(New York)

The ETF industry has been undermining the mutual fund business for years, but it is now set to undergo a transformation itself. In particular, as many as half of the 2,000+ ETFs currently listed are likely to close in the next few years as they die off from a lack of assets. Most ETFs need to reach somewhere between $50m and $100m to break even, but currently more than half of the 2,100 or so ETFs have less than $100m. The problem is that the market has become so inundated with new concepts—and so top heavy from broad index funds—that attracting assets is very difficult. Accordingly, many ETFs, including from large providers, are likely to close over the next couple years.

FINSUM: Big names have already started shuttering funds that were underperforming in terms of assets. Expect more of the same.

(Brussels)

In what can only be described as an act of both extreme patience—and hope for a better outcome—the EU has yet again agreed to extend the Brexit deadline from October 31st to January 31st following the big failure of Boris Johnson’s most recent deal in Parliament. The difference with this extension is that it has a caveat that if the EU and UK come to an agreement before January 31st, then the UK is free to leave in advance of the deadline.

FINSUM: The EU obviously wants the UK to leave on the best terms possible, and they are probably hoping Brexit gets completely reversed through an upcoming general election.

(Washington)

Yes, you read the headline correctly. The original DOL rule—the one vacated by the courts in 2018—is seeing new life breathed into it. We are not talking about the DOL Rule 2.0 effort being led by Scalia and company at the DOL, we are talking about the Obama era proposal. So who is bringing the new rule back, or at least proposing to do so—Elizabeth Warren. In a little covered policy release earlier this month, Warren vowed she would restore the Fiduciary Rule (1.0). She wanted to bring back “The Labor Department’s fiduciary rule that the Trump administration delayed and failed to defend in court, so that brokers can’t cheat workers out of their retirement savings”.

FINSUM: Add this to the long list of CFPB-oriented measures Warren wants to enact if she wins the election. On a separate note, it is very annoying how politicians so casually call all brokers cheaters when it is really a small sample of bad actors.

(New York)

Hopes for the housing market had been rising strongly in the last couple of months. After nearly a year in the doldrums, existing homes sales rose for a pair of months in July and August, giving the market hope that falling mortgage rates had revived the market. However, in September, sales again fell sharply, with existing home sales dropping 2.2% from the previous month. Prices, however, are rising, as short supply is moving asking prices higher.

FINSUM: Prices are holding up okay, but there is not much buying and building occurring, which means housing will be contributing less to the economy overall.

(San Francisco)

A prominent fund manager has just come out with a bold and bearish prediction—that the big multi-year surge in FAANG stocks will fade. Rob Arnott of Research Affiliates says “Will these stocks produce such impressive growth that they will justify their current market cap, or are these implausible growth expectations? We don’t have a crystal ball, of course, but we would recommend not betting on the momentum continuing”. Overall, FAANGs account for $4.2 tn of market cap, a huge concentration in such a small group of stocks, and a big threat to the overall bull market. Arnott is considered the founder of smart beta and has turned Research Affiliates into a firm that manages $184 bn.

FINSUM: The basic argument here is that FAANG valuations have simply grown too large relative to other sectors and are bound to come down. But what is the catalyst?