(New York)

One of the big developments in the wealth management industry right now is the big increase in recruitment spending by large independent broker-dealers. Even as wirehouses are cutting back on spending, big independents like LPL, Commonwealth, and Raymond James, are spending big on new talent. The payouts are usually being given in the form of forgivable loans. The spending on such payouts has been large, with LPL increasing its budgets for such items to $159.9m in 2017, 17% higher than the year prior.

FINSUM: So while wirehouses have been cutting back, independents have been heating up.

(Washington)

The fiduciary rule has suffered many blows over the last several months, none stronger than in the 5th circuit court in March. However, despite all the doom and gloom over the rule, there is still a good chance it will hold up. The 5th circuit court was the first circuit court to come in against the rule, which paves the way for the Supreme Court to hear the case (impossible to predict the outcome there). Furthermore, the courts may let an outside party step in and take up the DOL’s right of appeal on the recent 5th circuit court ruling, all of which means the rule is far from gone.

FINSUM: We do not think fiduciary rule advocates are going to give up this easily, especially because there is still a lot of legal recourse available to them.

(New York)

The bond market is in flux. It is caught between several strong opposing forces. On the one hand, the Fed looks intent to raise rates. On the other, many are worried about a recession. Finally, the huge and increasing crop of retirees need reliable income. With that in mind, here are some potentially good bond buys from Pimco. The fund manager doesn’t think we will have a recession soon, saying “We think the [economic] cycle will continue for the next couple of years, but stocks aren’t cheap and bonds aren’t cheap”. Pimco suggests looking at high quality junk bonds, and the short end of the Treasury yield curve (e.g. 2-years, which are yielding over 2%).

FINSUM: High quality junk is still yielding over 5%, while the short-end of Treasuries also looks appealing. We don’t think there is a reason to flood out of bonds yet.

(New York)

Despite the recent falls in the market, stocks still look quite expensive, and are, historically speaking. With that in mind, many investors may be looking for stocks with a strong value proposition. Barron’s has put out a piece choosing three: General Mills, Tractor Supply, and UPS. In the case of General Mills, the panic over grocery wars and pre-packaged food looks overdone, and the company is actually performing well in a number of areas. Tractor Supply has done very well historically, but its growth rate has slowed recently, but this may because of two mild winters, and not a sign of trouble to come. UPS has declined because of an announcement of increased capital spending, but given the health of the underlying business, it seems too cheap to pass up, says Barron’s.

FINSUM: These seem like very knowledgeable picks. We particularly like UPS, which is trading at a historically low P/E ratio right now.

(New York)

There is some speculation that bank stocks may be set to go on a tear. Rising rates are usually good for banks. They cause bond volatility, which boosts trading income, and they boost net interest margins, which raises interest income. However, so far this year, things have been weak. Barron’s also adds a solid point—insiders are not buying bank stocks. It has been two years since Jamie Dimon bought his company’s stock, and BAML top brass have been notably absent too. That seems to reflect a lack of conviction on the part of management.

FINSUM: The lack of buying from management is a troubling sign for us, as they certainly have the best insight into the future of the company. It is odd though, as ostensibly things look very positive.

(Washington)

In what could either be a big worry for tech or a pile of unwarranted hot air, there are rumors circulating that President Trump may be obsessed with regulating Amazon. Last week, the president escalated his calls for regulating the company, tweeting “I have stated my concerns with Amazon long before the Election … Unlike others, they pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!”. Trump has also repeatedly attacked the Washington Post, which is owned by Amazon CEO Jeff Bezos. Trump’s 2020 campaign manager said in a tweet that “Amazon has probably 10x the data on every American that Facebook does. All that data and own a political newspaper, The Washington Post. Hmm.....”.

FINSUM: Our other perspectives aside, we do think governments may need to adopt updated views of when regulation is called for. In Amazon’s case, the company is clearly not a monopoly in any sector, but the data it has does give it heightened importance. The context of monopoly laws, which are essentially modeled on 19th century ideas, don’t seem to have much scope to account for this.

(New York)

While stocks have seen some gains the last couple of days, the reality is that it was a very poor quarter. However, as the second quarter begins, stocks may be about to get a big boost. That boost will come in the form of a $400 bn dividend hike which will be delivered in April and May. “We think it is no coincidence that spring is also a seasonally strong period for equities … April in particular tends to be a strong month for global equity returns”, says Morgan Stanley.

FINSUM: This could be the shot in the arm that stocks need right now.

(Washington)

The back and forth over the fiduciary rule has been long, expensive, confusing, and bureaucratic. However, those opposed to the implementation of the rule should rejoice, as it appears it will die on April 30th. Legally, the DOL has until April 30th to seek a review of the Fifth Circuit Court’s vacating of the rule. If it does not do so by then the court’s ruling will go into effect on May 7th and the rule would dissolve. The DOL also has until June 13th to ask the Supreme Court to hear the case.

FINSUM: The DOL has already dropped a case in Washington D.C. because it was concerned the court there would uphold the rule. There seems to be a very low likelihood that they are going to challenge the Fifth Circuit Court’s ruling. The rule may very well dissolve on May 7th, but expect some drama before then as advocates make a final push.

(New York)

It is not pleasant to think about, but investors may need to face reality—the bear market may have arrived this winter. Stocks are already well into a correction and the immediate path forward doesn’t seem bright. All that said, not all the indicators are showing a bear market to come. Bank of America has assembled 19 indicators which have forecasted bear markets in the past. Right now, only 13 of the 19 indicators have been tripped, meaning the market may have room to move higher. While 13 out of 19 may sound high, this level was usually reached two years before the peak in prices in previous bear markets.

FINSUM: If you buy into these types of indicators, the big x-factor is how quickly the other 6 could be tripped. The big problem, of course, is that the returns at the end of a bull market tend to be the strongest, so one does not want to take all their chips off the table.

(Washington)

Donald Trump may be in some very hot water soon. Stormy Daniels’ lawyer has just moved to interview the president under oath in relation to her lawsuit against him. Her lawyer, Michael Avenatti, has just asked a California court for the right to depose the president and his lawyer. The president’s lawyer, Michael Cohen, reject Daniels’ claim, defending his payment to her saying “just because something isn’t true doesn’t mean that it can’t cause you harm or damage”.

FINSUM: We suspect this request will not actually lead to Trump speaking under oath, but that does not mean something else in the case (or others) will not eventually put the president in that position.