(Washington)

There has been a great deal of industry feedback on the SEC’s best interest rule already and the comment period has only just begun. One point of contention among many is that the SEC proposal did not define the term “best interest”, leaving it vague and wide open to interpretation. However, that was likely the point, and the SEC may be very clever in doing so. According to Charles Schwab, “Once you define something, then it becomes easier to figure out how not to be engaged in that definition”.

FINSUM: The SEC left the definition of best interest out of the proposal because it wants to make it harder for those in the industry to side-step the regulation. Smart play.

(New York)

In what might be a sign of a rough patch to come for the global economy and markets, 16 of the largest global banks have collectively just entered a bear market, falling 20% from their peak. Those 16 come from among the 39 global “sifis”, or systemically important financial institutions. One research analyst says “If these banks are supposed to be systemically important then policymakers ought to be watching them to see what is happening”.

FINSUM: The odd part about these falls is that rising interest generally help banks, as they have wider net interest margins. So why the downturn?

(Washington)

President Trump seems to have emerged from the summit with North Korea with a very high degree of confidence that the situation there has been handled. Trump put in writing yesterday that “there is no longer a nuclear threat of North Korea”. Interestingly, North Korean state media also reported the meeting as a major success, but did not mention denuclearization at all. Trump did backtrack a bit, saying “I may be wrong. I mean, I may stand before you in six months and say ‘Hey, I was wrong’. I don’t know that I’ll ever admit that, but I’ll find some kind of an excuse”.

FINSUM: We think this summit was a success and that Kim has played the whole situation very sharply. Our only concern is the lack of detail about how North Korea will actually go about denuclearizing.

(New York)

The whole retail world is centered on Amazon right now. Will ecommerce, led by Amazon, continue to disrupt traditional retailers? That is the nauseatingly frequent question being fretted over by investors. Well, here are a group of Amazon-proof strategies that investors can use to pick retail stocks. The core of the argument is that retailers need to focus on the areas that Amazon is not good at offering. In particular: “experience; customer service; partnerships with influencers; and personalization”. Private label brands are another area, as companies like Target have launched in-house brands that are exclusive to their stores.

FINSUM: We believe in three of the areas mentioned, but in-house brands and customer service are not good strategies to outcompete Amazon in our mind. In-house brands just aren’t compelling enough (especially nascent ones), and we feel Amazon has better customer service (at least online) than almost anyone.

(Houston)

Oil is an enticing commodity right now. Global cooperation on constraining output has led to strongly rising prices, which coupled with margin improvements during the downturn, means the sector looks ripe for great profits. But where is the best place to put money? Barron’s has tapped a top fund manager for his picks, and they are interesting. Both picks are exploration and production companies, and are Kosmos Energy and Apache. The former is a South American E&P that focuses on offshore drilling, while Apache is Houston-based and focuses more on gas.

FINSUM: These are pretty contrarian bets on small E&P companies. These seem quite high risk/high reward.