FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
These Are The 3 Biggest Issues Facing Financial Planners This Year (Nerd's Eye View)
Michael Kitces at Nerd's Eye View thinks there are three main issues facing financial planners in 2014. 1. Fiduciary regulation - "While the SEC may be taking a back seat on the fiduciary issue and waiting for the DOL to act, the regulator has committed itself to step up oversight (i.e., examinations) of investment advisers, and may even take up the recent SEC Advisory Panel's recommendation to begin levying "User Fees" on RIAs to help fund increased oversight." 2. Demographics - "While the anticipated mass exodus of retiring advisors has been more like a trickle so far - for a number of reasons - the veteran advisors who remain still cannot solve the capacity of growing firms that need to hire younger advisors to take the lead." 3. The rise of Robo-advisors - "While it still remains to be seen which robo-advisor models will prove viable - if any of them - and all of them are still small businesses (especially relative to the amount of capital they were funded with), expect to see a lot more activity in this space in the coming year. Along with, perhaps, a few more new tools for advisors to become more "cyborg-like" and take the robo-advisors on head-to-head.
I Don't Buy The Profit Margin Compression Argument (Raymond James)
Bears argue that profit margins are too high and that the trend isn't sustainable. Jeff Saut doesn't agree and he thinks the S&P 500 could go to 2,000. "Of course that brings about cries that elevated profit margins cannot remain where they are, and therefore must revert to their historic mean hurting earnings, an argument from the negative nabobs we have heard since 2010; and I just don’t believe it," he said.
"Many companies are moving their IT needs to the “cloud,” which saves a huge amount of money permitting margins to stay wide. Then there is the change in the composition of goods produced in this country that has moved from low margin goods to higher margined goods like jet engines. Or, how about the accounting term “income from affiliates,” which means a parent company has a minority stake in another company that brings in income but doesn’t record revenues associated with that stake, suggesting 100% margins. So, no, I do not buy the margin compression in 2014 argument."
Byron Wien Unveils His 10 Surprise Predictions For 2014 (Business Insider)
Blackstone's vice chairman Byron Wien is out with his 10 surprise predictions for 2014. Here they are: 1. "We experience a Dickensian market with the best of times and the worst of times. The worst comes first as geopolitical problems coupled with euphoric extremes lead to a sharp correction of more than 10%. The best then follows with a move to new highs as the Standard & Poor's 500 approaches a 20% total return by year end." 2. US GDP growth rises above 3% and the Fed taper ends up being a non-event. 3. The dollar strengthens and trades below $1.25 against the euro and buys 120 yen. 4. Shinzo Abe continues his aggressive fiscal and monetary expansion and the Nikkei 225 rises to 18,000 early in the year, but market sees a 20% correction in the second half. 5. China’s Third Plenum policies to rebalance the economy sees growth slow to 6%.
6. "Emerging market investing continues to prove treacherous." Stocks in Mexico and South Korea appreciate while other emerging markets can't keep up. 7. The price of West Texas Intermediate crude exceeds $110 because of demand from developing economies. 8. Agricultural commodity prices rise. 9. "The strength in the U.S. economy coupled with somewhat higher inflation causes the yield on the 10-year U.S. Treasury to rise to 4%. Short-term rates stay near zero, but the increase in intermediate-term yields has a negative impact on housing and a positive effect on the dollar." 10. "The Affordable Care Act has a remarkable turnaround," and president Obama's approval rating rises with Democrats retaining control of Senate in November, and gaining seats in the House.
Apparently Plummeting Stocks Can Send Investors To The Hospital (Business Insider)
Professors Joseph Engelberg and Christopher A. Parsons looked at California hospital records from 1983-2011 and "found a strong inverse link between daily stock returns and hospital admissions, particularly for psychological conditions such as anxiety, panic disorder, or major depression." The researchers focused on especially bad days like Black Monday, October 17, 1987, when stocks fell nearly 25% interview and hospital visits increased 5%. What's more they found that even if the market went up the next day investors didn't necessarily feel better.