Private Credit Cracks The AI Boogeyman Why Crypto is for Boomers The Real Eisman Playbook

Hey, it's Steve Eisman. So today we're going to interview two guests, two old friends, Glenn Shore, Dwight Collins. I call this depth and breath. Glenn is the analyst at Evercore, who covers the investment banks, asset managers, alternative asset managers, companies like that. And Dwight is the head of sales at Autonomous, which is a boutique firm that specializes in financial companies. So Glenn has great depth on the companies that he covers, and Dwight basically covers everything. So depth and breath. And what are we going to talk about today? We're going to talk about the topics that are on everybody's minds, which is what in the world is going on in private equity and private credit. People are literally freaking out. Some of these stocks like Blue Owl were down 30, 40, 50% this year. People are wondering whether there's going to be a terrible credit cycle. They're worried about the fact that companies like Blue Owl and Apollo might be overexposed to lending to software companies. Everybody's worried about what's going on with AI and software. And so we're going to explore that. We're going to explore what's going on a little bit in payments. And we're also going to explore some of the sectors that have gotten hurt from rumors about AI. Hi, this is Steve Eisman, and welcome to another edition of The Real Eisman Playbook. And today we're going to be discussing with two guests, Glenn Shore of Evercore and Dwight Collins of Autonomous, about everything that's going on in the financial services sector, because, well, there's a lot going on in the financial services sector this day. So before we just talk, Glenn, tell everybody what you do. Dwight, tell everybody what you do. Go ahead, Glenn. Sure. Thanks. I'm Glenn Shore. I work at Evercore for the last 13 years. I've been a sell-side analyst for 27 years, trying to follow in the footsteps of the great Steve Eisman. I cover most capital market-sensitive financial companies. So from the big banks and the big brokers to the traditional asset managers, to the trust banks and the private markets asset managers. Dwight? Dwight Collins with Autonomous, co-head of the U.S. business, also run our sales desk. I've been at Autonomous for, similar to what you just noted, 13 years. Glenn and I go way back as do you and I, Steve. So always a pleasure to be here. All right. So let's talk about the most boring aspect of what's going on in our world, private equity, private credit. Glenn, let's just do the facts first, because not everybody knows. Tell everybody what happened to Blue Owl last week, because private credit has been going through a period, I would say over the last year, where people just, you know, the business has exploded. It's now $1.8 trillion in total size. People are worried about, you know, are the loans going to be bad, if there's a recession, et cetera. But last week there was specific news on Blue Owl that freaked people out. So why don't you just tell everybody what happened first? Sure. I'm sure it was a busy Friday for you. No doubt. No doubt. And it takes a little more background than that, but I'll try not to, like, go too much into history. Go wherever you want to go. So first, the derivation of this is for a fund that is about 1% of their total assets. But the market is taking of, wait, is this a window into everything private credit? Because if you look back in September, October, November, there were a lot of headlines coming across the tape on private credit having issues. We actually had bank loans, some broadly syndicated loans that a couple turned out to be fraud. Tri-color first brands. Correct. But those weren't private credits. Those were bank loans. The natural reaction was to shoot the private credit stocks. Anyway, because there's this notion that some people have that private credit, those loans do take on more risk to get more yield, and that if and when we start to get into a credit cycle, that they'll have worse losses. And so that's the background for some of the moves that we've seen. So there's a BDC. Business Development Corporation, which is public. Correct. Which is basically a bond fund, a loan fund. It has a stock ticker, but when you peel back the onion, it's just a bond fund. Correct. And so it has a bunch of private loans in it. And this is run by Blue Owl. Run by Blue Owl. And lots of managers have BDCs, both public and private versions. And this one particular fund has been around for over nine years. And the plan was always, and paying, let's just call it round numbers, 9 or 10% type yield. And basically, we haven't had a credit cycle in about 17 years. So these funds were all performing great. I like 9, 10% yield and no losses sounds like I keep about 9 or 10% of the yield. So now we're getting to a tighter period of time and people are a little worried, interest rates come down a little bit, and people are more concerned about credit for lots of reasons, tariffs, AI, the economy in general. So any little wobble that goes on in the credit markets, people look to private credit. Maybe they're the ones that are left holding the bag. And unfortunately, if you have this environment where there's really low losses, and then there are some losses, it could be a normalization to a still low level. But that could be an increase in losses of 100%. Correct. Just on a percentage basis. Correct. Or it could be we're on our way from 1% to 10% losses if you want to be extreme. And so without knowing, people are very in the mood to shoot first and figure it out later. So anyway, so they decided, maybe we should- Blue Owl decided. Yes, thank you. Decided let's merge this little BDC, this $1.7 billion fund that's 1% of assets, let's merge it into the big BDC. Which is private. Which is private. Now the problem is they wanted to do that at a discount because the stock was trading at a discount. Wait, wait. They were going to move $1.7 trillion of a public entity. Billion. Billion that sells, whose assets are sensibly at par, and they were going to move it into a larger entity whose assets are being discounted by 20%. So if the merger went through, those people who had the $1.7 billion in assets just got a haircut 20% because of the merger. You got the end conclusion is correct. Right. Is that they said, hey, I got great news for you. We're going to give you 80 cents for the dollar. And people are like, what? And so they're like, ah, just kidding. And they called that off because it got some really bad press. It was ill-timed. In their defense, they started the process when things were closer to par. And when things drifted below because of first brands at all, and public BDCs were trading at 80 cents on the dollar, they were like, oh, let's just push through on the merger when maybe with the benefit of hindsight, they should have called it off. And they freaked out and they canceled the merger. So they canceled the merger. It goes away. Things recover. We move on. That was like late last year. Correct. Last week, they decided we have a solution for this OBDC2 thing. Let's sell off a bunch of the assets and return some money. Because remember, these funds, if you redeem, you can get up to 5% of your money back. A quarter. A quarter. And so they decided, let's sell 35% of the assets. And they got par for them. They sold them to three pension plans and one insurance company. They got their mark, 99.7. So they got their par for them. And they said, we're going to give you, instead of 5%, we'll give you 30% of your money back. We'll accelerate some of that. And then we'll work out of the rest of the funds. So we won't give you the 5% redemptions anymore. So no more quarterly redemptions, but we just gave you 30% of your money back. Correct. So we accelerate that. And these assets pay down. They have coupons. They have maturities, short enough duration, two, three-year type loans. Stick with us. And over the next couple of years, you'll wind up getting your money back. They thought they were doing a good thing. They really did. And the market, no likey. The market said, wait, you got par. You obviously sold the stuff that you can sell. You sold the good stuff. I'm going to assume that you can't sell that stuff. So now it's a bucket of crap. I don't want to own it. And so that's what started the meltdown. And one more wrinkle to it. There were four buyers. So there was Omer's, which is a Canadian pension. There was another Canadian pension. There was Calper's. So that's arm's length transaction. But the fourth buyer was Kovari Insurance. And Blue Owl controls the asset management arm of Kovari Insurance. So one could argue that some of the loans were basically sold to themselves at par and they set that price. So I tell you what, the press went bonkers on this and so did some investors. And I'm not sure if this was the only entity and you didn't have any transparency to pricing and there wasn't a third party verification. I could see people getting upset. I actually don't. I don't have a big issue with that. They don't own the insurance company. They don't control the insurance company. They own the insurance company's asset management arm. They bought the insurance company's asset management arm. And so they manage the money. They have an IMA investment management agreement for them. And I say, so what? These pension plans are not giving away money. They're not paying a price that they shouldn't pay for these assets. They're paying... The other three. Correct. So they're buying... Let's go back to the market. What they're really unhappy about is they thought they sold the good assets and they didn't sell the assets that they couldn't get their mark for. Right. I'm not saying they're bad. I'm saying the market... That's what the market was worried about. Right. And so I don't think that part of it... I know it got a lot of press. I don't have much of an issue with that. I don't think you can go stuff assets into your entity, into a regulated entity, and think that's not going to be a problem at some point. In other words, Apollo, a couple weeks prior, bought in ARI, which was their commercial mortgage REIT that was trading at like a 25% discount. They bought the entire $9 billion of assets in, and they put it in the insurance company they own, and it got some press. And then noticed not one person in the commercial mortgage loan market said a peep because they thought the assets were worth par, and they took it into par. Dwight, what are you hearing about all this stuff? I mean, you must be on the phone all day long about this. Yeah. I mean, I guess a couple of quick things. Great thoughts, Glenn. I think it was a 10-year-old fund, right? And the idea was always to IPO it, merge it, or run it down. And it's not like there's a performance issue, and they're doing the right thing. I think it's more the perception issue, which is acute for OWL and the alts in general, because it's all about flows, right? And in OWL in particular, very dependent upon retail flows. So I think you kind of have to separate a little bit, like, is there a credit issue versus like, is there just a general flow problem? And I think that's one of the concerns, no doubt, is that as these headlines emerge, another one today, not that it's necessarily related to OWL, but this MFS, this UK mortgage company. Oh, what happened? I don't know what happened there. Another case, similar to Tricolor and First Brands, where it was a fraud, double pledging of assets. This was in the UK. This was in the UK. So today it went, the judge ruled it insolvent. Apollo had some exposure, Jefferies, Wells, some of the headlines hit, so it hit all these stocks. But I think I bring it up just in the sense of like, there's general concern around, like, is there more to come? And I think as it pertains to OWL and some of the alts around, you know, speaking of the retail sensitive ones, just around flows, right? What is that dynamic? You know, is the retail investor like, I don't want to touch this. Right. And all of a sudden, I want my money back. And there's a surge of redemptions and it limits the inflows. I also found interesting, you know, some of the statistics out there that is that something like 20% of private credit is basically to buy out of software companies. And so that the private credit world is over, is over indexed to software. And as we all know, every single day, basically software stocks go down and people are freaking out. And that's one of the other worries. Yeah. Can I add something to that? I do this myself. The entire world does this. We should define when we're talking about private credit, what we're talking about versus the issues right now that we've been talking about are direct lending. Direct lending is a real component of private credit, but it is one strategy within private credit. Direct lending is making a direct loan to a sponsor-backed, a private equity-backed company. Right. To buy a company. Correct. That piece of the business, so if Blue Owl or KKR or Blackstone or whoever was going to buy a software company, somebody else is going to lend them the money to buy it. Correct. By the way, at an LTV of like 35%. Right. So they have a lot of equity cushion. They lend the money for someone that's buying the company on the equity side. And that piece of direct lending is over-indexed to tech and software in general, because that's where the growth has been for the last five years. So again, direct lending. So BDCs and direct lending funds, that is their business, and that's why we're talking about this now. But there's a much bigger pie included in private credit. There's real estate credit, there's infrastructure debt, and there is asset-backed finance that is mostly investment grade backed by real assets that are under the private credit four-letter word, but they're actually pretty good shape and have different characteristics. Fair enough. It's a good point because one of the things that often comes up is like, if you're worried about private credit, you should really worry about private equity. Ding, ding, ding. Because it's a zero. If you're worried you're going to lose 10 cents on that loan, the equity is probably zero. And that's private equity's company. Just for the viewers to understand, the direct lending business is basically, I'm KKR, I go buy a company, whether it's software or infrastructure, I put up X amount of equity and I borrow the rest, and maybe I borrow it from Blue Owl. But if the company that I own can't pay back the loan, then of course the equity that I own is worthless. So if I'm worried about the loan side, I should also worry about the private equity side because the equity goes first. And let me even give a numeric example, and two different things, one software and one food company, Glenn's beef jerky company that I aspire to launch one day. So my beef jerky company is pretty straightforward, run-of-the-mill company. Someone goes to buy it and they think it's worth $150 million, they will put up 100 million of equity and the lender, Blue Owl, Apollo, whoever, will lend 50. And the 50 sits in the top of the capital stack, meaning any money that gets paid out gets paid out to the lender first. And you need to lose almost all of that equity before the lender loses a penny. Got it. Okay. Okay. So Dwight, how much pushback are you, what are you hearing from your, well, you talk to clients all the time, investors, like, well, what are you hearing from all these people? People must be hysterical. I think it's, you know, Warren Buffett always talked about three buckets when he thought about investing, the yes bucket, the no bucket, and the too hard bucket. I think for the alts right now, it kind of falls into that too hard bucket. Right. They are hard. A lot of moving pieces. Obviously we talked about the credit angle. We talked about the flow angle and the complexity of the institutions, right? There's a lot of different, a lot of different assets that they're invested in, a lot of different assets they lend into. If you pull up a, you know, press release of an earnings report, takes a little while to get through. It's complicated. They got a lot of different sources of revenue and some of those sources of revenue are all, they're just all over the place. And while good companies, I think in this environment where you're just dealing with this daily kind of inflow of headlines, it falls into that, you know, kind of Buffett too hard kind of category. Okay. So you're not finding any clients willing to step up to play to buy these stocks, right? I think towards the end of last year, there was hope around, particularly as you thought about kind of a capital market super cycle, and you looked at the performance of Goldman and Morgan and a lot of the M&A boutiques, then you looked at the kind of disconnect versus the alts. It was kind of this, whoa, shouldn't they, particularly the private equity ones or the ones more geared towards private equity, geez, these seem like a good opportunity just given the realization kind of pipeline. I think as we got out of the gates in early 2026 and, you know, the group continued to stumble, it became a, all right, I just, I need to back away. Okay. Okay. All right, let's move on. Go ahead. I don't think we should. Okay. Let me do one thing before we move on. Okay. The stocks trade as if the private markets aren't a thing anymore, that no one will put money into these products anymore. And I do think it's important to think about direct lending, approaching a potential credit cycle. And I say potential because the losses really aren't there, despite these frauds that we just said. But even 17 years into the credit cycle, maybe things slow, even though the banks are telling you they're not. Direct lending are bullet maturity, meaning you don't get your money back as a lender until the maturity of the loan. So you get a coupon and then hopefully you get your money back at the end. People feel less good about that. And in the retail channel, I could see those flows slowing more than just this quarter. There are so many other assets, classes, and strategies across private markets that I do think the stocks are acting like those things will never be a thing again either. And they're wrong on that. They're just flat out wrong. It doesn't mean they couldn't be slowing in different products, but let me just give you a, for instance, 86% of companies in the United States with a hundred million or more of revenue are private. They are staying private much longer than they ever were before because they can get financed in the private markets or by banks in ways they couldn't before. And the lending spreads are pretty tight. So you don't need to go public and deal with idiots like us if you can finance yourself and grow your business without having to add on that cost and annoyance. And then mutual funds have overnight deposits. Banks have overnight deposits. A lot of these funds have long duration capital. Insurance companies, long duration capital. Pension plans, long duration capital. Some wealth funds, long duration capital. If you're going to finance your data facility for the next 30 years, or you're going to get government financing, which all have huge deficits that want to finance their defense budgets, they must be financed with the help of private markets. Because it's long duration money. Correct. That's it. And so there is some baby out with the bathwater that goes on. Picking price at times like this is so impossible. No one cares. They're in too hard bucket, like Dwight said. But make no mistake about it. They will rise again. They will generate a ton of capital flows again. Go back, last thing. 05, 06, and 07 vintages in private equity stunk for a lot of managers. And people thought it was the end of private equity. Go read the newspapers. And then private equity quadrupled since then, right? So direct lending is having this moment, particularly in and we will have some credit losses. I'm just saying, look at the entirety of what these companies do. Okay. Fully agree. So Dwight, let's turn to you because there were some headlines last week. I mean, I was looking at my screen and I was tapping it because some of the price moves were so insane for certain types of stocks that don't like, for example, tell us what happened about AI with respect to insurance brokers and wealth management. Well, it was insane. It was. Stocks like that don't move like that. And obviously the AI boogeyman is fully out there. I think for financial investors, we saw that firsthand last year with how the info services companies traded. And that's put that LSE, Facset, S&P, Moody's, names of that ilk, where there became real fear around disruption and disinheritation. That obviously spread significantly in 2026 so far. Last week, there was the other scare on the insurance brokers. Tell everybody what that scare was, because I think I actually completely understand it. I think OpenAI had approved, it's a company, I believe, out of Spain that had launched some AI insurance app and it was approved on OpenAI's platform. But I think really we're at this stage where anything kind of AI related could be even a quick press release is having these significant ripple effects. And the insurance brokers were down like 10, 12 percent that day. Huge move across the board. Huge for those stocks. Those stocks, if they move 2 percent, it's big. Yeah, it's tricky, right? And you saw it also with some of the retail brokers where there was another kind of AI related headline that hit Schwab, LPL Financial, Raymond James, and the group more broadly. It's tricky, right? Because I think for a lot of us, you look back at the release of, say, for example, the iPhone. And at the time, it's like, okay, this is amazing new technology. And then it's not until years later do you realize like, whoa, there was a lot of disruption that kind of came with it. I think some estimates are 15 to 25 different business sectors were disrupted ultimately. You think about BlackBerry, you think about the GPS side, the Garmin's, the TomTom's. You think about the rise of Uber and Lyft and how yellow taxis went away. You think about what the camera did with the iPhone and how Kodak essentially disappeared. I think there is this realization that there's something real here. But we don't really know what it is. But we don't know what it is. And I think using some of the recent examples, that's why I bring up the iPhone, this kind of real fear around like, do I have my head in the sand in a year from now or two years from now? There is real disruption risks to these businesses. And I think that's why you kind of have this panic fear. Now, that being said, I think as we think about insurance brokers I mean, largely these AI platforms are tools. They're tools for the broker. They are tools for that financial advisor. I mean, insurance brokers sell very complex insurance into the commercial. We're not talking about auto insurance. Aon, Marshmack, they serve as commercial insurers. I mean, they may have AI tools, but they're the ones who are going to be selling the insurance for the big insurance companies. So I didn't understand those headlines at all. Yeah, I agree. I mean, I think, again, you kind of have to separate the fear from like what could ultimately be the reality. And I think a lot of these companies talk about like, yes, we're partnering with AI companies. We're using a lot of the platforms to make our brokers, to make our advisors even sharper. And I think that's the tricky part is around how much is like business enhancing versus how much of it is business disrupting. I struggle to see the true disruption risk for the retail brokers and for the insurance brokers. Or for Visa and MasterCard, which also were down last week. Yeah. You agree on that, Glenn? Glenn, what do you think? Well, I've had my moments during this AI awakening. Hysteria? I don't know, like potential hysteria, but at least somewhere between awakening and hysteria. And there are certain moments that do remind me of the financial crisis. There are some moments that do remind me of pre-pandemic. And I'll take a minute to talk about that. And then there's things that I very much agree with. So hear me out. We won't go through the whole story. But there were two people in my life that knew exactly what was happening in the mortgage landscape. And it was you and it was my buddy Andrew Hoyne and John Paulson. And they were sitting at the table telling me what's happening. And I was grasping it. And I knew it was real, but I couldn't get the whole thing. I didn't understand the full leverage. And sure enough, things happened and things melted down. And thankfully, the government was able to step in and stop the bleeding because the financial system was melting. And by the way, you had the people that were close to the action telling me. And I'm capable of understanding. And it was close, but I couldn't fully digest it. In the pandemic, I remember watching what was going on through November, December of 19. And in January, a couple of days before my kids went back to school, we had a family dinner with another family. And I said, you guys might not be going back to school. You guys might we're not we might be working on that same exact day. I called my son who was in college and I told him to get on a plane to come home because he said, if you don't get on a plane to come, you're not coming home. So my family and the other family laughed their butts off and made fun of me. They went back to school. And then four weeks later, they were home. And so imagine what a biologist in Wuhan was what they knew in January, before March 12th, when all the companies sent us home. So what I would say is when I'm seeing all this AI stuff, and when we read some of these well-written papers, go talk to anybody that's an actual software engineer, anybody that's downloaded Claude and bought themselves an iPad mini, and that has been coding when they've never coded in their lives. And you ask them how they feel about AI. They sound like the biologists in Wuhan before. I'll challenge that a little bit. Some of the people that I mean, I've been reading a lot. There's no question that AI makes it a lot easier to create software. What I think people are missing is that there's a lot more involved in a company buying a software product than someone just showing up and saying, here, here's my software product. I mean, it's got to be integrated into the company. It's got to be used. It's got to be tested. I think the cost of software is coming down, but that doesn't necessarily mean these companies are being disintermediated. That's a very, very good point. And actually, that's huge for private credit, by the way. Because when we go back to our capital stack, and we go back to the duration of these loans, all they need to do is be paid back at maturity. And remember, these companies that they're lending, this is not venture capital. They're lending to high margin, high free cash flowing companies with built-in revenues. And you just got to make it to the line and get your money back, and you get par. But to your point on, at minimum, AI feels amazingly efficiency-producing for lots. And for the companies that we all cover, they're going to save a lot of money. But it also is deflationary, and it will cause some jobs in places. And so then that's an impact on the economy. And that's what you've seen some of these reports. All right, let's move on to bank M&A. Where do you stand on bank M&A? Hope it happens. It needs to happen. Me too. We've been waiting 30 years. We have. I think for the last big M&A cycle, we think about big, juicy premiums, and this is kind of... That was back to the 90s. Yeah, or the early aughts. And so I think for a lot of grizzled financial, or bank investors, you think about those golden heydays where it's that 30% premium, you break out the coverage map and like, oh, it makes total sense. I think there had been real hope that we could kind of get back to that environment, particularly in a much more lax regulatory environment, particularly with capital positions in a good place for a lot of the banks. But so far, while we've had activity, it just really hasn't had... It hasn't been a tsunami. It hasn't been a tsunami, and it really hasn't been the juicy premiums that you would have hoped for. I'm not actually hoping so much for the juicy premiums. I'd rather have decent prices where the combined company is worth a lot more several years from now. But I'm actually surprised that there hasn't been more bank M&A. Why do you think that is? It's a good question. I don't know. You would have thought, given the regulatory environment, given the fact that we're obviously approaching midterms, you kind of had a good two-year window to do something. And you had an environment where you had rising equity markets, management optimism was quite high. I would have thought you would have seen more. And important in terms of the lax regulatory environment, it's the time to close deals. I mean, that has shrunk considerably. Right. Much shorter, much easier, as opposed to two years. Yeah, exactly. By the way, I thought the most hysterical conference call last year was when First Horizon reported third quarter. Everybody who owns First Horizon, literally 100% of the people who invest in First Horizon are invested because they think the company's going to get sold. And so the CEO gets on and he says, I'm a buyer. And everybody goes, you're a buyer? What do you mean you're a buyer? You're a seller. And the stock just got cratered. So there's your answer to your question. The answer to your question is everybody likes to be the survivor. They want to be the buyer. They don't want to pay a big premium. They want to be the CEO. That human component is unfortunately big. The boards apparently don't have enough teeth. Because if you just thought about timing-wise, the economy is good still. There are some teetering parts at the bottom of the K curve. But all I know is it certainly seems like rates are going to go down, not up. It certainly seems like credit can only get worse, not better. It certainly seems like we have a window to get deals done that may or may not with the next administration. It absolutely should be now. And yet, slow, slow, slow. It's been actually, I've been disappointed. I mean, you would have thought 30 years of pandemic. Comerica, thank God, finally got sold. So Comerica could go, anybody could get sold. I do think more broadly, you're going to see some interesting M&A, not just within the banking sector. I mean, there's a lot of assets, good assets that are arguably quite cheap at this point. Well, if you think about just what's happened in the, whether it be the info services space, you think about some of the AI disruption fears that we just talked about and how stocks have gotten cremated. You think about just kind of where the alts are trading. There's a lot of optionality that I think exists. And there's a lot of companies that are sitting on a lot of capital, where if you think about where we're headed maybe over the next kind of five to 10 years, it's an interesting time to look at a lot of different things out there. I suspect the bankers are busy drawing up pretty unique combinations. If you think about, and I know Glenn will probably touch upon it, JPM's company update they did earlier this week. But you think about what Jamie Dimon talked about in terms of the payment space, and I forget his exact quote, but it was something like, we're getting our ass kicked in payments. JPMorgan is getting kicked in payments. Yeah, and he brought up a number of different kind of fintechs, the Stripes and the Chimes and the PayPals. But like, I don't know, you got roughly probably $40 billion in excess capital, JPMorgan. Yeah, they're too big to buy a bank, not too big to buy something else, whether it's an asset management or in payments. Was that your impression from the bank? Oh, yeah. It's abundantly clear. Asset and wealth management are high on the list of things to do. And believe it or not, private markets are squarely in, as part of that conversation, wealth outside the US. And they painted the picture in very clear words. They are looking at everything. They're kicking the tires and looking at every pitch book that anyone wants to show them. You could see them buying a payment company. It's possible. They would love to. Well, I think it's complex to figure out what fits well within their platform. Right. By the way, one thing I think people don't understand is that when finance company A buys finance company B, and they have different technology platforms, one thing we've all learned over the years is the merger of those two companies and merging the technology platforms can be a nightmare. And so what you're saying is JPMorgan might want to buy a payment company, but maybe when they dig under the hood, they realize that the technology merger might be too complicated. And let's remember this company, the reason why they have the highest multiple in Bankland is because they're great. They put up the best returns. They put up organic growth. He specifically said to that $40 plus billion of excess capital, I could over the next four years, deploy all of it organically and produce more organic growth and just keep doing what we do. We look at everything. I'd love to buy an asset wealth and I'd love to buy payments, but it's going to be really good if we're going to buy it because we can do it on our own. We're not going to mess that up. And we've done a few of those and we want to make sure it's right. Let's turn to another hot topic. Crypto, Robinhood, Coinbase. This is not your world. Also bludgeoned. This is your world. What do you hear? Before we even get to what these stocks have been obliterated, what are you hearing from your investor and people you speak to, clients? There is a little bit of confusion around where we stand on the Clarity Act, which is the next step in terms of regulation of crypto. So we had the Genius Act pass, which call it late last year. The hope being that we get the Clarity Act passed at some point early this year. Now, Coinbase's CEO had pushed back on some of the language within the write-up of the Clarity Act that sparked part of concern. Can you explain what the banks are pushing back because they feel they don't want Coinbase to be able to pay interest on their accounts? What is that all about? Yeah, it has to do exactly right with the yield. And I think that's kind of going back to the drawing board in terms of trying to figure out ways around it. Can I give the caveman version? Please. We could use the caveman. I know you like caveman. I want the caveman version. And I only know the caveman version of this. Please give us the caveman version. In a thimble what I know. If stablecoin pay interest, it's only so much of a threat for payments and deposits. If there's a workaround that you can get rewards, aka interest, then it becomes a tighter competition to bank payments and, more importantly, deposits. And most, you know, 29% of deposits in the United States pay zero interest. If all of a sudden comes along better technology, better products, real-time settlements... And can pay interest. That has a yield to it. That has yield to it. Right. And the bank's objection is, you know, we got deposits and we're federally guaranteed and you're going to pay interest and you're not federally guaranteed. Why is that kosher? And that's a risk to the system. And the banks and the bank regulators should fight on their behalf for this. And the crypto industry is like, free market? What happened to capitalism? This is better for the consumer. This is better for the core. Right, right, right. It's a real conversation. No, I think he sums it up well. The caveman. Good caveman. Yeah. Good caveman. Me. I think it's really... Me like deposit. It's the lobbying groups that are, you know, kind of fighting this out right now. Okay. That is derailing. So I think as long as there is that uncertainty around passage and ultimately what it looks like, it has taken a little bit of the, you know, certainly a lot of the air out of the crypto environment right now. So I have an alternative theory that I had George Noble on recently. And he had a thesis about crypto, which I thought was kind of funny, but maybe he's right, is that crypto is no longer cool. Like all the people who used to like... Gold's cool again. Not gold. Okay. Prediction markets. They're all in the prediction markets. And so all those people who used to trade crypto religiously are now on, you know, trading like what President Trump's going to say in the next hour. And so crypto, the way he put it was crypto is for boomers. Yeah. I can't imagine a worse put down. And so maybe that's part of it, but crypto acts just horribly. It does. And I think, you know, unfortunately it has hit Robinhood hard now. Robinhood, as we all know, is not purely just crypto. What percentage of Robinhood is crypto? Do you know? I would say, I don't know the exact percentage. I would say it's a lot smaller than any of us would think of. And you can see that in terms of when they reported most recently, and they talked about their kind of organic net new assets. I mean, it's still growing mid-20s. They talked about February being, I think, 26%, if I'm not mistaken. I mean, the growth is robust. And when you talk about prediction markets, I mean, this had been a side project for Robinhood last year. And in a matter of weeks, they spun it up and it's a major line item now for them. And where's Coinbase in all this? I mean, crypto is big for Coinbase. Crypto is big for Coinbase. And I think when people want to think about the differential between the two, it's really around the diversity of the platform. And obviously through Robinhood, you know, you have a lot. There's a lot to offer. There's a lot of innovation. And I think, you know, right now, obviously, there's a reluctance to be involved in both. And if there is a preference, it's certainly towards Robinhood. Okay. Well, let's move to payments. An exciting space. You had Ken Sahansky on a few weeks ago. He's killing it still. He talked a little bit about. I mean, the insanity of the payment space. I mean, Circle went public at 31, went to 260, got as low as 50. And when it reported this week, it was up 35% that day. I mean, that's not for the faint of heart. I mean, I have a very simple thesis that I discussed with Ken on the podcast, which is if you're a long-term investor, which is what I am, the only thing you can buy in payments is Visa and MasterCard. Because you know that nobody's going to disenfranchise them. And everything else is, as I like to say, peacock today, feather duster tomorrow. And then maybe peacock again. So that type of stuff you can trade. Hedge funds will into the quarter, out of the quarter. But if you're just looking to buy something and sleep at night, it's Visa, MasterCard, and don't talk to me about anything else. I wonder where you stand on that. Yeah, I think for a long time, Visa and MasterCard have always been thought of as generally kind of 1A, 1B in a portfolio. And then it was a matter of kind of what else within the group is interesting. And for a long period of time, it was kind of behind Visa, MasterCard, there was PayPal, then there was Block, and then there was Fiserv, and then there was maybe FIS, throwing a little oddy in. But as time has gone on, obviously, we all know what has happened to Fiserv. We know what's happened to FIS and to PayPal. They've all killed each other. They've killed each other. Right. They've all killed each other. So I think there's real reluctance to try to figure out where the trends are moving within payments, where is kind of a safe bet, and to kind of bring it back to the iPhone discussion I brought up around disruption. Like, just look at what Apple Pay is doing. It's killing them. It is. And you think about the PayPal. I mean, PayPal, the majority of their gross profit is driven through the core button. Right. And when you think about the competition versus the core button, it's kind of like, why would I use the core button when it's just so simple with Apple Pay? I tap, boom, move on. And they can't be fraud because it's looking at my face. Yeah, exactly. Exactly. So I think there is a part of also, where do we move, you know, going forward in terms of trends, right? What's the, you know, you talked a little bit about disruption, is Visa MasterCard, and I think that always exists there, but I really have a hard time seeing it. But it's thinking about, you know, other means of payment and where that other disruption comes. That being said, I think there is going to be interesting options in terms of M&A. Well, you saw PayPal. People thought maybe that's going to get pointed out. There were some headlines earlier this week where potentially Stripe was evaluating PayPal, some more articles out today saying that's not going to happen. There's an activist investor now involved in Fiserv. So, I mean, there are some interesting assets that present an opportunity for other companies looking to kind of build out that business line. But my view from just an investor perspective, after Visa MasterCard, it's like, you need to be able to write a dissertation on some of these companies, it's so complicated. You do. And I got better things to do with my life. So I'll just stick with my Visa. Call me when something happens. Yeah. And it goes back also a little bit to the kind of the too hard bucket. Too hard. And given how the group is traded, given the kind of the black box nature of a lot of these companies, yeah, the valuation kind of looks appealing in some cases, but I'll chalk it up to kind of too hard for now. Right. Let's finish up. Glenn, what do you want to talk about? Any final thoughts there? I find it interesting. So I got my point in about private markets not being dead forever. You did. You beat it to death. Good. I like to. I do find it interesting that on your same screen that has all your quotes on it, you can see the private markets getting pummeled. The stocks. Right. You can watch at the top of my screen. I have HYG and high yield spreads. Tighter than ever. Haven't changed at all. Right. I have every one of my bank CEOs telling me, Commie's pretty good. The consumer is pretty good. Right. And I have every brokerage firm saying, Kappa market cycle is awesome. Right. Can all those things coexist? Can that really happen? Can high yield public high yield spread stay tight and private markets get pummeled? Can the deal calendar really all get out with the financial sponsors not participating? It just feels like an unsustainable set of circumstances. Oh, it's not actually that dissimilar one. Last year, this year's been a crazy year, but last year we had a bull market. Tech stocks were up and gold is up. And that shouldn't exist at the same time. It's like two different groups of investors that don't even know each other exists. Dwight. Another fun one for you I'll bring up that you always used to love discussing with me. SoFi. So here's a little tidbit for you. SoFi just recently- Tell people what SoFi does first. Their FinTech effectively started off as doing student loan lending, largely more often doing a ton of personal loan origination. I want to say, you know, at various points last year, kind of putting up 70% type growth year on year. In terms of loan growth. In terms of loan growth, in terms of originations. A lot of it they will put on balance sheet. A lot of it they'll also put through securitization markets. So on the securitization side- I read about this today. Talk to me, talk to me. One of the more recent securitizations, the 2025-1, just triggered the cumulative net loss, the CNL trigger. So you got to- Let's calm down for a second. This is right into your world. Please try to translate that into English as much as you can. OK, so for the- Because this is technical. In the ABS markets, when you hit a trigger, that is a cumulative net loss. So I think in this case, it depends, I believe, on each securitization. In this case, that trigger is, I think, 2.6%. So if losses get cumulative above 2.6%, SoFi no longer gets paid from that securitization. It triggers the pay down to preserve the principle of the senior tranches. Because you're protecting the securitization investor. Yeah. Right. This is bad. It's one data point. Right. And it kind of also speaks a little bit to kind of Glenn's point around you have all these things happening in the environment. Yet also, when you look at the HYG, the high yield index, like, stop budging. You know, can that really be? You know, and I think in SoFi's case, again, just one data point. But, you know, as an ABS investor, you're probably looking at that saying, That's bad. And I think I believe it is the first time that SoFi has triggered a CNL. I think it is. Yeah. OK. Bigger picture, right? All you do is make loans for a living. You keep making loans and you get capital. You got to put it to work. We're 17 years into a credit cycle. It's an amazing statement. 17 years, no credit cycle. And as much as everyone has a job and we had wage inflation during COVID and their spending is high and all the banks tell us everything good, I think we're seeing little phrase that maybe it's 1% losses rising to 2%. Who cares? It's normalization, bull market for life. But if you have if you have the ability to asset allocate wherever you want, you know, raise your hand if you want to buy someone's old loan book. You raise your hand if you want to buy someone's old private equity book. Raise your hand if you want to buy or put new money to work today. It feels like we're at a moment where the asset allocators are starting to be like, maybe I just chill out for a little bit. Like, you know, so I'm going to be very interested to see how the next year plays out in terms of new capital raising, where it goes, how defensive of a stance. I think people that have the ability are going up in quality. That is the statement of direct lending and why you're seeing retail start walking away because you haven't actually seen bad losses. They just think they're coming and we're seeing a little bit of phrase. And so people are trying to move first with before they get caught. Guys, thank you. That was great. Appreciate it. We'll do this again, of course. Let me give just some conclusions that I've drawn from interviewing both Glenn and Dwight. You know, we started out talking about private lending, private credit. This is Glenn's area of expertise because he covers the companies. And he thinks at least at this point, the fears are overblown. He makes a very interesting point. Glenn points out that despite the fact that the private equity stocks like Blue Owl, KKR and Apollo have gotten obliterated this year and partially obliterated last year. The credit spreads, which is a sign of how much the fixed income markets think there are problems, credit spreads are at all time tights or narrow. They're showing no fear at all. So despite all the fears about the overexposure of private credit to software, at least so far, the fixed income markets are pretty complacent about it themselves. The other thing Glenn pointed out is that when private equity finances these software type companies or buyouts, the companies that are being bought out have a lot of equity in the deal. It's like 75% equity, 25% debt. So a lot really has to go wrong for the debt to go bad. I thought that was a very, very interesting point. We then moved on to Bank M&A, which has been a real topic of mine for the last year. And Dwight pointed out that even though there should be a lot of Bank M&A, there's only been some. It's been a lot slower than people have hoped, including me. And it's probably because bank CEOs still like to be bank CEOs, and they don't want to sell too quickly. And then we moved on to payments, where we basically came to an old conclusion of mine, which is the only long-term investments in payments these days is Visa and MasterCard. Everything else is just a trade. So hope you enjoyed. It's a great interview. And please send in questions if you have any, which I'll be happy to address.