(New York)

There was a great deal of anxiety over the fiduciary rule, and now there is mounting consternation about the SEC’s Regulation Best Interest. But within that story, there is a lost narrative—the fate of the US’ small broker-dealers. Mounting regulatory pressure continues to dwindle their ranks. The number of Finra-registered broker-dealers has fallen 10% since 2013, and last year the number fell to a total of 3,726, down 109 from 2016. One industry commentator summarizes that “It is getting to the point that the many firms under 10 advisors dread Finra audits and are positioning themselves to be under a larger broker-dealer in order to simplify their life”. “This used to be a fun business, but not anymore”, says the commentator, citing a B-D owner.

FINSUM: We can personally testify to the difficulties that smaller B-Ds face, and not just in terms of direct regulatory costs. Additionally, factors like limits to markups constrain revenue, so there is pressure on both sides.

(New York)

If you are interested in getting some strong dividends in your portfolio, and don’t mind adding a little risk, then we have a story for you. Generally, dividend stocks are seen as a steady and low-risk strategy, but this group of 7 stocks, are high risk, high reward. The dividends of all 7 look solid (no cuts seem likely in the near-term), but all have some significant risks in their long-term outlook. The stocks, with their yields, are: Ford (6%), Steelcase (3.9%), Ethan Allen Interiors (3.4%), Macerich (5.0%), Stage Stores (9.7%), ABB (3.6%), and IBM (4.3%).

FINSUM: This is a quite a mix of stocks, each with their own very particular story. Ford seems like an interesting bet.

(Istanbul)

Following a diplomatic spat with the US that has thrust Turkey into an economic tailspin, the country is entering full-blown crisis mode. Turkey’s Lira is down more than 35% this year and fell another 5% overnight. Bond yields are soaring alongside the losses, with the country’s ten-year yielding over 20%, a move exacerbated by Istanbul’s large budget deficit. The crisis is going so badly that the EU is seeking to limit the Eurozone’s banks from exposure to Turkey’s meltdown. BBVA, UniCredit, and BNP Paribas have the most exposure to Turkey.

FINSUM: There is no end in sight to the selloff. The big hope is that Turkey is supposed to unveil a new economic model today that will show how it plans to cut debt and shrink its budget deficit. That would be a start.

(New York)

There seems to be some serious incredulity over whether Elon Musk’s tweet about taking the company private will ever come to pass. And with good reason, as it would take around a $100 bn of private capital to do so—no small feat for a money-losing company. However, Barron’s says it may actually happen. The company’s board is moving to lay out a strategic plan for how to pursue the privatization. CNBC further comments that “Tesla's board will likely develop a special committee of a smaller number of independent directors to review the buyout details”. Tesla’s share price fell 5% yesterday, apparently on doubts the plan would go ahead.

FINSUM: This is the kind of coup that someone like Musk could likely pull off. We also think it is a smart strategic play. However, given how challenging the undertaking is, we are leaning towards it not happening.

(New York)

ESG is growing steadily in the asset management community. More and more capital is being to committed to green bonds and other sustainable investments. Yet, as anyone who pays close attention will know, the definition of “green” or “sustainable”, is poorly defined. Academics have not helped, as their research—a big part of the movement—has somewhat muddled the power of the brand. Now, however, finance is demanding more research from academics, and both are aiming to work together more closely to deliver a better ESG product.

FINSUM: We can speak from experience in saying that when you get down to actual company selection according to ESG factors, it becomes very difficult to make any informed choices because of how little core data there is on which to make a decision.