David Rubenstein 5.0 7 ideas

If there's any part of the world's economy that is not subject completely to what the US wants, it's energy prices. Trying to jawbone down energy prices doesn't often work. If the Straits of Hormuz are blocked for some time, that's going to have a big impact. Political administrations cannot control oil prices through PR campaigns. Because energy prices are dictated by global supply and geopolitical conflicts, ongoing tensions will keep prices elevated. This provides a strong fundamental floor and upside catalyst for direct oil trackers and broad energy sector equities. LONG oil and energy equities as structural supply risks and geopolitical conflicts outweigh domestic political pressure to lower prices. A sudden peace agreement or rapid de-escalation of global conflicts would remove the geopolitical risk premium, causing energy prices to drop.

My guess is that probably you won't see any rate cuts. Energy prices are probably going up a little bit more than the CPI numbers suggest today. The market has been eager for rate cuts, but rising energy costs will keep inflation stickier than backward-looking CPI reports indicate. This will force the Federal Reserve to hold interest rates higher for longer, which is a hostile environment for long-duration Treasury bonds. SHORT long-duration Treasuries as sticky, energy-driven inflation forces the Fed to delay anticipated rate cuts. A sudden macroeconomic shock or severe recession forces the Fed into emergency rate cuts regardless of energy-driven inflation.

Private credit is in relatively good shape. A relatively small percentage of them have had any default issues. I don't really think there's a big problem right now in private credit default ratios. The broader market is overly fearful of systemic defaults in private credit, specifically regarding software loans. Because these portfolios are actually resilient and a near-term recession is not expected, major alternative asset managers will continue to collect strong yields and management fees without suffering the massive write-downs the market is pricing in. LONG alternative asset managers with heavy private credit exposure, capitalizing on the disconnect between market fear and actual portfolio performance. An unexpected, severe economic recession could trigger the exact wave of defaults and liquidity stress that the market is currently fearing.