A 50-year sketch of private credit market

From an interview/podcast - Howard Marks - (a rough sketch, only for directional understanding)

“When I started, it was actually the beginning. In 1976, I think it was impossible for a company without an investment-grade rating to issue a bond.   

And in 77, 78 is when it became possible. A few people had the idea that regardless of the rating, if the bond paid enough interest to compensate for the risk, it might be a good investment. So at the time, it was a small universe.

I think when I started, picked it up in third quarter of 78, I think there was two and a half billion dollars of bonds outstanding. That was the whole thing. They were not great companies.

They were more levered than an investment-grade company would be. But you might find some recurring aspect to the cash flows, which makes them creditworthy. And you're right, there's been changes.

The biggest change was the blossoming of the LBO business, which really came on big in 84.5. The LBO business leveraged buyouts could be done if you had 50 million of capital. You could buy a billion-dollar company.

You could borrow 95% of the money. That meant that lesser companies could buy bigger companies, or individuals could buy billion-dollar companies. It put a lot of companies in play.

That really blossomed in the mid-80s. In 1991, we had our first crisis. And many of the prominent LBOs of the 80s went under.

Macy's Federated National Gypsum, US. Gypsum, RJ Arnabisco was the biggest of the buyouts. It almost went under, but not quite.

So that changed things. It made it hard to get the capital for buyouts. The leveraged buyout business actually had to reinvent itself.

And you don't hear the term LBO business anymore. Now you hear private equity. Well, why did they change the name?

Because nobody would do it if you called it leveraged buyouts because the results had been so bad. The other thing is now you couldn't get 95% financing. You could only get 75% financing.

So a guy with 50 million could not buy a billion dollar company, only a 200 million dollar company. That was a big change. So the multi-billion dollar companies were not longer in play.

And the industry practiced buy and build, roll ups. In[…]”

In the mid to late 90s, we had the inception of the senior loan business. First, it was banks making loans.

Then it was high yield bonds being issued. Then people began to issue senior loans, which took the place of the banks to some extent. Unlike high yield bonds, those were floating rate.

And had pretty good covenants like any good banker would request. So we had the inception of the leverage loan market. Then we had the tech bubble burst in 2001 and 2002.

First three-year decline in the S&P since the Great Depression. People lost interest in the stock market pretty much. The Fed took rates down to fight the swoon, and people lost interest in the bond market.

Well, if you don't want stocks and you don't want bonds, what do you want? Well, let's have something else. Well, what can we call it?

Let's call it alternatives. So you had the growth of the alternative investment business, and they tried hedge funds, but when the hedge funds got too big, they stopped performing, most of them, and then people fastened on private equity. Around 05 or 06, that's when private equity funds first started.

They crossed the $10 billion line, and people were eager to do those. I would say from 06 or 05 to 22, private equity was really knighted as what I call the silver bullet, the can't miss strategy. Then we had the global financial crisis in 08 or 09.

The banks were chastened, lost some of their capital, were more tightly regulated, were discouraged from risk taking, and that led in 2011 or 2012 to the creation of the private credit market, which is now over a trillion and a half. In 07, I think it was a quarter of a trillion, so it's up more than 6X in 17 years. But this is the equivalent of senior loans, but issued privately without the benefit of registration, SEC, oversight, et cetera, and that leads us to where we are now.”

From Capital Allocators – Inside the Institutional Investment Industry: Howard Marks – Navigating Private Credit, 7 Apr 2025

Sharing a link - Blogs/libraries

Came across this blog - https://blas.com/library/
They call it a rabbit hole - and seems like one. Just discovered.

And one of the sentences from one of the books that I stumbled on:

Declining from the public ways, walk in unfrequented paths. By this it is to be understood that those who desire wisdom must seek it in solitude.

Will carry this around as thought for the day. :)


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Reminds me another similar blog - Derek Sivers book notes. https://sive.rs/book


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Between these two, hours and hours of inspiration and browsing.

On Zest

From Ray Bradbury's 'The Joy of Writing' essay, his case for zest and gusto, "Life is short, misery sure, mortality certain. But on the way, in your work -" zest and gusto:

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Zest. Gusto. How rarely one hears these words used. How rarely do we see people living, or for that matter, creating by them. Yet if I were asked to name the most important items in a writer's make-up, the things that shape his material and rush him along the road to where he wants to go, I could only warn him to look to his zest, see to his gusto. 

You have your list of favorite writers; I have mine. Dickens, Twain, Wolfe, Peacock, Shaw, Molière, Jonson, Wycherly, Sam Johnson. Poets: Gerard Manley Hopkins, Dylan Thomas, Pope. Painters: El Greco, Tintoretto. Musicians: Mozart, Haydn, Ravel, Johann Strauss (!). Think of all these names and you think of big or little, but nonetheless important, zests, appetites, hungers. Think of Shakespeare and Melville and you think of thunder, lightning, wind. They all knew the joy of creating in large or small forms, on unlimited or restricted canvasses. These are the children of the gods. They knew fun in their work. No matter if creation came hard here and there along the way, or what illnesses and tragedies touched their most private lives. The important things are those passed down to us from their hands and minds and these are full to bursting with animal vigor and intellectual vitality. Their hatreds and despairs were reported with a kind of love.

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So, simply then, here is my formula. 

What do you want more than anything else in the world? What do you love, or what do you hate? 

Find a character, like yourself, who will want something or not want something, with all his heart. Give him running orders. Shoot him off. Then follow as fast as you can go. The character, in his great love, or hate, will rush you through to the end of the story. The zest and gusto of his need, and there is zest in hate as well as in love, will fire the landscape and raise the temperature of your typewriter thirty degrees.

All of this is primarily directed to the writer who has already learned his trade; that is, has put into himself enough grammatical tools and literary knowledge so he won't trip himself up when he wants to run. The advice holds good for the beginner, too, however, even though his steps may falter for purely technical reasons. Even here, passion often saves the day.

The history of each story, then, should read almost like a weather report: Hot today, cool tomorrow. This afternoon, burn down the house. Tomorrow, pour cold critical water upon the simmering coals. Time enough to think and cut and rewrite tomorrow. But today—explode—fly apart—disintegrate! The other six or seven drafts are going to be pure torture. So why not enjoy the first draft, in the hope that your joy will seek and find others in the world who, reading your story, will catch fire, too? 

It doesn't have to be a big fire. A small blaze, candlelight perhaps; a longing for a mechanical wonder like a trolley or an animal wonder like a pair of sneakers rabbiting the lawns of early morning. Look for the little loves, find and shape the little bitternesses. Savor them in your mouth, try them on your  typewriter. 

... ideas lie everywhere, like apples fallen and melting in the grass for lack of wayfaring strangers with an eye and a tongue for beauty, whether absurd, horrific, or genteel.

A brief economic-political history of last 100 years

Following paragraph from Preface of Piketty's Chronicles sums up the economic dynamics over the last 100 years or so. The countries mentioned are the largest economies in the world and control much of the capital and money flow. 

 

The problem perhaps is not that there is capitalism, I think in the context of human development, capitalism and democracy are choices which allow for human freedom. May not be ideal, but given the realities of the world and human nature, perhaps the most optimum. But the concern which this alludes to is the unchecked, at times, un-thoughtthrough rise of capitalism. Governments need to work with it to allow for human flourishing in a long-term sustainable way. A lot of slow thinking, contemplation and consideration of how world has shaped perhaps leads in direction which learn from nature (say limited life, sunset companies as ideals of capitalism and nature combined), or governments which serve flourishing rather than rule masses. A change in mandate sometimes changes the actions too. Subtle shifts, but perhaps those that require the most deep studies, appreciation and a multiple pov seeing of the world as it is. 

I also believe that ideals need to be recalled to mind often. And that one's task in life is to negotiate a path from reality to ideals, and one tries one's best to walk it. 

Yoga, Stretches

A few stretches and poses from yoga to do mindfully, focusing on breathing, holding the pose.  (a. Form/posture, b. control/active being/aware/mindful, c. breathing ). 

A practice in stretching for a lifetime. Something to learn, something to practice :)

From the internet:

Surya Namaskar (Sun Salutation)

The Metamorphosis of Plants

By Goethe.

Yet to read. But looks lovely. Available here.

Seamus Heaney on Ulysses

Seamus Heaney on BBC Desert Island disks (1989). One of the things he says is about Joyce's Ulysses, how it open English language like accordion! I have sometimes tried to begin reading the book, at times daunted by the talk that surrounds it, and at times just by the time and patience needed to read it well. I had mentally put it aside, not planning to attempt it anytime soon. And then, this refreshing note by Seamus Heaney inspires me to look for an annotated version! (Guess one can do with any notes and help on this book). Hope to begin reading it again! :) Looking forward to some language joy!

Here is the link to the program with the music he chose for his desert island disc.

Later, June 16. I started reading the first chapter. What better day to begin it than today :)

20k years ago

 

I wonder about those times, about the gradual sea level rising, about previously known land getting submerged and the known land and its boundaries changing. Little changes over one lifetime perhaps but a lot across a culture. Also allowed the flowering of the human civilisation as we know it. Sort of a little blip - this warm period of human blossoming. And though we seem to have done a lot of man-made changes to the world's own rhythm of cyclical changes, one has to persist with hope for human wisdom and an attuned to nature way forward, that is, if human consciousness is to live through. Life, by itself is much stronger, it will survive in its own way.