Tag Archives: investment advice

To Lobby, or Not To Lobby, That is the Question

babel 2My Comments: I admit to perverting the title to this article (Lobbyists Pervert Politics And Earn Their Infamy) which appeared in the Financial Times recently. But it points to a problem that may have no solution, at least until the clowns who inhabit our Congress feel enough pain to find a solution. But it most likely won’t happen in my lifetime. But I will use my remaining years to try and inflict some pain along the way. Fascists be damned!

February 24, 2015, by John Kay

A contract to lobby government, like an agreement to sell sex, was unenforceable in the courts.

Even distinguished former foreign secretaries such as Jack Straw and Sir Malcolm Rifkind might be forgiven for having forgotten the treaty of Guadalupe-Hidalgo. It is a notable document, and not only because it determined that California would be part of the US, rather than a province of Mexico. Its signing triggered one of the lobbying industry’s earliest controversies — telling, perhaps, in the week two parliamentarians were caught in an undercover sting offering to help fictitious corporate interests in return for cash.

Nicholas Trist was America’s lead negotiator on the 19th century treaty, and he believed he had not been properly recompensed for his services — which do, in retrospect, seem to have been considerable. After a 20-year campaign, he hired a Boston lawyer, Linus Child, to lobby Congress on his behalf. Child’s efforts bore fruit. His son told Trist: “I find that my father has spoken to . . . members of the House. Every vote tells, and a simple request to a member may secure his vote, he not caring anything about it.” Congress eventually agreed to pay Trist $15,000, then a considerable sum.

Trist, a hard bargainer, refused to pay the contingency fee he had agreed. The case went to the Supreme Court, which dismissed Child’s claim. A contract to lobby government, it said, was contrary to public policy and hence, like an agreement to sell sex, unenforceable in the courts. Paid lobbying, said Mr Justice Swayne, was “pernicious in its character”. But this was only the beginning of his denunciation. “If any of the great corporations of the country were to hire adventurers to procure the passage of a general law with a view to the promotion of their private interests,” he thundered, right-minded men “would instinctively denounce the employer and employed as steeped in corruption and the employment as infamous”.

The 20th century eroded this austere view of the proprieties of political life. But the notion that politicians might themselves become professional lobbyists after leaving office remained unacceptable. When Harry S. Truman ceased to be US president in 1953, he determined, according to biographer David McCulloch, that “his name was not for sale. He would take no fees for commercial endorsements, or for lobbying or writing letters or making phone calls.”

Truman had little personal wealth and had earned only modest public salaries, and the embarrassment of his poverty led Congress to make financial provision for America’s former presidents.

But by the time of Bill Clinton’s retirement, this pension and contribution to office costs was hardly necessary. Prime ministers and presidents could expect to become millionaires on leaving office, and lesser politicians sold access to their contact books for sums far exceeding what they had earned in public service.

The Court of the 1870s had taken the view that free speech and honest speech were two sides of the same coin. “The theory of our government,” ruled Swayne, “is that all public stations are trusts.” There was a corresponding duty on the citizen. “In his intercourse with those in authority, he is bound to exhibit truth, frankness and integrity.”

But in Citizens United in 2010, the same court held that the expression of views you were paid to hold was no longer “an infamous employment, steeped in corruption”, but an activity deserving of the protection awarded to free speech under the First Amendment. That contentious decision probably did not, in the end, seal the outcome of the 2012 election — though the tide of political donations that it unleashed will surely decide a presidential contest before long. Americans may look back on Justice Swayne as the wiser judge. “If the instances (of paid lobbying) were numerous, open, and tolerated,” he predicted, “they would be regarded as measuring the decay of the public morals and the degeneracy of the times.”

‘It’s the Weather…!’

My Comments: The cacaphony of negative comments by Republicans about the Obama administrations efforts re the economy used to be deafening. Now, not so much.

As an economist, I’m sensitive to the fact that there are too many variables at play to attribute success or failure to an individual in the White House or to a political party. But taking credit or placing blame is a tricky exercise. These comments by Scott Minerd, which to my mind describe events this past winter that can be attributed to global warming, are a lesson not to be missed.

April 10, 2015
Commentary by Scott Minerd, Chairman of Investments and Global CIO, Guggenheim Partners

When Bill Clinton beat George H.W. Bush in the 1992 presidential election, campaign strategist James Carville’s now-famous explanation was, “It’s the economy, stupid!” To paraphrase a more polite version of Carville, I believe the punch line to why real first-quarter gross domestic product (GDP) growth will thwart the consensus forecast of 1.4 percent is just as simple: “It’s the weather…!”

Severe weather conditions this winter have had a profound impact on economic activity in the United States. Based on our analysis of retail sales, industrial production, and government spending, I wouldn’t be surprised to see U.S. economic growth near zero or even negative in the first quarter. This out-of-consensus position is supported by the Federal Reserve Bank of Atlanta, which recently forecast 0.1 percent growth.

When you look at the data, the winter ravages in first quarter are clear. Consumer spending declined in December and January, and was basically flat in February, while nonfarm payrolls were up by just 126,000 in March—the smallest gain since December 2013. As a result of the harsh March weather, 216,000 people reported being unable to work, and over 560,000 people were forced to work part time. Retail data have also borne out the consumer’s frigidness this winter. In February, U.S. retail sales declined 0.2 percent, adding to declines in January and December, and making it the worst three-month performance for retail sales since 2009. Other hard-hit sectors of the economy include construction, where spending declined in both January and February, and manufacturing, with the March Institute for Supply Management (ISM) reading worse than the lows seen last winter.

Essentially, it appears we are having a replay of what happened in the first quarter of 2014, where winter weather distortions caused the economy to slow dramatically. This winter, the warning signs are even stronger, but there seems to be some cognitive dissonance among economists. A Bloomberg survey pegs consensus GDP estimates at 1.4 percent, for example. Besides the Atlanta Fed, I have not seen many forecasts approach zero. All this leads me to believe the market may not be anticipating the full impact of weather distortions on the U.S. economy. Investors’ shock at the true state of first-quarter GDP could easily send interest rates back to test the lows of January, or maybe even lower.

Rather than hit the panic button, investors should view a disappointing first-quarter GDP print as a short-term dislocation. Since 1975, a slowdown in first-quarter growth caused by winter weather has usually been followed by a significant bounce back in the second quarter. The underlying strength of the U.S. economy remains sound, so I expect a similar pattern will play out in the remainder of 2015. While noise around the economy could lead to increased volatility in equities and credit spreads, the bottom line is that weather-induced weakness may present long-term investors with an opportunity to increase their positions to risk assets at discounted prices.

The Unraveling Is Gathering Speed

man+umbrella+globalMy Comments: Yesterday, I posted an article that suggested what you might expect over the next six years if you are a generic investor. You have money positioned here and there across the globe in traditional investments. Today I post an article that posits further evidence that we have structural problems that need resolution.

The dilemma facing those who find themselves in charge of the national debate is that no amount of prayer is going to help. I’ve said before that HOPE is not an effective investment strategy, and by the same measure, PRAYER is unlikely to result in economic stability for future generations. Couple this with global warming and we’re looking at a tough road to hoe.

Charles Hugh Smith / Mar. 19, 2015

Does anyone else have the feeling that things are not just unraveling, but that the unraveling is gathering speed?
Though quantifying this perception is more interpretative than statistical, I think we can look at the ongoing debt crisis in Greece as an example of this acceleration of events.

The Greek debt crisis began in 2011 and reached a peak in 2012. The crisis was quelled by new eurozone/IMF loans to Greece, and European Central Bank chief Mario Draghi’s famous “whatever it takes speech” in late July 2012. The Greek debt crisis quickly went from “boil” to “simmer,” where it stayed for almost two and a half years. But no one with any knowledge of the gravity and precariousness of the situation expects the latest “extend and pretend” deal to patch everything together for another two years. Current deals are more likely to last a matter of months, not years.

We can discern the same diminishing returns in Federal Reserve/central bank interventions, as the initial rounds of quantitative easing pushed stock and bond markets higher for years at a time, while the following interventions generated lower returns.

What factors are reducing the positive effects of intervention and causing increased volatility? Let’s start with the engine behind every central bank/state intervention and every “save” of the status quo: debt.

Debt Brings Forward Consumption & Income
Debt has one primary dynamic: borrowing money to consume something in the present brings forward consumption and income. Economists describe trading future income for consumption today as bringing consumption forward. And since debt must be repaid with interest, bringing consumption forward also brings income forward.

Let’s say we want to buy a vehicle with cash, and it will take five years to save up the lump-sum purchase cost. We forego current consumption to save for future consumption.

If we get a 100% auto loan now, we get the use of the vehicle (present-day consumption), and in exchange, we sacrifice some of our income over the next five years to pay back the auto loan. We brought consumption forward, and in essence, took future income and brought it forward to pay for the consumption we’re enjoying today.

We can best understand the eventual consequence of this dynamic with a simplified household example. Let’s say a household has $2,000 a month in net income, i.e. after taxes, healthcare insurance deductions, etc., and rent (or mortgage payments), basic groceries and utilities consume $1,000 of this net income. That leaves the household with $1,000 in disposable income.

At the risk of boring finance-savvy readers, let’s briefly cover the difference between net income and disposable income. Net income can be earned (wages, salaries, net income from a sole proprietor enterprise, etc.) or unearned (dividends, interest income, rents, etc.) It can only rise by making more money or reducing taxes. There are limits to our control of these factors. In a stagnant economy, it’s tough to find better-paying jobs and harder to demand higher wages from employers. Since governments’ expenditures are rising, taxes are also going up; it’s difficult for most wage earners to cut their total tax load by much.

Disposable income is more within our control, as it is fundamentally a series of trade-offs between current consumption and future income/savings: if we choose to consume now, we have less income to save for future consumption or investments. If we sacrifice consumption today, we have more money in the future for consumption or investing. If we borrow money to consume today, we’ll have less future income, because a slice of our future income must be devoted to pay down the debt we took on to consume today.

If our household borrows money to buy a vehicle and the payment is $500 per month, the household’s disposable income drops from $1,000 to $500. If the household takes on other debt (credit cards, student loans, etc.) with payments of $500 per month, the household’s disposable income is zero: there is no money left to dine out, go to movies, pay for lessons, etc.

In effect, all of the future income for years to come has been spent.

The Only Trick To Expand Debt: Lower Interest Rates

There are only two ways to support additional debt: either increase net income, or lower the rate of interest on new and existing loans to free up disposable income. Suppose our household refinances its auto loan to a much lower rate of interest, and transfers its credit card debt to a lower-interest rate card. Huzzah, each monthly payment drops by $100, and the household has $200 of disposable income to spend on current consumption or on more loans. Let’s say the household chooses to buy new furniture on credit with the windfall. This new consumption brought forward pushes the monthly debt payments back up to $1,000.

This additional debt-based consumption profits two critical players in the economy: the state (i.e. all levels of government) and the financial sector. The state benefits from the higher taxes generated by the sales, and the financial sector profits from transaction fees and the interest earned on the new loans.

The household’s consumption and debt rose as a result of lower interest rates, but there is a limit on this dynamic: lenders have to charge enough interest to service the loan, reap a profit and compensate shareholders for the risk of default.

If lenders fail to properly assess the risk of default, they will be unprepared to absorb the losses incurred as marginal borrowers default en masse. This places the lender’s own solvency at risk.

Using this trick to enable further expansion of debt thus creates a systemic risk that borrowers will over-borrow and lenders will not have sufficient reserves to absorb the inevitable losses as marginal borrowers default and other borrowers suffer declines in disposable income that trigger further defaults.

In other words, the trick of lowering interest rates yields diminishing returns: the more debt that is enabled, the thinner the margins of safety, and thus, the greater the systemic risks rise in direct correlation with rising debt loads.

The Trick To Increase Consumption: Punish Savers
While lowering interest rates increases disposable income and enables an expansion of debt, it also generates a disincentive for households to forego current consumption by saving disposable income rather than spending it. Near-zero interest rates actively punish savers by reducing the interest income earned on low-risk savings accounts and certificates of deposit (CDs) to near-zero. Savers are pushed into either investing in high-risk markets that benefit the financial sector, or into spending rather than saving – a choice that benefits the state, as more spending generates taxes for the state.

The Global Expansion Of Debt Has Increased Systemic Risks
These are the basic dynamics of the entire global economy: interest rates have been pushed to near-zero to punish savers and encourage the expansion of debt-based consumption. But this inevitably leads to a reduction in disposable income and current consumption, as debt brings forward both consumption and income.
Once the borrowers have maxed out their borrowing power, there is no more expansion of debt or additional debt-based consumption. This is known as debt saturation: flooding the financial sector with more credit no longer boosts borrowing or brings consumption forward.

Those who brought their consumption forward can no longer add to present consumption, as their future income is already spoken for. That’s where the global economy finds itself today. This vast expansion of debt on the backs of marginal borrowers and the expansion of risky investments has greatly increased the systemic risk of losses from defaults arising from over-extended borrowers.

No wonder every attempt to further expand debt-based consumption is yielding diminishing returns: net income is stagnant virtually everywhere in the bottom 95% of the populace, and further declines in interest rates are increasingly marginal, as rates are near-zero everywhere that isn’t suffering a collapse in its currency.

The diminishing returns manifest in three ways: the gains from each round of central bank tricks are declining, the periods of stability following the latest “save” are shrinking and the amplitude of each episode of debt crisis is expanding.

That the unraveling is speeding up is not just perception – it’s reality.

My source: http://seekingalpha.com/article/3012436-the-unraveling-is-gathering-speed?ifp=0

If Trees Don’t Grow To The Sky: The Next 6 Years

rolling 6 year numbersMy Comments: You’ve read my earlier comments about whether the world we now live in is a different world. The details have changed, but the fundamentals have not. The following article will cause you to think twice if have not made plans for your money to be protected going forward.

Charlie Bilello, Pension Partners, Mar. 18, 2015

Summary
• The last six years have been one of the strongest periods in history for U.S. equities.
• Investors need to lower their expectations for the next six years.
• This is quite possibly the worst starting point (looking ahead six years) for a 60/40 portfolio in history.

The Bull Market turned six last week and what an incredible six years it has been. From the depths of despair in March 2009, the S&P 500 (NYSEARCA:SPY) has more than tripled in one of the greatest six year bull market runs in history.

The Next 6 Years

There is a growing contingent of market participants today that seem to believe 20% annualized returns are the “new normal,” and the next six years will mirror the last. The crux of their argument is as follows: with central banks around the world engaging in unprecedented easing, there is no limit to how high a multiple the S&P 500 can fetch. In short, the narrative is that in the new central bank era, historical norms can be safely discarded as trees can grow to the sky.

While anything is possible, we should also consider a world where trees do not grow to the sky and mean reversion still exists. In that world, the “old normal,” a repeat performance is unlikely for the following reasons:

1) The average annualized return for the S&P 500 since 1928 is 9.3%. To expect the market to more than double this return for another six years is to expect the greatest bubble in the history of markets, far surpassing the dot-com bubble that peaked in 2000.

2) The long-term price-to-earnings ratio (CAPE or Shiller P/E) of 28 is now higher than all prior periods since 1871 with the exception of 1929 and the dot-com bubble which peaked in 2000.

3) While a terrible short-term predictor, there is a strong inverse relationship between longer-term returns and beginning price-to-earnings ratios, particularly at extremes. The worst decile of Shiller P/E values in the past (levels >26.3) have shown the worst average forward returns at 1.7%.

4) The gains of the past six years have not been lost on investors, who are about as bullish as they have ever been. The 45% spread between bulls and bears today stands in stark contrast to the -20% spread six years ago. The strongest gains in equity markets are built on a wall of worry and there is no such wall to speak of anymore.

While these factors may certainly be ignored in the short-run, they will be harder to ignore over a six-year period. At the very least, they suggest that the odds of above-average returns from here are low.

Borrowing From the Future if Trees Don’t Grow to the Sky

In the end, what the Fed has accomplished through the most expansionary monetary policy in history is not a new paradigm but simply a shift in the natural order of returns. In search of a “wealth effect,” they have borrowed returns from the future to satisfy the whims of today. They did so with the hope that the American people would borrow and spend more money and economic growth would accelerate because of short-term gains in the stock market.

Unfortunately, after six years, this “wealth effect” has failed to materialize, as this has been the slowest growth recovery in history in terms of real GDP and real wage growth. What we are left with is a boom only in the stock market, not in the real economy.

If trees don’t grow to the sky, then, future returns will have to suffer because past returns have been so strong. There is no other way unless you believe that multiples can continue to expand to infinity without reverting back to historical norms.

For anyone still saving and adding to their investments without having sold a single share, this has not been a gift from the Fed but a tremendous burden. The net savers have been forced to add money to stocks at propped-up levels, which will ultimately lower their long-term returns. The savers would have been far better off with a more moderate price advance with declines along the way which would have enabled them to buy in at lower prices and increase long-term returns. This is a mathematical truism.

In the bond market, math is also working against investors as the Fed has suppressed interest rates for over six years now. At the current level of 2.1%, the U.S. 10-year Treasury yield suggests that bond returns (NYSEARCA:AGG) are likely to be far below average in the years to come.

If trees don’t grow to the sky, the next six years will look nothing like the previous six and investors are likely to face a much more challenging environment. But don’t just take my word for it. I’ll leave you with a quote from Clifford Asness of AQR who had this to say in a recent interview with Barry Ritholtz:

“We find the 60/40 portfolio is about as bad as it’s ever been, prospectively” – Cliff Asness, February 21, 2015

This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

Note: here is the URL from which I took this article to share with you: http://seekingalpha.com/article/3010966-if-trees-dont-grow-to-the-sky-the-next-6-years?ifp=0

Euro: Parity Like It’s 1999

My Comments: The writer featured here provides, in my judgment, the most insightful reflections on what is happening economically across the globe. It appears here without his permission, but unless and until I’m told not to share them with you, I plan to continue.

March 20, 2015 / Commentary by Scott Minerd, Guggenheim Partners

Europe stands to benefit as the euro nears parity with the U.S. dollar – the Fed knows the U.S. economy faces a winter soft patch – the outlook for equities and fixed income remains fundamentally strong.

When the euro was introduced as an accounting currency on Jan. 1, 1999, it declined quickly, depreciating by 14.7 percent by Dec. 31 and hitting parity with the dollar early in 2000 before plunging to $0.83 by October of the same year. The euro’s recent slide has been no less severe, falling by 21 percent against the dollar since July of last year. With parity once again within sight, it seems quite plausible that one euro will once again equate to one dollar, and could potentially head even lower.

Of course, the biggest beneficiary of the depreciating euro has been Europe itself. Economic data coming out of the euro zone has been decent of late, and economic sentiment in Germany remains at a high level. The ZEW index of economic expectations for Germany, although perhaps tempered slightly by concerns over Greece and the Ukraine, still rose to a reading of 54.8 for March, up from 53 the previous month and the highest level since February 2014. Meanwhile, European equities are being powered higher—on Monday, Germany’s DAX Index breeched the 12,000 barrier for the first time and is now trading at just above that level—and euro zone consumer confidence is at levels last seen in 2007.

In contrast to the party spirit emanating from Europe, the U.S. economy faces some tough sledding in the weeks ahead, although not so much that it prevented the Federal Reserve from removing the word “patient” from its March meeting statement, signaling that there is enough strength in the economy for the Fed to start raising rates, most likely in September. In the short-term, temporary seasonal factors will likely tarnish investors’ faith in the economy. This seasonal downturn is not lost on the Fed. In the Federal Open Market Committee’s March meeting statement, it changed its description of economic growth from “has been expanding at a solid pace” to “has moderated somewhat.”

While U.S. job growth has been impressive, retail sales were weaker than expected, with last week’s sales print again coming in below expectations. But weak, weather-distorted first-quarter data is nothing new, and should not be taken as a sign of lasting weakness. In the early months of 2014, key economic data points, such as housing, retail sales, and even employment, were negatively impacted by an extended winter cold snap. Indeed, the U.S. economy shrank by 2.1 percent in the first quarter of 2014 before promptly turning back around in the second quarter. I expect a similar scenario to play out in 2015 as a result of another severe winter season.

The most likely place where we will see the direct impact of weaker economic data is the bond markets. Yields on U.S. 10-year Treasuries could fall meaningfully from 1.93 percent, perhaps even making a run on the lows we saw in January, with investors likely to be spooked by weaker economic data as the current quarter progresses. Personally, I have a great deal of confidence that the U.S. economic recovery remains on track and I don’t see weather-related economic data distortions having a lasting impact on the real economy. The prospects for U.S. equities and credit remain strong this year and recent weakness represents a buying opportunity.

Tough Sledding: Winter Weather Could Weigh on Interest Rates
As it did last winter, recent economic data has surprised to the downside as a result of severe weather. Retail sales have fallen the past three months, housing starts plunged 17 percent in February, and consumer confidence has backed off its recent highs. With economic momentum temporarily slowing, the Fed signaling the possibility of a later rate hike, and capital continuing to pour in from overseas, U.S. Treasury yields could be headed lower in the near term.

The Great Monetary Expansion

US economyMy Comments: Dozens of emails cross my desk daily, some promoting stuff that is clearly not relevant, many with a narrow focus that is largely self-serving, few of them truly informative. Those that come from Scott Minerd and Guggenheim Partners are usually worth paying attention to. They’re not too long, and they seem to have relevance for many of us. This is one of them.

March 05, 2015 by Scott Minerd, Chairman of Investments and Global Chief Investment Officer, Guggenheim Partners

While winter weather will likely distort first-quarter economic data, accommodative monetary policy around the world means the long-term outlook remains positive.

The European Central Bank will this month begin a program of full-scale quantitative easing to match what the central banks of Japan, the U.K., and the U.S. have been doing for some years now. The People’s Bank of China, by cutting its benchmark deposit and lending interest rates by 25 basis points last Saturday, provided further evidence—if any was needed—that the global economy will remain flush with liquidity for some time to come. The takeaway from this is that the great global monetary expansion is far from over and the outlook for stocks remains positive.

With regard to economic data here in the United States, we are potentially headed toward a period marred by winter distortions. This is nothing new. In the early months of 2014, key economic data points such as housing, retail sales, and even employment were negatively impacted by an extended winter cold snap. When the economy shrank by 2.1 percent in the first quarter of 2014, investors debated the fundamentals of the American economy. Of course, the economic soft patch of early 2014 proved temporary and the economy quickly regained momentum upon the arrival of the spring thaw. If similar factors are now at play, economic activity may be temporarily delayed, but not canceled.

If we do begin to witness a similar softening in economic data over the coming weeks, debate around the fundamentals of the U.S. economy will likely start afresh. Investors may even begin to question the Fed’s appetite for raising rates. However, I believe the underlying economy remains exceptionally strong and investors should not be panicked by seasonal setbacks. Indeed, considering the strength of the U.S. economy and the wave of liquidity emanating from various central banks around the world, the general investment environment should remain attractive.

GOP Lawmaker Hopes To Halt Fiduciary Push

financial freedomMy Comment: This push by the GOP is, in my opinion, more smoke and mirrors from those beholden to the lobbyists from Wall Street. The crux of this issue is that the people who run Wall Street firms do not want their rank and file representatives, the ones who work with people like you and me on a daily basis, to be held to a fiduciary standard.

For those of you who may not understand, a fiduciary standard means that what is said and done by representatives has to be in all respects, in the best interest of those who are clients of those representatives. The push back has been going on for years, and here is another example of how monied interests are more concerned about the welfare of the monied interests than of the general public.

That it “harms thousands of low and middle income Americans’ ability to save and invest for their future” is absolute and utter bullshit. I’m someone who has worked and made a living for the past 40 years, helping low and middle income Americans save and invest for their financial future, not some politician, bought and paid for by Wall Street firms.

Feb 26, 2015 | By Melanie Waddell

Firing back after President Barack Obama endorsed the Department of Labor’s efforts to revise fiduciary rules for retirement plan advice, Rep. Ann Wagner, R-Mo., has reintroduced legislation to require the DOL to wait to repropose its rule until the Securities and Exchange Commission issues its own fiduciary rulemaking.

Wagner’s bill, H.R. 2374, the Retail Investor Protection Act, passed the House last year. But the Senate had “no interest” in taking up the bill and President Obama’s senior advisors threatened that it would be vetoed.

Better Markets and the Consumer Federation of America sent a letter to the full Senate the same day Wagner took action this week, arguing that the DOL rulemaking should be allowed to move forward as the “actual contents” of the DOL rule have not been made public.

Discussion about the DOL rulemaking “has for the most part been based on speculation,” Barbara Roper, director of investor protection for the Consumer Federation, and Dennis Kelleher, president and CEO of Better Markets, said in a letter.

“Much of (the discussion/complaints about the DOL redraft) has been directly contradicted by statements from DOL officials about its expected regulatory approach,” Roper and Kelleher wrote.

In a statement, Wagner said that she is reintroducing her bill because Obama and Sen. Elizabeth Warren, D-Mass., “presented a solution in search of a problem by proposing another massive rulemaking from Washington that will harm thousands of low- and middle-income Americans’ ability to save and invest for their future.”

“This top-down, Washington-centered rulemaking against financial advisors and broker-dealers will harm the very middle-income families that Senator Warren and President Obama claim to protect,” Wagner said. “Americans should be given more freedom to seek sound financial advice without Senator Warren and President Obama’s interference.”

Wagner’s bill says that the SEC would be required to “go first” in issuing its rulemaking under Section 913 of the Dodd Frank Act before the DOL is able to propose a rule that expands the definition of a fiduciary under the Employee Retirement Income Security Act.
But Roper and Kelleher told the Senate that the DOL rule should be “allowed to go forward, so that the public and all stakeholders have an equal opportunity to see the actual content of the rule.” Indeed, they wrote, “as required by law, at the close of the public comment period, DOL will consider all of the comments and input and decide the best course of action consistent with the law.”

By sending the rule to the Office of Management and Budget, DOL is simply starting the process to release the actual proposed rule for public comment, the two wrote.

The OMB review could take several months. Wagner’s bill would also require the SEC to “look into potential issues with a rulemaking establishing a uniform fiduciary standard in regards to investor harm and access to financial products that were not adequately addressed” in the agency’s 2011 study.

The SEC would also be asked under Wagner’s bill to look into “other alternatives outside of a uniform fiduciary standard which could help with issues of investor confusion.”

Wagner’s bill “is an investor protection bill in name only,” according to a statement from the Financial Planning Coalition, which comprises the Certified Financial Planner Board of Standards, the Financial Planning Association and the National Association of Personal Financial Advisors.

The coalition added that it “helped prevent this legislation from becoming law when it was first introduced and continues to oppose it now and in the future,” arguing that it would leave American investors “vulnerable to potential abuses and would substantially impede or even prevent the SEC from proceeding with congressionally authorized fiduciary rulemaking.”

Wagner’s legislation, the coalition stated, “would require the (Securities and Exchange) Commission to consider less adequate and less effective alternatives,” and would also “slow or effectively prohibit the DOL from proceeding with its proposed fiduciary rulemaking for financial professionals who provide investment advice to retirement savers.”

SEC Chairwoman Mary Jo White said last week that she would speak about her position regarding a rule to put brokers under a fiduciary mandate “in the short term,” noting that it remains her priority “to get the Commission in a position to make that decision” on such a rule.