(Washington)

The battle over client is heating up again. On one side stands the broker, and on the other, the firm. Who owns the client relationship? Both say they do. Some may have been wondering where FINRA stands on the issue. However, the regulator has just taken the easy way out, saying it has no stance on the question. FINRA says it is not involved in the broker protocol and takes no sides on the topic, though it does have arbitration rules to handle disputes. Brokers want a FINRA rule, or at least process on the issue, with one attorney saying “Finra needs to convene an industry conference to finally be able to decide on what’s a workable definition of who owns the customer … There’s got to be a better way of doing this than TROs and arbitration”.

FINSUM: The broker protocol seems likely to completely dissolve this year. Hopefully something workable will take its place, because the legal alternatives are not great for anyone (other than lawyers!).

(New York)

Call it a “silent killer”, but there is a big threat coming to US malls that many don’t see coming. While the big bout of retail bankruptcies in 2017 hit the industry hard, a less headline-grabbing, but more widespread issue might cause bigger issues in 2018. That issue is that smaller mall tenants are likely to simply not renew their leases. Smaller operators between the big anchor stores actually generate more revenue for malls, and a decrease in tenancy would be a big blow to mall revenue. Smaller operators are actually better indicators of retail health because their lease terms keep them on the lookout for greener pastures.

FINSUM: Mall REITs could be in for a rough time here. While little companies won’t get much press, this pending increase in vacancy rates could hit malls hard.

(New York)

While the economy seems to be innovating faster recently, nothing can match the pace of online retail, whose entire operating model has been completely overturned in about a half decade. Physical retail is being rethought and marketing is now primarily social media driven, two big changes. But what is next? Equity research analysts argue that voice orders through new devices like the Amazon echo will be key, as will better digesting customer data. More digitally-native brands will move into physical retail, which will be more about marketing and client experiences than it will about sales.

FINSUM: It will take some very astute investors to make money in retail at the moment as one has to have a sharp view about the development of the industry to pick winners (perhaps outside of buying Amazon or Walmart/Target).

(Washington)

Advisors need to pay very close attention to what states are doing on taxes. As might have been expected, states with high taxes are working hard to come up with solutions that protect their residents from the higher payouts trying to be imposed by the federal government. The new tax package limits state and local deductions (“SALT”) to just $10,000, which means much higher tax bills for residents of higher tax states. While New York is preparing to sue the federal government over the changes, California has already come up with what looks like a good solution. Residents of the state can simply donate to the “California Excellence Fund” instead pf paying taxes, as such a charitable gift is deductible in the new federal package.

FINSUM: New York may also use the same plan as California is using. All the states seem likely to do this. What a big waste of time and energy because of a silly rule.

(New York)

Barron’s has been getting increasingly bearish of late (with the Dow at 25,000 now, we can understand why!), and they have published a bearish article laying out the case for why a correction is looming. The argument has a lot to do with price action, and what the market is showing is that despite reaching a new high, it is coasting rather than gaining momentum. The last trading day of the year—a 118-point loss—was a worrying sign of slowing momentum, and many technical indicators now point to falling prices soon.

FINSUM: One key takeaway from this piece is that despite January being considered a good month for stocks, that is not the case in midterm election years.