All the news you need to know and some comments on private credit, the new cool kid in town

I'll start with China today. The two biggest pain points of their economy are the unwind of their epic residential real estate bubble and the excessive debts at the local government level. The NDRC (Nat'l Development and Reform Commission) press conference on Saturday focused on both with the continued goal of putting a floor under the former and helping relieve the financing pressures on the latter. Also, there was more talk about giving local governments cheap financing to buy unsold properties that in turn can be rented out. What was not really discussed in detail was how to reinvigorate Chinese consumer spending. However, those looking for it via the hand out of checks was never going to get it. The Chinese consumer does not lack for savings. In fact, they have about $18 trillion of it. What they lack is confidence and hopefully a stabilization in the housing market, where much wealth is locked up in, will provide more of it. 

Chinese stocks were mixed overnight with mainland trading higher but those in Hong Kong down. The offshore yuan is trading lower. Metals are mixed as iron ore is up while copper is down. We are sticking with the China/Asia related stocks we own, along with a variety of commodity related stocks.

Also out of China was softer than expected September trade data, particularly with exports. Loan data was about as expected. And lastly, both CPI and PPI came in lighter than expected. Deflation boogeyman is getting thrown around but at least for CPI flat pricing is a relief to many households and the definition of true price stability. 

I probably get 5-10 private credit deal pitches emailed to me every day all with the same pitch. We'll get you equity like returns at the top of the capital stack, senior secured and we're filling the lending gaps left by the commercial banking sector. All sounds good for what is now a $1.5-$2 trillion market but a few things here. First, it is important to separate out the two forms of private credit. One focused on financing private equity deals and financial engineering. That incestuous relationship I have zero interest in investing in. The other, focused on direct lending to credits that need financing in lieu of commercial banks has more legitimacy I believe.