(Berlin)

In what comes as a very worrying sign for the global economy, one of the world’s largest economies has just gone into a recession. Germany now appears to be in an economic downturn says the country’s central bank. The Bunbesbank says Germany just shrank for the second consecutive three-month period, meaning it is officially in a recession. The decline in economic output has been led by a strong weakening in the manufacturing sector, but the labor market is still hanging on. This is Germany’s first recession in six years.

FINSUM: Germany is the world’s fourth largest economy. How long until the gloom spreads?

(New York)

There are many big concerns surrounding the new Reg BI. It is considered an industry-friendly regulation, but questions abound: can we call ourselves advisors, how should we conduct rollover advice etc. The truth is that the pain and anxiety has not even really begun. Being a principals-based rule, Reg BI really won’t be understood until enforcement has begun. Therefore, it is very hard to plan for how to deal with certain questions until one feels how the SEC is behaving in practice.

FINSUM: There is a lot of uncertainty regarding this rule. In some ways, it could turn out to be very light touch, or it could be very onerous. It all depends on how it is enforced.

(New York)

Probably the world’s most famous hedge fund manager, Ray Dalio, who runs the largest hedge fund in the world, has just made an interesting comment about equities. Dalio, who runs Bridgewater, says that he does not see a big bust coming in equities, just a “great sag”. Speaking about corporate debt levels and the risk of a blow up in fixed income, Dalio says “Those extremities we are reaching are not such that it is likely to have a debt crisis. But you have reached the limits of that so it creates a big sag versus a big bust”.

FINSUM: We think this is a pretty nuanced view. A big meltdown similar to 2008 does not seem likely, but a long-term growth overhang from too much debt does seem a distinct possibility.

(Beijing)

China’s newest GDP data has just come in and it is shockingly weak. Third quarter GDP growth was the lowest in has been since the early 1990s and appears to show the sting of US tariffs. Growth was just 6%, a major sign of the weakening state of the global economy. That is the same level of growth as in the late 1980s, though China’s economy is now far larger. Those paying attention will know that China’s economy grew at around 7-8% per year since the Crisis.

FINSUM: So this is an admitted 6%. Beijing keeps very tight control of its economic data, so it is not inconceivable that the real number is actually lower.

(New York)

Fixed index annuities had a really rough time in the year or so leading up to the debut of the first Fiduciary Rule. The DOL’s changes all but made the product extinct. However, since the rule was struck down, fixed index annuities have made a resurgence, posting their biggest ever quarter for sales with $20 bn in Q2 this year. The good news for brokers is that changes in the government’s regulatory approach means that fixed index annuities will now be treated like an equity product, which means they will be under the SEC’s purview. Additionally, a new kind of FIA has been developed—fee-based—which means brokers and advisors have a choice between a fee-based product or a commission-based one.

FINSUM: The big question for FIAs is how to do a best interest comparison between the fee-based and commission-based versions, as the cost changes depending on time and other factors.