Monday, 22 October 2018 10:27

(New York)

Investors have gotten so used to low inflation that it is sometimes hard to imagine seeing it rise. However, Morgan Stanley is warning that inflation is rising across the globe and investors need to keep an eye on it. In Europe, Asia, and the US, inflation has risen from 1.1% to 1.4%, and it is bound to move higher, according to Morgan Stanley’s chief global economist. Interestingly, MS argues that the Euro area and Japan will see a higher rise in inflation than the US.


FINSUM: If inflation rises more strongly in other developed markets than the US, will that lead to even more foreign buying of US bonds because yields in those locations are so much lower? In other words, will there be even more demand for US bonds?

Why This Selloff May Change Everything

The Fed Might Take a Very Hawkish Turn

The Recession Will Arrive in 2019

Thursday, 21 March 2019 11:40

(New York)

Bonds and stocks are sending different signals right now, and it is hard to tell which side is correct. Bonds are reflecting an increasingly bearish outlook on the economy, with yields falling. Stocks, on the other hand, have been jubilant so far this year. The reality is that both sides cannot be correct. Historically speaking, bonds have usually been more astute is measuring the direction of the economy and markets, and if that is the case, then we would be headed for a downturn.


FINSUM: The Fed really weighed in with its view yesterday and they are clearly worried about the direction of the economy. Are bond investors right again?

2/3 Chance of a Recession This Year

Why the Stock Market Could Collapse

Credit Suisse: Why the S&P 500 Rally Can Keep Going

Monday, 18 March 2019 12:39

(New York)

In a sign of just how far Bitcoin and other cryptocurrencies have fallen from their heights, the CBOE has just scrapped its plans to continue to offer Bitcoin futures. Creating mainstream products around Bitcoin was all the rage until recently, but Wall Street’s appetite for doing so has tumbled alongside cryptocurrencies’ prices. Godman Sachs’ plans to create a bitcoin trading desk, much discussed early last year, have yet to materialize.


FINSUM: Have cryptocurrencies reached their zenith? In terms of prices, things are way off (Bitcoin at $20,000 in December 2017 to $4,000 now), but what about in terms of their place in the financial system?

Lyft is Launching the Golden Age of Tech IPOs

Goldman Offers New ETF for Emerging Tech

Tech Unicorns are Finally Coming to Market

Thursday, 14 March 2019 12:42

(Washington)

Beto O’Rourke, long expected to step into the race for the Democratic bid, has finally announced he will. The young Texan lost a close race to Ted Cruz in Texas in November, but is aiming to ride his surge in popularity to the White House. Unlike many other contenders from the Democratic party, he is more of a centrist, not adopting the now-common socialist platform. Commenting on his candidacy, Beto says “The challenges that we face right now, the interconnected crises in our economy, our democracy and our climate have never been greater. They will either consume us, or they will afford us the greatest opportunity to unleash the genius of the United States of America”.


FINSUM: Outside of maybe Bernie Sanders, we think Beto is the biggest contender to Trump because he may be able to simultaneously get voters on the far left and some of Trump’s more centrist supporters.

Sell the US-China Deal

Cohen to Allege Trump Crimes

Real Trump Fireworks are About to Begin

Wednesday, 06 March 2019 13:51

(New York)

The move towards passive management has been worthy of the term “flood”, with investors pouring funds into ETFs and out of mutual funds. Fees have been a major part of that shift, but performance has been too, as active management performance has been broadly weak over the last decade. However, there are some areas where mutual funds have significantly outperformed passives—international funds. Especially in emerging markets (e.g. India and Mexico), but also in developed ones like the UK and Italy, 10-year track records show significant outperformance for active managers. The opposite is true in US funds.


FINSUM: Sifting through market opportunities gets harder and harder (and finding alpha alongside it) as you move into less liquid markets. Accordingly, we think there is a lot of benefit to using actively managed funds for international stocks.

A Second Brexit Referendum Looking Likely

A Second Brexit Referendum Looms

The EU’s Move to End Brexit

Thursday, 06 December 2018 11:09

(Istanbul)

Alongside the renewed fall in equities, EMs and especially EM currencies have been taking it on the chin. With western markets seizing up and oil prices tumbling it is a double whammy for emerging markets. EMs are hurt by declines in oil, but are doubly wounded by the risk-off mood that is pervading markets. Treasuries have seen big yield declines as investors flooded in, and that has meant outflows from EMs, which have seen their currencies drop considerably. The Rand and Lira have been hurt most.


FINSUM: This ship probably won’t be righted until western markets exercise their demons.

The Emerging Markets Rally May Be for Real

Emerging Markets are Getting Boosted by Oil

Emerging Markets See Biggest Selloff Since March

Thursday, 14 March 2019 12:43

(New York)

Investors are anxious about the chances of a recession right now. While the Fed doesn’t seem likely to hike us into one any longer, economic fundamentals have just begun to show cracks. It started with housing, then job growth for February, and now it is jobless claims. Jobless claims rose by 6,000 last week after a long stretch of falling numbers. Weekly numbers are seen as less reliable than monthly figures because of random gyrations, but the data could indicate the economy is starting to soften.


FINSUM: It is too early to tell whether this is indicative of a coming softening or just an aberration, but certainly something to pay attention to.

How to Profit from Rising Rates

Bond Funds are Bleeding

New ETFs to Fight Rising Rates

Wednesday, 20 March 2019 12:35

(New York)

Just three months after flashing a dreaded “death cross”, the Dow is now showing some very bullish indicators. The Dow is signaling a “golden cross”, or a strongly bullish sign. The last time the market showed this kind of technical sign was three years ago, a moment which was followed by a 30% rally. The “golden cross” is when the 50-day moving average passes the 200-day moving average, and is taken as a sign of when a rally becomes a longer-term uptrend.


FINSUM: We don’t give a lot of weight to technical analysis unless it is accompanied by some fundamental news. In this case the bullish signs seem to exist in isolation.

It’s Time to Get Out of Junk Bonds

The Best Performing Dividend Funds

The Best Safe High Yield ETFs

Thursday, 21 March 2019 11:42

(Washington)

A lot of brokers have been feeling good about the SEC’s best interest rule. While that may be misguided, the perception is that the rule is significantly less stringent than the DOL rule, and thus offers a better operating paradigm. However, developments with the rule are not looking favorable to those hoping for a loose regulatory structure. In House hearings recently, four out of five witnesses called to testify on the rule said that having no new rule would be better than having the BI proposal implemented. One top compliance firm thinks the SEC is moving towards a much more strict DOL-type rule, saying “We predict that the SEC is going to re-propose [Regulation Best Interest] to make it closer to a fiduciary standard because the states have come out [with their own initiatives]”.


FINSUM: We have said for some time that we do not believe the SEC rule will be implemented in anything near its current form. That is reality is looking ever more likely.

The Best Interest Rule is a Fiduciary Rule

State Fiduciary Rules May Be Illegal

Morgan Stanley Threatens to Leave States Over New Fiduciary Rules

Friday, 05 October 2018 10:54

(New York)

Gold has been in an extraordinary multi-year slump. From its peak of around $1,900 a few years ago, the shiny metal has sunk into a multi-year bear market, recently settling at around $1,200 an ounce. However, a couple of factors are coming together that may mean the bad times are over. The first is that there has been consolidation in the mining sector, but secondly, because the pending trade wars have meant that central banks have been buying more gold as a safe haven. This type of demand rose 8% since last year, and gold buying by central banks is off to its best start since 2015.


FINSUM: Unfortunately, we have to disagree with this article. Buying gold as we move into a higher-rate and stronger Dollar period contradicts all the fundamentals of the market. Furthermore, we think if gold was going to benefit from trade war fears, it would have already started.

Oil is Surging to New Highs

Why It’s Time for Gold to Shine

Oil Investors Need to Worry about a Trade War

Tuesday, 20 March 2018 10:12

(Moscow)

Sometimes we just have to run a story for fun that has no relevance to markets or investing. This is one of them. Evidently, last week a plane flowing over Siberia (Yakutia to be exact) had its cargo hatch break open. When it did, $368m worth of gold bars, silver, and diamonds fell from the sky down onto the frozen landscape. The “drop” happened right near the airport and the company who owned the goods had to get trusted staff to recover the bounty, but not before going through metal detectors before they went home. Now locals think that not all the gold has been recovered and flights to the area are sold out all over Russia as treasure seekers come to the frozen region.


FINSUM: Sorry for the irrelevance of the story, but treasure falling from the sky and oversold flights full of treasure hunters was too much not to share.

ESG is Now Mainstream

Why Hedge Fund Fees are High

There is a Dangerous Bubble You Don’t Know About

Tuesday, 19 September 2017 11:06

(San Francisco)

The new Apple iPhone X has gotten a lot of hype in media. Aside from all its new features, which are admittedly extensive, its ~50% price hike to $1,000 has received a great deal of attention. That price hike is testing a long-held economic principle which says that as prices for a good rise, demand falls. However, for the last 100 years there has been a view that rising prices could raise demand for certain goods because they amounted to “conspicuous consumption”, or saw their demand rise as prices did because owning them signaled wealth and status.


FINSUM: Apple’s new iPhone X, with a lofty $1,000 price tag, may just prove conspicuous consumption true.

Amazon is About to Redefine the Grocery Business

Big Banks May See Profits Surge

Banks Think Rates Won’t Rise

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