The Few, The Proud
The U.S. Marines have a saying for recruits: ‘The few, the proud’. It is catchy and simple and fits who Marines are.
The same expression applied to the stock market during the first half of 2024. The S&P 500 and Nasdaq were on a roll, while the Dow Jones Industrial Average (and most other stock market indices) were in a lower orbit. Why? Because just a few stocks pushed forward the S&P 500 and NASDAQ indices – Nvidia and its Magnificent Seven peers. In the 3rd quarter, many other stocks joined the party and saw their stock prices rise. This is a healthy transition, all else being equal. We’ll see how this evolves in quarter 4.
Fight For Your Right….to Deceive
The Labor Department has been trying to enact a rule where anyone providing advice to investors regarding moving their 401’s to an IRA would have to offer advice that is in the best interest of investors, forbidding excessive fees and deceiving recommendations. This seems very reasonable, and most would assume it’s already the case. Yet it’s not. Some ‘financial advisors’, including many in the insurance industry, are fighting these common-sensical potential rules and spending a lot of money to do so – which suggests they have a lot of money to lose if the rule is passed.
These companies are fighting for their ‘right’ to overcharge customers and create confusion….and they actually might win. Their argument is that if they had to comply to these rules, consumers would be hurt by having less options. Technically that may be true, but it seems many of these options they are referring to are terrible options. Thus, their argument, when boiled down, is baseless and self-serving.
Saving for retirement (or in general) is not easy. When companies are portraying themselves as ‘helpers’ yet are spending millions to have the right to bilk their customers, there’s a real problem.
A Quick Panic
In late July, on the heels of the Japanese government announcing they’d finally be raising interest rates, markets around the globe quickly sold off. The NASDAQ fell almost 10% (the definition of a correction) in less than two weeks.
These market reactions seemed irrational and overdone. Adding to the panic, some finance articles even suggested that the Fed should have an emergency meeting to lower interest rates based on this modest market fall. Have we become THAT sensitive that the slightest pain we see in the stock market means we need to immediately be placated as investors and be given a baby bottle? That’s not how normal and healthy markets work and we should, as investors, recognize that markets hold risk and the government cannot and should not always step in to make the pain go away.
Interest Rate Headwinds
I find it unsettling and ridiculous that the investment world was hanging on every nuance and word associated with the Fed’s interest cut announcement in mid-September. Given that just the month before Chairman Powell indicated he’d cut rates in September, the only question was simply if the cut would be a quarter or half a percent. This seems very overreactive. Yes, rates had been raised for many years and then held steady, so a cut is somewhat ‘new’. Yet it’s FAR from clear that this is part of a larger trend of cutting rates significantly over time.
Yes, mortgage and other debt instruments saw marginally lower rates, but not earth-shattering. Many believe (hope?) interest rates will continue heading lower and perhaps get back to where they were 4 or 5 years ago (not far above zero). I don’t see that as likely, unless we really hit a big economic wall, which none of us should hope for.
With U.S government debt at historic highs (both in inflation-adjusted dollars AND compared to GDP), I don’t see how the government can keep selling US Treasuries at very low rates when they have so much to sell. The Fed may not have the last word – instead, the markets very well may.
JP Morgan: Top Dog in the Doghouse
Regulators are given a bad name by politicians but often do things most Americans philosophically agree with, such as inspecting meat quality and keeping airlines from ignoring customers when the airlines fail in their duties. In that spirit of helping the consumer, regulators have recently placed caps on overdrafts and late fees for banks and financial institutions.
This is simply common sense. Banks should certainly charge for overdrafts and late fees to the degree it costs them money to process and cover their costs (plus a profit). However, these fees should not be ridiculously large, as they often are. The fees often seem unrelated to the ‘cost’ to the banks. It has the clear appearance that banks use outrageously large overdraft fees to make extra profits – extra profits they’ve now gotten used to. Further, they do so on the backs of those who have little voice and are often least able to afford the heavy charges.
When this regulation change was announced, the head of Chase bank (a part of JP Morgan) confirmed this reality. She said that all account holders should expect to get charged for things that were free in the past due to these caps on overdrafts and other fees. Basically, she’s saying that if they can’t get the fees they’re used to from some customers, they’ll just charge other customers fees to make up for it.
The overarching goal of companies should be to provide a product or service of value to customers and make a profit as a result. It’s not that you want a certain profit goal and the question then becomes how do you get that profit and who do you charge what. It appears JP Morgan is focused more on themselves than their customers. How terribly uninspiring.
On other JPMorgan fronts, after being recently called out for overworking their junior staff, the bank pledged to keep their weekly hours to a maximum of 80. This says two things about this leading bank: 1) they were clearly demanding OVER 80 hours a week from their junior workers before they were exposed; 2) they’re still expecting 80 hours a week which translates to over 11 hours a day at work…SEVEN days a week. This can’t be done regularly and live a healthy lifestyle.
I generally admire Jamie Dimon, JPMorgan’s CEO, but this is an indication that more and better needs to be done.
Brian Weisman, CFA,CPA,CFP,CMA
(734) 665-1454
brian@columbiaasset.com
Traveling Resa with Linda