(Washington)

Well the midterms are finally here. However, one thing has become apparent—how these elections will affect financial advisors has not been discussed nearly enough. One of the big concerns advisors should have is about what happens if the Democrats take the House. In this scenario, it seems likely regulation would grow much toughed as fire & brimstone-like Maxine Waters (D-Calif.) would taken the helm of the House Financial Services Committee. Additionally, Republican-led deregulatory measures could be scuttled. One area of possible positivity could be on new legislation for retirees, including new measures to encourage people to save for retirement.

FINSUM: Perhaps the biggest worry regards some sort of defeat of the new SEC rule with renewed support for the DOL rule 2.0. The Democrats fiercely advocate for a comprehensive fiduciary standard, so their ascendance in the House could lead to that becoming a reality.

(San Francisco)

Apple’s stock got hit in a big way last week as the company announced it would no longer announce unit sales of iPhones. The announcement was taken as a sign of weakening iPhone demand. An analyst summed it up this way, saying “Apple Reduces Disclosure; Typically Not a Good Sign”. The stock has fallen 10% since the announcement. The more positive view is that Apple wants investors to focus more on its earnings than on its unit sales, as earnings are ultimately what will drive the shares forward.

FINSUM: Apple’s shares often fall on earnings (8 out of the last 15 times), so the company has little to lose by eliminating unit sales. We think this is a smart move, especially as the iPhone transitions to being a highly saturated and mature product.

(Seattle)

The Wall Street Journal ran a major headline on Amazon’s search for a new headquarters yesterday. The newspaper says that Amazon is now planning to not host a single headquarters but open two new smaller offices, splitting the total of 50,000 new hires between two locations. New York and Northern Virginia are said to be the choices. The WSJ says Amazon decided to have two because it would make hiring the tech talent they want easier.

FINSUM: While they were under no obligation follow through, this development does seem a little unfair to the cities bidding. Cities put in resources to get the full as-promised HQ from Amazon, so only getting half the return is perhaps a little disappointing (though still very positive).

(New York)

Over the last couple of years there has been a movement on the fringes of the active management space. That movement was towards funds that only charge investors full and/or rising fees if they outperform a given benchmark. If they underperform, their fees would fall back to ETF levels. Well, that idea has taken a big step recently as major fund provider AllianceBernstein has a handful of so-called “fulcrum funds”. The largest is the AB FlexFee Large Cap Growth Advisor Fund, with $106m under management. A top figure at AB put the goals most clearly, saying “The big impact of this will be if we can take money from passive, or money that would’ve gone there … That’s the ultimate goal here”.

FINSUM: Fulcrum funds make a lot of sense for active managers and clients. If the fund managers do their job and seriously outperform a benchmark, then higher fees make sense. If they don’t, then fees stay low.

(New York)

Housing stocks are in a real slump right now. Many homebuilders are in a full bear market following months of slowing home sales and new construction. For instance, the iShares U.S. Home Construction ETF is down 26% this year. That said, take a look at two stocks that seem like they have strong upside—Ingersoll-Rand (IR) and Lennox International (LII). Both companies are in the HVAC sector of housing, which is a strong niche.

FINSUM: What is so strong about the air conditioning and heating (HVAC) sector is that it is at the start of a big replacement cycle. These machines typically last 12 to 15 years, so there is an ongoing boom in replacement of the huge amounts of these systems installed in the 2003 to 2006 housing surge.