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Not every new idea on Wall Street is a good one... The latest example of this is an unusually complicated exchange-traded fund ("ETF"). It's called the SPDR SSGA IG Public & Private Credit Fund (PRIV).

Be Wary of Wall Street's Latest Lure for Regular Investors By Joe Austin, senior analyst, Chaikin Analytics Not every new idea on Wall Street is a good one... The latest example of this is an unusually complicated exchange-traded fund ("ETF"). It's called the SPDR SSGA IG Public & Private Credit Fund (PRIV). The "SSGA" in the name stands for "State Street Global Advisors," which manages ETFs. And the "IG" in the fund's name stands for "investment grade." The original name for this fund was even more of a mouthful – the SPDR SSGA Apollo IG Public & Private Credit Fund. But in a highly unusual move, the U.S. Securities and Exchange Commission ("SEC") made State Street take "Apollo" out of the fund's name. (The "Apollo" it referenced is an affiliate of private-equity giant Apollo Global Management. Remember that point, since I'll come back to the firm shortly.) The main selling point of PRIV is that it gives retail investors exposure to the alternative-asset world of "private credit" loans. These loans get made to small and medium-sized businesses. The lenders are hedge funds and private-equity companies. Private credit loans also pay higher interest relative to other types of debt. That's why they might look attractive. But this market also has a "Wild West" aspect... Private credit loans are unregulated. That means there are no set rules between borrowers and lenders. There's also no backstop like the Federal Deposit Insurance Corporation ("FDIC") if things go wrong. Meanwhile, private credit loans are unrated. Credit-ratings agencies like Moody's and Standard & Poor's don't assess the creditworthiness of these investments. So unless you do a deep dive on each and every loan, it's hard to tell the good ones from the bad. And lastly, private credit loans are illiquid. Without standards for either borrowers, lenders, or the structure of these loans, they're difficult to value and trade. And because these loans are unregulated, unrated, and illiquid... from an investment standpoint, they're highly speculative. That's why, historically, they've never been sold to retail investors. With this PRIV ETF, State Street seems to think it has found a way to get around these issues. But as I'll explain, how the firm is doing all this poses some serious risks for investors. And the issue goes beyond just this one ETF... Recommended Links: Before the 'Final' Big Crash: Move Your Money Here Immediately More pain could soon be on the way... and it could be far worse than anything we've seen so far this year. To respond, a Wall Street veteran is sharing the ONE strategy that once made him 20 times his money on a single trade – right as U.S. stocks collapsed. (He also saw additional gains like 30 times his money in 15 days... and 34 times his money in six days – but as you'll see, even bigger gains may be coming soon.) Click here to learn more. Be Warned: 'A Specific Type of Market Crash (Outside of Stocks) Is Coming Soon' It's actually much bigger and more important than what happens to the Nasdaq or S&P 500 indexes. Some of the world's best investors are practically drooling in anticipation. Because this crash will create a slew of 100%-plus opportunities... backed by legal protections that stocks can only dream of. A top expert believes this could happen within months (if not weeks) – and you must prepare now. Get the full story here. Wall Street Wants Regular Folks to Invest in Private Credit Growth in private credit lending skyrocketed after the 2008 financial crisis. Following the near collapse of the banking system, regulators put strict limits on banks making risky loans. Hedge funds and the whole private-equity complex stepped in to fill the void. That gave rise to the term "shadow banking system." In the past 10 years alone, private credit lending has quadrupled in value to about $2 trillion. And private credit lending is expected to grow to $2.6 trillion by the end of 2029. Institutional investors – like endowments, foundations, and pension funds – are the main investors in private credit. Given the speculative nature of these assets, institutional investors are likely the only ones sophisticated enough to know what they're getting into. Institutions also operate with long-term time horizons. So they aren't worried by the illiquidity, either.  Among institutional investors, demand for private credit investments isn't slowing down. But private credit managers are hungry for capital. And retail investors are squarely in their sights... You see, individual investors own about half of all global assets under management ("AUM"). But they only make up about 16% of AUM in the alternative investment world. So this is an obvious avenue for growth. But that doesn't mean private credit is a good idea for a retail investor. And the State Street PRIV ETF shows why... PRIV Has Complexity and Risk Under the Surface First, most of this portfolio isn't private credit. According to PRIV's prospectus, around 80% of the holdings will be in investment-grade securities. You don't need this ETF to buy those kinds of investments. And with a 20% allocation, unless the return on the private credit assets is unusually high, the return likely won't be much higher than the return of an investment-grade bond fund. Meanwhile, the prospectus says that PRIV can buy anywhere from 10% to 35% in noninvestment-grade securities. And it has an upper limit of 15% in private funds. That means up to 35% in private credit. And that includes potentially 15% from "commingled" private credit vehicles. This is where Apollo comes into the picture... In the prospectus, State Street says Apollo will be the lead originator of the fund's private credit holdings. The fund can theoretically buy them from other originators. But none are named. The prospectus also says that State Street relies on Apollo for pricing and liquidity of the fund's private holdings. In short, the relationship is totally lopsided in Apollo's favor. And that looks like the main source of risk... For pricing, Apollo is obligated to price the fund's private holdings three times a day. For liquidity, Apollo is also obligated to buy those holdings... but only at the prices it provides. This allows State Street to get around the usual 15% limit on illiquid holdings in an ETF. But if State Street decides it doesn't like Apollo's prices, Apollo is under no obligation to buy anything. So Apollo could shut the fund out simply by submitting low bids. It's a bit like giving someone an exclusive right to buy your house... and then having them tell you what it's worth. And if the market for private credit loans gets choppy, investors in the fund could get left holding the bag. Under a worst-case scenario, lots of investors in the fund could decide they want to sell. At the same time, the fund could get unacceptably low bids on its private holdings. Should that happen, State Street would need to sell investment-grade securities to meet redemptions. That would leave the remaining fund holders with an over-allocation to the illiquid securities. And it would be at a time when there's no orderly market in which to sell. No investor would want to endure that kind of a death spiral. The SEC had issues with Apollo's role here, too... In a remarkable rebuke to State Street, the SEC made the firm remove "Apollo" from the fund's name. The SEC also noted that it had issues with the fund's liquidity and valuation practices. So State Street changed the name of the fund. But the rest of the arrangement between the fund and Apollo still holds. As I said earlier, there's more to all of this than just PRIV's specifics under the surface and its risk... In a letter to shareholders, JPMorgan Chase (JPM) CEO Jamie Dimon has sounded the alarm on the whole private credit industry. He said that private credit hasn't seen the stress of a recessionary environment. Dimon also noted that these securities are illiquid, unregulated, and unrated – the same problems I discussed. Sure, the return on private credit assets might look attractive. But beneath the surface, there's plenty of complexity. And of course, investors have to be mindful of the risk. PRIV is a great example. On Wall Street, higher returns always come with higher risk. There's no way to get around that. Good investing, Joe Austin Market View Major Indexes and Notable Sectors     # Hld:     Bullish     Neutral     Bearish Dow 30 +7.86% 1 20 9 S&P 500 +10.5% 37 314 149 Nasdaq +12.0% 5 73 22 Small Caps +8.5% 125 1253 515 Bonds +0.59% Information Technology +13.43% 2 54 13 — According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks are Bearish. Major indexes are mixed. *  *  *  * Sector Tracker Sector movement over the last 5 days Information Technology -2.71% Consumer Staples -2.75% Communication -3.21% Consumer Discretionary -3.82% Health Care -3.84% Utilities -4.34% Industrials -4.73% Financial -5.84% Real Estate -6.82% Materials -7.18% Energy -12.5% *  *  *  * Industry Focus Homebuilders Services 0 17 18 Over the past 6 months, the Homebuilders subsector (XHB) has underperformed the S&P 500 by -18.59%. Its Power Bar ratio, which measures future potential, is Very Weak, with more Bearish than Bullish stocks. It is currently ranked #17 of 21 subsectors and has moved down 1 slot over the past week. Indicative Stocks BLD TopBuild Corp. BZH Beazer Homes USA, In CARR Carrier Global Corpo *  *  *  * Top Movers Gainers MCHP +27.05% UAL +26.14% AMD +23.82% MPWR +23.43% DAL +23.38% Losers DG -1.92% MKTX -1.49% AWK -1.33% CBOE -1.11% KR -0.81% *  *  *  * Earnings Report Earnings Surprises DAL Delta Air Lines, Inc. Q1 $0.46 Beat by $0.07 STZ Constellation Brands, Inc. Q4 $2.63 Beat by $0.36 SMPL The Simply Good Foods Company Q2 $0.46 Beat by $0.06 *  *  *  * You have received this e-mail as part of your subscription to PowerFeed. If you no longer want to receive e-mails from PowerFeed, click here. You're receiving this e-mail at diansastroxz.forex@blogger.com. For questions about your account or to speak with customer service, call +1 (877) 697-6783 (U.S.), 9 a.m. - 5 p.m. Eastern time or e-mail info@chaikinanalytics.com. 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