(New York)

The end of the exciting but short-lived Bitcoin era may be upon us. As everyone will know, the cryptocurrency surged this year by around 2000%, from $1,000 up to $20,000. However, after worries and threats of regulation, bitcoin has fallen back steeply and is now trading at around $10,000 or just half what it was a few weeks ago. One prominent fund manager commented on bitcoin that “Having no clear fundamental value and largely unregulated markets, coupled with a storyline conducive to delusions of grandeur, makes this more than anything we can find in the history books the very essence of a bubble”.

FINSUM: It is next to impossible to forecast what bitcoin will do, but it should be noted that the cryptocurrency has bounced back from 50% drops before in this big rally.

(Washington)

RIAs are furious about one aspect of the broader tax package passed last month. That is the way the government puts limits on the amount of income and type of entity that can use the new lower tax rate for pass through entities. RIAs say the new rules discriminate against RIAs that are not set up as C Corps. There is already a major movement to get the rule changed being led by Savant Capital Management. “We believe RIAs deserve the same tax treatment as other business owners” says TD Ameritrade.

FINSUM: We noticed before the new package got passed that it seemed to very deliberately exclude some sectors. Hard to judge the chances of this push succeeding.

(New York)

It looks like the end of the road for one of the most popular and successful subsections of the REIT business. For the last decade there has been a veritable gold rush in self storage units. The business is a very profitable one and operators were able to charge gigantic rent increases over the last several years because of a lack of new supply. However, the market is now being flooded with new rental units, which could spell the end of the boom. There are also some demographic factors working against self storage, such as how Millennials collect less stuff than previous generations, and are likely to inherit large houses form their parents.

FINSUM:This is a succinct and well-conceived argument on the sector. That said, it does not look like performance will fall off a cliff, just that the best years are behind self-storage for now.

(New York)

Goldman Sachs just reported its first quarterly loss since 2011. The good news is that the loss does not mean the sky is falling in on investment banking or the markets. The loss was because of a huge $4.4 bn tax charge the company took in advance of the new tax regime for this year. Aside form the tax charge, Goldman’s business looked solid, with higher overall revenue and pre-tax margins in 2017. The one sore spot was bond trading, which produced only $1 bn of revenue.

FINSUM: The fall in bond trading revenue at GS has been prolific. In 2009 the firm created $23 bn of revenue in FICC trading. In 2017 revenues were just $5.3bn.

(Stockholm)

For the first time in half a century, Sweden is seriously prepping its country for the possibility of war. Growing national anxiety over the threat of Russia has led the government to send out 4.7m information pamphlets to all households informing them of what to do in the event of war. “All of society needs to be prepared for conflict, not just the military. We haven’t been using words such as total defence or high alert for 25-30 years or more. So the knowledge among citizens is very low”, says the government. The country is also considering whether it should join NATO.

FINSUM: The Baltics and Scandinavia are particularly exposed to possible Russian military aggression, so it makes sense they are nervous.

(Washington)

On Wall Street has run what we consider to be a very bad article, but we thought our readers might enjoy, or cringe, in hearing about. In an article entitled “Why Financial Planners Should Support a Strong Fiduciary Rule”, the director of consumer protection for the Consumer Federation of America manages to make almost no discernible argument. Attacking those who oppose the fiduciary rule, the article fails to make any salient points in support of the current DOL version of the rule. In fact, the most interesting part of the article is actually an inadvertent support of those who oppose the DOL rule. The author acknowledges that commissions-based payments are no more inherently conflicted than fee-based accounts.

FINSUM: This article was incredibly mind-numbing. While we have been in consistent opposition to the DOL rule, we are not against fiduciary duty in principal, and have been trying to find arguments in its favor. In this piece we kept reading and reading waiting for a good point to be made, but it never arrived.

(New York)

If you are a hybrid BD/RIA, you need to pay attention. FINRA is trying to loosen the strictures in which you might find yourself. In particular, FINRA wants to make changes to its outside business activity rule. It no longer wants to force hybrid B-Ds to have compliance tracking for their RIA businesses. Being legally liable for such businesses can prove a major cost burden. “The motive for taking a percentage payout on the RIAs advisory business will go away”, says one industry insider.

FINSUM: This will certainly be a welcome change for the many hybrid RIAs who deal with the current FINRA rule.

(New York)

The media and many bond market gurus would have you think the ceiling is caving in on bonds. Talk of a massive bear market, surging inflation, and big losses abound. How to make sense of it all? The answer, if there is one, is that reversals in rate environments tend to take a long time, and have historically lasted 2-3 decades before reversing back. Therefore, bond yields may continue to climb steadily, but this shouldn’t be bad for the stock market, so big losses may be avoided. In fact, slowly rising rates can spark structural bull markets. It would also be helpful for pension funds to have higher yields as they could be safe in assuming better returns, helping fund the huge national pension deficit.

FINSUM: We just are not that worried about bonds. The Fed still seems fairly timid, there is high natural demand for yields because of demographics, and inflation and growth aren’t all that strong.

(San Francisco)

While most publications have been running stories arguing that it may be time to get out of the FAANGs, Barron’s has a run a piece to the contrary, saying that they have more room to run. While the piece admits that the group of stocks is under a lot of pressure and is highly priced, it contends that it is not time to pull out yet. The argument is that despite accusations of misbehavior and threats from Trump, the sector will remain the centerpiece for growth investors. If the economy continues to chug (meaning stay under 3% growth), then tech’s steady growth will remain attractive.

FINSUM: We tend to like this view. Despite how richly these companies are valued, we think there is still room for medium-term value growth as regulation is still a way off and their fundamental businesses are solid.

(New York)

A lot of investors are looking for income, and over the last several years it has been hard to come by. While yields are rising, they are still very low by historical standards. With that in mind, Barron’s has run a piece selecting the best income stocks from a sector not considered as much as it should be—biotech. Many biotech companies have strong overseas cash flow, and solid yields. For instance, Pfizer, which rose just over 13% last year, sports a 3.7% yield. Abbvie and Amgen are also good looking stocks, both offering dividends just below 3%. Eli Lilly, Johnson & Johnson, and Bristol-Myers Squibb are also names to look at.

FINSUM: These are definitely some good names to look at, especially as there has not been much focus on biotech for income over the last year.