Sep 24, 2026
On September 24, Barry James Dyke, President of Castle Asset Management and author of “Black Eyes for BlackRock,” joined us to discuss the growing role of private equity and alternative investments in the retirement system and the potential risks for American savers and retirees. The full transcript, which has been modified slightly for accuracy, can be found below.
TEDDY DOWNEY: Hello, everyone. And welcome. I’m Teddy Downey, Executive Editor here at The Capitol Forum. Today I am extremely pleased to be joined by Barry James Dyke, President of Castle Asset Management, and author of “Black Eyes for BlackRock,” among other books about the world of private equity. Barry has worked in financial services for more than 40 years with experience in financial planning, pension consulting, employee benefits and investment advisory services.
Today we’re going to be talking as always on the private credit crisis, the growing role of private equity and alternative investments in the retirement system and what that could mean for American savers and retirees. Barry, thank you so much for doing this today.
BARRY JAMES DYKE: Teddy, pleasure. Thank you so much. I’m very grateful to be on and get on a forum like this where there’s a lot of really great like-minded people such as yourself.
TEDDY DOWNEY: We have an audience of people who are extremely curious about the world of private credit, want to be rigorous about looking into these risks. I can’t think of anyone who has been more rigorous in the study of private equity over the years than you. You have just done tremendous work here.
We had one person write in you should call this podcast “The Great Retiree Robbery.” I could imagine you writing a book with a similar name because you’ve focused so much on how much private equity has extracted from the retirement system here or put that money at risk.
My first question is in that vein. How worried should the average retiree be about their annuities or other assets in this ecosystem defaulting? Is the risk isolated to certain instruments and insurers or is it widespread?
BARRY JAMES DYKE: It’s widespread, Teddy. The bigger problem is that we’re the number one economy in the world. We’re the number one capital markets country in the world. We raise more capital than anywhere else.
But in my book, “Black Eyes for BlackRock”, I document how although we’re the number one economy and number one capital markets our retirement system for the average person, we’re number 30.
Now, this is as of 2025. We may have gotten a little bit better, I hope. But the fact of the matter is, if you live in a country like Mexico, actually, your retirement system is rated better. It’s an actuarial outfit out of Australia called Mercer.
The thing is that we’re a Third World country for retirement plan for the majority of the population. It’s gotten worse as private equity has gotten more and more into this ecosystem, if you will. And it all goes back to you have a good financial background but it all goes back to the collapse of Executive Life and Drexel Burnham Lambert in the 1990s and then the takeover of First Executive by Apollo Global. And it’s been scorcher capitalism since then.
TEDDY DOWNEY: Yeah. Can you maybe walk us through the history? Because I think the history is super important. And just the history of private equity getting into people’s retirement savings.
BARRY JAMES DYKE: Well, it goes back to Michael Milken and Drexel Burnham Lambert in the 1980s. And he was essentially selling lots of junk bonds. And actually, Drexel, at the time, was operating on 96 percent borrowed capital. Talk about debt. Ugh-we. And so, this is back in the day when Michael Milken was making actually a half billion dollars in the 1980s. I don’t know what that would be in today’s dollars.
But they were overleveraged. And the reason why they collapsed was the junk bond crisis and the foreclosure by the State of California. But it was excessive risk and excessive debt. And if you look at what’s going on today, Teddy, it’s always about the debt. And so, we had excessive debt in the system. They were promising more than they could deliver. And unfortunately, that looks pretty much the same today.
So, we have junk bonds which caused the collapse of First Executive Life and Drexel, which led to their collapse. And today, we’re having all these overleveraged life companies. And it’s getting even more opaque using offshore reinsurance, Bermuda, the Caymans. And it’s so big, Teddy, as I say, I don’t know how much we can really cover on this call, but I’ve been alarmed.
And the funny thing is that a little background on this is that you ever heard the guy Tony Robbins?
TEDDY DOWNEY: Of course. I actually went to my sister’s graduation. He was the speaker at graduation, which was kind of shocking to me, to be honest, but go ahead.
BARRY JAMES DYKE: Anyway, I’ve written all these books, the first one being the book, “The Pirates of Manhattan.” So, believe it or not, he recruited me this is like 10, 13 years ago to do one of his company’s books called “The Masters of the Universe” or something. I don’t know, finance or whatever. And at the time, I’d gone through a rough period of my life and went through a divorce and the whole thing.
So, having Tony Robbins co-author, I was really excited. But at the time, I said, Tony and I actually had a very long conversation when he was flying in his private jet to London true story. And I would swear on a Bible on this.
And I said Tony, one thing which we should stay away from is private equity-backed life companies. And he said, why? He says, I know Peter Gruber. He’s a friend of mine. And I said, well, they’re involved in the Los Angeles Dodgers takeover. And I said, I don’t think policyholders’ money should be helping financiers financing ball clubs.
So, this is true. So, it’s kind of like, God is good. I’ve waited a long time. So, this whole thing is imploding now. So, in any event, I went to one of his conferences and walked in the cold and the whole thing. And I had a great time. But I don’t think Tony really liked my opinion back then. But that’s a true story.
But it’s gotten so big now with the financing of sports teams. I mean, we have the case of Guggenheim financing the Dodgers and then the Lakers and Chelsea FC, which is another problem to itself. And we have 777 partners. They’ve gone into bankruptcy. They had 777 Re with Bermuda. They’ve gone into the state of Bermuda. Bermuda Monetary Authority has stopped them doing business. We have the ACAP companies, which essentially are under investigation in South Carolina. So, you have all these private equity guys buying all these sports teams with other people’s money. And the average American is screwed.
TEDDY DOWNEY: And I want to get back to all the things that they’re doing now. Because it’s kind of crazy there. And somehow involved in Trump financing pipelines to get around the Strait of Hormuz. They’re involved in AI bubble. They’re involved in so much. Every single article about some speculative project, somehow is getting money from private equity. But I want to come back to that.
First, I want to talk about, well, actually, let’s stay on that. I mean, that’s in the news. Let’s talk about that first. What’s going on there? Like, how is it that they are rumored to be involved in all of these, like, seemingly very risky data center projects or Strait of Hormuz workarounds? Just the riskiness of the project itself seems problematic.
But then you have all these other things like your super close ties to Trump. Like, what do you make about why we’re reading in the news that private equity and private credit keeps coming up? I saw another article today that Chase is trying to get credit cards to denied customers.
BARRY JAMES DYKE: Yes, private credit.
TEDDY DOWNEY: So, like, non-worthy credit card holders are going to be getting cards from private credit. I mean, you just can’t open the paper now and not read about private credit being involved in some kind of sort of somewhat speculative investment thing. What do you make of all that?
BARRY JAMES DYKE: It’s crazy, Teddy. And I saw this yesterday and I was floored. I told the ladies in my office that this country has gone crazy.
Todd Boehly, who is the President of Eldridge Industries which is the spinoff of Guggenheim Trump picked them to take over Lukoil, the Russian oil company. I said, you’ve got to be kidding me. Because he’s involved in this whole Dodgers scandal and the Lakers scandal and Chelsea FC.
And I said, I just can’t believe it. And I will run the threads for people and you can follow the money. And if you look at my book by the way, I don’t know if you can see the book, “Black Eyes for BlackRock,” just go to the website. But I kind of put in the book history before it happened.
So, Boehly is involved in a lot of crap. But they’re best friends with Michael Milken, going back to the Drexel thing. So, it’s all incestuous Wall Street money going to these things and they’re doing it with other people’s money.
And Rod Tobitsky you did a webinar with him the other day – and Louis Brandeis said this a hundred years ago in 1914 it’s all about using other people’s money. And another very successful client of mine said, Barry, it’s really easy to gamble when it’s not your money.
So, things are going offshore and they’re using not the only offshore reinsurance. We’re using captives in Vermont, which have no assets. There’s no there there. And Golden Gate and PHL just collapsed. And this is going on like crazy. But the point is that they’re really hurting the individual American retirement saver. And to me that’s wrong.
But what really motivated me to write this book was now they want to stuff this crap into 401ks. Because, Teddy, they can’t get out. Banyan Company came up with a survey. There’s roughly 32,000 private equity-backed companies worldwide in 25, and they can’t get out. It’s hotel California money. You can get in anytime you want, but you can never leave.
And so, they need a greater fool. And they can’t get IPOs. And they can’t get mergers M&A because of the interest rates going up. And so, they’re doing all this crazy financial shenanigans, like dividend recaps and continuation funds and all this other crap. And this is not going to end well.
And the thing is that one thing I’ve learned with the last financial crisis, no one went to jail. And this is much worse because now we’re really talking about people’s retirement savings. So, I don’t know, that’s why I’m kind of motivated about it. But the facts back me up.
TEDDY DOWNEY: And I want to talk about all the rigorous work you’ve done on these portfolio companies. Because I think if you’re talking about the shell game here the shell game, which is a private credit, which is the private equity company, buys these portfolio companies. Then they buy a lender or they create a lender. So, make loans to the portfolio companies when they can’t sell off the portfolio companies. And then they buy an insurance company to stuff with all the bad loans that they’ve made to all these companies that they can’t sell.
And so, it’s this very incestuous thing. And they sort of while they’re looting and making the insurance company that they own insolvent, that risk ultimately is borne by the policyholders, the retirees, to your point, and taxpayers, right? To the extent that there are tax credits to further support the resolution of the insolvent insurance company.
Now, one of the key things we spend a tremendous amount of time on the hiding of the assets, the hiding of the risks, that you talked about sending it over to Bermuda or Vermont or whatever, and just getting the regulators to approve of all sorts of rules that allow for this to be a very opaque situation. But you, more so than anyone else, have done an incredible amount of work on the distress in the underlying portfolio companies of private equity, that 32,000 companies that you mentioned. You have a spreadsheet. You have documentation of – how many companies have you looked at?
BARRY JAMES DYKE: Well, it’s actually about 708. And Teddy, what I did, I just did it because it’s so big. I just did it within the past three years for the most part. I gave a model really only from about 2023 to 2026 current, and I watched it every day. And I was just I couldn’t believe it.
But if you go back – so, that means I excluded all these collapses of these large leverage buyouts like TXU, which is the largest leverage buyout of all time, which collapsed into bankruptcy in 2014, or the collapse of Caesars Entertainment done by Apollo Global and TPG, which went bankrupt in 2015.
So, I excluded all those big ones, okay? But just since 2003 and I would testify in court on this roughly about 700, more than 700 companies are essentially severely distressed. They’ve either gone into default, bankruptcy, or a debt for equity swap, essentially just not a court restructuring. It’s a bankruptcy, but it’s just they’re swapping the debt for the equity.
TEDDY DOWNEY: So, 700 of these portfolio companies that you can show that they are either bankrupt or insolvent or severely distressed, basically, or have gone through —
BARRY JAMES DYKE: Yeah.
TEDDY DOWNEY: And these are the portfolio companies that are in the private credit. I mean, obviously, 700 of the 32,000 or whatever.
BARRY JAMES DYKE: Yeah, but the thing is that these are huge companies, Teddy, some of these things. And people don’t realize is that they want to know why their healthcare is so expensive. Well, look what just happened to Stewart Healthcare. They went bankrupt with 37 hospitals in 2024. And that was owned by Cerberus. And they extracted all the equity out using a sale lease back of the real estate. And they went bankrupt.
And then, we also had the collapse of Remington Outdoor. And also, the same private equity firm also owned Chrysler. And they went into bankruptcy as well. And now the craziness about it, the guy who ran that, Stephen Feinberg, is now the number two guy at the Pentagon.
So, a lot of these things really affect people in the sense that their retirement well, this is the thing, Teddy. If you look at the best retirement system in the world and I have they’re all income-based or annuity-based. The purpose of a retirement plan is to produce retirement income, period.
Now, private equity is very smart, okay? They understand this, that really the only place for people to put money for retirement, for guaranteed income, is with a life company. Because they’re the only ones who will guarantee — contractually guarantee the income payment. And they know this.
So, they know that they’re very good at capturing a lot of assets. The thing is, they’ve just found ways to just I don’t know they’ve found more side doors than I can even comprehend it. And the financial tricks, I can’t keep up with it all. I mean, guys like Rod Debitsky have done a great job. And Tom Gober has done a great job. But the state of the American retirement saver is not really good.
TEDDY DOWNEY: Well, I mean, Rod and Tom, both good friends of The Capitol Forum here. We go to them for a lot of their analysis as well. And over the years, obviously, people are looking to them and you for guidance on where the risk is. Can you walk us through more examples of some of those 700 companies that you think are sort of distressed and in trouble in ways that people aren’t paying enough attention? Big companies that are in trouble, where you particularly think, well, this definitely hasn’t been written down in the private credit assets. Give us some good examples of the companies that you’ve sort of followed that are in financial distress.
BARRY JAMES DYKE: Okay. There’s so many of them. But one of the things which concerns me is the amount of dividend recapitalization, Teddy. You know how that works, right? How they essentially —
TEDDY DOWNEY: Yeah, walk us through that again.
BARRY JAMES DYKE: Well, this is I can’t believe this is legal, but they do it all the time. But one of the things essentially dividend recap, essentially placing a second mortgage on a business, and then taking out that debt money out as a dividend.
So, let’s say we have a billion dollar company and when they buy a billion dollar company in a leverage buyout, most of that money comes from public pension funds, i.e. state pension funds, who are the major limited partners, the general partners of the private equity firm. They buy the company for a billion dollars, and generally a company will have a capital structure, maybe it’s 80 percent equity, 20 percent debt. After they buy it, it’s going to be 20 percent equity and 80 percent debt. And most of that equity, Teddy, actually comes from the limited partners, which is state pension funds.
The private equity firms themselves really put very little of their own money in, Teddy, maybe 1 percent. And when they take over the company, they get 1 percent, 1.5 percent investment banking fee. So, right out of the gate, Teddy, their money is good for the most part. Are you with me so far?
TEDDY DOWNEY: Yeah. So, you’re making the point that not only are private equity getting money for their insurer from policyholders, but they also get money for their parent company from retirement, pension funds, buying equity in the partnership at the parent level.
BARRY JAMES DYKE: Yeah. So, my point is a dividend recap, Teddy, is essentially – so, they buy this company let’s say for a billion dollars. Then they sell off assets. They get rid of pension plans. They get rid of real estate and so forth. And they refinance it and they put more debt on it. And then they pull out the money, say, like a half a billion dollars, as a dividend. And this is what the Carlyles — yeah.
TEDDY DOWNEY: This is a pretty routine private equity strategy to pay themselves back and lever up the company. It’s one way of doing that, correct?
BARRY JAMES DYKE: Yeah. But the thing is you have major players like Blackstone, for instance. They did a huge it’s over a billion dollars of dividend recaps on a company called IntraFi. And you know who IntraFi is? That’s the company they actually, they bust up people’s money for the $250,000 FDIC. So, they spread it out to a whole bunch of banks so people can’t lose any money. Well, I know for a fact that Blackstone owns that and Warburg Pincus, they’ve refinanced that. They’ve pulled out over a billion dollars in debt by the dividends. So, essentially dumping all the risk onto the taxpayer and then making billions of themselves.
Or another example is Clayton, Dubilier & Rice, they have a windshield company called Belron. I think it’s safety glass in this country. But I think they’ve taken out like a monster dividend, like $4.5 billion.
But even another one who was even bigger than that is the Brookfield. They took a dividend of about $4.5 billion out of a company called Clarios, which is actually the old Johnson Controls out of Wisconsin, 18,000 employees. And they took out a monster dividend, $4.5 billion. And Clarios also got a billion dollar tax credit from Joe Biden.
So, it’s unbelievable. So, we have a Canadian private equity firm looting an American company and taking the money out because they’re desperate because they can’t sell these companies, Teddy. So, they’re desperate to do these things like dividend recaps.
TEDDY DOWNEY: Yeah, I think that’s another key thing. If you can’t sell it off, you have to come up with increasingly exotic strategies to keep the whole system going. Because that’s sort of where you would then get the money to buy another company. That was the original premise. But because they can’t sell them off, that’s one of the reasons why they created this shell game to keep the thing going. Oh, no one wants to buy this. Well, we’ll have our own insurance company and we can always load off the assets onto them.
Are there any insurers or any private equity companies that you think are particularly problematic in terms of having those 700 companies that you follow on their balance sheet, on the books of their insurers, or any companies like Brookfield?
BARRY JAMES DYKE: Yeah, the Brookfield and United. There’s a union group that did a great piece on that. Obviously, Brookfield is big because they’ve used the American Equity Life and also American National to essentially gut the portfolios.
Then you also have the classic case of Apollo. I think Rod mentioned this, which I can’t believe how they did that. They took a $9 billion REIT and they put it to a theme. It’s so big. I could give you more examples, give them more time.
Yeah, so, we have these things. We’ve got another thing, and I brought this up in Eisman, but he never dropped the podcast. He said, well, who are you concerned about? I said, I’m concerned about Hertz, Hertz Automotive. Because that’s actually owned by Knightsbridge or Knight Capital. They did an LBO and it’s gone from $30 a share, Teddy, to I think $1.80 a share. And they have an offshore reinsurer in the Caymans, which even Apollo says the Caymans is worse than Bermuda.
So, we have all these things going on. But the thing is you know what they’re doing, Teddy? They’re all playing copycat to Warren Buffett. It was Buffett who really started all this in 1967 with the formation of National Indemnity Insurance. It was actually Buffett who actually started this. Unlike the private equity firms, Buffett says he’d like to hold onto some of his companies forever. But what we’re seeing with Apollo, it’s kind of the quick flip or KKR. And look at some of the disastrous bankruptcies. I think KKR had Envision Healthcare. That went bankrupt.
And so, we have some of these monster bankruptcies with Apollo, which is Apollo Season Entertainment. And EP Energy was another kind of example of this. And I think it was Gretchen Morgensen who actually found out that prior to Season Entertainment going bankrupt, they used money from Athene. And I have to chase that thread, but I’m pretty sure on that one. I’d have to check on that.
So, we’re seeing all this. So, what is happening is that, as a result of this, Teddy, the American retirement saver doesn’t have a clue. And Trump, last year on August 7th, 2025, put an executive order, we’re going to put alternative assets into 401Ks. And to me, that’s just wrong. So, that’s why I’m kind of motivated to do this.
TEDDY DOWNEY: You’ve written a whole book about BlackRock, “Black Eyes for BlackRock.” What do you see their role in all of this? Any history there that we should know so that we can understand how this whole ecosystem evolved?
BARRY JAMES DYKE: Well, they’re the lead dog, Teddy. Because they’re the biggest asset manager in the world, I think $15 trillion now. And they were actually birthed out of Blackstone. I chase it and I go through the history in the book. But they are the lead dog. They were also the company who brought us the ESG movement, which ended up being a total debacle, which I get through in detail.
Now, the irony of this all, Teddy, is that BlackRock and they spent millions and millions of dollars came up with the same conclusion that most people need lifetime incomes in retirement. So, they spent all the millions of dollars and actually, Fidelity came up with the same conclusion about 2004 or so. So, BlackRock spent all this money saying people need an annuity income in retirement, which I agree with. But then they picked probably two worst insurers in the world.
One being Bright House, which is in private equity play now. I don’t know what’s going to happen on that. And then the other one would be Equitable. So, two of these companies which really have no surplus and no reserves. And this is what BlackRock chose. I said, so no one’s talking about this. I think the research they did was very great. It was very conclusive. But they picked kind of like the worst two companies in America. And so, I said, no one’s talking about it. So, that’s why I did it.
TEDDY DOWNEY: And walk us through why Bright House and Equitable have such problems. I mean, you mentioned they’re effectively insolvent. What did you look at to figure that out?
BARRY JAMES DYKE: Well, I knew that Bright House was a casualty of the variable annuity, variable life business, which used to be very big. And Wall Street pitched it in a big way. But I’ve been in the business so long, Teddy. You have to understand I’ve been in the business 40 years. I’ve done pension plans. I still do pension consulting work to this day that using variable annuities is a very difficult business to insure, reinsure, predict, guarantee income. It’s very, very difficult. It takes a tremendous amount of reserve to do it correctly. You need a big cushion.
TEDDY DOWNEY: Why is that? Can you walk us through that quickly so our listeners know?
BARRY JAMES DYKE: Yeah. So, if you’re dealing with an insurance company, Teddy, you don’t want to have a surplus which is thin as paper. You really want to have them with a big fat belly because inevitably financial crises come about. And this is why most insurance companies have had significant surplus to protect things from systematic events.
TEDDY DOWNEY: And so, surplus is when you take —
BARRY JAMES DYKE: Yeah, it’s a cushion.
TEDDY DOWNEY: Yeah, it’s the cushion.
BARRY JAMES DYKE: It’s the cushion. Because it inevitably happens. It always does, okay? So, your typical mutual insurer which I’m in favor of mutual paternal insurers. They generally have — the national average is about 7 percent. And some of your better ones are 12, 13. Some as high as 17 percent. So, in case something happens, they have a backstop.
Now, Equitable and Brighthouse, Equitable has less than 1 percent. So, that means they step on the banana peel game over. Or, for instance, Brighthouse is, I think, maybe 2.3, not very much. And then you have the gigantic portfolios like Athene. Their surplus is very little as well.
So, you have leverage upon leverage upon leverage. And all the risk has been dumped onto the balance sheet, i.e. in case of Athene or Global ending in the case of KKR. And there’s really no — and who’s going to be holding the bag? And you had those guys on from Texas that did a great paper. I forget what their names are, but who’s going to be holding the bag?
And so, we have all these financial shenanigans going on. And then you have these private equity firms themselves being owned by passive mutual funds who don’t say anything about anybody. So, thank God for people like The Capitol Forum.
TEDDY DOWNEY: Yes. And you mentioned the mutuals. I think a lot of people think, wow. There’s no contagion here. If goes belly up, it’ll just be contained to these private equity and their insurance. But my colleagues, Lisa and Kim, did an incredible report showing that a lot of these mutuals reinsure with private equityowned insurers. And so, they are also part of this ecosystem. So, even if you think you are with a safe annuity, a safe life insurer, that isn’t in the PE world, you might not be right. It might be part of this ecosystem.
BARRY JAMES DYKE: Yeah, I saw that. And that was a great chart. And I was kind of shocked with that too. And I wanted to use that research in my next book, which I’m doing. But yeah, I was not totally unsurprised by it. But I also know, I mean, one of the good things about writing books and stuff like that is that I’ve kind of known, I mean, I know some CEOs and some major life companies and been on the advisory board of some companies.
I think that there is a, I don’t know, a sense of duty as some of these big Midwestern ones in particular and even some like New York Life they don’t participate in any of the shenanigans. And the paternals, really, they’re not involved in this space. So, I agree with you, there is a concern there. But I think there’s still significant surplus to weather these storms. And when I saw that, I was very, very concerned.
TEDDY DOWNEY: I want to ask you a question. Because I have been wondering why the safer mutuals, particularly in states where there is no tax credit, why there isn’t more industry level executive concern about what private equity and private credit are doing, because they’re, at least temporarily because the way these tax credits work, if the PEO insurer goes belly up, a lot of the resolution costs actually goes to the industry. And over time, they get paid back by tax credits.
But there are certain states, California among them, that don’t have any tax credits to make the remaining insurers whole. They’re the ones that are going to be on the hook. Do you see any uptick in interest in some of these more responsible insurers to say, hey, we’ve gone too far? As an industry, we need to start policing this more. Our regulators need to get their head out of the sand. Or have you not seen any real movement there?
BARRY JAMES DYKE: Well, it’s funny. I was in a movie called “A Baby Boomer Dilemma,” and I got to know the state insurance commissioner, actually. And I had concerns about the private equity in this space for a number of years. And I talked to him and he good guy, very knowledgeable guy he’s aware of the problem, but he really didn’t care.
So, to make a long story short, he referred me to NOLGA, which is the State Guarantee Association, which coordinates the bailout, i.e. like the Executive Life and so forth. And Teddy, I tried and tried to email them to get answers there, and why states aren’t more alarmed about this. And they wouldn’t talk to me now. But the silly thing is that they left all this great data on their website for me to kind of scrape, to go through the collapse of Executive Life. And I think we’re going to need some type of federal regulation on this.
Because I was a big favorite of states. And I was really kind of apprehensive about federal regulation of insurance companies. Because I knew how federal regulation has made it really easy for the banking industry, Teddy. And so, I’m very concerned about that. Because now when banks want to legislate something at the federal level, they can do it in a blanket across the country. And so, it’s more easily manipulated.
So, if it’s going to benefit the people more safety in the retirement and the policyholder savings, it’s inevitable. But I’m also apprehensive because the federal government makes it much more easy for the banking industry to manipulate things. And so, my fear is that once they put that at the federal level, they’ll be easier to manipulate and put this stuff into all policyholders.
TEDDY DOWNEY: I want to get to listener questions here. If you have a question, please put it in the chat, please put it in the Q&A or the Q&A function. We’ll get to that shortly.
You mentioned all these private equity people, executives, who are now part of the Trump administration or big donors to the Trump administration. You mentioned Michael Milken. The Milken Institute has a bar on the top floor that is the preferred hangout of the Trump administration right now, The NED, I believe it’s called.
BARRY JAMES DYKE: It’s in D.C., isn’t it?
TEDDY DOWNEY: It’s in D.C. Yeah, it’s right across from the Treasury Department, the Michael Milken Institute. You mentioned sort of the history of all these players. Are you concerned that, if there is a collapse within the next two years, the Trump administration will look to bail out private equity, private credit, and not the retirees?
BARRY JAMES DYKE: That’s a good question, Teddy. To me, it’s so big. I think it’s bigger than the financial crisis, but I’m concerned more about the policyholders more so than Wall Street bankers. I don’t know. They have the legislative power probably to get bailed out. But I think more people need to know about it because the fact of the matter is that this is one of the reasons why America has one of the worst retirement systems in the world for regular people.
I’m not saying — if you’re a member of a collective bargaining plan with a union, with a public pension fund or a state or something like that, you’re going to be fine. Or if you’re rich, you’re going to be fine. The argument that private equity which gives, by the way, they’re saying, well, private equity works great in public pension plans. Well, that’s bullshit, quite frankly. Because when the annuitant or the retiree from a state or government pension plan, they get a guaranteed annuity for life, and it’s the state or the government entities that are on the hook, not the retiree.
What they want to do with the democratization of assets is they want to push this stuff into the 401Ks to people who could least afford to take a loss or to manage to oversee this loss. I hope I answered your question.
TEDDY DOWNEY: Well, if you were going to bail anyone out, who would it be? Would it be the policyholders?
BARRY JAMES DYKE: Yeah, yeah. Because they’re the people who least can afford to I’ll give you a great example. I know a guy who’s worth about $100 million. He said, Barry, if I lose half of my money, I still have $50 million. He said he’s going to be fine.
But if a guy has a $500,000 annuity or something like that, and he loses half of it, that guy’s got a real problem. I’m really looking out for the little guy in this. And I’m a capitalist at heart, but that’s my concern. Because the average 40 percent of the population can’t come up with a thousand bucks, something like that. But my concern really is the policyholder.
TEDDY DOWNEY: What do you think is your biggest concern in terms of the next shoe to drop here? We have interest rates at a high-level going up. We’ve got these private credit companies involved in speculative industries. We’ve got the AI bubble, data centers, that could obviously deflate or pop. Where do you think the next shoe to drop is here for this sector? What are you looking at to see how quickly it collapses, or if at all?
BARRY JAMES DYKE: Michael Burry did a great piece on how Apollo uses the Athene funds for buying Nvidia chips, and I was just amazed. So, I think AI data centers, a lot of people, they don’t want it. People, I don’t know what gas is in Washington, D.C., but people are pissed. So, I think the AI data centers is big because it’s going to take a number of years. I think at best case, it’s going to take five, six, seven years for these things to come online. Or if they want power, they’re going to have to get gas turbines for GE Vernova. And that’s going to take three to four years.
So, the whole thing is I just see bubble, Teddy. Because what I’ve learned is that these bankers it’s like the SpaceX IPO, which is one of the biggest IPOs of all time the bankers, they’re going to make their big Christmas bonuses this year after doing that. But if it goes south, but they’ve already got their money.
So, I think AI is a big thing. I think the fragility of these life companies, PHL Variable. Then we had Eurovita in Italy, which was one backed by 777. We had the – there’s just so many of them. Then we have the Guggenheim debacle. And then we have Eldridge. And there’s so many of them. In any event, so there’s a lot to cover here.
TEDDY DOWNEY: You mentioned these companies have thin cushions, thin surpluses, in case things go wrong. My concern with the thin cushion is that’s with the numbers, with the regulations as they are. We know these regulators are allowing for all sorts of very convoluted strategies to make those numbers look just very opaque.
So, it’s really hard to have confidence in the numbers that are there. If you are questioning a lot of the numbers, are you concerned that those thin cushions are actually just insolvent insurers pretending to have thin cushions?
BARRY JAMES DYKE: Yeah, I am. And because it’s just like debt upon debt upon debt. And if you look at the financial crisis in history, Teddy, whether it be 1929 or 19 — well, not so much 1987, but the great financial crisis, other financial crises. And Japan is kind of kind of the showcase example of too much debt and too much money printing. It never ends well. I mean, Japan is probably the classic case of the downside of money printing and debt. And so, what we’re seeing with private credit and private equity is debt upon debt, and then using these opaque entities.
And then we haven’t even gotten into the secrecy of the limited partnership agreements, which private equity does. In other words, if I’m a public pension fund and I invest $100 million dollars in Blackstone or KKR or Polly it doesn’t really matter I sign away my rights with a confidentiality agreement. So, everything is done in secrecy. And when people do things in secrecy, Teddy, they usually have things to hide.
And so, I think really the problem is debt and it always involves debt. And look at how much, what do you have, $40 trillion of debt right now? I mean, how are we going to repay that? I mean, who’s going to help pay that debt for your daughters? I mean, I’m that serious about it. And that’s why I dedicated this book to my granddaughters, by the way, because of my concern is for them.
TEDDY DOWNEY: How much of the problem do you think is around secrecy and opaque accounting? Obviously, one of the shoes to drop here has been more transparency into the Guggenheim ecosystem with lies about affiliates, lies to regulators, about who is affiliated and how that should be counted as riskier assets. The industry standard, however, is to just get your regulator to approve of your affiliate rather than lie about it.
So, it’s not like what Guggenheim is doing is really any different other than that they felt the need to lie. I mean, at some level, I guess they had some sense that it wouldn’t be approved. So, I guess that has them giving their regulator a little bit more credit than everyone else, but it’s really not different. So, there are affiliates all over the place, you just get the regulator to approve it.
But in terms of secrecy, in terms of opaque accounting, if you’re thinking about the problem here, in addition to the obvious debt, how much would transparency help to give people a better understanding of what’s going on?
BARRY JAMES DYKE: That’s a great question, Teddy. And that would take a lot. And that’s a great example of Guggenheim. And they have $350 billion of assets under management, something like that. I’m a researcher, Teddy, and I only could find one portfolio, one pension fund, which invests in Guggenheim. And that’s the State of Maine College Retirement Fund. So, we don’t even know who their investors are.
And now, luckily, some states such as California with CalPERS and CalSTRS, and the State of New York, have some pretty good disclosure. But a lot of these states, we have no idea who they’re investing with. There is no disclosure.
And so, I think transparency or sunlight is always the best protection against this stuff. And most of this stuff, unfortunately, is kept in the dark. And I’m a digger on this stuff. And thank God for AI, Teddy, because it’s really made my job a lot easier. But even with AI, it’s very difficult to dig into some of the stuff because everything’s held in secrecy.
So, there is not a lot of transparency in this stuff. And this is a major problem with pension plans, such as Minnesota and a friend of mine, Ted Sedell, who’s an attorney. There is no transparency in these major pension funds who are the largest purchasers of private equity interest. So, we see that on the major – so, in other words, if a pension plan buys into private equity, essentially, they sign off their rights and they can’t disclose anything. So, take that and then you start doing this with retail savers and their annuity, I just don’t see this ending well.
TEDDY DOWNEY: We’ve got a listener question here. This loose group of individuals, Gover, Eisman, yourself, Dubitsky, are doing a great job of trying to expose these issues. Is there a risk that in doing so you will actually trigger the confidence spiral that could collapse all of these interlocking institutions?
Sounds a little bit like a question if you saw someone mugging your grandmother, should you just pretend that you didn’t see it? Or should you step in and stop it? But curious to get your thoughts here, Barry. Is there a risk that you could trigger a confidence spiral? I mean, I have my own thoughts, but please go ahead. I would love to hear your reaction here.
BARRY JAMES DYKE: Well, that’s funny you should mention that because people — well, she doesn’t like me too much and that’s okay. But I think it’s really kind of our duty. I’m kind of taking it from a spiritual perspective. It’s really a duty to tell the truth on this stuff. Not a lot of people are doing it. I mean, that’s why I love Tom.
It’s going to happen. I mean, it’s not one or two people like me or Gover or Dubitsky, whatever, are going to trigger it. I mean, it’s because we’re just individual guys, but I think it’s really important for the next generation. I mean, this thing is a house of cards and I love this country. But I told him that in the beginning of my book, I dedicated really, my father was a Marine in World War II. And he was rarely he kind of got me impassioned about economics. And he always said, son, you’ve got to leave something better than the way you found it.
And I’ve been in this industry for such a long time saying that, and I’ve just gradually seen it get worse and worse and worse. And I think I said the other book I did in the retirement route is about the whole SPAC bubble during the COVID. I mean, I have 50, 60, 70 companies went public in SPACs, Teddy. And I think probably more than 40 of them have gone bankrupt. I mean, this is freaking wrong. And it’s all interconnected with and Apollo was involved in one of these with like Fisker the EV company. They were involved in that. They went bankrupt and no one’s talking about it.
TEDDY DOWNEY: Yeah. I mean, I just have a lot of reactions to this kind of question. The first is one of the things that private equity companies say is insurance is great because there can’t be a run on the bank.
Well, obviously, your question implies that there can be some kind of run on the bank situation here. If there is a lack of confidence in the underlying solvency of these insurers, which I think I agree with. I think there are some aspects of a run on the bank situation. If the insurers can’t roll over their FABN commitments, they can’t keep getting access to that kind of money, that could trigger some issues. If the policyholders themselves don’t want to get any more policies with private equity-owned insurers, or they start surrendering the policies that they have because they’re concerned about risk.
But at the end of the day, Barry didn’t load up insurers with bad assets, didn’t do shady accounting maneuvers with the Cayman Islands, Bermuda, and Vermont regulators. These executives did that. I mean, he didn’t decide to invest insurance assets in risky investments, sort of like you said, the Warren Buffett approach. But instead of investing in sort of like safe assets, you’re investing in very speculative ones like baseball teams and AI data centers and things like that. He didn’t do that.
So, I think, look, the responsibility will be on the people who engaged in these shenanigans. And I should say, these companies are already being sued for fraud. They have allegedly inflated assets by not writing them down. They are being sued for the resulting high fees associated with inflated assets in their portfolio.
So, the investors are already suing the companies for fraudulent conduct. And I can only imagine that we’ll see more and more of that, more and more savvy investors taking a closer look at whether or not they want exposure to these instruments, to these insurers, to this ecosystem.
And also, to Barry’s point, he’s looked at 700 companies that are already distressed. There are just going to be so many companies popping up to invest or buy out distressed assets going forward, just given the state of this industry, in my opinion. I wanted to ask you, again, Barry interest rates are going up.
Oh, actually, let’s see. Do we have another listener question here? Let’s see. Here’s a question. I do think there can be a run on the bank. It feels like there is a group of investors who feel like this is the time to get the ball rolling on GFC part two and profit like those were short subprime.
I don’t like to speculate on that level. But certainly, maybe a good way to ask this to you, Barry, you’re a student of history. You’re a student of Michael Milken. of the global financial crisis, of financial crises generally. What are the parallels that you see here in this potential credit crisis with 2008, with the savings and loan crisis, with other financial crises? Do the circumstances remind you of those times?
BARRY JAMES DYKE: Yeah, it always involves the debt. It always involves excessive debt. And the thing is that if people read my book, “Black Eyes for BlackRock” and by the way, I put a lot of free information out there for the people listening. — it always involves the debt. And the problem is that in America, we are kind of on a race to the bottom because we have all these — the debt problem. Then we were at war, which nothing drains a country’s Treasury like war. And so, we have all these other expenses. But we have a lack of savings.
I think, in the savings we’re one of the unhappiest places in the world, believe it or not. And a lot of that is due to lack of savings. We don’t save in America. We borrow and spend. And we don’t invest. We don’t save in America. We just speculate. And so, we’re seeing kind of a perfect storm, Teddy. So, we have all these prediction markets. And then we have Kalshi. And what’s the other one?
TEDDY DOWNEY: Polymarkets.
BARRY JAMES DYKE: Polymarkets, okay. And then, if you read the Financial Times or I’ve been studying the UK we have this massive problem with gambling now, with sports gambling, and private equity’s interconnected with this.
TEDDY DOWNEY: Can you walk us through that? Because I am fascinated with how much of the U.S. economy seems tied to speculation and gambling. Tell us about how private equity is intertwined with the what do they call them, prediction markets?
BARRY JAMES DYKE: I don’t know how much they’re predicted, they’re interconnected. But I can tell you for a fact that they’re involved with the sports teams. And the reason why they want sports teams, because gambling has since the 2018 court case, which essentially allowed gambling online.
So, it’s exploded. And as a result, the private equity is buying up sports teams. And I have all the data on this, it’s another show, if you will. But they’re buying all these sports teams you, not just because it’s impossible to lose money on the team itself, but with the media rights, and the gambling. And so, it’s huge.
Now, if you want to look at kind of a sign of the future, what is happening is that they have this problem already, Teddy. In the UK, where the young men, I mean, they can’t get jobs. They’re betting on their phones. They have a phone, which is like a pocket in the casino. So, they’re very interconnected.
So, private equity is very connected with sports teams. And the reason why they want to get involved in it, because of the media rights, and also the tax subsidies. For instance, you’re in D.C., am I correct? So, Josh Harris, who made his fortune at Apollo Global Management, owns the Washington Commanders. And they’re going to be building another $3 billion stadium, I guess, am I correct down there?
TEDDY DOWNEY: Yeah.
BARRY JAMES DYKE: And the taxpayer is going to be picking up a billion of it. And I don’t even know what the gambling rights are or the media rights on that. So, I know how interconnected this all is to people, and people need to know.
TEDDY DOWNEY: Well, Barry, you are a gentleman and a scholar, a very handsome man, I should add, for those listeners who are audio only. I can’t thank you enough for doing this. I would be thrilled to do another one at some point, especially after I’ve read all of your books. You’re such a student of history. You’ve done such rigorous work on the asset side, which I think is really key to understanding this ecosystem. Would love to have you on again. Thank you so much for doing this today.
BARRY JAMES DYKE: Thank you so much, Teddy.
TEDDY DOWNEY: And to our listeners, thank you so much for taking the time again today on our Private Credit Crisis series. Please, please register November 12th for our event here in D.C. We will have lots of people. Hopefully, Barry will join us. We are going to have lots of experts to look into this issue, policymakers as well here in D.C. And if you haven’t listened to the podcast yet, please check it out. My daughter does the art. The music’s great. The guests are so great. So, please check that out as well. Thank you so much for joining us today. And Barry, thanks again.
BARRY JAMES DYKE: Thanks, Teddy. Have a good day.
TEDDY DOWNEY: Have a good one.
