like Campbell’s and General Mills are starting to look out of step.

Ares Management ($ARES) – Market Cap: $31.8B (Week-to-Date: -12.3%)

Ares got dragged down by private credit panic, even though the headlines were mostly about other firms. J.P. Morgan marked down some private credit loans, and Morgan Stanley capped withdrawals in one of its funds. That spooked investors across the space, sending stocks like Blue Owl, KKR, Carlyle, BlackRock, and Ares lower together.

OUR PARTNER: LONGVIEW TAX

Actionable “how-to’s” for bridging the tax tech gap

One of the biggest challenges facing tax leaders is the shrinking pool of qualified talent.

This guide explores how you can address the growing tax talent crisis through digital transformation, automation, and the integration of AI.

Download the guide

CHART OF THE WEEK
Inflation Could Make A Comeback 😬

After a huge stimulus-fueled spike that forced the Fed to jack up rates, inflation has basically plateaued. Core inflation, which strips out the more erratic food and energy categories, is currently about 0.1-0.2 points higher than the graph above.

That puts inflation in the 2.5% to 3% range, which is still above the Fed’s 2% target. The gap is small, but it’s telling:

• Inflation has been stable since 2024. It’s tame, but not defeated.

• Tariffs didn’t lead to a major inflation spike like many feared (or fearmongered).

• Rate cuts haven’t re-ignited inflation, at least not yet. (They can take 6-18 months to work through the system fully.)

The main risk is that oil changes the outlook. WTI closed at nearly $97/barrel yesterday, and according to Apollo, here’s what ~$100 oil would do to the U.S. economy:

• Headline inflation rises by +0.7 percentage points

• Core inflation rises by +0.1 percentage points, since oil is an input cost across many goods and services

• Unemployment rises by +0.1 percentage points

• Real GDP falls by -0.1 percentage points

Even though inflation has moderated, that only means price increases have slowed. Prices themselves haven’t come down overall.

That’s why affordability is expected to be a key concern in the midterm elections this fall. The current administration has a lot of incentive to keep the war brief, or at least keep oil prices at bay.

FAST FACTS
Volatility At The Pump And In Your Portfolio 💥

⛽ See how much gas jumped in your state: The national average is up sharply, but the real story is how uneven the pain has been depending on where you live. [Read]

🧠 7 investor mistakes to avoid: Fidelity breaks down common traps investors fall into when markets get shaky. (I’ve definitely been guilty of #3.) [Read]

🤖 Musk takes a shot at Microsoft: Elon unveiled “Macrohard,” a Tesla-xAI project that he says could eventually replicate entire software companies. [Read]

🎟️ Ticketmaster monopoly case settles: Live Nation agreed to let venues sell up to half their tickets through outside platforms, cap service fees at 15%, sell several venues, and fund a $280M consumer settlement. [Read]

🏠 ARMs make a comeback: Adjustable-rate mortgages are creeping back into favor as buyers chase lower rates while waiting for fixed rates to fall. [Read]

🛢️ Oil shrugs off emergency rescue: Despite the IEA’s biggest-ever emergency oil release, crude keeps climbing, with Brent closing back above $100/barrel yesterday. [Read]

⚠️ Los Angeles hospice fraud exposed: Not long after Minnesota’s autism fraud scandal, investigators are now uncovering widespread hospice abuse in LA, with hundreds of providers showing red flags. [Read]

WORDS TO REMEMBER
Great Investors Lose Small And Win Big 🧠

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