Morgan Stanley Just Issued A Warning Nobody Is Talking About

Private credit has been crashing on Wall Street and it just got worse. Morgan Stanley just put out a new warning where they said default rates on private credit are about to hit COVID peak levels. This comes after Morgan Stanley blocked investors from pulling their money out of these private credit funds. It comes after BlackRock blocked investors from pulling their money out of these private credit funds. Blackstone also blocked investors. Blue Owl also blocked investors. And this is something you want to pay attention to as an investor, even if you aren't invested in private credit, because this can have a broader impact on the stock market, the economy, and your retirement funds. So let me break this all down. By the way, this is why later today on March 18th, 2026, I'm hosting a live free and virtual investor workshop where I'm going to be showing you my firm's research as to how the economy is changing, but also how these changes create investment opportunities to grow your wealth faster. It's a free workshop. I'm doing it twice today, once in the morning at 1030 a.m., again in the evening at 8 p.m. Eastern time. So if you'd like to join me, all you have to do is register. I have the link for you down in the description below. And when you do show up live, my team is going to send you a free digital copy of our new book, How Money Changed Forever, just for showing up live today, March 18th. Now to understand what's going on with private credit, let's understand how we got here. Because after the 2008 financial crisis happened, we saw a lot of new regulations put on banks, making it more difficult for certain banks to lend money. Now if you're a business and you wanted to borrow a couple hundred million dollars and JPMorgan Chase Bank said no to you, Bank of America said no to you, you would have been out of options. But this is where a new industry of lending was born. It's called private credit, where now you could go to a hedge fund like Blackstone, or Blue Owl, or BlackRock's private credit fund, or Morgan Stanley's private credit fund, and now you could borrow this money. It's going to cost you more money. You might pay 8%, 10%, 12%, 14% a year in interest, but you can borrow that money and you don't have to deal with the same regulations that banks have. Now this is also good for investors because now you can lend money to these hedge funds, to these private credit funds, and you could make 8% or 10% a year in interest. Compare that to putting your money in a savings account and you would make 0.5% a year in interest. Not just that, these private credit funds provided liquidity for you as an investor, meaning you could pull your money out like a savings account. Sure, you couldn't pull it out every day, but you can make quarterly withdrawals so you can access your money. It wasn't like putting your money into a CD or like investing your money in real estate where it's hard to get your money out. These were liquid. At least that's what they were marketed as, but now it looks like that's not true. So all these investors were lending money to Blue Owl, BlackRock, Blackstone, Morgan Stanley, that way they could get this 8% or 10% a year in interest with the promise that you could pull your money out essentially whenever you want. Well, these hedge funds then lent that money out to businesses who are now defaulting, and because they're defaulting, these hedge funds don't have money to pay back, and now these hedge funds are saying you cannot have your money back. You can start to see the problem. Well, what's causing these defaults? Because previously I've talked about what happened in the subprime auto loan industry where there were a number of lenders and businesses in the subprime auto loan business that were now going bankrupt because high interest rates made it hard for people to pay back their loans, and so because they were not getting paid back, they could not pay the hedge fund. The hedge fund couldn't pay investors. But the other part to this are software companies and AI because one of the biggest borrowers of private credit have been software companies. It's about a quarter of all private credit loans were software companies, and this was marketed to you as an investor as an attractive thing. You can lend money to a software company with strong revenues, and you're going to be paid back with high interest because if a software company has reoccurring revenue, they're going to have the money to pay you back, right? Well, not exactly. Why? Because of artificial intelligence. AI has grown so much that what we're seeing happen is many of these software companies are now getting hurt because of AI. Why? Because if you're a business and you were paying let's say half a million dollars a year for a software, then now you can just build AI agents to do for a tenth of the price or a hundredth of the price. You're no longer going to use that software. So what we've been seeing is a lot of these software companies have been getting hurt. Businesses are leaving them. Businesses are just not needing them, and so some of these software companies are starting to default because AI has made it so that these software companies aren't as necessary as they were before. So the subscription revenue that was predictable is no longer predictable, and the cash flow that was strong is no longer there. So now these software companies are no longer able to pay their loans, which is why their debts have been failing. Not just that, software debt has had the worst returns of any sector this year in the beginning part of 2026 in the leveraged loan market because these software companies have been struggling. And Jamie Dimon and JPMorgan Chase Bank recently spoke about this as well. What JPMorgan Chase Bank just did on March 11, 2026, is they started marking down the value of their software loans as collateral. Now that's going to sound a little bit confusing, so let me explain what that means. When you mark down collateral, what that means is I go in and buy a $200,000 house. The bank says I can borrow $100,000 out of my $200,000 house. Well, if I mark down the collateral, that means now my house is not worth $200,000. It's only worth $150,000, which means I can't borrow 100 grand. I can only borrow $75,000. So what JPMorgan Chase Bank is doing is they're looking at all their software loans, and they're now saying they're not worth as much as we thought. These software loans are now worth less because we know or we believe that these software companies are going to bankrupt, or they're going to default, and they're not going to pay us back. And so because now JPMorgan has last week started marking down these loans, it's a little bit of a warning that maybe more of these software companies are going to get hurt. Let me actually read you what JPMorgan had to say about this. Quote, as the world gets more volatile because of AI, the outcome should be expected. I'm shocked that people are shocked. So they're not waiting for more loans to go bad. They're trying to be proactive in marking down the value of their loans to try to protect their own stock, but they don't want to wait until the crisis comes. So what does that mean? These companies who've been borrowing money from private credit are now struggling. We talked about subprime model lenders. These software companies are hurting because of AI. So it's the mix of high interest rates. It's the mix of artificial intelligence that is hurting these companies that were borrowing from private credit. Well, these companies now are not able to pay back the hedge funds. The hedge funds are not making money, so they can't pay money out to their investors. That's why Morgan Stanley, Cliffwater, Blue Owl, BlackRock have all come out and limited investors' ability to pull their money out. But there's one more part to this that a lot of investors are still overlooking, which is many banks are also investors in these hedge funds. It's not just regular people. It's just big wealthy investors. Big banks have also been one of the leading investors to these hedge funds as a way to get a return on their assets. And if this continues, well, it's not just the hedge funds that are going to get hurt, but the banks could also get hurt. That's the concern that Wall Street has, that if these banks start to get hurt, that's where things can start to become a problem. And we don't know how far it will go or how much worse it is going to get. Because right now, the SEC, the Treasury Department, they've all said that the problems are contained to the private credit market. It's not going to trickle down to other parts of the economy. It's not going to trickle down to other parts of Wall Street. It's not going to trickle down to other industries. That's what we're being told today. Is that true? Only time will tell. The reason why people are concerned and hesitant to believe that is because we've heard that before. We heard after the pandemic that inflation was transitory and it wasn't going to last long. Well, here we are, six years out of the pandemic. Inflation is still a problem for many people. We heard before the 2008 crash happened that the hedge funds that collapsed in 2007 were isolated incidents. It was not going to trickle down to the rest of the economy. Well, in 2008, the entire financial system imploded. We heard from the Federal Reserve Bank that there was no housing market bubble in the mid to late 2000s. Well, it turns out there was housing market bubble. That's why people are concerned. And the thing that I want you to understand is this can also create opportunity, but you have to be able to not get emotional and to be able to cut through the noise and actually understand what's happening. Because this is not something that's going to stop tomorrow. This private credit pain looks like it's going to continue at least in the near term, and that's going to have some sort of impact on the economy. That impact could trickle down to the stock market. That's what causes people to panic. It causes people to sell. It causes people to freak out, but it can also create opportunity. What do I mean? Now, I got to give you the disclosure. I'm just a random guy. YouTube investing has risks. You're never guaranteed to make money when you invest. In fact, you will lose money at some point, so make sure you always do your own due diligence and never blindly trust a random guy on YouTube. But if the private credit market is hurting or the banking industry is hurting, that could create an opportunity to invest in when it's hurting. But you have to be careful because anytime you see downturns, hear what I'm saying carefully. Distressed assets can be a great buying opportunity assuming you're not buying something on the way to bankruptcy. When the 2008 crash happened, real estate prices were hit hard. That was when I started investing because you could buy rental properties for pennies on the dollar. When the 2020 pandemic hit, the stock market fell by 35%. That gave investors the opportunity to buy good stocks at a discounted price assuming you didn't buy something on the way to bankruptcy. In 2022, crypto fell by 60%. The stock market fell by 20%. Again, it created a great buying opportunity assuming you bought something that did not go bankrupt. So if you can find good assets that are not going to go bankrupt, that are hit hard because of the economic pain or the industry pain, that can create opportunity. For example, if the banking industry does get hurt, well, I'll tell you something. The banking industry is not going to be extinct. The government's not going to let it happen. Wall Street's not going to let it happen. The Federal Reserve Bank is not going to let it happen. But if the banks are getting hit, you can invest in that industry. There are funds that can give you broad exposure to United States banks. And now you don't have to worry about picking the right bank. Same with the private credit market. If you believe that private credit is not going to die, if the private credit industry is getting hurt, you can invest in private credit ETFs. Now, I'm just going to give you examples so you can see how investors think. I'm not telling you what to invest in, but you can monitor the private credit market with an ETF like BIZD, which will show you what's happening in the private credit market and you see if it's going up or down. An ETF like XLF gives you exposure and shows you what's going on in the financial services industry like banks. Again, I'm not telling you to buy these. What I'm showing you is these are industries that are going through a shake-up. I don't know how long the shake-up is going to last. It might get significantly worse. It might not even get worse. But as an investor, you have to remember that sometimes an industry is going to be affected. Sometimes that industry can impact the entire markets, but you don't want to be panicking. You don't want to be emotional. You want to understand where the opportunity is. That way, you as an investor can find opportunity to grow your wealth based off of where you believe money is going to be moving in the future, not where money was. Again, I'll be covering this more on my workshop today on March 18th. That link is free down in the description. But just understand that in the long term, it is the investors that build wealth. It is not the traders. It is not the people that are emotional. Because even if you had invested your money in the worst times possible, you invested your money in the 2020 peak, right before markets crashed. You invested your money during the 2008 peak, right before markets crashed. You invested your money right in the 2000 peak, right before markets crashed during the dot-com bubble bursting, and you didn't sell, you would still be wealthier today. Because over time, markets go up. But you have to be able to research and know what it is that you're investing in and have a strategy that makes sense for you. So if you got value out of this video, the best thank you is a referral. So if you could, please share this video with a friend, family member, colleague, or fellow investor. That way, we can continue to spread this type of financial education. Thank you. President Trump just confirmed that he wants to get rid of your income tax. Take a listen. I believe the tariffs paid for by foreign countries will, like in the past, substantially replace the modern-day system of income tax, taking a great financial burden off the people that I love.