(New York)

Those who only pay causal attention to muni bonds might be scared away from the market by negative stories about big buildups in debt, bankruptcies, and a general erosion in credit quality. However, this year, nothing could be further from the truth. There has been a massive deleveraging of the sector in 2018, with total US muni bond issuance down a whopping 17% to-date, and on pace for 25% by the end of the year. The dearth of issuance has pushed yields down and prices up. “It’s a seller’s market”, says one muni bond analyst.

FINSUM: Part of the lack of new issuance is due to the federal tax changes, but nonetheless, the market is looking increasingly healthy.

(New York)

If there was one subset of stocks that looks deeply out of style right now, it has to be utilities. Back a few years ago, they were immensely hot as the stock market’s bond substitutes in an insanely low-yield era. Now, you can earn almost 2% on a short-term Treasury bond. However, it might be time to take another look at the sector. Most utilities are yielding about 3.3%, and have been supported over the last few weeks by the fact that bond yields have stopped rising. The sector’s stock prices have fallen just short of 10% since last September, but that means valuations look attractive, as do yields.

FINSUM: If you think yields won’t climb that much further—which we don’t, at least in the short to medium term—then utilities do seem like a good-yielding bargain.

(New York)

Many in the industry think a big bust in commercial real estate (CRE) is coming. If you think of the residential real estate market, you probably think about tight supply, rising prices, and more buyers than sellers. The commercial real estate market is currently characterized by the opposite conditions. A building boom and a glut of new CRE debt is threatening to wipe the sector out. The sector looks very vulnerable to rising rates because the massive amount of debt (which just hit a record) and the overindulgence of borrowers. So how can one play the fall? Oddly, the best strategy might be to buy homebuilders, who will be much less sensitive to rate rises, and sell REITs.

FINSUM: The paired strategy sounds like a good one, but the bigger theme here is that a bust in CRE is reportedly on the horizon.

(New York)

Goldman Sachs says it has a new wealth management strategy, and it has to be one of the oldest and simplest ideas in the book. The bank is trying to aggressively grow its wealth business, and wants to increase revenue there by $1 bn in the next three years. Its big plan for doing so: get the money it makes for founders through its investment banking business to stay at the firm in its wealth management arm. One of the bank’s top wealth management managers says that there is no formal requirement for founders to do so, but “it’s obviously a very positive introduction”.

FINSUM: A very good strategy indeed, but then again, that is an incredibly narrow segment of clients!

(New York)

While it is the first high profile closure of a robo advisor in recent memory, it feels like the start of a big change in the industry. This week, robo advisor Hedgeable announced it was closing its doors. The platform was a smaller rival to Betterment and Wealthfront and was founded by two former employees of Bridgewater Associates. The platform received a good deal of media coverage and tried to differentiate itself via a unique offering. However, it was unable to attract sufficient assets to keep operating. The $80m it had in client AUM will now be passed on to Folio.

FINSUM: All the VC money that was funding these robo advisors is going to start running out, which means a mass wave of consolidation is coming.