FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
Brokers Are Using A FINRA Rule To Their Advantage (The Wall Street Journal)
Last summer the Financial Industry Regulatory Authority (FINRA) required that brokers had to gather more information about their clients before making recommendations. Turns out, brokers are now using this to ask clients questions about subjects like their age, investment experience but also about assets that clients are keeping to themselves or that are being managed by other advisors.
Investors Shouldn’t Abandon Risky Assets Altogether (Financial Times)
In a zero-rate world investors continue to search for real returns. In a Financial Times column Blackrock’s Russ Koesterich writes that despite Washington’s stalemate over the debt ceiling, investors shouldn’t dump stocks and other risky assets.
“Rather than abandoning risky assets altogether, investors should tap market segments most geared to faster global growth and less exposed to US consumption. Practically, this suggests lowering exposure to small and mid-caps and favouring large and mega-cap companies, which benefit the most when global growth accelerates and are the least sensitive to a slower domestic economy.
“To benefit from global growth even more directly, investors can reduce their overall US allocation. …Today, while US companies are still reasonably priced, they are relatively expensive compared with the rest of the world (the S&P 500 trades at a 40 per cent premium to international markets based on price-to-book). Given the near-term outlook for slower growth, more volatility, and a debt-ceiling showdown, that premium may no longer be justified. At the same time, the rest of the world is in marginally better shape. Given the shift in relative fundamentals, investors should consider reallocating some portion of their holdings out of the US and into emerging markets, smaller developed markets and European exporters.”
Dylan Grice Wants You To Read These 22 Books (Business Insider)
Dylan Grice who is set to start as Research Director at Edelweiss Holdings in March, put together a series of his favourite research reports from his time at Societe Generale. Among them were 22 book recommendations he made during his time there.
Manias, Panics, and Crashes by Charles P. Kindleberger, which Grice describes as a “history of financial calamity,” is one of them. “It is the best single book on how financial markets actually behave and if I could recommend only one book to understand finance it would be this.”
Gold Is Going to $1,200 (Goldman Sachs)
Goldman Sachs’ commodity analysts called the end of the bull market in gold. They argue that the U.S. economic recovery will take off in 2013 and that will drive the sell-off in the safe haven asset. They expect gold to fall to $1,200 per ounce by 2018.
Citi technical analyst Tom Fitzpatrick thinks the current market rally of the final rallies into the market tops of 2000 and 2007. He expects stocks to enter a bear market soon.
“I think in the short term, we still a little bit of legs here. If you look at the S&P 500 – we’ve just moved to this new high above 1475 – it’s actually very similar to the way we traded into the highs in 2007 and 2000.
“So, I wouldn’t be surprised that there is a little bit of legs here – maybe even up toward 1495 – but what there isn’t is momentum. Most of the momentum came in the first move up from last year, and we’re seeing a loss of momentum here similar to what we saw there.”
He also warned investors against putting too much faith in the central bank put.
“They are keeping the put under the market, but I think we should respect history. If we look back over history, we constantly find that if what holds the market up is interference, if what holds the markets up is a policy specifically geared toward creating those moves, and you don’t get the underlying sustainable dynamic and the underlying economic pickup, then it can hold it up for a period of time, but the market will eventually run its own way.”