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Credit spreads are widening. Concerns about private lending are growing. Does this mean we are on the verge of collapse? Pure pessimism and fear. Let's look at this realistically. OK. The first thing that is happening is a lot of talk again about withdrawal restrictions at companies like Blue Owl, which is again restricting withdrawals at two business development corporations after massive requests. Essentially, they're saying, " Hey, we'll let you take 5% of your money, even though people want to take 39%." So they limit withdrawals to 5% per quarter to curb outflows and avoid selling the underlying assets for next to nothing. There are
explanations for what is happening, and it is useful to look at the charts to understand how systemically important this rise in credit default swaps (protection against defaults in private lending) is and where we are in terms of credit spreads in general. So, first you need to know that two things are happening here. There are credit spreads, and there is the actual yield that is being paid out now. Both indicators show growth on the charts, which looks spectacular on television when people see them and exclaim, "Oh my God, look, we see this spread here."
OK. So this top panel is the spread. This is essentially how many additional basis points investors demand for owning high-yielding assets. When you hear "high yield," think junk bonds, right? Compared to a wider range of government bonds or simply the risk-free rate. Typically, we argue that when this line is stable, we demand, say, 2.7% above the risk-free rate. So, if the risk-free rate is 5%, let's picture this to simplify it as much as possible . I think that always helps. If the risk-free rate-and we call it that because we believe the U.S. government will never default- if people demand 250 basis points more, that means they're demanding 7.5% for " junk," essentially.
Also known as HY, or high yield. Of course? As people's concerns about the economy or the ability of companies to service these debts grow, they demand more here. So they can say, "You know what? Now we want, let's see, it's already 325." We want 325 basis points. Of course? Well, that means we don't need 7.5% anymore, we want 8.25 %. This is what we expect as compensation for providing a loan to this business. And that's what you see when this top line grows. The bottom panel shows the average yield that companies are currently paying on bonds with a "three C" rating. And it's displayed simply as a regular percentage. So if you're a Class C company, you're currently paying about 10%. I mean, that's
about the level that Workhorse is at. So, there are some important conclusions that can be drawn from these graphs alone, telling us a little bit about the private market and the tensions, and also what they don't really show. The first thing we know is that one of the reasons for such rapid growth, especially on this hockey stick-shaped part, is the general rise in profitability. 10- year Treasury bonds have jumped sharply in the last 2-3 weeks from 4.9 to 5.27, which is what I call a peak. I could be wrong, but the bottom line is that some of this growth is purely mechanical due to rate increases. But this does not explain the increase in the spread. So, to be fair, the spread is also increasing. Why might the spread increase? Because there is a greater
risk when companies are forced to pay higher rates, and this also affects artificial intelligence. This is where it shows. When a company like CoreWeave has to pay higher interest, or a company like Enphase has to pay higher interest when they go public when they're losing money, the risk is that these companies are likely to not be able to pay their bills, and then they'll need bailout funding, and people will start to worry, "Oh, the AI sector is about to collapse, and the whole economy is going to go down the drain." Which, frankly, if the AI sector collapses, the entire economy will really go down the drain. This will be very bad. The New York Times published an article about how AI is powering a significant portion of the economy; Mark Zandi
of Moody's Analytics estimates that 0.6 to 0.7 percentage points, or about 30% of inflation-adjusted growth, is attributable to AI. I generally think this is an underestimate. I think GDP is growing almost exclusively due to artificial intelligence. It's just harder to isolate. So a company growing because of rising health insurance premiums or whatever might not call it AI, but it could be a consequence of AI, and they could gain more pricing power, because who knows? They are able to raise prices better because AI helps them do it better. I do n't know. But the point is, I think the economy can grow in ways that don't count as AI growth, even though it's actually growing because of AI. And in their Times article, they make it clear: Look, earnings
are growing faster than stocks right now. We see that P/E ratios have declined because over the past 3 months, expected earnings for S&P 500 companies have increased by over 29% in just 3 months. It may be a bubble forming, but it is actually very conducive to low You know, we made a prediction that the Nasdaq 100 would reach $750 by next Friday, which is October 9th. We have already reached this level. And we have another forecast for the end of the year. And spoiler alert: we are very, very optimistic about the economy. But we also understand very well that everything can go wrong. And now I'll take this moment to say: if you want all my predictions- short-term, medium-term, and long-term- join us
at meetkevin.com. So go to meetkevin.com, you will be redirected here to our reinvest.well, I Reinvest is a membership where you get every one of our products for life in one package. A lifetime subscription to Alpha membership, what we do every morning: those short-term, medium-term and long-term forecasts. This morning we sent a trade alert to sell a put option. Well, I think we did a great job with this option. You also receive these trading alerts. You get the Reinvest terminal, which is coming out soon, and the full stock system update that we're preparing for the end of the year, which is very exciting. You get the Reinvest Homes platform. You get all nine courses, live streams for
participants, and the Blue business plan launching in the first quarter. Dude, you get a bunch of everything. Lifetime access to this. Go to meetkevin.com and join us. If you join us before the end of the year, you will never have to pay any recurring fees for these products. No data licenses, no monthly fees, nothing like that. If you join in 2027, you will have to pay an annual subscription fee for this product instead of lifetime access. So consider it on meetkevin.com. Right now, I think the stock market offers a lot of good deals.
We talk about them a lot in the Alpha membership, but for example: I predicted Nvidia to break above 227. It finally reached an all-time high, albeit a little higher, but I still see a lot of opportunity for Nvidia. It currently trades with a PEG ratio of just 0.7. So I agree with The New York Times that companies are actually getting cheaper, not more expensive. But there are risks, as a sharp market decline will hurt the economy due to the wealth effect acting in the opposite direction. I agree with that. However, in my opinion, hedging should not be done by shorts in the market, but by repaying debts. But I don't think the stress situation in private lending is that critical right now If you look at this
graph that we just marked and zoom in here, a lot of it can be explained by rising rates, which puts pressure on CCC-rated companies that could go bankrupt. Credit stress is really rising, especially when the 10-2 curve is above 50. We're at about 44 right now. We've risen significantly, but we haven't reached the real shock zone yet. In fact, you can see it here. Spreads are not as high as they were at the beginning of our war with Iran. Credit spreads are nowhere near as high as they were here in 2025. So yes, they are growing, but compared to what we experienced in 2025, we are doing well.
You know, the peak of fears about private lending was last year. If you look at the five-year chart of spreads on high-yield loans. But that's enough for you. Well, because. People panic like little children because of the number on the right side of the graph. I understand some people don't want to delve into this nonsense. This is normal. That's why I make these videos. That's why we prepare our alpha reports. That is why we are summarizing our results. Because I don't think it's anything serious. And if you enter into a bad deal, that hockey stick graph on the right will immediately go down because people will see a decrease in overall interest rates, and therefore the credit pressure on these companies will decrease. For me, this is not a problem.
In fact, I think this creates a buying opportunity. Now, yes, I know people are saying, "Oh, but Kevin, what about the credit default swaps on Oracle? The credit default swaps on Oracle continue to rise." Well, you have to remember that credit default swaps are more than just an indication that we think a company is going to go bankrupt. CDS is a hedge fund hedging tool. So if you have a large exposure to data centers, of course you need protection if you are a hedge fund, because that's what the People forget that while hedge funds are trying to make more money on artificial intelligence, the demand for.imagine. Hedging is growing. So yes, this doesn't necessarily mean Oracle will fall to zero.
Yes, CDS on Oracle are rising. I know. But there is a reason for this. In fact, the other day we were looking at Oracle's fundamentals. I have to say, they're not as bad as they were last year. I really think they are in the process of bottoming out around that 139 mark. That's about where they are right now I really think they are in the process of forming a bottom. We did a deep fundamental analysis of this during the live stream for the course participants, and the PEG ratio that they have on their balance sheet right now, man, you should look at that Look for it. You know, when you join, you can literally sort through the stocks and find out when we last talked about them. And we did the same with Nike in our Alpha membership.
We looked at Nike a year ago. A year ago we said, "This is a disaster." They have no pricing power. And then we did an update in December and said, "Guys, it's still worse than we thought." And look what's happened to Nike since then. In October, they cost $70. In December it was $60. It's now $33. The situation is only getting worse. Fundamentals tell you stories, and if you don't fundamental analysis, at least come read or listen to ours. Remember, this is on meetkevin.com. But ultimately, for me, this whole story with private lending, especially with all this talk about buying back shares in Blue Owl, I get the point, but it seems to me that it's just a small part of the
market. This will become a problem if everything starts to fall apart. You know, there is over a trillion dollars in private lending. But I think the level of fear we're seeing right now is a bit exaggerated. And these buyouts that are happening, I think, mean that people are saying, " Look, I'd rather choose Nvidia than keep my money in your stupid private equity fund with CCC-rated venture capital or whatever, because I'm going to get a better, safer deal there." Which makes sense to me. Or maybe people want to take their money out of there and put it into House Hack, reinvest. Although you can't do that now.
We don't have a fundraiser. But I'm just kidding. Okay, dear SEC, this is not a fundraiser. This is not.I'm not advertising anything. I'm not trying to persuade you to buy Reinvest. I think that's pretty cool. But in terms of market opportunities, yes, I think there are a lot of situations where people ask, "Why?" Why should I be tied to this when I can get a great deal on something else right now? That's why, I think, we're seeing such an outflow from private lending. And in my opinion, it's a bit exaggerated now. But hey, you know, maybe you're the one who sees the benefit in private lending, and you know you'll eventually say, If you liked this video, check this out. I think you'll like it.
Why not publicize these things you told us about here? I don't think anyone else knows about this. We'll try some advertising and see how it goes. Congratulations, dude. You've done so much. People love you. People look up to you Kevin O'Leary, Pat Beth- David, financial analyst and YouTuber. Meet Kevin. It's always nice to hear your opinion.
