BREAKING: A top apollo executive just admitted that the $2 TRILLION private credit market is effectively built on fake valuations. John Zito, co president of the asset management arm at Apollo Global Management, said something rarely said publicly in private markets: “I literally think all the marks are wrong. I think private equity marks are wrong.” Here is what that means. Private equity firms buy companies using private credit loans. Unlike stocks, these companies do not trade on public markets every day. So the firms themselves decide what those companies are worth. When economic conditions weaken, there is no market forcing valuations to fall. Many firms simply keep reporting the same high valuations instead of marking assets down. Zito specifically pointed to software companies bought between 2018 and 2022, when private equity paid much higher prices than similar public companies were worth. If the economy slows, he estimates loans to a typical mid size software company could recover only 20 to 40 cents on the dollar. That implies potential losses of 60% to 80%. And the first signs of stress are already appearing. Funds linked to Morgan Stanley, BlackRock, and Cliffwater LLC have recently limited investor withdrawals after redemption requests exceeded quarterly limits. Investors are trying to withdraw money faster than these funds can return it. Private credit has grown into a $2 Trillion market over the past decade as investors searched for higher yields outside traditional bonds. ...