FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
Some Brokers Are Getting In Trouble Because Of Discretionary Trading (The Wall Street Journal)
Brokers are only allowed to make trades for their clients by getting the client’s permission for each trade or by getting a “blanket permission known as discretionary authority,” according to the WSJ. And some involved in discretionary trading are getting in trouble.
Some brokers, however, mistakenly believe that if a client approves his/her investment strategy this allows them to make trades. Finra pulled up a broker for just this and he received a suspension and a $5,000 fine. For discretionary trading, brokers need the approval of both the client and the firm in writing.
Why Rebalancing Isn’t Just A ‘Dumb’ Investment Strategy (The Capital Spectator)
A recent Forbes piece claimed that the idea that rebalancing your portfolio “increases your expected return is balderdash.” But The Capital Spectator writes that while thinking rebalancing can always boost gains is a mistake, it also doesn’t mean that you don’t need to rebalance at all.
“In fact, if you look at any strategy that appears to deliver superior results, the fundamental source of the enhancement is usually—you guessed it—rebalancing. The triggers for why and how you rebalance vary, of course, and the strategy is marketed under numerous labels. But when you pull back the curtain, you’ll probably find some form of rebalancing for strategies that are something other than passive.”
Goldman Wants Its Clients To Short Gold (Goldman Sachs)
Goldman Sachs is closing its long gold position and has a year-end price target of $1,450 per ounce for gold. They also lowered their 2014 year-end to $1,270 per ounce.
“While there are risks for modest near-term upside to gold prices should US growth continue to slow down, we see risks to current prices as skewed to the downside as we move through 2013. In fact, should our expectation for lower gold prices continue to prove correct, the fall in prices could end up being faster and larger than our forecast, as aggregate speculative net long positions across COMEX futures and gold ETFs remain near record highs.”
Madoff Victims Lawsuit Against SEC Is Dismissed (Thomson Reuters News & Insight)
A New York federal appeals court has dismissed a lawsuit brought by the victims of Bernard Madoff’s ponzi scheme against the SEC. “The court said the SEC’s actions and “regrettable inaction” were protected by a law that shields federal agencies from liability,” according to Thomson Reuters.
Profit margins in the first quarter have been bigger than expected. Whether profit margins will continue to expand or fall has been divisive. UBS’ Jonathan Golub for one thinks the trend will continue.
“Of the 22 S&P 500 companies that have already reported, 73% beat their earnings expectations by an average of 1.7%,” according to Golub. “Upside is entirely due to margins not revenues. We expect these trends to continue.”