(Washington)

A senior wealth management expert, Scot MacKillop, has just run a piece in Wealth Management, arguing that the SEC has made a big mistake in the drafting of its new rule. The piece carefully employs various SEC statements to show that there is no sound logic for why the regulator created an entirely new two-tier structure for regulating brokers versus advisors. The piece makes clear the idea that if there is no fundamental difference between the service of brokers versus an advisor (something the SEC’s Clayton has said), then why should there be a regulatory difference. The SEC could have simply extended the rule from the Advisers Act of 1940 to also cover brokers.

FINSUM: It is true that simply extending the rules to brokers would have created the littlest amount of confusion amongst clients (one of the stated aims of the SEC). But at the same time, the nature of the relationship between brokers and advisors and their clients is different, so we understand the road the SEC took.

(Washington)

Trump has named his next choice for the Supreme Court—Brett Kavanaugh. Mr Kavanaugh has a long judicial history to review, and by all accounts, he looks like a very friendly pick both for Wall Street and wealth management. He has consistently sided with the interests of financial businesses in his rulings, including rulings against regulators like the SEC.

FINSUM: Obviously all the focus of the media is on Kavanaugh’s impact in a wider sense, but from a purely financial standpoint, he appears to be very anti-regulation.

(New York)

Whether investors like it or not, a lot of signs are currently pointing to a pending recession. The yield curve has flattened dramatically, and the trade war and hawkish Fed loom large. With that in mind, JP Morgan has put out a piece telling investors which currencies to own when a recession hits. According to Paul Meggyesi of JP Morgan, it will be best to own the US Dollar, Swiss France, Japanese Yen, and Singapore Dollar, and to get rid of any emerging market currencies. The Yen and Dollar look best, as in a deleveraging scenario, the whole world needs to buy back Dollars as it is the default funding currency.

FINSUM: No surprises here, but given how long it has been since a recession, it is always useful to revisit the logics and strategies to use during one.

(Detroit)

The auto industry has been the center of an ongoing technological battle. Not only are auto companies and tech businesses battling over self-driving vehicles, but there is another competition going on over how to power them electrically. With that in mind, here are four stocks to play the electric vehicle revolution; hint, you won’t know any of them. The four names are Aumann, Constellium, Sherritt International, and Visteon. All of the companies make some key component for electric vehicles, from batteries to copper wire installations.

FINSUM: Electric vehicles are one of those revolutions where it seems best to own the component makers rather than the actual carmakers. The big question for us is the horizon for appreciation, as the exact timeline for electric vehicles becoming mainstream still seems unclear.

(New York)

One of the really worrying parts of this year’s stock market is that buybacks are booming to new records, yet share prices remain flat. US companies are on pace to buy back $800 bn of stock this year, a figure which would even eclipse 2007’s bonanza. But worryingly, 57% of the more than 350 component companies that have bought shares back this year are trailing the S&P 500’s return. That is the highest share to fall short of the index since the 2008 Crisis.

FINSUM: Aside from the worries about share prices not responding, the other concerning factor is that companies are buying their shares back at very high prices, which seems like it might portend the end of the bull market.