(New York)

All the worries about the economy seem so 2019 now, right? Wrong. A big new warning sign just came out of that all important sector that we love to worry about—manufacturing. New data shows the US manufacturing sector is in its worst shape since 2009, according to the ISM. The sector only accounts for 10% of the economy, but it has been suffering mightily as Trump has ratcheted up the trade war.

FINSUM: So the question is whether this weakness is just because of the trade war or whether it signals something more broad. We think it is primarily trade-driven. As a consolation, garbage stocks have usually done very well when manufacturing is weak, according to Barron’s.

(Seattle)

Yes, Amazon looks expensive and has seen massive gains in recent years. This makes many fearful of the stock. But the reality is that the stock is a free cash flow rocket ship that is going to keep surging higher, according to 47 of the 49 Wall Street analysts who cover it. Amazon trades for 69x 2020 earnings, but it still looks pretty inexpensive on a free cash flow basis. The company’s past growth initiatives are now paying off, which means Amazon is throwing off free cash flow in a big way.

FINSUM: Amazon has averaged a 35% gain per year since it went public. We don’t see any big reasons why it cannot continue this year.

(New York)

There have been two huge beneficiaries of the increased tensions with Iran in recent days: oil and gold. The shiny metal is now at its highest level since 2013 at almost $1,600 per ounce. The difference between the two is that gold seems likelier to stay elevated. Goldman Sachs argues oil would actually need a physical disruption to supply in order to stay elevated, while historically gold is likely to keep rising. According to the bank, “In contrast, history shows that under most outcomes gold will probably rally to well beyond current levels”, says Goldman’s head of commodities research.

FINSUM: Gold certainly has a longer runway than oil for staying high as its rise in prices has nothing to do with a possible supply disruption, which means one doesn’t need to materialize in order for prices to keep moving higher.

(Los Angeles)

Regulators might be about to really shake up the all important annuities market. The National Association of Insurance Commissioners, which is comprised of state level regulators, has just proposed a new suitability standard for annuities transactions. The new rule would require insurance brokers to act in the best interest of clients when recommending products. The specific wording used says that the insurance salesperson must act “without placing the producer’s or the insurer’s financial interest ahead of the consumer’s interest” and that they must “without placing the producer’s or the insurer’s financial interest ahead of the consumer’s interest”. Speaking about the rule, the NAIC says “It’s in harmony with what the SEC did but goes a little further in providing clarity as to what the conduct standard actually is”.

FINSUM: The annuities market has had some bad behavior so a clean up to give peace of mind to all involved is warranted, but this will likely mean big changes if it comes to pass.

New York)

Yesterday we ran a piece explaining the level of AUM advisors need to successfully breakaway (cheat sheet: $50m-$100m). Today, we wanted to hit on another key topic: what percentage of clients typically come with an advisor when they break away? Now, this obviously varies a great deal based on particular circumstances, but according to Kestra, the typical rate is 80% in their experience.

FINSUM: This is useful, but only to a point because many advisors will have a great deal of their assets concentrated in a small group of clients, meaning it is a fairly tight number of make or break accounts.