The Cockroach Census
“The worst of loans are made in the best of times. We’ve seen 17 years of good times. When the stuff hits the fan, or as Warren Buffett would say, when the tide goes out, we will find out whose credit analysis was discerning.” — Howard Marks, March 2026
There is a particular kind of confidence that only billionaires and central bankers can muster. It is the confidence of being inside the room where the books are kept — and being paid handsomely to insist those books are sound.
On May 6, the Financial Stability Board — the global body chaired by central bank governors and finance ministers — released its formal Report on Vulnerabilities in Private Credit.
The 47-page document, signed off by representatives from every G20 jurisdiction, is the kind of paper that no retail investor will read, and that every major allocator will pretend they’ve already digested. The findings are dry. They are also, when read carefully, alarming:
“Banks provide financing to US BDCs often through borrowing-base facilities... Studies show up to 90% of bank lending to BDCs takes the form of credit lines, which BDCs frequently utilise. The average ratio of bank loan commitments to total debt for BDCs has risen over time... US banks’ private credit loan exposure nears $300 billion.”
The room where it doesn’t happen | Reuters
Translated from regulator-ese: the supposedly separate worlds of regulated banking and “shadow” private credit are, in fact, the same world.
The banks fund the private credit funds.
The private credit funds lend to leveraged borrowers.
The borrowers — increasingly — are software companies whose moats are being eroded by generative AI.
The whole structure has been called, with admirable understatement, an “indirect credit supply channel.”
It is, of course, exactly the structure that was supposed to be impossible after 2008.
A week after the FSB report, on May 14, Capital Economics published an update bluntly titled “Listed BDC data highlight mounting private credit distress.” On May 20, they updated it again. The Bank for International Settlements — the central bank of central banks — quietly noted in its Q1 2026 bulletin that “software companies’ stocks collapsed by almost 30% between October 2025 and February 2026, while BDCs’ stock prices fell by about 10% on average, and discounts to net asset value... deepened.”
The cockroach census, in graph form | BIS
Howard Marks himself — the most respected voice in credit, the man who literally wrote the book on Mastering the Market Cycle — published a memo titled “Cockroaches in the Coal Mine.” And then, in his next breath, told CNBC: “I don’t think today’s issues are systemic in the sense that there’s something wrong with the lending system.”
This is the position of nearly every senior credit professional on Wall Street today. The plumbing is fine. The defaults are idiosyncratic. The redemption requests are technical. Apollo’s CEO has called the concerns “hysteria.” The SEC chair has said non-banks pose no systemic risk.
We have heard this song before. We know how it ends.
Below the paywall: the precise location of the four cockroaches we believe regulators are quietly tracking, the single name we expect to be the next “First Brands moment” before October, the BDC ticker our work suggests is most vulnerable to NAV markdown in Q3, and the hedge that costs almost nothing but pays asymmetrically if even one of these calls is correct…