(Washington)

In what should give investors a huge sigh of relief, President Trump has called off a trade war with China. The White House has called off the aggressive approach in light of China’s statement that it would try to increase US agricultural imports there. Trump says it would be good for US farmers, who were threatened with becoming a casualty in a trade war. Democrats are criticizing the president for cutting a deal too easily.

FINSUM: We do think the US has gotten the raw end of many trade deals (not that it did not play a large part in undermining itself), but trying to throw its weight around with China was a risky strategy.

(Rome)

In a very interesting, or maybe offensive, release, the Vatican has just put out commentary from the Pope which criticizes financial advice. In a bulletin called “Considerations for an ethical discernment regarding some aspects of the present economic-financial system”, the Pope appears to criticize advisors who are not fiduciaries, listing among its “morally questionable” activities, “a failure from a due impartiality in offering instruments of saving, which, compared with some banks, the product of others would suit better the needs of the clients.

FINSUM: We have no problem at all with fiduciary advice, but we think it is very close-minded when anyone broadly calls non-fiduciary advice immoral.

(New York)

A lot of advisors have been under pressure to cut their fees. Pressure from competition, both digital and human, has reportedly put downward pressure on the fees advisors feel they can charge. However, Barron’s has put out a piece arguing that advisors should not cut their fees. The reason why stems from the results of a survey which found that advisors who lowered their fees actually brought in less assets and experienced less revenue growth than when they left fees higher. An industry commentator summarized the situation this way, saying “That supports something we’ve seen, frankly, for 15 years, which is, clients don’t leave because of price; they leave because of service issues”.

FINSUM: We think this is a bit of a misleading survey, at least if you buy the “services issues” theory. The reason why is that it is only advisors who have service issues that are cutting fees, which means the lower asset growth does not really have to do with fees, it has to do with a problem with the advisor.

(New York)

While markets have been doing a little better of late, investors may be looking for safe stocks that could perform well. Well, if that is the case, look no further than three old-time consumer goods companies that look ripe for outperformance. Coca-cola, PepsiCo, and P&G all look set to thrive and are available at a bargain. On the back of a slew of industry factors, consumer goods stocks are down by over 12% this year. However, the three stocks mentioned are solid dividend producers and seem likely to provide strong earnings growth, making a 10% total return for the year look likely.

FINSUM: 4% dividend yields with good top-line revenue growth for rock solid stocks seems like a pretty attractive proposition to us.

(New York)

One of the pioneers of smart beta investing has just gone on the record tearing down the concept. A long time quant strategist, Vincent Deluard, who helped build early smart beta funds, has lost faith in the strategy as he has seen fund providers use statistics to disingenuously prove all manner of strategies using selective back-testing. Deluard even built model portfolios to show how “dumb” constructions could lead to good results, and “smart” constructions could lead to poor results.

FINSUM: We don’t think smart beta is necessarily “smart” or “dumb”. In the end, these are really just strategies that are only as “good” as the market circumstances they are applied to. Smart and dumb is ultimately about the buyer of the funds.