(New York)

Fidelity made a huge splash in the asset and wealth management world’ about a month ago when it launched the markets first completely free indexed mutual funds, and with no investment minimums. The move sparked big share price losses for other asset managers and seemed to spell doom for the industry. But how have the funds actually performed so far? The answer is well. The pair of funds have taken in almost $1 bn of client money in just a month, which is considered a solid success.

FINSUM: We think this is a good showing for Fidelity, but one of the other issues the zero fee funds have brought up is that there are many other terms of index funds that investors need to pay close attention to. Not just price.

(New York)

Ever since the now infamous “op-ed” about Trump’s inner circle appeared in the New York Times earlier this week, there has been increasing discussion of the 25th amendment, so we thought it would be good to give a quick primer on it. Basically what the amendment allows for is a president’s cabinet to remove them from office if they are deemed “unable to discharge the powers and duties” of the office. The vice president and a majority of the cabinet need to agree in order to remove the president. But if the president protests, it takes a 2/3 majority in Congress to remove the head of state. It has never been used to remove a president and was only ratified in 1963.

FINSUM: Given the likelihood that Trump would protest any move, a 2/3 majority in Congress seems like a massive obstacle for anyone trying to remove the president.

(New York)

New academic analysis has found part of the full cost of the DOL rule on the financial sector. A group of academics analyzed the market cap movements of the top 30 brokerage and fund providers and found that, in aggregate, the DOL rule cost firms $14 bn of market cap. That figure does not include the money spent to prepare for the rule, just changes in share valuation that directly resulted form the rule. However, the same firms have since benefitted strongly from the so-called Trump Effect.

FINSUM: The DOL rule ended up being an enormous waste of time that in hindsight appears to have been doomed from the beginning. We will say that its lasting effect was to bring consciousness of fiduciary duty to the wider public.

(New York)
The last few months have been bleak for the US housing market. There has been a steady stream of negative data showing that the market is definitively slowing. Now a new one is emerging—bank lending is contracting quickly in the space. The fall off is so strong that banks are laying off workers in lending units. Both sources of demand for mortgages—refinancing and new home purchases—have dried up as interest rates and housing prices have risen. July showed the fifth straight month of declining home sales, coming in the time of the year when they should be strongest. Speaking about the state of home prices and mortgage demand, the chief economist at Fannie Mae says, “people are saying, ‘at these prices, and with rates rising, I’ll stay where I am’”.

FINSUM: We believe the US is in for a long winter of falling home prices. We think the market is at a turning point right now where sellers are trying to cling to high prices, but buyers have finally stopped giving in.

(New York)

The Fed looks set for another hike in September, and likely another before the end of the year. That means that fixed income is a very tricky market, as many bonds will likely see losses. So how can one protect their portfolio but still earn reliable income? One option is to buy floating rate bonds. Luckily, there are several funds that can help investors own floating rate bonds. Some of them include the Fidelity Floating Rate High Income (4.36% yield), the iShares Floating Rate Bond ETF, the BlackRock Floating Rate Income Strategies Fund, or the Eaton Vance Floating Rate Income Fund.

FINSUM: We think floating rate bonds seem like a good strategy for the current environment. Just be careful of high credit risk in some of these funds.