FINSUM + Magnifi: Big Changes to Reg BI Likely Delayed by SEC
(March 2021)
One big anxiety that has been on every broker’s mind since mid-January is: is the SEC going to make Reg BI compliance tougher, or introduce something even worse? A lose-lose. Accordingly, there has been a lot of focus on what newly nominated SEC chief Gary Gensler might do to the rule. The Biden administration and the Democratic party have been quite vocal in their desire to replace the rule with a full fiduciary rule, but will that happen, and when? Well, the reality is that the meme stock craziness is likely one of the best things that could have happened to brokers. You may be asking why: because it likely just distracted the new leadership of the SEC for about a year. The meme stock frenzy has dominated headlines and become a Democratic cause, which means newly nominated SEC chief Gensler will likely be focusing on that immediately upon taking over. Bitcoin is another emerging issue given the huge run-up in prices and public focus. Reg BI is obviously very important, but may become second fiddle because of the other, more newsworthy issues.
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FINSUM + Magnifi: How to Capitalize on the US Energy Crisis
(February 2021)
The polar vortex sweeping across the south has left many American’s without energy, but investors are not as powerless in their response to this weather phenomenon. For those who were scared of the volatility in oil prices, electrical equipment suppliers may be on the move. The vortex has exposed electrical grids in deep need of investment. This market was already in a relatively good position as the economy picked back up boosting demand for electrical services. The nation’s expanding alternative energy sector also amplifies electrical suppliers as the intricacies of renewables complement their growth. John Inch, an analyst for Gordon Haskett looks to Eaton (ETN) to capitalize on the older U.S. electrical Grid. Other investors are turning to Quanta Services (PWR) and MasTec (MTZ) to capitalize on the energy crisis. Both stocks exceeded early-week price targets.
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FINSUM + Magnifi: Fear rising inflation? Here’s How to Play It
(February 2021)
Inflation concerns are on the rise. The Fed has reacted with large unprecedented moves to the Covid-19 recession. The Biden administration is coming out of the gates swinging with a proposed $1.9 trillion stimulus package, that even has debt dove Larry Summers, former secretary of the Treasury for Democrat Bill Clinton, voicing fears of inflation's return. It’s not just talking heads either, the data can speak for itself. Treasury yields are on the rise and the 10-year-break even inflation rate reached a 6-year peak. Generally speaking, the banking sector is speaking to the same tune as the Fed, and given the Fed isn’t stepping off the gas pedal the SPDR regional banking ETF (KRE) is a way investors can align themselves with Fed’s zeitgeist. The regional banks are in tune with the local loan markets and are more responsive to policy than the day-to-day financial news cycle. KRE is trading at $61.83, by buying a $61 put option for $4.40 and a $65 call option for $3.90 in June, investors can bet that the Fed and the Biden administration are going to hold steadfast until they “see the whites of the eyes of inflation”.
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FINSUM + Magnifi: Biden Just Let Trump’s Fiduciary Rule Go Into Effect
(February 2021)
In what comes as a surprise to the entire industry, President Biden’s administration has just let the Trump-era version of the Fiduciary Rule go into effect. Almost everyone in wealth management thought Biden would surely use his administration’s powers to stop the rule’s enactment, but they elected to let it go into effect as of this Tuesday, accompanying the announcement with positive and supportive language. The industry’s reaction was immediate and positive, while consumer advocates were disappointed as they were hoping for a more stringent rule from the Democratic administration.
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FINSUM + Magnifi: Putnam Warns Fresh Stimulus is a Major Risk to Markets
(January 2021)
Despite all fears, markets had a fairly strong year in 2020. Why? The answer is pretty clear. Other than some general optimism about how large cap tech would perform during the pandemic, the real savior was huge government stimulus which infused massive amounts of cash into the economy and kept the US out of its worst recession since WWII. Fast forward to January 2021 and we have another major stimulus package on the horizon being pushed by Biden and the Democrats. While many investors might be elated at the prospect, Putnam Investments is warning investors that this could be a death knell for the market. The reason why is that a major new stimulus package would give the market a “sugar high” and potentially cause a melt-up that inflicts serious pain soon thereafter.
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FINSUM + Magnifi: Why Gold is in for a Tough Year
(January 2021)
Gold had a very strong 2020 as investors feared chaos from the pandemic. However, 2021 looks likely to be a weak year for the metal. The reason why has to do with reflation. Everything the new Biden administration is planning to do (or not do) is part of an effort to reflate the economy. Whether that means the nearly $2 tn stimulus package that will be primarily directed to low income households, or new Treasury chief Yellen’s commitment to not intentionally weakening the US Dollar. All of this poses a major headwind to gold, as the metal yields nothing and will suffer as rates moves higher on creeping inflation.
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FINSUM + Magnifi: Why the Biden Administration May Be Bad for Gold
(January 2021)
Gold has been hurting recently, with prices currently around $1,800 after some strong gains over the course of 2020. The big question is where gold is headed now that the vaccine is rolling out and a new administration is coming in. The bottom line is that the Biden administration may pose some difficulties for gold. The reason why is that Biden is planning a multi-trillion Dollar stimulus package that could boost inflation. Gold generally falls as rates rise because of its zero yields. Therefore, the administration’s plans for ongoing stimulus—which will boost the cash flowing into the economy—are a net negative for the metal.
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