Mark Rowan 1.9 11 ideas

Rowan warns of a coming "shakeout" in the private credit industry, specifically citing defaults on loans to software companies. He notes this will not be a short-term event. As the "easy money" era ends and defaults rise, the private credit sector (which has grown to trillions) faces a structural stress test. Firms with poor underwriting standards will suffer. AVOID. The sector faces a 12-24 month period of pain and consolidation. Top-tier managers (like Apollo/Blackstone) may actually gain market share during the shakeout, making a blanket short dangerous.

Mark Rowan states Apollo has "zero software" in their private equity or credit books. He notes software stocks are down significantly but credit hasn't repriced. Dawn Fitzpatrick predicts a "painful 18 to 24 months" for the software sector shakeout. Software companies were the darling of the LBO boom (30% of the market). If AI disrupts their moats (coding becomes cheap, SaaS pricing power erodes), their leverage becomes unsustainable. This creates a toxicity in software-heavy ETFs. AVOID or SHORT software sector ETFs. AI integration actually accelerates software margins rather than destroying them.

Rowan identifies massive long-term capital needs: "This is manufacturing. This is energy. This is AI and data. This is infrastructure... measured in trillions." The "re-industrialization" of Japan and the build-out of AI capabilities require physical infrastructure. The grid, power generation, and data centers are the "picks and shovels" required before the digital economy can function. LONG Infrastructure and Energy sectors supporting the AI/Data buildout. Regulatory hurdles in energy policy or supply chain bottlenecks.

Japan has moved from deflation to ~3% inflation. AG Wadah states, "Cash has been the king... But with the inflation out there close to 3%, cash is not the right assets to own... Stocks are the [better] assets." For 30 years, Japanese households and corporations hoarded cash because goods got cheaper. Now, inflation erodes cash value. This forces a massive rotation of capital out of savings/bonds and into the equity market to preserve purchasing power. LONG Japanese broad market indices. DXJ is preferred if the Yen weakens; EWJ for unhedged exposure. A return to deflation or global recession crushing export demand.

Japanese corporate CFOs and global markets are shifting away from bank debt and public equity for financing. There is a "third way" of finance—Private Credit—filling the gap for investment-grade companies needing long-dated capital. Japan is specifically highlighted as a market seeing "extraordinary growth" in this area. LONG Apollo (APO) as a primary beneficiary of the secular shift toward private credit, particularly in untapped markets like Japan. A global recession or liquidity crunch could freeze private credit origination and increase default rates.