There’s a whole generation of investors who never lived through pain. They came of age in a world where risk meant reward and loss meant stimulus. Where the Fed was not a referee but a guardian angel. They watched markets recover in days, not years. And they believed it. All of it.
They saw the Fed cut rates to zero and thought it was normal. They watched balance sheets explode past nine trillion and assumed the money would never stop flowing. They learned that when things break, the Fed steps in. Every time.
So they took on risk. Blindly. Thoughtlessly. Proudly. Long on leverage. Heavy in tech. Chasing crypto at its peak. Buying startups with no revenue. Loading into private equity and venture capital like the party would never end.
But this is not 2021. And this time, the air is thinning fast.
What they do not realize is that we are deep in the middle of a real credit cycle. The kind that doesn’t end with a soft landing or a press conference. This is not a dip. This is not a temporary dislocation. This is what happens when capital gets mispriced for over a decade and the cleanup finally begins.
Institutional giants are unloading. Endowments. Foundations. Pensions. They are liquidating stakes in private funds for ten cents on the dollar. Not because they want to. Because they have to. They need liquidity. They need cash. Not paper dreams.
The bid for assets is gone. The exit doors are smaller than anyone imagined. There is no rush of buyers waiting to catch the falling knife.
When interest rates are pinned at zero and the Fed is pumping liquidity into junk bonds, that is not a bullish signal. That is a warning.
It means the system is broken. It means trust is gone. It means banks are getting taken over by the FDIC in quiet weekend deals while most are still asleep. And if your portfolio is loaded with the same ideas that worked when money was free, you are about to learn what real price discovery feels like.
Hope is not a strategy. Liquidity is not permanent. And the Fed is not your friend.