Big Short's Moses: If Private Credit Goes, Fed Has No Choice But to Bail Out
Summary
- Private Credit Risks: Moses draws parallels between current private credit markets and the 2004-2006 mortgage warehousing cycle. He warns that liquidity drying up will expose leverage, though he believes the Fed would ultimately bail out the sector if it becomes systemic (moral hazard).
- The "GP" Trade: He explicitly advises retail investors to avoid direct private credit funds and instead buy the General Partners (Blackstone, KKR, Apollo) who benefit from fee streams and permanent capital.
- Macro & Debt: He is deeply concerned about US debt hitting $50T by 2028. He views the stock market wealth effect as the primary driver of the economy, making a market sell-off the likely trigger for a recession (reverse wealth effect).
- AI & Efficiency: Cites Block (SQ) cutting 40% of staff as a precursor to a broader "white collar" recession driven by AI efficiency, which boosts corporate margins but hurts the consumer/labor market.
Trade Ideas
"We saw already from BLOCK... firing, you know, 40% of their staff... Your job is for margin expansion to produce earnings. If you see the opportunity to do it... you're going to do it." While Moses worries about the *macro* effect of unemployment, he acknowledges the *micro* benefit to the specific companies: AI and efficiency measures lead to margin expansion. Block (SQ) is the prime example of a company aggressively cutting costs to boost profitability. Long SQ (and similar efficiency-focused tech) for earnings growth via cost-cutting. The cuts signal deeper growth issues or the "white collar recession" eventually destroys consumer spending power, hurting Block's transaction volumes.
"If I were a retail investor right now looking to get myself exposure, I would be buying Blackstone, KKR and Apollo... I'd be buying the parent companies that large PE firms that have permanent capital, that have, you know, a huge fee income stream." While Moses is bearish on the *underlying* private credit loans due to liquidity risks, he is bullish on the *asset managers*. These firms collect fees regardless of underlying performance and offer liquidity (publicly traded stock) that the credit funds do not. Long the Asset Managers (GPs) as a way to play the credit boom without taking the illiquidity risk of the credit itself. A systemic collapse in private credit would eventually hurt the GPs' AUM and fee realization.
"I am very concerned about U.S. debt and debt to GDP... When you start to issue more T-bills instead of ten year notes... you by definition create refinancing and repricing risk down the road." The Treasury is playing games with issuance (short-term bills) to mask long-term yield pressure. Eventually, this refinancing risk hits. If inflation sticks, the long end of the curve (10yr/30yr) must reprice lower (yields higher). Avoid Long-Duration Treasuries (TLT). A deflationary crash would send investors rushing back into long-term bonds for safety.
Danny Moses
Co-Host, The Best Business Show
"Still long gold. Long the gold miners... It's really a play that central banks are incompetent to a degree... If you think the way out of this... is bailing out private credit... gold kind of prices all that." The thesis is fiscal dominance. With US debt approaching $50T and inflation sticking, the Fed will be forced to debase the currency or bail out credit markets (printing money). Gold is the hedge against this "moral hazard." Miners (GDX) are a leveraged play on the metal. Long Gold (GLD) and Miners (GDX). A "soft landing" where inflation cools without Fed intervention, or a strong dollar rally driven by global instability.
Danny Moses
Co-Host, The Best Business Show
"Everybody's energy playbooks out in the last week or so like, Wow, these stocks are cheap. If oil were to even stay at 65, these stocks are... cheap." Energy stocks have disconnected from the immediate spot price of oil. Even if oil prices stagnate or drop slightly (to $65), the sector's valuation implies a margin of safety. This is also a hedge against the geopolitical risks Moses mentions earlier. Long Energy Sector (XLE) as a value/valuation play. A global recession crushing oil demand below $60/barrel.
Up Next
This Bloomberg Markets video, published March 03, 2026, features Danny Moses discussing SQ, BX, KKR, APO, TLT, GLD, GDX, XLE. 5 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Danny Moses · Tickers: SQ, BX, KKR, APO, TLT, GLD, GDX, XLE