- Addison Wiggin on a SEC disruptor…
- … and under-the-radar “smart money”
- Zach Scheidt weighs in on rule change pros and cons
- “Tech trade gets frothier,” says Alan Knuckman
- [Election 2020] What’s next? President Pelosi?
- Like butter: Cali cuts the crap
- A miffed reader wants “bogus” proof… Another reader caught between a rock and a hard place… And more!
The 5’s founding editor Adison Wiggin says: “Today we’re examining the biggest financial change no one is talking about. And why.”
To his point, Addison sheds light on a tremendous sea change at the SEC… as the agency proposes new guidelines for its Form 13F that’s been around since 1978.
According to the SEC’s website: “An institutional investment manager that… exercises investment discretion over $100 million or more in… securities… must report its holdings on Form 13F with the Securities and Exchange Commission (SEC).”
Addison continues: “On July 10, the SEC said it wants to up the lower limit for filing the quarterly 13F disclosure from $100 million to $3.5 billion, stopping about 90% of all 13F filings.” (Emphasis ours.)
To be clear, the SEC’s Form 13F hasn’t been rewritten… yet. But to run through the pros and cons of the SEC’s proposal, Addison interviewed our buyout specialist Zach Scheidt (via Zoom, of course)…
“Institutional investors, hedge funds, pension funds, mutual funds, family offices, private equity… they love this proposal,” Zach says.
“They get to operate a little bit more in secret. They get to build a position without having to tell everybody.” Not to mention, raising the bar for Form 13F means fewer regulatory hoops for institutional investors to jump through.
To wit, Zach recalls his days as a hedge fund manager when he and his associates would actually pass on investing in a given position because the cost for lawyers and accountants to file Form 13F was prohibitive.
Zach’s take then about changes at the SEC? “It’s definitely something that the big institutional investors are going to be pressing for.
“On the other end of the spectrum,” Zach says, “individual investors really want to see what these big [investors] are doing.
“There are whole businesses that are built on following Warren Buffett, David Einhorn or John Paulson,” he continues.
But it’s no secret where the “smart money” is flowing these days… large-cap technology stocks. “Right now, these big institutional investors are going to invest in Facebook or Amazon or Microsoft,” Zach says.
“If I heard today that Warren Buffett increased or decreased his position in Microsoft,” says Zach, “I wouldn’t really care, because… those stocks are big enough that they’re not going to get pushed around by the institutional investors nearly as much.”
In other words: Meh.
Instead, Zach’s looking for ways retail investors might juice this potential SEC rule change…
Private equity has “$1.45 trillion of dry powder,” Zach notes, “that money has to go somewhere, and it will be chasing a return.” He believes “smaller names” will become increasingly more attractive should the SEC change course on Form 13F.
Soon big investment firms might be able to invest literal billions before having to report to the SEC; Zach says: This change “could drive a lot of smaller stocks much higher in a very short amount of time.”
So Zach’s takeaway? “We expect to see these smaller-cap individual names moving higher, and that’s going to make a big difference in the market and create some big opportunities for investors.”
As for changes to the SEC Form 13F: “It’s going to move the markets,” Zach concludes, “but under the radar.”
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“The tech trade is getting even frothier as we kick off the new trading month,” says CBOE trading veteran Alan Knuckman.
More specifically, Alan notes: “Apple Inc. and Tesla Inc. are in the news as speculators pile in following their respective stock splits.” But he warns: Don’t “just throw money at whatever stock is streaking higher any given day.”
Word, Alan… especially considering Tesla’s shares are sliding today — down 10% now — on news one of its biggest institutional investors has whittled its TSLA position down from 6.25% to less than 5% of its holdings.
As for the tech-heavy Nasdaq index — where AAPL and TSLA are both listed — it’s down 70 points to 11,870 while the S&P 500’s up 17 points to 3,545. Meanwhile, the Dow’s in the green, up 180 points to 28,827.
And it’s not a great day for commodities… oil and gold are both flagging today, down 2.4% and 1.5% respectively…
Psst… while gold’s down, it’s time to buy. Here’s why…
Countdown to a contested election continues: When, on July 30, the president tweeted that Election Day 2020 might have to be postponed in order to guarantee a fair election, a slew of self-proclaimed constitutional experts crawled out of the woodwork proclaiming “President Pelosi.”
According to the 20th Amendment — ratified in 1933 — the president and vice president’s term expires at noon on Jan. 20, regardless of a clear election outcome. And in the absence of a newly minted president, the House speaker would be next in line… possibly?
“That assumes Pelosi is named speaker,” Jim Rickards says. “What if House seats are also undecided because of mail-in ballots, legal challenges and close elections?
“If enough House seats are not decided, there may not be a quorum in the House, which means that there will be no speaker at all and still no acting president.”
Heh… sounds par for the course in 2020. Another solution?
“Inauguration Day succession doesn’t have to be… disorderly,” says an article at Foreign Policy. “Indeed, the Constitution suggests that it isn’t supposed to be.”
“The 20th Amendment gives Congress an additional option for Inauguration Day succession: predefining a process instead of a list,” the article explains.
“In other words… the 20th Amendment opens Inauguration Day succession to any ‘person,’ not just the limited class of ‘officers’ allowed by Article 2.” (A succession of “officers” that would start with the speaker of the House… then the president pro tempore… down the line to Cabinet members.)
Foreign Policy contends, however: “The very premise of Inauguration Day succession is that control of the presidency would be up in the air. As such, a more wide-open process makes more sense.
“[Congress] could seek out someone to act as president who does not have a direct stake in the outcome — unlike congressional leaders, who would be playing current, prominent political roles.”
And here’s an intriguing possibility: “One obvious set of people who are on the sidelines, but who would still be capable temporary caretakers, are former presidents. Barack Obama, George W. Bush and Bill Clinton all have the background to handle the task.” (Nonagenarian Jimmy Carter wasn’t included in this list.)
Anticipating objections on all sides, the article says: “The point is not to choose someone acceptable to all Americans — no such person exists.
“The point is to have an experienced hand other than the departing incumbent at the helm during a tumultuous, uncertain, but ideally brief time,” Foreign Policy concludes.
We’ll continue exploring these mind-bending election scenarios as the countdown continues…
[Further proof the nanny state thinks you’re a numbskull] Is “vegan butter” the new “cauliflower rice”?
Last year, Arkansas regulators banned the label “cauliflower rice”… because it might confuse us mouth-breathing consumers. More recently, California officialdom attempted to bring the ban hammer down on Miyoko’s Creamery’s “vegan butter” because the nondairy concoction doesn’t fit the “standards of identity” for butter.
You can’t make this stuff up…
But common sense prevailed in California last week (and we don’t get to say that very often… sorry, Cali) when “U.S. District Court Judge Richard Seeborg of California's Northern District Court ruled Miyoko's Creamery… may use the word ‘butter,’” Reason reports.
"This victory is the latest in a growing trend of common-sense labeling decisions made in courts across the United States," says Michele Simon of the Plant Based Foods Association.
Phew… we guess peanut butter is safe. For now…
“I would like you to devote some time to substantiate your claim that the Steele dossier is ‘bogus,’” says a miffed reader, referencing Tuesday’s issue of The 5.
“Don’t call something ‘bogus’ unless you can prove it with something other than a politician’s twisted spin.
“We all expect better from you and — as I have suggested before — stick to business and stay out of politics.”
The 5: If only “business” weren’t so intrinsically connected to the (dirty) business of politics…
Just taking a look at today’s episode, you see the government’s reach — from the SEC to Election Day shenanigans… Uncle Sam wheedles his way into all our pockets.
Another reader says: “Concerning your comment at the end of the Sept. 1 issue of The 5: ‘A pox on all of ’em. The best thing that could happen is each side brings about the other’s demise, and we can get a fresh start as a free country…’
“I get yelled at by my liberal friends for not supporting BLM and yelled at by my conservative friends for saying that Trump tweets too much. None of the third-party candidates are any good either — assuming that any of them has a ghost of a chance of getting even one electoral vote.
“Perhaps we should revive Bill Buckley's admittedly tongue-in-cheek plan to ‘entrust the government of the United States to the first 400 people listed in the Boston telephone directory.’”
Boston, you say? Heh…
The 5 Min. Forecast
P.S. Zach believes small-cap stocks “have been left behind… and have a lot of room to make up.”
To that end, Zach’s offering a credit toward his proprietary research that’ll give you an edge when it comes to the best market-moving small-cap names.
Click here to claim your credit… Please note, this offer is limited to the first 250 respondents.
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