"I don't want to grow up, I'm a Toys 'R' Us kid."
One of the first commercials I remember as a kid will soon fade into an even more distant memory. That is because Toys 'R' Us is going out of business here in the U.S.
The toy giant is reportedly closing all of its U.S. stores despite attempts to restructure its massive debt. The company decided that it can pay off more of the billions it owes by liquidating the business entirely rather than continuing its struggling operations. At least one bankruptcy hearing remains, but it looks like operations will wind down in the very near future.
Toys 'R' Us is just one of the many retail companies that will succumb to Amazon in the years ahead, which has rendered such traditional brick-and-mortar distribution obsolete. It also continues to chip away at commercial real estate, as these Toys 'R' Us warehouse-like locations will remain empty for some time.
If you have gift cards to either Toys 'R' Us or Babies 'R' Us, use them as soon as possible. In a CNN Money article I was reading, a company spokesman said gift cards would only be honored for the next 30 days. To that end, if you plan on returning something purchased at either store, do not wait. On the bright side you should expect massive discounts in the weeks ahead as Toys 'R' Us winds down its operations in the next couple months.
In The Market...
The S&P 500 fell -1.3% this past week. Let's look under the hood:
Stocks continue to see-saw, having alternated between weekly gains and losses since early February. Investors migrated to safety last week, namely Utilities and Real Estate, which were the only stock sectors that finished in the green. The surge in these defensive sectors would suggest that more losses are coming for the broader market, but overall conditions still look pretty good despite last week's decline and general choppiness. The S&P 500 has been inching its way back toward its record high of 2,873 set in January. The index enters this week at 2,752, roughly -4.5% below that peak.
The bond market had its best week of the year, rising for just the fourth time in the past 11 weeks. Treasury Bonds, Corporate Bonds and Preferred Stock all finished positive. Our more conservative client accounts continue to hold a cash position. This cash would normally be invested in bonds but the bond market has looked weak for the past few months. If that changes and the bond market continues to strengthen then those funds will be reinvested sooner than later.
In Our Portfolios...
In Financial Planning...
The long-awaited Dept of Labor Fiduciary Rule was rejected by the Fifth Circuit Court of Appeals. I am not sure exactly what that means, but it does imply that it will be a while longer before the law goes into effect. The Fiduciary Rule requires stock brokers to begin serving as true fiduciaries to their clients, rather than meeting the current, minimum standard of recommending investments that are solely considered suitable.
This distinction of "suitability" vs. "fiduciary" can be summed up by the following analogies:
"That shirt fits you." (Suitability requirement met)
"That shirt fits you AND looks good on you." (Fiduciary requirement met)
The second analogy is the standard we are already held to by virtue of being a Registered Investment Adviser (RIA) firm. As such, this DOL Fiduciary Rule does not impact our firm like it will other brokerage firms. Nonetheless, it is important to be aware of what checks/balances are being implemented across the broader financial services industry.
What's New With Us?
The good news is I mowed our lawn for the first time this year. The bad news is the engine was steaming when I finished, so I need to figure out what is wrong and fix it. Hopefully this great weather we have had continues throughout this week.
Finally, if you need help prepping the investment-related details for your tax return, just ask. By now you should have all the materials you need or have the instructions that I sent to obtain your Scottrade tax information from TD Ameritrade.
Have a great week,
Brian E Betz, CFP®