(New York)

Vanguard has been leading the race to the bottom in fund fees for years. It has also been immensely successful doing so. Until now, most fund providers had only fought back by cutting their own fees, but now they are getting more defensive. For instance, Fidelity, which is the largest 401(k) manager, will now charge clients an extra 0.05% fee for all funds invested in Vanguard products. Fidelity says that “A small number of fund families have not compensated Fidelity for certain services, and this pricing change is designed to address that disparity with the intention of providing fairness across all of our business relationships … This is about leveling the playing field”.

FINSUM: This is a good way to push back against Vanguard, but considering it is retaliatory, the fee does seem quite minor!

(New York)

Deutsche Bank has just put out a stern warning on what is one of the quickest growing asset classes there is. Yes, you guessed it, cryptocurrencies. The bank does not recommend any of its wealth management clients to invest in the space, saying “We do not recommend that. It’s only for investors who invest speculatively … There is a realistic risk of total loss”. The bank says cryptos are plagued by high volatility, possible price manipulation, and data loss or theft.

FINSUM: Just to clarify our opinion on cryptos, our view is that they are not going anywhere and will likely be a part of financial markets for the foreseeable future. However, they have such high regulatory risk right now, and such a lack of clarity on valuation, that it is simply too risky to put any money in.

(New York)

The stock market is rich, with prices sky high and valuations closing in on their historical peak. The conundrum, though, is that while there is a lot risk, there may yet still be a long way for the market to rise before falling. How to play it? The answer is the options market. Because the incredibly long period of low volatility, options prices are very low, which means if one uses a solid options strategy, there is a potentially inexpensive and effective way to play the market.

FINSUM: This seems like a smart way to play further upside, while keeping costs down, especially if you are already long stocks to a major degree and want to take some chips off the table.

(Washington)

While all the focus is on a possible trade war between NAFTA countries, and possibly, with China, there is another area where President Trump is trying to counter the rising power of Beijing. That area is in technological development. New reports out of the White House indicate that the president and his team consider the development of a 5G mobile data network of critical importance to combating China’s investments in the same area. The White House considers its development so crucial that it likened the need to the US’ effort to build the interstate highway system in the mid-20th century.

FINSUM: The scope of why the administration feels this way is not immediately clear, but what is clear is that America’s telecom industry is poorly suited to developing 5G because of its oligopolistic structure and lack of domestic manufacturers.

(New York)

Any stock investor, especially those who have been investing over the last twenty years, has noticed that there is a dearth publicly traded companies these days. Years of mergers and acquisitions, combined with a lack of IPOs, means there are many less publicly traded companies these days. Now, in what seems a strong move to change that, the SEC is considering making a new rule that would bar shareholders from suing companies, with all claims moving to arbitration instead. Doing so would eliminate one of the headaches of going public for companies, and would move the relationship between shareholders and companies to something more akin to clients and advisors, where arbitration is the norm.

FINSUM: This is an interesting move, but we do not think it is enough to push companies over the edge to IPO. It might also prove poor from a corporate governance perspective.