Podcast Summary: "True or False – Private Credit Is This Generation’s Subprime"

Podcast: The Compound and Friends
Hosts: Downtown Josh Brown, Michael Batnick
Guest: Garrett Baldwin (Author, Research Economist, AJB Capital Research)
Release Date: March 6, 2026

Episode Overview

In this episode, hosts Downtown Josh Brown and Michael Batnick welcome research economist Garrett Baldwin for an in-depth discussion on current market dynamics, private credit risks, and the shifting cycles in business and investing. The team explores if private credit is the "subprime" of this era, the role of liquidity, changing investor behaviors, and their impact on everything from oil prices to rotation among market sectors. They also tackle technology’s influence, the psychological climate of investors, and actionable trading/investing frameworks.

Key Discussion Points and Insights

1. Market Recap & Initial Context

Market volatility and geopolitics:

• Discussion opens with Josh Brown referencing recent Middle Eastern conflict, market reactions, and the rapid normalization in asset prices.
• Garrett Baldwin (03:51): "We've just been range bound... stocks up more than 5%, up 10%, but the Mag 7 continues to bleed. It goes back to liquidity peaking and shift toward defensives, energy, commodities."
• The surprise: Even after alarming global news (e.g., missile attacks), markets bounced back quickly. (05:03)
• Michael Batnick: "Futures opened down 1.2%. That’s not a lot given the headlines… The U.S. as a net exporter of energy gives our market resilience compared to Europe or Korea." (08:15)

2. Liquidity, Flows & Market Structure

The importance of passive flows:

• Passive investing/persistent inflows act as a "price-insensitive buyer." (10:24)
• Josh Brown: "That's the secret undercurrent people haven't wrapped their heads around. There's a price-insensitive buyer coming in almost no matter what happens."
• Discussion on whether passive investing distorts price discovery; agreement that even most 'active' managers hug benchmarks, reinforcing trends. (11:23)

Trading amplification:

• The algorithmic, high-speed nature of modern trading means news and reactions happen much faster—so do reversals.
• Josh Brown (24:58): "Algorithms have made all intuitive thinking, at least in the short term, completely worthless... The machines are speed-running that process in minutes rather than weeks."

3. Geopolitics, Technology, & Market Sentiment

AI and Modern Warfare:

• Technology (drones in Ukraine, AI in Middle East conflicts) is reshaping both warfare and market reaction paradigms.
• Josh Brown (11:59): "Every time Iran launches, there's an AI DOD effort to pinpoint the launch and wipe out the launcher. That's part of why we're not contending with $100 oil."

Investor psychology:

• The emotional landscape for investors feels anxious, not euphoric, despite market resilience (21:24).
• Michael Batnick: "I think people are very anxious and the market has swallowed so much... There are so many more buyers than sellers despite the way we all feel."
• The "vibe session"—hard data (market) says one thing; soft data (investor feelings) says another.

4. Cycles, Rotation, and Trading Approaches

Market sector rotations:

• 2023-2024: S&P 500 returns heavily concentrated in top 10 stocks.
• 2026 is different: Top stocks are detracting; most others up—the market trends are being netted out, leading to tightest starting range in S&P history. (32:07–33:53)

Credit cycles and liquidity's role:

• Baldwin (35:11): "If you believe in cycles—liquidity expands and you buy high beta. Once everyone’s missed that, rotation to commodities and financials, and later, defensives. We are on the other side now…energy, materials, consumer defensive."

5. Is Private Credit the Next Subprime?

Core debate:

• Josh Brown: Reads the provocative claim: “Private credit is this generation’s version of subprime.” (38:00)
• Garrett Baldwin: Scores it a "seven out of ten"—not the same in impact, but "the source of the crisis is in private credit... It’s the shadow banking system, largely unregulated." (38:00–40:05)
• Post-2008 regulations pushed risk out of banks into private credit funds, but banks still indirectly involved by financing loans. Not as ring-fenced as regulators hoped. (41:26–42:33)
• Michael Batnick (47:01): "Everyone is all over this private credit trade. Equities [in the space] are bombed out. But they’re illiquid—5% a quarter bleed until people calm down, not sudden collapse."

Sentiment and Schadenfreude:

• Many (media, investors) seem to 'want' a blow-up in the space, partly for retribution against wealthy private equity players (41:41–50:24).

6. What Could Break the Cycle?

• A major negative event—boots on the ground in Iran, broad job losses, or clusters of sudden 1% moves followed by reversals (historically precede bear markets: 52:35).
• Proving resilience: So far, markets rotate (from AI/tech to energy/defensives); no mass retail exit from stocks—supported by ongoing employment, 401k inflows (53:45).

7. Practical Frameworks and Models

Liquidity & Momentum Analytics:

• Baldwin describes a multi-factor momentum model (liquidity, momentum, insider buying). When the model goes negative, major events often follow (e.g., August 2024 Japan crash; January 28th, 2026 model turn preceded gold/silver crash: 71:30).
• Uses Cross Border Capital’s Global Liquidity Index, scrutinizes Federal Reserve and Bank of Japan actions (67:34–70:39).

8. Stock-Specific Discussion

Trade Examples:

• Garrett’s approach: Buy stocks breaking down only after insider buying picks up; cites Trade Desk (TDD) as recent example (73:16).
• CrowdStrike vs. Black Stone Minerals (59:59):
  • Michael Batnick: "CrowdStrike—the best company in the space, but a trade, not an investment for me right now."
  • Josh Brown: "CrowdStrike’s multiple justified by network effects—once under the umbrella, clients don’t leave."
  • Baldwin: Favors royalties and “choke point” plays (e.g., Black Stone Minerals) for long-term wealth preservation, with momentum stocks as short-term trades.

Notable Quotes and Memorable Moments

• Garrett Baldwin (07:02): "Price discovery—I don't know if it exists anymore... We're just in a YOLO market where people are chasing headlines."
• Josh Brown (10:24): "There is a price insensitive buyer coming in almost no matter what happens... If we had that current in reverse, you’d never want to invest in a stock again."
• Michael Batnick (21:24): "I think the market is lying to us. The market continues to be hit with these super bearish narratives and it just won't go down."
• Garrett Baldwin (24:58): "The difference between the 90s and now: we would see 3–5% moves, continuation. Now it's round-tripping during the day... I'm not blaming Zero Date [options], but it's wild."
• Josh Brown (38:00): "Rate this phrase: Private credit is this generation's version of subprime."
• Garrett Baldwin (38:03): "Seven. The source of crisis is in private credit—the shadow banking system, largely unregulated."
• Michael Batnick (47:01): "What makes me feel a lot better about this not being the next subprime? These things are illiquid. They’ll bleed 5% a quarter until people calm down."
• Josh Brown (63:35): "Cyber's TAM is bigger and faster. AI is a gift to cybersecurity—every workload needs to be secured."

Important Timestamps

• 03:51 — Garrett on market cycles, liquidity, and the Mag 7’s underperformance
• 08:15 — Michael on energy independence’s impact on market reaction
• 10:24 — The effect of passive investing flows
• 11:59 — AI’s real-time effect on warfare and markets
• 24:58 — The rise of algorithmic speed and near-instant market reversals
• 32:07–33:53 — Unique 2026 market dynamics: top stocks underperforming
• 35:11 — Liquidity cycles and sector rotations
• 38:00 — “Private credit is this generation’s subprime?”
• 41:26 — Why banks aren’t fully insulated from private credit risks
• 46:57 — BDCs (business development companies) as stress indicators
• 52:35 — Clusters of 1% reversal days as warning signals
• 59:59 — CrowdStrike vs. Black Stone Minerals: trading vs. long-term investing
• 67:34 — How Garrett tracks liquidity and momentum (Cross Border Capital model)

Final Thoughts & Actionable Takeaways

• Investors must know their risk profile: Separating “traders” from “investors” is more important than ever in fast, algorithm-driven markets (27:09).
• Private credit could be a brewing risk, but is not hidden: Everyone is watching, and its illiquidity changes the crisis profile (47:01).
• Rotation is constant: Money does not stay still for long in today’s markets; sector leadership is fluid.
• Focus on liquidity and momentum for early warnings: Stay attuned to moving averages, insider buying, and Liquidity Index movements.
• Beware of financial narrative schadenfreude: Many are rooting for certain risks to materialize—don’t get swept up in headlines or biases.
• Know your edge: Whether riding trend stocks like CrowdStrike or seeking "choke point" plays (royalties, toll roads), stick to your expertise and system.

Follow-Up Resources

• Garrett Baldwin
  • Website: garrettbaldwin.com
  • Substack: Me and the Money Printer
• Hosts:
  • Josh Brown: Twitter
  • Michael Batnick: Twitter

For More

• Check out the episode on The Compound’s site for links/references.
• Review Garrett’s substack "Me and the Money Printer" for liquidity and momentum model signals.

This summary captures the full arc and tone of the episode, providing a resource for those who missed it and a companion for those wanting to revisit the details.