Apollo's business model is risky due to opaque valuations, offshore liabilities, and dependence on cheap credit.

Athen's insurance policy holders get a fixed return no matter what happens. Those are two different groups of people. And when money moves from Athen over to Apollo, one group is making money at the other group's expense.

Blackstone, Apollo, KKR, Brookfield, along with asset managers like Black Rockck, they're all competing for these huge deals.

And some of the biggest asset managers, including Blackstone and Apollo, are now amongst the most frequent users of ratings companies outside the big three. But one private equity sponsor is now under investigation over payments to a ratings company. two ex employees sued alleging that they were pressured to inflate those ratings to win business.

Now, they deny this and it's still ongoing, so keep that in mind.

That's why Athen moved almost all of its $200 billion in retirement obligations to its Bermuda affiliate.

That insurance company is owned by a private equity company. That company makes loans to data center projects. The private equity company then sells those loans to the insurance company that it owns.

The loans are worth whatever their model says it's worth. The rating comes from a company that the industry is paying and the liability has been moved offshore to Bermuda where we can't see it.

And if those loans go bad, the insurance company takes the hit. If the insurance company can't cover it, the guarantee fund does. And if the guarantee fund pays out, the other insurers have to cover it.

And then they get that money back as a credit against their state taxes which means the state ultimately absorbs it and the state is of course your tax dollars.

Our insurers own private loans that don't trade anywhere and they're worth whatever their model says they're worth and their number is $96 billion. It's going up. That's for Japan.

The US doesn't have a number. We just have Bermuda.

But that's why Japan is so important to the US. That's why we're helping up prop up their currency because Japan holds a huge amount of US treasuries. their yen, their money is weakening.

They need to buy more of it to keep it strong. They could sell US treasuries to do that. So the US is like, "Please don't do that, Japan. We will take our US treasuries from you here.

We'll sell our European Treasury bonds. Here's some money." Because if the US does not come to Japan's rescue, Japan could start dumping US treasuries, which would then cause interest rates to go up here in the US.

And so everything in this video that I explained would get even more expensive. All the private credit and all that debt, it gets way more expensive and potentially blows up our markets because all of this only works under the assumption that borrowing money stays cheap.

Now, I don't think anyone can tell you when any of this matters. Or maybe it won't matter. Maybe the AI buildout pays off and the market just keeps on going for another year or two and none of this is important, but it feels like we built a system after 2008 specifically so we could see the stuff coming.

And it seems like bit by bit we kind of recreated it just with different characters and with a little more extra steps.