FINSUM

FINSUM

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(Washington)

Joe Biden has picked Lisa Gomez to head the Employee Benefits Security Administration at the Department of Labor. And speaking to senators this week, she made a comment which clearly signals the direction of the Department. She said “there’s nothing that is more central to ERISA than defining who is a fiduciary”. Speaking about her pending work for the DOL, she said she plans “to be briefed on the efforts of looking at the definition of a fiduciary in different contexts, and taking another look at the conflict of interest rule and how it would apply in different situations”. She continued “Determining exactly who is a fiduciary in different contexts … has been the source of disagreement and it’s been a long road to get there”.


FINSUM: The writing is on the wall at the DOL and SEC. The Biden administration is starting to flex its muscle and will beef up regulation.

Thursday, 07 October 2021 20:51

SEC Warns of Harsher Reg BI Enforcement

(Washington)

Every scary dream about regulations that broker-dealers have had since Biden got elected might be coming true, at least based on new comments out of the SEC. According to Gurbir Grewal, “We must design penalties that actually deter and reduce violations, and are not seen as an acceptable cost of doing business”. Grewal is the former Attorney General of New Jersey who is now the Director of the Division of Enforcement of the SEC. He added, “[T]o achieve the intended deterrent effect, it may be appropriate to impose more significant penalties for comparable behavior over time … Doing so will make it harder for market participants to simply ‘price in’ the potential costs of a violation”.


FINSUM: All signs point to things getting much tougher over the next couple years.

Thursday, 07 October 2021 20:13

Here is the Best Hedge for this Volatility

Whether the US’ current bout of inflation is caused by transitory supply-side factors, or trillions of dollars poured into the economy by policymakers, is irrelevant because investors are now tasked with finding a way through the stock market jitters. As inflation rises it eats at yields and the value of fixed coupons falls. To avoid the pitfalls of rising prices look to dividend stocks, whose yields are pushed higher by inflation. Of course not all dividend stocks are created equal and some will outperform in an inflationary environment. The best income stocks are in the financial sector because they benefit from rising interest rates, as their interest rate margins expand in such environments. Energy is next, at least currently. Higher demand boosts prices of oil and gas, which benefits energy sector investors as it is one of the highest dividend payers. These sectors are the most likely to boost their dividends in the rising price environment.


FINSUM: Dividend stocks have no doubt outperformed just about every segment of the bond market, and expanding your dividend holdings may be a good idea as inflation comes in at 20-year highs. 

Thursday, 07 October 2021 20:12

Why Volatility Is Here to Stay

September saw the Vix creep to a 4-month high as the S&P 500 blew off 4.8% of its value. Most investors were hoping for a bounce-back month in October, chalking up September’s poor performance to a checkered history for the opening of autumn. However, they are likely to be remiss as volatility indexes are still climbing. The pullback in September was the largest since March of 2020, when the pandemic began.BofA said that while October is generally a well-performing month when it trails a struggling September, October can drag as well. Debt ceiling negotiations, oil price spikes, and Fed tapering are just a few of the onslaught of headlines which are giving the market fits.


FINSUM: While volatility has yet to hit the peaks of September it is already consistently above its 200-day moving average, which could be a sign of even more volatility to come.

Thursday, 07 October 2021 20:12

Whistleblower Looms Over Facebook

Facebook was blacked out on Monday October 5, 2021, which they claim was related to technical issues on their backbone routers. This came just before Frances Haugen, former product manager for Facebook’s civil integrity team, said that regulators need to intervene in the ‘crisis’. Haugen told ‘60 Minutes’ that she saw Facebook consistently choose profits over public safety at Facebook.She took with her tens of thousands of documents that prove these claims. Additionally, she filed complaints with the SEC that Facebook misled investors and advertisers by not sharing the whole picture about its platform.


FINSUM: This was a huge hit to Facebook stock on Monday, but it piggybacked on the rest of tech’s rally Tuesday morning to see some recovery. It is difficult to tell how long this may loom over the stock.

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