Stock Market Indexes Hit Record Highs

Outlook Stays Positive for Stock Markets

Investment News, Jeff Benjamin reported on August 12, 2016 – that three major U.S. stock markets indexes all hit record highs for the first time since 1999 has given pundits and market watchers plenty to analyze, but fear is not yet part of the equation.

“Valuations are getting high, but they can get even higher in this environment,” said Doug Cote, chief market strategist at Voya Financial.

“Compared to bonds, equities actually look cheap, and U.S. bonds look cheap compared to the negative yields around the world right now,” he added. “My theme is that the expensive can keep getting more expensive, and you have to go somewhere so you might as well go to global equities and U.S. bonds.” The fact that this week saw the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite Index all register new highs is not what concerns most analysts these days, despite the fact that the last time this happened the equity markets rolled into an extreme free-fall in early 2000.

“You can chalk the stock market performance up to basic valuation principles,” said Bob Rice, chief investment strategist at Tangent Capital.

Like Mr. Cote, Mr. Rice ties the performance of stocks to the unprecedented global monetary policies that have created $2.7 trillion worth of negative-yielding sovereign bonds. “The level of interest rates around the world is just mind blowing, which is why you have to think about stock market performance from a classic, old-school discounted-cash-flow point of view,” Mr. Rice said. In essence, stock prices are climbing not because of expected higher earnings, but because of the falling value of the risk-free return, as measured by government bonds. “The stock market isn’t predicting boom times or higher earnings, but a given amount of earnings is worth more and more as the risk-free rate declines,” Mr. Rice said.Of course, the flip side of what might seem like nirvana for the moment, Mr. Rice added, is that a stock market dependent on low and falling rates will “get crushed when the Fed raises rates.”

But, in the meantime, you have to stay on the ride and take all you can get, according to Paul Schatz, president of Heritage Capital.

“The market is definitely not cheap, which is what the bears are still hanging their hats on, but this isn’t 1999 when we had expensive markets and investors were falling over themselves to buy stocks that were priced in eyeballs instead of earnings,” he said. Mr. Schatz cited stock market pullbacks in February and again in June following the Brexit vote as examples of the resilience of stocks right now. Contrary to 2014 and 2015 when the broad stock indexes kept crawling forward while some sectors fell way behind, the stock market this year has been showing strong momentum, he said. Read More>>

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Small Independent Broker Dealer, Newport Coast Securities is Closing

WestPark Capital CEO says he’s adding some brokers from Newport Coast Securities, which he said is closing

Richard Rappaport says WestPark is being selective in whom it hires from Newport Coast

Investment News, Bruce Kelly reported on July 28, 2016 – a small independent broker-dealer, Newport Coast Securities Inc., is closing, according to the head of another broker-dealer that has an agreement to acquire some of its 109 registered reps. Richard Rappaport, the owner and CEO of WestPark Capital Inc., said Newport Coast was closing but he did not know why it was shutting down. Mr. Rappaport said Newport Coast and WestPark had been in merger discussions for about a year, adding that it was the first acquisition by his firm. Joseph Mangiapane, who owns the Newport Coast’s parent, Rubicon Financial Inc., and is also registered with Newport Coast, declined to comment.

Mr. Rappaport said WestPark is treading lightly when it comes to hiring the Newport Coast brokers. An InvestmentNews review of the firm’s employment roster showed that a large percentage, 63%, have at least one “disclosure event” on their Financial Industry Regulatory Authority Inc. BrokerCheck reports. That’s far above the industry norm. According to Finra, just 12% of the 640,000 registered reps, executives and back office employees of securities firms have at least one compliance mark, known as a “disclosure event,” on their records. Mr. Rappaport stressed that WestPark had no intentions of hiring Newport Coast brokers with ugly employment histories. “We signed an agreement (with Newport Coast) to acquire some of the brokers in an asset transaction and [we’re] doing normal due diligence on them,” Mr. Rappaport said, including using an outside firm to perform background checks on the brokers and running each broker under the review of a senior management committee at the firm.

The BrokerCheck profiles of the 15 former Newport Coast brokers who moved to WestPark at the start of the week bear Mr. Rappaport out. Nine have zero or one “disclosure event” on their BrokerCheck profiles, and none has more than four. Several Newport Coast brokers have large numbers of tax liens and judgments during their years working in the securities industry. Critics say brokers with problems paying taxes are a significant warning for investors; if a broker cannot adequately handle his own finances, how can he manage client money properly? Read More>>

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Independent Broker Dealer, Foothill Securities, to be Acquired

Independent Broker Dealer, Foothill Securities to be Acquired by Securities America

The firm has agreed to acquire the mid-sized Independent Broker Dealer (According to two industry sources)

Investment News, Bruce Kelly reported on July 27, 2016 – Securities America Inc. has agreed to acquire rep-owned, independent broker-dealer Foothill Securities Inc., according to two industry sources. In May, Foothill Securities chairman John Burroughs said that Foothill, an adviser-owned firm with 220 registered reps under its roof, was in serious discussions to be acquired by a larger firm. Securities America was one of the firms Mr. Burroughs identified at the time to be in the running to buy the firm. Mr. Burroughs could not be reached to comment. Steve Chipman, president and CEO of Foothill, did not return a call on Wednesday to comment. Natalie Hadley, a spokeswoman for Securities America, said the firm declined to comment. Details of the acquisition were unclear as of Wednesday afternoon.

Foothill Securities in 2015 generated $39.8 million in total revenue and posted a loss of $674,000, according to its annual audited financial statement filed with the Securities and Exchange Commission.

Securities America’s acquisition of Foothill comes at a time when the common wisdom in the securities industry is that small and mid-sized broker-dealers such as Foothill are facing extinction-like pressures. Sales of high-commission products like variable annuities and nontraded real estate investment trusts are down across the board, and independent broker-dealers commonly operate on notoriously thin margins.

One recruiter noted that when a merger like the pending deal between Securities America and Foothill occurs, advisers should perform due diligence as if they were going to a completely new firm. “When something like this happens, advisers should study the situation and try to understand what the new firm’s culture will look like,” said Jodie Papike, executive vice president of Cross-Search, a recruiting firm. “They need to stay informed and keep their options open.” Read More>>

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