(Atlanta)

The type of loans that fueled the Financial Crisis are making a comeback in a big way. Issuance of subprime mortgages is surging once again, with the total volume of loans issued in the first quarter doubling from a year ago. Such issuance fell to almost zero in the years after the Crisis, but specialist lenders have sent it surging yet again. The loans have been very popular in the debt markets as investors have been snapping up the loans. “[Investors] are definitely chasing yields. Whenever these deals come out, for the most part, they are oversubscribed”, says a New York hedge fund.

FINSUM: This is a bit worrying, but given how low the starting base for the market is, this is just not big enough to be a concern, yet….

(New York)

One of the big developments in the wealth management industry right now is the big increase in recruitment spending by large independent broker-dealers. Even as wirehouses are cutting back on spending, big independents like LPL, Commonwealth, and Raymond James, are spending big on new talent. The payouts are usually being given in the form of forgivable loans. The spending on such payouts has been large, with LPL increasing its budgets for such items to $159.9m in 2017, 17% higher than the year prior.

FINSUM: So while wirehouses have been cutting back, independents have been heating up.

(Washington)

The fiduciary rule has suffered many blows over the last several months, none stronger than in the 5th circuit court in March. However, despite all the doom and gloom over the rule, there is still a good chance it will hold up. The 5th circuit court was the first circuit court to come in against the rule, which paves the way for the Supreme Court to hear the case (impossible to predict the outcome there). Furthermore, the courts may let an outside party step in and take up the DOL’s right of appeal on the recent 5th circuit court ruling, all of which means the rule is far from gone.

FINSUM: We do not think fiduciary rule advocates are going to give up this easily, especially because there is still a lot of legal recourse available to them.

(New York)

The bond market is in flux. It is caught between several strong opposing forces. On the one hand, the Fed looks intent to raise rates. On the other, many are worried about a recession. Finally, the huge and increasing crop of retirees need reliable income. With that in mind, here are some potentially good bond buys from Pimco. The fund manager doesn’t think we will have a recession soon, saying “We think the [economic] cycle will continue for the next couple of years, but stocks aren’t cheap and bonds aren’t cheap”. Pimco suggests looking at high quality junk bonds, and the short end of the Treasury yield curve (e.g. 2-years, which are yielding over 2%).

FINSUM: High quality junk is still yielding over 5%, while the short-end of Treasuries also looks appealing. We don’t think there is a reason to flood out of bonds yet.

(New York)

Despite the recent falls in the market, stocks still look quite expensive, and are, historically speaking. With that in mind, many investors may be looking for stocks with a strong value proposition. Barron’s has put out a piece choosing three: General Mills, Tractor Supply, and UPS. In the case of General Mills, the panic over grocery wars and pre-packaged food looks overdone, and the company is actually performing well in a number of areas. Tractor Supply has done very well historically, but its growth rate has slowed recently, but this may because of two mild winters, and not a sign of trouble to come. UPS has declined because of an announcement of increased capital spending, but given the health of the underlying business, it seems too cheap to pass up, says Barron’s.

FINSUM: These seem like very knowledgeable picks. We particularly like UPS, which is trading at a historically low P/E ratio right now.