'Arrogance' in the private-credit market; Meta Platforms plans sweeping layoffs due to AI costs; Barron's published a beautiful piece about my friend Guy Spier; I ran the NYC Half Marathon
1) Following up on the turmoil in the private-credit market, which I wrote about last Thursday and Friday…
Last night, the Wall Street Journal reported on blunt comments made by John Zito, co-president of the asset-management arm of Apollo Global Management (APO), one of private credit's largest players:
Zito called out "arrogance" in private markets, predicted that a private-credit loan made to a generic small or midsize "Joe Software Company" might recover 20 to 40 cents on the dollar and said Federal Reserve Chairman Jerome Powell is needling President Trump with his inflation commentary, according to audio recordings of the comments reviewed by The Wall Street Journal.
When asked "where he sees the pain in Apollo's private-equity portfolio or those of other firms," Zito replied:
"I literally think all the marks are wrong... I think private-equity marks are wrong."
An Apollo spokesperson clarified that Zito was referring to software companies, to which the firm has very low exposure.
This Bloomberg article from last week reports on Deutsche Bank's (DB) huge private-credit exposure, also highlighting software companies:
Deutsche Bank AG flagged a €26 billion ($30 billion) exposure to private credit, an asset class that's grappling with fund redemptions, scrutiny of underwriting standards and the impact of AI on some borrowers such as software makers.
I'm not surprised that the German bank has a lot of exposure to this troubled asset class, as it has a well-deserved reputation as the dumbest of dumb money...
But even I was shocked to read that it's planning to increase its exposure:
While Deutsche Bank is warning of risks in private credit, its asset management arm DWS Group plans to expand its own private credit offering. The bank said it intends to widen distribution through selective regional expansion and the joint development of innovative products and digital investment solutions with its private bank.
Anyone with money in this sector should redeem as much as they can, as fast as they can.
2) Over the weekend, Reuters broke the story that Meta Platforms (META) is planning mass layoffs...
Reportedly, this could affect 20% or more of the company. The reason? AI:
... Meta seeks to offset costly artificial intelligence infrastructure bets and prepare for greater efficiency brought about by AI-assisted workers.
This line in particular caught my eye:
[CEO Mark] Zuckerberg has alluded to efficiency gains from the investments, saying in January he was starting to see "projects that used to require big teams now be accomplished by a single very talented person."
It's consistent with this X post, which a friend with connections inside Meta tells me is true – that the company is cutting costs by getting rid of programmers.
Here are the first few paragraphs:
This is further evidence of how AI is displacing even the most skilled humans. There are sobering implications for society...
But it makes me more bullish on Meta's stock. And the market agrees, as META was up roughly 3% this morning.
3) I don't think I've ever received as much reader feedback as I did from two e-mails last month (here and here) about my friend Guy Spier's final annual letter.
After 26 years, he's closing his hedge fund, Aquamarine Capital, because he's battling grade 4 glioblastoma (brain cancer).
Last week, Barron's Andy Serwer wrote a beautiful piece about Guy's story. He begins:
Spier, who lives in Zurich, was skiing with his family and on the ride home had a seizure. (Luckily, his wife was driving.) Then came the gut punch: "The histology confirmed grade 4 glioblastoma, or GBM."
I closed my eyes and sighed. GBM is a fast-growing type of brain cancer that manifests in uncheckable tumors. It is incurable, with a median life expectancy of 12 to 18 months – in other words, a death sentence. My best friend Matt succumbed to GBM; so did John McCain, Ted Kennedy, and New York Mets catcher Gary Carter. I remember Matt telling me as he lay dying, "You don't want to go like this."
Serwer then shares the lessons Guy has learned from his situation:
"Whatever gifts nature gave you, use them. Don't have any shame. So long as you are not doing damage to yourself or anyone else, go on and enjoy them. I used to look disparagingly on people who used their looks to get ahead. No longer."
"Delete envious people."
"Keep a positive attitude and don't complain. I've tried all the other things and they don't work."
"Meditation – it's not worth it... meditation activates the reptilian freeze mechanism, so it is counterproductive. What works for me is movement and curiosity."
He concludes:
Spier says the response to his letter has been "massive and overwhelming," with 8,000 downloads and counting. Spier and his team have received over 700 emails.
Small wonder. These are words to contemplate and remember.
I look forward to seeing Guy in Omaha, Nebraska on May 1, the day before the Berkshire Hathaway (BRK-B) annual meeting, when he will once again host his annual ValueX BRK gathering.
4) My youngest daughter Katharine and I ran the NYC Half Marathon yesterday, which had a record 30,204 finishers.
She ran a blazing 1:44:21, and I was a respectable 1:47:18. Katharine finished in the top 10% among all women and in her age group, while I was top 36% and 25%, respectively.
We started in Prospect Park, went through downtown Brooklyn, over the Brooklyn Bridge, up FDR Drive, across 42nd Street, through Times Square, up Sixth Avenue, into Central Park, and finished at Tavern on the Green.
We ran together for the first six miles, but when I made my first quick stop for Gatorade, I fell behind by 50 yards and never caught up.
But I have plenty of excuses! She has been training six days a week, while I only decided to run it two weeks ago. Plus, she's 35 years, six months, and 28 days younger than I am (I had to Google the exact difference)!
But seriously, we both had great races, beat our goals, and had so much fun. The NYC Marathon awaits, which we're both planning to run on my 60th birthday on November 1.
Here are some pictures (I posted more on Facebook here):
And here's a short video made by our loudest cheerleaders, my older daughters, Alison and Emily. My wife Susan, her parents, and Emily's boyfriend Phil also came out to cheer us on.
It was 35 degrees and windy at the start, so you might ask why I gave my shirt, hat, and phone belt to Alison and Emily at the fourth mile. I wondered that myself as I froze for the next nine miles... But in big races, I shed every ounce I can to go just a little bit faster.
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.