(New York)

Dividend stocks usually don’t fare as well in periods of rising yields, but guess what, yields have been largely paused for some time. Further, investors may be wise to stay away from tech for awhile as it seems the sector is going through a reckoning. Well, interestingly, the famed Dividend Aristocrats—a group of companies who have raised their dividends for 25 straight years—has just one tech company in it, ADP, the payroll processor, so it is a very good way to earn income and hideout from the tech turmoil. Furthermore, and somewhat surprisingly, the average P/E ratio of the group is 18.1x, below the S&P 500’s average of 18.8x.

FINSUM: This seems like a nice stable group to buy into, and the ever rising dividends provide a nice cushion for any potential losses.

(New York)

Those hoping the current turmoil in the technology sector may turn around the fate of gold will be upset by new data. Gold has suffered its worst start to a year in almost a decade despite the fact that the US equity market was in a correction for much of it. Now, economic data shows that demand for the shiny metal is at its lowest since 2009. The big drop in drop demand did not stem from industry, but instead from investment markets, with ETFs buying ~60% less gold in the last year than the year prior.

FINSUM: Gold is in a tough and interesting spot. On the one hand, it is easy to see why rising rates have depressed gold prices. But on the other, it seems gold have should have benefitted from all the geopolitical and market instability of this year.

(Washington)

There is a lot of excitement right now about the possibility of the new capital gains tax cut. The Treasury is looking into whether to effectively cut the capital gains tax rate by allowing investors to account for inflation when reporting their gains. The cut is estimated to amount to $100 bn over the next decade. However, the Treasury is uncertain if it has the authority to make the cuts on its own, a move it would undertake by simply redefining the meaning of “cost”.

FINSUM: So evidently the first Bush administration looked into this in the early 90s and decided that the Treasury did not have the legal authority to make this change on its own.

(New York)

Are you looking for high yielding stocks that also appear to have good upside? Look no further than this handful of picks. Market Watch has picked a group of stocks with solid dividends that are also seeing dividend hikes. This is a key feature to have not only as a way of offsetting any losses from rising rates, but also a means to drive price appreciation. All the names on the list have dividends of over 4% and have seen recent dividend hikes of 10%+. These stocks include CareTrust REIT, Six Flags Entertainment, AbbVie Inc, and Janus Henderson Group.

FINSUM: Dividend hikes have been rarer lately than one would expect given the good spell of earnings we have had. The reason why seems to be the prevalence of buybacks. All of which makes these shares unique.

(Washington)

The US broker community is currently growing increasingly concerned about the SEC’s new “Regulation Best Interest”. On top of anger over the rules governing the use of titles, brokers have become increasingly worried about a part of the SEC rule which essentially mirrors the DOL’s best interest contract exemption (BICE). The problem is that there are rules governing conflicts of interest that are very similar to the DOL’s, such as brokers having to take steps to resolve conflicts, and minimize compensation incentives for certain products. According to one lawyer representing brokerages, “We believe the commission should replace the DOL rule-based preamble provisions on mitigation and elimination of conflicts with a simple principles-based statement”.

FINSUM: When the rule was first debuted, the general industry reaction was positive. However, the more everyone has dug into it, the more stringent the opposition has become.

(New York)

The FT ran an article today looking at the tech meltdown from an angle no one else is, and it is definitely worth paying attention to. Their worry is how ETF issuers are going to be able to offload shares of tech giants quickly enough to match benchmarks. For instance, Facebook lost $120 bn of market cap last week, and it will be difficult to source enough buyers to unload all that stock without roiling the market further. The overall point of the article is that trouble in tech might cause the dreaded “liquidity mismatch” issue in ETFs.

FINSUM: It seems like this problem is already rectified for last week’s fall, but the overarching argument is that any falls in FAANG stock prices are going to be exacerbated by large amounts of forced ETF selling. This could explain why the losses have been so steep.

(Washington)

In what could come as very welcome news for investors across all asset classes, Fed Chief Powell has indicated that the Fed may take a break from hikes for a while. The question is when this pause in hikes will occur, and the Fed is debating this internally. The central is expected to introduce the words “for now” in regards to its plan for near-term hikes, a new phrase that signals conditionality. According to a former Fed economist, “Given that there’s no visible inflation threat -- not in the data and not in the FOMC forecasts -- it makes sense to inject conditionality on future moves”.

FINSUM: We hate analyzing Fed speak, but a pause in hikes seems like a good idea to us. With inflation low, there is no reason for the Fed to forcefully invert the yield curve and cause a recession.

(Washington)

The Trump administration is exploring a new $100 bn tax cut for Americans. The plan, which is designed to potentially bypass Congress, will try to use the Treasury Department’s own power to enact the cut. The core idea of the cut is to allow investors to account for inflation when calculating capital gains. What that effectively means is that investors could walk up their basis in shares as time progresses, minimizing the taxable portion of their gains. The cuts are far from final, as Treasury head Mnuchin says he is not even sure if the Treasury has the authority to do so. Mnuchin commented on the cuts that “We are studying that internally, and we are also studying the economic costs and the impact on growth”.

FINSUM: This cut makes logical sense to us, but there is already backlash in the media that this is a major gift only to America’s wealthy.

(New York)

The idea of bitcoin being a 21st century version of gold, a digital value store for the next generation, has become prevalent. However, Barron’s argues, and we second, the idea that Bitcoin can never be gold. The idea comes from a new paper out of the University of Chicago. The core reason why?: It is simply not as secure. If you pay close attention to the headlines, Bitcoin is being hacked and stolen left and right. Even worse, the more valuable Bitcoin becomes, the more it is stolen. The same cannot be said for gold.

FINSUM: The paper argues that bitcoin will never play more than a “bit role” in the global financial system because of its fundamental vulnerability to theft. It sounds like the cryptocurrency needs a digital Fort Knox.

(New York)

There has been a lot of consternation over markets this year, and with good reason. Between a trade war and rising rates, there has been a good deal to be nervous about. But in the last few weeks, something definitely changed, as exemplified by the Dow just recording its best month since January. Worries about the trade war have abated in the last couple of weeks, but the big question is whether recent gains are sustainable.

FINSUM: So on the question of sustainability of gains, big banks like Morgan Stanley, Citi, and Goldman Sachs have indicated this week that they think markets are destined for a near term correction. We aren’t so sure. We are suspicious of how prices have risen, but in this instance we are drawn to the old idea that markets love to climb a wall of worry.