Tag Archives: institutional investors

Handcuff Volunteers and the Rally of 2013

The S&P500 is up by 26% for the year-to-date, despite the fact that employment growth is anemic, the labor participation rate is at its lowest point in thirty five years, and inflation-adjusted GDP growth is experiencing a long-term slowing (see chart below).  GDP turns negative in recessions—this is the definition of a recession—but has historically recovered much faster than we have seen in the post 2008 years. Continue reading

Financial Services for the Masses

JP Morgan has gotten considerable attention in the press for a recent statement that serving clients with less than $100,000 in assets is unprofitable.  Not surprisingly, one response to this statement has been to frame it in terms of the message that financial institutions just want rich clients and don’t want to spend their time working with the small guy.  The broader story is quite interesting and has long-term implications for both financial services firms and their clients.

Smaller customers (those with less than $100,000 in the bank) are looking less attractive as clients these days for two reasons:

1) Low interest rates mean that a bank makes less money on its deposits.

2) New regulations have capped the fees that banks can charge for a range of services.

One of the persistent themes in the investment advisory business has been Continue reading