The Everything Bubble Is Ending

In an economy built on layers of leverage, the most dangerous part may be the one nobody can see. Nick Nemeth, a public markets investor who has spent months analyzing private credit portfolios, insurance balance sheets, and the interconnected leverage systems that prop up asset prices, returns to TFTC with an update. The defaults are already at 2008 levels in healthcare and consumer sectors. Software hasn't joined yet. When it does, the real trouble begins.

The Leverage Stack Nobody Is Marking to Market

The core mechanism Nemeth describes is a compounding of leverage that has no precedent. Private equity funds take loans against their own portfolios—NAV loans—to fund their capital commitments. The general partners themselves are often five times levered into their own funds, using personal assets like Greenwich homes as collateral for margin loans that finance stakes in funds that may not return capital for 15 years. Then inside the fund, portfolio-level debt is layered on top. Then the companies themselves are bought with high leverage. "It's leverage on leverage on leverage," Nemeth says.