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Federal Reserve-Minutes of the Federal Open Market Committee, January 31-February 1, 2023
February 22, 2023--Developments in Financial Markets and Open Market Operations
The manager pro tem turned first to a review of U.S. financial market developments. Market participants generally expected U.S. economic growth to moderate this year, all though there was a wide dispersion in views about the extent of a potential slowdown. Market participants interpreted incoming data as pointing to moderating inflation risks.
Against this backdrop, market participants judged that the FOMC would likely slow the pace of rate increases further at the current meeting, and respondents to the Desk's Survey of Primary Dealers and Survey of Market Participants widely expected the Committee to implement a 1/4 percentage point increase in the target range for the federal funds rate.
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Source: federalreserve.gov
Horizon Kinetics Launches Energy & Remediation Exchange Traded Fund (NVIR)
February 22, 2023--Horizon Kinetics LLC today launched the Energy & Remediation ETF (NVIR), an actively managed fund that began trading on the New York Stock Exchange (NYSE) today (February 22, 2023).
This active ETF applies the same proprietary research-driven philosophy-long-term, fundamentals-based and value-oriented -that has differentiated Horizon Kinetics' other products for nearly 30 years.
This fund is unique in that it has a dual, reality-based mandate. Acknowledging the existing and growing demand for carbon-based energy, a portion of the portfolio will own fundamentally attractive, carbon-based energy companies. The second portion of the portfolio will be comprised of remediation companies that employ existing technology that allows carbon-based energy to be generated in a more environmentally sensible manner. Innovative technologies in this "clean energy" space are being developed at a rapid pace. As they are brought online, NVIR will purchase them when warranted by their valuation.
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Source: Horizon Kinetics Energy & Remediation ETF
SEC targets built-in marketing fees in fund-to-ETF conversions
February 18, 2023--One question is whether 12b-1 fees levied on mutual funds can be used to promote them as converted ETFs
The Securities and Exchange Commission is investigating whether 12b-1 fees are being appropriately handled during the process of converting mutual funds to ETFs, compliance consultants say.
Certain mutual fund share classes charge 12b-1 fees, which cover marketing, distribution and shareholder costs. But it is exceedingly rare for ETFs to carry such fees. And companies that convert mutual fund share classes with 12b-1 fees into ETFs could open themselves up to SEC scrutiny, the consultants say.
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Source: ft.com
IMF-Bringing the US Economy Back into Balance
February 16, 2023--The US Federal Reserve has been raising interest rates to restore price stability and to bring balance to the labor market. The demand for new hires is exceeding the supply of available workers in the US, as the unemployment rate has fallen to its lowest level in over 50 years, and this has contributed to higher inflation.
To help bring the economy back into balance, IMF analysis shows that staying the course and keeping interest rates elevated this year will tame inflation. Although these higher rates will temporarily increase unemployment, they will pave the way for stable inflation and sustainable economic growth, which will ultimately help create more jobs in the future.
When prices began rising in 2021, they were initially limited to goods affected by pandemic-related disruptions, such as vehicles. However, by early 2022, rising prices had spread to housing and other services such as hotels and restaurants. Growth of prices in the personal consumption expenditure index is now around 5½ percent, well above the 2 percent target.
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Source: imf.org
AllianzIM's Suite of ETFs Exceeds $1 Billion in Assets
February 15, 2023--It was one of the fastest growing suites of ETFs in the industry in 2022.
Allianz Investment Management LLC (AllianzIM), a wholly-owned subsidiary of Allianz Life Insurance Company of North America (Allianz Life(R), announced its suite of Buffered ETFs has surpassed $1 billion in total assets under management.
It was one of the fastest growing suites of ETFs in the industry in 2022.1
With rising interest ratings and the current geopolitical tensions continuing in 2023, risk mitigation strategies from investors and investment professionals continue to be in high demand, as the majority of investors (83%)* believe the market will remain very volatile this year. To meet this need, AllianzIM is continuing to expand its lineup of Buffered ETFs to provide investors new entry points into the market with downside Buffers against losses. Since debuting in June 2020, AllianzIM has launched 16 Buffered ETFs with six or 12-month outcome periods.
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Source: allianzlife.com
REX Shares Launches Energy Long and Short MicroSectors ETNs Tracking Solactive Index
February 15, 2023--Oil & Gas are the main ingredients of a great variety of industrial products such as transportation fuels, plastics, solvents, and a source of electricity and heat generation. Recently, demand and supply for these commodities as well as their prices have been rising in volatility on a global basis, especially due to market concerns about energy shortages, Covid-19 restrictions in China, and a recession in the horizon.
However, the restraints of Russian oil by the European Union, China's reopening, and the prospect of a change in the Fed monetary policy can establish a different scenario for these commodities' prices. Solactive is pleased to announce REX Shares, LLC ("REX") launched two Exchange Traded Notes (ETNs) issued by Bank of Montreal ("BMO") linked to the Solactive MicroSectors Energy Index (ticker: BIGOIL). The ETNs, MicroSectors Energy 3x Leveraged ETNs (ticker: WTIU) and MicroSectors Energy -3x Inverse Leveraged ETNs (ticker: WTID) started trading today on NYSE Arca.
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Source: Solactive AG
CBO-Federal Debt and the Statutory Limit, February 2023
February 15, 2023--Summary
The debt limit-commonly called the debt ceiling-is the maximum amount of debt that the Department of the Treasury can issue to the public or to other federal agencies. The amount is set by law and has been increased or suspended over the years to allow for the additional borrowing needed to finance the government's operations. On December 16, 2021, lawmakers raised the debt limit by $2.5 trillion to a total of $31.4 trillion.
On January 19, 2023, that limit was reached, and the Treasury announced a "debt issuance suspension period" during which, under current law, it can take well-established "extraordinary measures" to borrow additional funds without breaching the debt ceiling.
The Congressional Budget Office projects that, if the debt limit remains unchanged, the government's ability to borrow using extraordinary measures will be exhausted between July and September 2023-that is, in the fourth quarter of the current fiscal year. The projected exhaustion date is uncertain because the timing and amount of revenue collections and outlays over the intervening months could differ from CBO's projections. In particular, income tax receipts in April could be more or less than CBO estimates. If those receipts fell short of estimated amounts-for example, if capital gains realizations in 2022 were smaller or if U.S. income growth slowed by more in early calendar year 2023 than CBO projected-the extraordinary measures could be exhausted sooner, and the Treasury could run out of funds before July.
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Source: CBO (Congressional Budget Office)
CBO-The Budget and Economic Outlook: 2023 to 2033
February 15, 2023--The Congressional Budget Office regularly publishes reports presenting its baseline projections of what the federal budget and the economy would look like in the current year and over the next 10 years if current laws governing taxes and spending generally remained unchanged.
This report is the latest in that series.
The Budget
CBO projects a federal budget deficit of $1.4 trillion for 2023. (Deficits and spending have been adjusted to exclude the effects of shifts that occur in the timing of certain payments when October 1 falls on a weekend.) In the agency's projections, deficits generally increase over the coming years; the shortfall in 2033 is $2.7 trillion. The deficit amounts to 5.3 percent of gross domestic product (GDP) in 2023, swells to 6.1 percent of GDP in 2024 and 2025, and then declines in the two years that follow. After 2027, deficits increase again, reaching 6.9 percent of GDP in 2033-a level exceeded only five times since 1946.
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Source: CBO (Congressional Budget Office)
SEC Proposes Enhanced Safeguarding Rule for Registered Investment Advisers
February 15, 2023--The Securities and Exchange Commission today proposed rule changes to enhance protections of customer assets managed by registered investment advisers. If adopted, the changes would amend and redesignate rule 206(4)-2, the Commission's custody rule, under the Investment Advisers Act of 1940 and amend certain related recordkeeping and reporting obligations.
The proposed rules would exercise Commission authority under section 411 of the Dodd-Frank Act by broadening the application of the current investment adviser custody rule beyond client funds and securities to include any client assets in an investment adviser's possession or when an investment adviser has authority to obtain possession of client assets. Like the current rule, the proposed rule would entrust safekeeping of client assets to qualified custodians, including, for example, certain banks or broker-dealers.
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Source: SEC.gov
SEC Finalizes Rules to Reduce Risks in Clearance and Settlement
February 15, 2023--Final rules will shorten process for settling securities transactions from two business days to one.
The Securities and Exchange Commission today adopted rule changes to shorten the standard settlement cycle for most broker-dealer transactions in securities from two business days after the trade date (T+2) to one (T+1). The final rule is designed to benefit investors and reduce the credit, market, and liquidity risks in securities transactions faced by market participants.
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Source: SEC.gov
