(Houston)

MLPs can perform well during periods of rising rates, such as in the last tightening cycle. While they are broadly more risky than bonds, they can provide good returns. Many MLPs collect inflation hedged payments, so they should perform better than bonds in a tightening environment. As an asset class, MLPs have been holding back on payouts, but these should accelerate in 2019 and 2020. Three names to look at are Enterprise Product Partners, yielding 6.1%, Magellan Midstream Partners, yielding 5.2%, and Antero Midstream Partners, yielding 4.8%.

FINSUM: Those yields look really juicy don’t they? And they are moderately inflation hedged, which is also quite promising. Worth a look.

(New York)

Okay, we are calling it. Officially. While some had been holding out hope that Bitcoin might regain ground back up to its peak of around $20,000, the bottom appears to have officially fallen out. The cryptocurrency is now trading under $8,000, down around 60% since its peak. The currency continues to suffer setbacks from regulatory efforts in various jurisdictions, and it has put bears firmly in control.

FINSUM: Bitcoin and cryptos will be around for a long time, but the price discovery for a realistic level is going to be painful.

(Houston)

Oil prices have been rising strongly on the global market. However, those gains took a breather yesterday when eye-opening new info emerged on the oil market—the US is now producing more than 10 million barrels of crude oil per day. The mark was hit in November, and arrived much sooner than anyone expected. The US has only broken that threshold twice in the past, both times in 1970.

FINSUM: Okay so our big concern with the oil market right now is that these higher prices are not sustainable. The fundamental oversupply of oil has not been solved. The only thing holding up prices is the fact that OPEC members, for the moment, are happy to let the US benefit disproportionately from their output cuts. This output figure might change that.

(New York)

ETFs have been the dominant investing trend for the last half decade or so, eating away at mutual funds’ grip. However, what will be the next major investing trend? The answer may have just debuted. Orion Advisor Services has just announced a new product called ASTRO (Advisor Strategy & Tax Return Optimization tool). ASTRO “allows advisors to build tax-efficient SMA portfolios that can take into account clients’ environmental, societal and governmental concerns”, according to Michael Kitces, who says that the new technology is a threat to asset management and could prove highly disruptive, as it would allow better loss harvesting and more tax-sensitive liquidations in retirement. The system would allow advisors to “buy, own and manage a portfolio of all the underlying individual investments directly”.

FINSUM: This sounds like it could be a very potent offering, but we do not expect ETFs do go away any time soon.

(New York)

Morgan Stanley went on the record yesterday arguing that market liquidity will likely vanish in the event of turmoil. The bank says that the reduction in bank participation in trading, brought on by post-Crisis regulation, has led to “shadow banks” taking up the burden of liquidity. Such shadow banks including entities like professional trading firms, hedge funds etc. However, Morgan Stanley points out that this type of liquidity provider has never been tested in a tumultuous market, and that liquidity is likely to vanish.

FINSUM: While there may be some truth to it, banks love to over play the amount of liquidity they provide in periods of turmoil. When the market gets ugly, they tighten up just like everyone else.

(Houston)

So oil has staged a slow and cautious recovery over the last year powered largely by OPEC’s oil cuts. That said, prices are still ~35% below the $100 per barrel threshold. But guess what, it does not matter. In an absolutely eye-watering piece of data that is a testament to both management and technological innovation, Shell oil company is making as much profit barrel with oil at $60 as it did when oil was $100. Exxon performs even better.

FINSUM: Oil companies have done a truly commendable job rejigging their business models and cutting costs to maintain profitability.

(New York)

While there has been some speculation that the US housing market may be facing a tough period ahead, new data is showing that prices might continue rising. The big worries are that rates will rise quickly, hurting mortgage demand, while at the same time, the new tax package will reduce home-buying because of the lack of deductibility of mortgage interest above a threshold. However, new data shows that housing inventory continues to sink. There are few homes for sale compared to buyer demand, and the building rate of new homes is weak. This means there is much more demand in the market than there is supply.

FINSUM: We are not very worried about home prices, especially in the lower and middle pars of the spectrum. The largest ever US generation—Millennials—is entering the key home buying period of their lives.

(Detroit)

General Motors is ramping up its efforts in the self-driving car space. In what has become somewhat of a new age automotive space race, the company is doing well in its testing of autonomous vehicles. That said, it is still well behind the performance of Waymo, Google’s self-driving car unit. GM’s vehicles are getting very autonomous, with a human driver only needing to intervene 0.797 times for every 1,000 miles driven in 2017, down from 18.51 in 2016. Google’s number is 0.179 per 1,000 miles. Some criticize this “disengagement” metric because it is not well controlled or defined.

FINSUM: There is probably a little bit of “play” in how these stats are recorded, but if they are anything near the truth, the technology sounds like it is performing very well. GM says it wants to debut self-driving cars in 2019.

(Seattle)

The Whole Foods acquisition by Amazon has been somewhat of a mystery for markets. While the move sparked a great deal of fear and excitement, it is still not readily clear what Amazon will do with its new asset. That said, prices at Whole Foods are falling, and the company’s in house basic brand, 365, is pushing forward. Whole Foods 365 is the company’s new low price chain of stores. Many thought it would be shuttered under Amazon’s leadership, but it is moving ahead. The first store just opened in Brooklyn and will expand to five more locations this year.

FINSUM: We think a Whole Foods sub brand of lower priced items with the same general theme could work very well in attracting more Millennial shoppers.

(New York)

Vanguard, one of the preeminent global fund managers, has just gone on the record warning about a big and growing danger for ETFs. Vanguard says that “predators” are increasingly front-running ETFs at the expense of legitimate investors. Because most ETFs disclose their daily holdings, and are benchmarked to an index, they are susceptible to manipulation by those who trade ahead of the reconciliation. Vanguard hopes that regulators will not approve new rules which would demand even greater transparency in the ETF marketplace, as this could worsen the problem. Vanguard currently only discloses its holdings with a one-month lag to mitigate frontrunning, but could be forced to do so on a daily basis.

FINSUM: This is one of the areas of markets where transparency may actual work counter to the interests of the everyday investor.