[Week 12 of 2026] Boxes, Bonds, Banks

Welcome back to Price and Prejudice with a few musings from Week 12 of 2026. Now that the Capital Markets & Investments class at Columbia is in progress, the blog will also reference to some contents from class as well.

The Virtue of Not Knowing

This WSJ article describes the $42 billion Cliffwater Corporate Lending Fund, which is facing a wave of redemptions as investors question whether its reported net asset value is inflated. The fund holds over 3,600 individual positions, 71% of which are "Level 3" assets valued using "inputs that are both significant and unobservable." Another 28% are stakes in other private funds, valued using NAVs reported by those funds' managers. So it's basically black boxes all the way down.

The instinct here is that opacity is the problem and more transparency would fix things. But academics have argued in the past that certain forms of debt are designed to be "information insensitive," meaning they work precisely because nobody investigates the underlying collateral too closely.

Bank deposits are the classic example: the whole system functions because depositors don't run credit analysis on their bank every morning. The moment they start asking questions, you get a run. Corporate bond mutual funds offer a more recent parallel, where daily liquidity and transparent NAVs have been shown to amplify fire-sale dynamics. Cliffwater's smoothed NAV (it moved 8 cents in over six years) and quarterly redemption gates may seem clunky, but at least they slow down the bank-run dynamics.

Bloomberg as Membership Card

This WSJ article chronicles the online war that erupted after AI startup Perplexity released a tool and its supporters declared the Bloomberg terminal "cooked." Finance professionals responded with a ferocity that surprised the tech crowd, with some suggesting the original posters turn themselves into the police for their assertions.

One obvious mistake is that the tech evangelists misread the situation thinking that Bloomberg is a product (or maybe they are trolling.) But perhaps it's more akin to a membership card. People have met their spouses on Bloomberg chat. Someone commissioned a wedding cake in the shape of the terminal. When a trader says "Bloomberg is irreplaceable," they're not making a cost-benefit argument about data feeds but rather expressing that I am a Bloomberg user, and that means something about who I am and what tribe I belong to. Surely Perplexity can replicate a dashboard, but it cannot replicate a 350,000-person professional network, and it certainly cannot replicate what it signals to sit in front of that black and orange screen.

Selling Shovels to Short Sellers

This article reports that Goldman Sachs and JPMorgan are offering hedge fund clients ways to bet against the $1.8 trillion private credit market. Goldman has assembled three bespoke indices: one focused on European financials with private credit exposure, one of business development companies, and one of alternative asset managers. JPMorgan offers a similar basket.

The mechanics (which are not described in the article) likely work through total return swaps: the hedge fund enters a swap referencing the bank's custom basket and profits when the constituent stocks fall, without having to individually short 20 or 30 names. The bank clips a spread on the financing rate and handles the hedging.

What's worth noting is who's doing the building. Goldman and JPMorgan spent years helping originate and distribute private credit to investors. Now they're packaging the tools for other clients to bet against that same market. The banks are perfectly happy on both sides of the trade because they're not in the business of taking directional risk. Instead, they are in the business of flow and intermediation, which helps when you don't know which direction the world is headed.