Why The Shadow Banking System Could Trigger The Next Major Crisis Please ❤️like, bookmark🔖, and 🔁share with fellow investors In this Short video, Danielle Danielle DiMartino Booth and Adam Taggart discuss why the shadow banking system—not traditional banks—could become the source of the next major financial crisis. * Private... credit may have disappeared from the headlines, but that doesn't mean the risks have disappeared with it. In this discussion, the focus shifts beyond private credit itself to the much larger theme—the shadow banking system—and why it could become the next major source of financial instability. * Companies have raised a record $251 billion through equity sales in the first half of the year. That surge has also drawn renewed attention to private equity, which sits at the center of the private credit ecosystem. The concern isn't simply the size of private credit—it's whether the underlying private asset valuations are realistic. * A key issue is the feedback loop between private and public markets. Many public companies own private investments, and gains from those holdings can boost reported earnings. If those private assets are being valued too aggressively, investors have to ask whether the "E" in the P/E ratio is as solid as it appears. Inflated valuations can support stronger earnings, higher stock prices, and more capital raising, creating a cycle that works well until confidence begins to crack. * Although fears around private credit have faded in recent months, Danielle argues that the market has simply moved into an "acceptance phase," not a resolution phase. The structural problems remain, but investors have largely stopped talking about them. * Meanwhile, non-bank financial institutions now control roughly $258 trillion in assets, representing more than half of global financial assets and exceeding the size of the traditional regulated banking system. Unlike banks, these institutions operate with far less transparency and oversight, making it much harder to assess the true level of risk. * At the same time, higher interest rates continue to pressure borrowers. Public company bankruptcies are already running about 40% higher than a year ago, suggesting financial stress is building. If publicly traded companies are struggling under today's financing conditions, the health of private companies—where financial information is far less accessible—remains a major unknown. * Danielle rates concern about private markets at roughly a 7–8 out of 10 now. The combination of opaque valuations, rising bankruptcies, higher-for-longer interest rates, and the enormous size of the shadow banking system creates a meaningful systemic risk. While this doesn't guarantee another financial crisis, it highlights an area that many investors may be underestimating simply because it has faded from the daily news cycle. #privatecredit #privateequity 💡 Get access to my notes with the key takeaways from this interview with Danielle Danielle DiMartino Booth by visiting my Substack (link below) ⬇️show more

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