Valuetainment - November 22, 2025


＂Give My Money Back!＂ - Investors PANIC As BlackRock Linked HPS Faces $400M FRAUD Investigation


Episode Stats

Length

10 minutes

Words per Minute

195.82593

Word Count

2,058

Sentence Count

156

Misogynist Sentences

2


Summary


Transcript

00:00:00.000 Blue Owl, okay, plunges to 23 low after blocking exit from fund.
00:00:08.200 Okay, so let me read this to you.
00:00:09.440 I know Jeff, you, and Tom both have a lot to say about this.
00:00:12.780 I'm going to come to him.
00:00:13.420 We'll wrap up the podcast with this here.
00:00:16.180 So Blue Owl Capital, Inc., shares have fallen to their low since 2023 December
00:00:20.140 after the alternative asset manager restricted investors from redeeming capital
00:00:23.340 from one of its oldest private credit funds.
00:00:25.700 Shares dropped almost 6% on Monday, closing at 13.78.
00:00:28.860 The firm announced earlier this month that it would merge its $1.8 billion
00:00:32.420 non-traded business development company, Blue Owl Capital Corporation,
00:00:36.480 to with its $17.6 billion publicly listed vehicle, Blue Owl Capital Corp, or OBDC.
00:00:43.840 But investors in non-traded fund won't be able to redeem their capital
00:00:47.120 until the merger closes, which is expected to happen early.
00:00:49.760 Next, you're invested in the acquired vehicle, will swap their holdings for OBDC stock.
00:00:55.420 That means they could see paper losses as much as 20% if the deal closes that current share price,
00:01:02.540 given that OBDC shares are trading at much higher of a discount compared to the value of the fund business.
00:01:07.900 Jeff, thoughts on the story?
00:01:09.580 There is a growing problem in what's called private credit or shadow banking,
00:01:13.400 whatever term you want to talk about it.
00:01:15.020 It is potentially, it could, if it continues to go in this direction,
00:01:18.500 it could turn into a financial crisis.
00:01:20.780 And the reason is because a lot of this private credit,
00:01:23.480 without getting into really the deep weeds here,
00:01:25.520 it's just a source of relending in the economy.
00:01:28.040 So you have these investment funds that borrow,
00:01:30.360 they get seeded by wealthy investors, a lot of hedge funds, things like that.
00:01:33.800 They borrow in wholesale markets like repo to leverage up the returns.
00:01:37.500 And it's basically these investment funds,
00:01:40.440 these private credit shadow bank funds are blank balance sheets.
00:01:43.920 They've been heavily involved, huge volumes over the last several years
00:01:46.780 because the bank, regulated banks haven't been lending in risky sectors of the economy.
00:01:51.260 So private credit funds have been absolutely banging the table on volume, volume, volume in credit growth
00:01:57.780 without really paying a whole lot of attention to the fundamentals, to the underwriting.
00:02:03.000 Underwriting has gone by the wayside here.
00:02:04.960 There's that word again.
00:02:05.540 Yeah, exactly. And it's a very important word.
00:02:09.100 We see this in every credit cycle in human history.
00:02:11.460 You know, greed takes a hold of everybody.
00:02:12.860 You rationalize away the risk, all the kind of stuff,
00:02:15.020 all the bubble behaviors that we associated in 2008,
00:02:17.760 we're seeing it again here in 2025 in private credit.
00:02:21.920 So what that could potentially lead,
00:02:24.140 what's really happening is there's a lot of losses
00:02:26.340 because there was a lot of dumb lending that took place over the last several years
00:02:29.120 as they were voluming up and growing and whatnot.
00:02:32.360 We don't know how, because it's sort of in the shadows,
00:02:35.120 we don't have a real idea of what those losses might actually end up being.
00:02:39.360 And of course, that feeds into mistrust in the marketplace.
00:02:42.200 And it could from there potentially spill over into something bigger.
00:02:46.400 So what we're trying to figure out is how many losses there are and who has them.
00:02:50.880 And if there are enough of them, who is going to end up paying the bill?
00:02:54.280 The problem with that process of a downside of a credit cycle is that it can spill over into the general marketplace,
00:03:00.360 where if there's not enough information, and believe me, there is not,
00:03:03.880 then people just say, screw this, I want my money back.
00:03:08.180 This is what happened in the earliest stages of the 2008 crisis.
00:03:11.240 And I don't want to get, I mean, I'm not making a comparison to 2008 in any other way,
00:03:13.940 then that's just the process it takes.
00:03:15.940 What you had is you had a bunch of hedge fund investors that were earlier exposed to subprime mortgages
00:03:20.220 and really subprime mortgages that looked a lot like this, securitized structures and whatnot.
00:03:25.220 You had hedge funds investors that said, I don't know what's going on here.
00:03:28.640 I'm not getting any answers from my fund managers.
00:03:30.740 They're not telling me the truth.
00:03:32.160 All I know is that there's fund guys over here that are losing tons of money.
00:03:36.040 I don't want to be one of those.
00:03:37.720 Give me my money back.
00:03:38.620 So what you had was a bunch of hedge fund redemptions hit the marketplace,
00:03:42.300 which then created a cascade of selling that became the 2008 crisis.
00:03:47.280 So what we're seeing here with the Blue Owls story is the latest in a series of escalations
00:03:52.700 moving in that same direction.
00:03:53.960 It started with Tricolor.
00:03:55.380 Then it was First Brands.
00:03:56.860 Then it was a couple of small regional banks that were exposed to First Brands.
00:04:00.840 Then it was Primalend.
00:04:02.260 Then we started getting notice from UBS.
00:04:04.900 UBS said we're shutting down a couple of our hedge funds.
00:04:07.140 Why?
00:04:07.420 They started getting hit with redemptions.
00:04:09.900 And so this Blue Owls story is, again, the same thing.
00:04:13.120 Hedge fund investors are saying, give me my money back.
00:04:16.420 And these funds are not even exposed to the bankruptcies that we see so far.
00:04:20.960 And so what that potentially tells us is that the investors in these institutional spaces
00:04:25.920 are getting cold feet about the entire space.
00:04:29.420 And if that's the case, then you have what started out as potentially a credit crisis
00:04:33.900 starts to become a liquidity crisis.
00:04:35.320 Well, exactly.
00:04:38.160 And now for everybody that was listening to that, I'll give you an easy visual.
00:04:43.100 In the movie, The Big Short, you have the wealthy individual, I forget what his name was,
00:04:49.600 comes in and sits down with Michael Burry and says, we want to take our money out.
00:04:56.120 Oh, you can't do that right now.
00:04:57.760 I'm freezing all withdrawals.
00:05:00.480 He says, he says, Michael, you can't do this.
00:05:03.000 I want my money back.
00:05:03.760 I'm calling my attorney.
00:05:04.680 Remember that whole interchange?
00:05:06.000 That is exactly what we're talking about here.
00:05:08.100 And Blue Owl was trying to merge things together.
00:05:12.680 They were literally trying to build the Jenga that was built on the table in The Big Short,
00:05:20.400 where they talk about all this, because they were trying to take Blue Owl 1 and Blue Owl 2,
00:05:25.640 put them together so that they could have diversified risk.
00:05:29.860 And they said, you can't do a redemption while we're putting this together.
00:05:33.340 Well, then guess what?
00:05:34.420 Then the merger broke.
00:05:35.400 They couldn't get it together.
00:05:36.540 They couldn't get all the approvals they needed.
00:05:38.100 So it stopped.
00:05:39.600 Meanwhile, we covered Tricolor last week on used cars, where they found that the asset
00:05:47.140 value of all the used cars that were out there was less than the value of the subprime auto
00:05:52.800 loans here, which is why everybody was saying, oh, it's all subprime, subprime.
00:05:56.380 But it's not.
00:05:57.800 Now you have this happening.
00:05:59.160 And by the way, U.S. regulators have fired the first shot.
00:06:02.440 And it's called HPS Partners.
00:06:04.160 HPS Investment Partners, they're a private credit arm of a company called BlackRock.
00:06:12.200 And they're responsible for running highly leveraged but high returns.
00:06:18.180 So their charter, go find things that maybe might be untenable for other people, will be
00:06:24.260 smarter.
00:06:25.140 So they put $400 million back by receivables.
00:06:28.820 The receivables of the company's path appear to be fake future sales.
00:06:34.040 Wow.
00:06:34.900 So now BlackRock's got HPS going, wait a minute, these guys lied to us?
00:06:38.640 The telecom guys lied to us?
00:06:39.600 And they never checked.
00:06:40.560 So now BlackRock is like, and BlackRock's only saying, it's not us.
00:06:44.580 It was a division of us at arm's length that we call HPS.
00:06:48.200 Baloney!
00:06:48.880 It was you!
00:06:49.840 It was HPS.
00:06:50.780 You knew them, but you've deliberately set it up to keep some distance there.
00:06:54.880 But now the federal investigators are coming in here going, hey, you 18-year-old college
00:07:01.200 boys got beer in there.
00:07:03.000 Are you having a party you shouldn't be?
00:07:04.960 And so that's the knock at the door.
00:07:06.660 So what we're seeing here is some things out there, when times get good too long, Pat,
00:07:13.620 what happens?
00:07:14.260 People get sloppy.
00:07:15.520 You've talked about it.
00:07:16.400 You've talked about it so many times in the businesses that you've ran, that I've watched
00:07:22.060 you, that I've sat next to you and watched you run them.
00:07:25.180 When things get really good, sometimes that's when people get sloppy or get a little careless
00:07:29.700 or cut corners.
00:07:30.860 Ladies and gentlemen, your private capital market, and it's coming.
00:07:34.640 The problem is that the private capital market is huge.
00:07:37.980 It's gotten to be really huge, so it actually can impact a lot more than just BlackRock.
00:07:41.660 Why in 24 did BlackRock agree to acquire it?
00:07:44.540 They wanted the return.
00:07:46.000 So you guys have figured out European telco, and you've figured out how to get some of
00:07:49.800 the bonds on the equipment building they have there, and you've done this?
00:07:52.540 Yeah, I'll give you $12 billion for that whole stack.
00:07:54.560 That's what they did.
00:07:55.480 Now U.S. investigators are going back going, wait, wait, wait, wait, wait.
00:07:58.780 You're telling me some of this was fake receivables and sales that didn't exist?
00:08:02.500 So BlackRock's going to say, I didn't know that.
00:08:05.240 You were a bad underwriter.
00:08:06.880 Where's your diligence?
00:08:07.520 Nobody wanted to underwrite.
00:08:08.580 Everybody wanted to do.
00:08:09.560 It's bubble behavior.
00:08:10.620 Everybody just wants to get the deal.
00:08:11.820 I want the $12 billion because I need the return, and I ran the red light on diligence.
00:08:15.540 We know personally, we know a company that is at that seven-year mark of having raised
00:08:21.340 a ton of money, and those guys are coming and saying, hey, we need that money back.
00:08:26.400 We need that money back.
00:08:27.220 We don't care how you get it.
00:08:27.960 We need that money back.
00:08:28.860 You've reached that moment here.
00:08:30.400 Did you have any thoughts on this?
00:08:31.260 I'm going to go to the Tim Cook story.
00:08:32.560 Just quickly, I think it's crazy to me that nothing's happened in the last 15 years
00:08:36.420 where there's been this great growth in the stock market and asset prices.
00:08:39.640 So I'd be shocked if something didn't give eventually, just like he's saying.
00:08:43.300 If you've got big plans for 2026, I am telling you right now, I can't say how many conversations
00:08:47.820 we're having about business planning.
00:08:49.040 There's a reason why we went less than 22 hours to Dallas and come back because we want
00:08:54.000 to see exactly what's happening with 2026.
00:08:55.960 We're planning for our family, for our businesses ourselves, and if 2026 is a big year for you
00:09:00.880 as well, I want you to watch this clip.
00:09:02.420 Rob, can you go to the clip with the Jenga to show them what happens when it comes on to
00:09:07.420 business plan and how all of these things are necessary?
00:09:10.320 Go ahead, Rob.
00:09:11.420 Business is a lot like Jenga.
00:09:13.200 Every piece matters.
00:09:15.280 You need a vision.
00:09:16.940 Do this carefully.
00:09:17.820 Oof, oof, oof, oof.
00:09:20.040 You need capital.
00:09:21.440 You definitely need capital.
00:09:23.940 Let's put this here.
00:09:24.640 Ooh, listen, hanging on one piece here, by the way.
00:09:27.120 You need the right team.
00:09:28.780 For sure.
00:09:29.780 This almost fell off, by the way.
00:09:30.960 You need sales.
00:09:33.140 As good as this looks, if your foundation isn't built on a good business plan, you know
00:09:39.720 what happens?
00:09:40.220 The whole thing crumbles.
00:09:46.720 If you have big plans for 2026, on December 12th, I'm hosting an event called the Business
00:09:54.680 Planning Workshop, where all day we go through the 12 building blocks of writing an effective
00:10:00.900 business plan.
00:10:01.680 So this doesn't happen to you.
00:10:03.200 If you have a good register, click on the link below.
00:10:05.700 Let's spend an entire day together on December 12th.
00:10:08.860 Looking forward to seeing you there.
00:10:10.560 Folks, click on the link below.
00:10:12.100 Get registered.
00:10:13.560 You can watch it with your friends, family.
00:10:15.540 And this is going to be people watching.
00:10:17.260 It's from 100 plus countries.
00:10:18.540 And you can find a way to just get registered at the lowest level.
00:10:20.960 Or you can find a way to be on the screen so everybody can see each other.
00:10:23.300 And at the end, we'll do a Q&A for 90 minutes.
00:10:25.040 If you enjoyed this video, you want to watch more videos like this, click here.
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