FINSUM

FINSUM

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Wednesday, 21 November 2018 12:27

Vanguard is Slashing its Minimums

(New York)

Vanguard appears to be taking action on one it its biggest weaknesses. Others in the industry, notably Fidelity, have been making moves to try to make their funds ever more accessible and cheaper. Vanguard has been the low cost leader for years, but some of their features now make them look slightly outdated. Perhaps no longer. For its Admiral Shares class, its cheaper option, Vanguard has lowered the minimum investment from $10,000 to $3,000, a significantly lower threshold for younger and less wealthy investors. The changes will apply to 38 of their index mutual funds.


FINSUM: This is a good move but we are surprised they didn’t just change it to no minimums.

Tuesday, 20 November 2018 17:43

Goldman Says You Should Retreat to Cash

(New York)

Here is a big warning. Goldman Sachs says that with bonds and stocks falling, and the outlook remaining poor, cash will be king. The bank thinks that stocks will only rise by single digits in 2019. In the words of Goldman analysts, led by David Kostin, the chief of Goldman’s research arm, “We forecast S&P 500 will generate a modest single-digit absolute return in 2019. The risk-adjusted return will be less than half the long-term average. Cash will represent a competitive asset class to stocks for the first time in many years”.


FINSUM: Goldman basically think T-bills are a great buy right now and we have a hard time disagreeing. The yields on short-term holdings are very favorable and quite rate insensitive.

(New York)

Merrill Lynch’s new compensation plan is not being received well by brokers. Many are angry about certain aspects of the plan and are pushing back. In particular, brokers don’t like that the plan incentivizes them to tell clients to take on more debt during a period when interest rates are rising. Around 15,000 advisors have complained to Merrill Lynch management. Management responded by saying it was a good incentive and was designed so that it didn’t heighten conflicts of interest.


FINSUM: This seems like it will just create misaligned incentives, especially given that it is being put in place when it is very unfavorable to be adding debt.

Tuesday, 20 November 2018 17:37

Why Real Estate Might Stop the Fed

(New York)

One of the surest signs in the economy right now is that real estate is in trouble. Data coming out of the sector has been consistently weak for months and shows a clear downtrend in the housing market. Rates seem to be playing a big part of that, as demand for housing has sunk as rates have risen. That could prove one of the few brakes on the Fed’s relentless rate hike path. The fall in real estate comes at a time when the market should be surging, as unemployment is at extreme lows and Millennials are entering their peak home buying years.


FINSUM: Besides stocks and bonds freaking out, real estate is one of the areas showing a lot of weakness, and this it is perhaps one of the few aspects that could stop the Fed.

Tuesday, 20 November 2018 17:36

Routed Markets are Being Led by Tech

(San Francisco)

As of today, the FAANG stocks have shed over $1 tn in market cap since their recent highs. The turmoil pulled markets down around 2% across indices, with the Dow seeing the biggest drop at 2.21%. The losses mean once again that indices have lost virtually all their gains for the year. As one CIO put it, “absolute bloodbath for technology stocks”. The selloff seems very forward looking, as investors are quite focused on what might go right and wrong in 2019. The biggest worries seem to be around trade.


FINSUM: Here is a question: why exactly is tech selling off? Apple obviously has its own problems, but those particular issues don’t seem very relevant to Facebook etc. Panic?

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