Investors may soon see their favorite stocks quoted in half-penny increments.

The U.S. Securities and Exchange Commission will vote Wednesday to change the minimum pricing increment for many large-cap stocks, likely to allow for pricing increments of a half-cent. The agency rolled out this proposed rule in late 2022. 

The measure would likely affect the pricing of most of the largest stocks, including most in the S&P 500. It may also affect the pricing of some highly liquid Exchange Traded Funds (ETFs).

Currently, the minimum pricing increment — or tick size — for most stocks is one cent.

Before the mid-1990s, the stock brokerage business was very profitable.

Since the 1800s, the smallest increment that a stock traded at was an eighth of a dollar (12.5 cents). A broker might have a bid — a price at which they would be willing to buy — of $20.00 for XYZ stock, and an ask — that is, a price at which they would be willing to sell — of $20.125. That’s an eighth of a dollar higher.

That turned out to be a very lucrative business.

This all began to change in the 1990s. In 1997, the minimum tick size went from an eighth of a dollar to a sixteenth, or 6.25 cents. This dropped to a penny in 2001.

These reductions in tick size had a profound effect on the brokerage business: It made stock trading far less profitable, but it provided big savings to buyers and sellers of stocks. Reducing the tick size also improved market liquidity.

As the volume of trading in the largest stocks has expanded, the trading community has debated about whether tick sizes should be reduced further. For starters, certain highly liquid stocks are “tick constrained,” meaning they could easily trade if the tick size were reduced further. There have been discussions about adding tick sizes of a tenth of a cent or a fifth of a cent, as well as a half cent.

Why reduce the tick size further? For the same reason minimum pricing increments were reduced decades earlier: This would reduce trading costs.

Most in the trading industry feel the SEC will settle on a half-cent increment because trading in increments of one-tenth of a penny creates too many price points.

Investors who dread the idea of their favorite stocks being quoted in half-penny increments will likely have some time to get used to it.

Most market participants told me any change would likely take a year or more to implement, as it would require changes in the systems that display quotations.

Why are September and October historically weak for stocks? For answers, I turned to Mark Higgins, senior vice president at Index Fund Advisors and author of the book, Investing in U.S. Financial History: Understanding the Past to Forecast the Future.

The answers have been edited for clarity.

What is it with September and October being weak months for stocks?  Has this always been the case?

Yes. The most intense panics on Wall Street have tended to occur during the late summer and early autumn months. This can be traced all the way back to the 1800s. A few notable examples of exceptional panics include Black Friday of 1869, the Panic of 1873 and the Panic of 1907.

But why September and October?

It is a byproduct of an old weakness in the U.S. financial system.  Prior to the reintroduction of a central banking system with the passage of the Federal Reserve Act of 1913, the U.S. was limited in its ability to adjust the money supply in response to market conditions.

The inelasticity of the U.S. currency made the late summer and early autumn months an especially precarious time, due to the agricultural financing cycle. In the 1800s, the U.S. economy still relied heavily on agricultural production.  For the first eight months of the year, American farmers had a limited need for capital, so excess funds held on deposit in state banks were shipped to New York banks or trust companies to earn a higher rate of return.

When harvest time arrived in August, state banks began withdrawing their capital from New York, as farmers drew on their accounts to fund transactions required to ship crops to market.

The agricultural financing cycle created chronic shortages of cash in New York City during the autumn months. If these shortages happened to coincide with a financial shock, there was little flexibility in the system to prevent a panic. 

How did the government respond to these panics?

The limited ability of the government to react was the primary impetus for the passage of the Federal Reserve Act of 1913. The Act granted the Fed the power to serve as a lender of last resort during financial crises. Prior to the Act, leading financiers (most notably J.P. Morgan) were forced to assemble ad hoc solutions that relied primarily on private capital. After the U.S. barely avoided a catastrophic collapse of the financial system during the Panic of 1907, there was just enough political support for the return of the third and final iteration of a central banking system in the United States. 

Did the creation of the Federal Reserve provide more stability to markets? 

Yes, and if one compares the frequency, intensity and misery of financial panics during the 1800s, this is plainly evident. In fairness, the Fed made a few mistakes along the way, with the most notable being its failure to stop the contagion of bank failures in the 1930s. But, by and large, the U.S. financial system has been much more stable since the Federal Reserve became operational in late 1914. 

Still, the U.S. economy is not primarily agricultural anymore.  Why are September and October still weak months?

People tend to fear things that have happened before even if they don’t remember the origin of the fear. It may be that the fall panics have repeated so many times that they have become a self-fulfilling prophecy. In other words, people expect them, and because they expect them, they behave in ways (i.e., reducing risk in late summer and early fall) that make them more likely. I know this sounds like a stretch, but it does seem like it may actually be real.

The explosion of online sports betting is taking a toll on personal finances, particularly among those who are financially distressed.

That’s the conclusion of a recent paper, “Gambling Away Stability: Sports Betting’s Impact on Vulnerable Households.” The authors found that sports betting has exploded since the Supreme Court overturned a federal law prohibiting it in 2018. Since then, 38 states have legalized it and it has become a growth industry, generating more than $120 billion in total bets and $11 billion in revenue in 2023 alone.

That has put considerable sums into state coffers, but it has come at a notable personal expense to gamblers and their families. Those who participate tend to invest less and have higher debt levels.

“Our results show that not only does sports betting lead to increased betting activity, but it also leads to higher credit card balances, less available credit, a reduction in net investments, and an increase in lottery play,” the authors concluded.

The authors noted these negative effects were particularly noticeable among “financially constrained households.” That term was not defined, but the implication is that this group typically has lower savings, lower cash levels to cover expenses, higher debt levels and lower net worth.

The authors used a quarterly panel of 230,171 households in states that have legalized gambling. About 7.7% of the households made online sports bets, with a household average of $1,100 a year.

Not surprisingly, people who gamble on sports have less money to invest, particularly in the stock market. The authors found a large decrease in net deposits to traditional brokerage accounts. “Two to three years after betting becomes legal, there is a noticeable drop in net investment relative to states where betting is not yet legal,” the report said.

The authors estimate that legalization reduces net investments by bettors by nearly 14%, and that every dollar spent on sports betting reduces net investment by $2.13.

But the implications are much broader.

“The increase in betting and consumption drives an increase in financial instability in terms of decreased credit availability, increased credit card debt, and a higher incidence rate of overdrawing bank accounts,” the authors said.

This is particularly true for financially constrained households. The higher credit card debt indicates that these households are not just shifting funds from one type of entertainment to another. (For example, shifting money from betting on lotteries to betting on sports.) Instead, they are “becoming more indebted to fund an addictive losing proposition.”

Again, lower-income households suffer disproportionately; the bottom one-third of households by income had the largest increase in spending on sports gambling relative to income.

There were notable differences between the characteristics of bettors and non-bettors.

Both groups had similar incomes, but bettors displayed riskier behavior. They were more than twice as likely as non-bettors to have ever invested in crypto or ever overdrawn their bank account. They were four times more likely to have played online poker or purchased lottery tickets.

These results are consistent with several prior studies. One 2009 study concluded gambling‐related activity is greater among low‐income investors, who tend to excessively bet on state lotteries and also are overweight risky, lottery‐type stocks.

The authors note the quandary for policymakers. By continuing to legalize and expand activities like sports gambling — where the vast majority lose money — the government is sending conflicting signals.

On the one hand, the government attitude is: These are adults, they have a right to spend their money any way they want to. And we need the money.

But governments have other priorities they are promoting, including encouraging saving money for retirement, that are clearly in conflict with promoting gambling.

“As legalized sports betting gains traction, it potentially undermines government efforts aimed at promoting savings through tax incentives and financial literacy programs,” the authors concluded.

“Policymakers should consider how the allure of betting might divert funds from savings and investment accounts, particularly for constrained households, which can affect household financial stability and long-term wealth accumulation.”

When BlackRock CEO Larry Fink bought the iShares ETF business from Barclays for roughly $13 billion in 2009, the economy was still reeling from the great financial crisis.

At the time, $13 billion seemed like an awful lot of money to spend on a tiny business. ETFs were still in their infancy: there was roughly $700 million in total assets under management, a paltry sum compared to the trillions then in mutual funds.

By these metrics, Fink’s gamble has proven to be one of the greatest financial investments of all time.

Doing a sum-of-the-parts analysis of Blackrock’s ETF business would be a difficult endeavor, but certainly revenue, assets under management (AUM), and growth potential are important factors.

According to Greggory Warren, equity strategist at Morningstar, Blackrock total revenue was $17.8 billion in 2023. Of that, iShares equity ETF pulled in $4.41 billion and iShares fixed income tallied $1.23 billion (They don’t break down alternative ETFs and multiasset class, but they are both relatively small.)

So the iShares ETF revenue was about a third of Blackrock’s revenue, and Warren said that segment is still growing.

Revenue growth: Check.

Assets under management for Blackrock’s ETF business was $3.85 billion, a number that has roughly doubled from the $1.79 trillion of ETF AUM announced five years earlier in November 2018. It appears this figure includes ETFs that listed and traded outside the United States, including London and Canada, but even excluding ETFs outside the U.S., Blackrock still has the dominant position in total AUM.

ETFs: Where the money is
Blackrock: $2.9 trillion
Vanguard: $2.7 trillion
State Street: $1.3 trillion
Invesco: $570 billion
Schwab: $360 billion
Remainder: approximately $1.5 billion

Source: ETF Action

AUM growth: Check.

As for growth potential, inflows were $83 billion in the second quarter, or $150 billion year-to-date. To give you an idea of how large that is, it’s about one-third of the inflows into the entire ETF business.

Inflow growth: check.

By any metric, Blackrock’s ETF business just keeps getting more valuable. Revenue: growing.
AUM: growing. Inflows: growing.

The entire ETF business is growing

Blackrock’s ETF business is a gold mine, but total AUM for the entire ETF business now a bit over $9 trillion, which means Blackrock and a few rivals control a staggering amount of ETF investment dollars.

If you look at the list above, it’s clear the rich are getting richer. There’s about 300 ETF providers, but the top five represent about 85% of all the ETF assets.

The search for new revenue is endless

The ETF business is still raking in money, but there is tremendous fee pressure across the entire ETF universe, so the search for more revenue goes on.

Neither Fink at Blackrock nor anyone else in the asset management business can afford to rest on their AUM.

For example, Blackrock recently announced their LifePath Paycheck program, an attempt to muscle into a difficult area: the annuities business. Investors have historically been deeply suspicious of annuities due to low payouts and high commissions.

LifePath Paycheck uses Blackrock’s existing target date fund framework, which automatically adjusts asset allocation as participants approach retirement (less equities, more bonds). Here’s the kicker: starting at age 55, a participant can allocate a portion of their assets to a lifetime-income asset class. Participants can begin redeeming their investment at 59½ and purchase annuities from insurers selected by BlackRock.

Another area of potential growth is private equity. Blackrock recently purchased Preqin, a leading provider of alternative equity data, for approximately $3.2 billion in cash. What they want is more access to private equity data. With the IPO market still range-bound, there’s big money to be made in private equity. There’s the potential to create indexes for private equity investment.

But the investment is bigger than just data. The big hope — that somehow an ETF of private equity investments could be created — remains, for the moment, a pipe dream, for the simple reason that buying the underlying private equity assets and managing them in an ETF wrapper is exceedingly difficult. (To create and redeem ETF shares, the market makers would have to be allowed to buy and sell the underlying assets, difficult, if not impossible, to do on a daily basis when you are dealing with private equity.)

Might it be possible to create an index and then find a way to synthetically mimic the index without owning any underlying private equity? That is a possibility.

The bottom line: It’s good to have a business that scales big

Regardless of the challenges, remember that this is a scale business. You could take in billions of dollars more, and because it is so technologically advanced, the costs are minimal.

And that is what keeps a smile on Fink’s face.

“We have $2 trillion more in assets than we did a year ago with the same amount of employees. That is technology at work,” Fink said on CNBC’s “Squawk on the Street” Monday morning.

Spot ether exchange traded funds are set to begin trading on Tuesday. Crypto enthusiasts are hopeful it will broaden the investor base for Ethereum, a blockchain technology many argue has a far wider use case than bitcoin. 

These ETFs will invest directly in ether, which is the cryptocurrency used in the Ethereum network. There are already ether ETFs that track futures contracts, but these are the first to track spot ether.

Spot ether ETF applications

Grayscale Ethereum Mini Trust (ETH)
Grayscale Ethereum Trust (ETHE)
Bitwise Ethereum (ETHW)
VanEck Ethereum (ETHV)          
21Shares Core Ethereum (CETH) 
Invesco Galaxy Ethereum (QETH)
Fidelity Ethereum (FETH)                                             
Franklin Ethereum (EZET) 
iShares Ethereum Trust (ETHA)

Like the spot bitcoin ETFs that launched in January, most are waiving fees initially — in many cases for up to a year.  

By the standards of ETF launches, spot bitcoin ETFs have been a success: They recently topped $17 billion in net flows year to date since their debut.

For a new asset class, that is a big hit.

However, at $1.3 trillion in total assets, bitcoin has about three times the value of ether, which has about $414 billion in assets. That may limit the initial appeal of ether ETFs.

Bitcoin prices rose going into the launch of spot bitcoin ETFs. Ether has been a bit spottier: It is up 50% in 2024, but most of the gain came in the first three months of the year.

Still, for Ethereum enthusiasts, the primary value of a spot ether ETF is that it’s a perfect vehicle to educate the public about the use cases for Ethereum, which are far greater than anything bitcoin has to offer.

Ben Johnson, Morningstar’s head of client solutions and an ETF research veteran, noted that while bitcoin is often advertised as digital gold, “Ethereum is more like picks and shovels.”

“The case for the former is that it is finite and could be a store of value, the latter is not finite and being used to build some real-world applications,” he said. 

Many investors have never been impressed with bitcoin, primarily because the use case seems limited: It is purely a digital currency. But the Ethereum platform is different. 

Bitcoin and Ethereum both utilize blockchain, which is a decentralized, immutable ledger to record transaction histories, but they have very different purposes. 

Bitcoin uses the blockchain as a digital currency. Ethereum utilizes digital money just like bitcoin, but its blockchain has broader purposes. (Ether is the cryptocurrency used in the Ethereum network, but in practice the terms Ethereum and ether are often used interchangeably.) 

Ethereum is a platform for building smart contracts, which are self-executing programs that enforce a pre-existing contract or agreement. It can be as simple as “If I do this, you do that.” The key is that they execute automatically, are done on the blockchain (the Ethereum network) and produce the same result each time they are executed. They also have a wide variety of applications.

The most common use is for decentralized finance, or “DeFi.” This is just a fancy term for using financial services on the blockchain. In theory, you could perform almost any banking services: Users can send, lend or borrow money, open a savings account, trade stocks or derivatives or other cryptocurrencies, get insurance. Theoretically, you could also do real estate transactions. Users can perform these functions using software called “decentralized apps.”

The use case goes beyond financial services. Users can play games. Corporations could use it for tracking supply chains. It could even be used as a clearing platform to settle stock trades. 

Another application for Ethereum: stablecoins. These are cryptocurrencies whose value is pegged to another asset, usually the dollar. Because cryptocurrencies like bitcoin and ether are volatile, many DeFi applications rely on stablecoins for lending, borrowing and trading.

The promise is a transaction network that — in theory — could be a much cheaper and faster way to do business.

It’s not clear whether this latest development will open the floodgates for more crypto ETFs — or whether the U.S. Securities and Exchange Commission will find a way to stop the potential tidal wave.

Any applicant for other crypto ETFs would still need to show that the underlying market was not subject to manipulation, a crucial requirement for approval of these funds.

But a lot may depend on the political climate.

In the past, for commodities, the SEC has traditionally required a regulated futures market to trade alongside the asset. Right now, that only exists for bitcoin and ether, so it would take time to develop futures markets for other crypto products. 

“Under the current regime in Washington, that would not change,” Matt Hougan, chief investment officer of Bitwise told me. “But if you get a change of regimes in Washington, that could change.”

Regardless, expect a lot of trading. “These new ETH ETFs will likely trade a lot,” Johnson at Morningstar told me. ”I’d guess that if and when options on these ETFs become available, this will all go into overdrive…. These ETFs effectively add a whole new wing to the crypto casino.” 

For the moment, selling Ethereum as a new transaction platform is the main game, and Ethereum enthusiasts have a potent argument: that the platform is a technology investment at heart.

“A lot of investors view bitcoin as digital gold, a store of value, whereas investors view Ethereum more as a technology play,” Hunter Horsley, CEO of Bitwise, said on CNBC TV last night.

Note: Jan van Eck, CEO of VanEck; Morningstar’s Ben Johnson; and David Mann, ETF product and capital markets at Franklin Templeton, will be on ETF Edge Tuesday, July 23 at 1:10 p.m., Eastern.  ETFEdge.cnbc.com.

How’s your 401(k) looking? A new report shows Americans are saving more, but probably need to do even more. 

Vanguard has released its annual report, How America Saves 2024. Vanguard and Fidelity are the two biggest sponsors of 401(k) plans, and this is a snapshot of what nearly five million participants are doing with their money. 

The good news: stock market returns are up and, thanks largely to automatic enrollment plans, investors are saving more than they did in the past. 

The bad news: account balances for the median 401(k) of a person approaching retirement (65+) remains very low. 

The takeaway: Americans are still very reliant on Social Security for a large chunk of their retirement. 

Higher returns, participation rates, savings rates 

Why do we care so much about 401(k) plans? Because it’s the main private savings vehicle Americans have for retirement. More than 100 million Americans are covered by these “defined contribution” plans, with more than $10 trillion in assets. 

First, 2023 was a good year to be an investor.  The average total return rate for participants was 18.1%, the best year since 2019. 

But to be effective vehicles for retirement, these plans need to: 1) have high participation rates, and 2) hold high levels of savings. 

On those fronts, there is good news. John James, managing director of Vanguard’s Institutional Investor Group, called it “a year of progress.” 

Plan participation reached all-time highs. Thanks to a change in the law several years ago, a record-high 59% of plans offered automatic enrollment in 401(k) plans. This is a major improvement: ipreviously, enrollment in 401(k) plans were often short of expectations because investors had to “opt-in,” that is they had to choose to participate in the plan.  Because of indecision or simple ignorance, many did not. By switching to automatic enrollment, participants were automatically enrolled and had to “opt-out” if they did not want to participate. 

The result: enrollment rates have gone up. Plans with automatic enrollment had a 94% participation rate, compared with 67% for voluntary enrollment plans. 

Participant saving rates reached all time highs. The average participant deferred 7.4% of their savings. Including employee and employer contributions, the average total participant contribution rate was 11.7%. 

A few other observations about Vanguard’s 401(k) plan investors: 

They prefer equities and target date funds.  They love equities over bonds or any other investments. The average plan contribution to equities is 74%.  A record-high 64% of all 2023 contributions went into target-date funds, which automatically adjust stock and bond allocations as the participant ages. 

They don’t trade much. In 2023, only 5% of nonadvised participants traded within their accounts; 95% did no trading at all. ”Over the past 15 years, we have generally observed a decline in participant trading,” Vanguard said, which it partially attributed to increased adoption of target-date funds. 

Despite gains in the market, account balances are still low

In 2023, the average account balance for Vanguard participants was $134,128, but the median balance (half had more, half had less) was only $35,286. 

Why such a big difference between the average and the median? Because a small group of investors with large balances pull up the averages. Forty percent of participants had less than $20,000 in their retirement accounts. 

Distribution of account balances

• Less than $20,000     40%
• $20,000-$99,999        30%
• $100,000-$249,900  15%
• $250,000 +                  15%

Source:  Vanguard 

Median balances for those near retirement are still low

A different way to look at the problem is to ask how much people who are retirement age have saved, because it’s an indication of how prepared they are for imminent retirement.

Investors 65 years or older had an average account balance of $272,588, but a median balance of only $88,488. 

A median balance of $88,488 is not much when you consider older participants have higher incomes and higher savings rates. That is not much money for a 65-year old nearing retirement.

Of course, these balances don’t necessarily reflect total lifetime savings. Some have more than one retirement plan because they had other plans with previous employers. Most do have other sources of retirement savings, typically Social Security. A shrinking number may also have a pension. Some may have money in checking accounts, or have stocks or bonds outside a retirement account. 

Regardless, the math does not look great

So let’s do some retirement math. 

A typical annual drawdown for a 401(k) account in retirement is about 4%. Drawing down 4% of $88,488 a year gets you $3,539 every 12 months. 

Next, Social Security. As of January 2023, the average Social Security benefit was almost $1,689 per month, or about $20,268 per year.

Finally, even though pensions are a vanishing benefit, let’s include them. 

According to the Pension Rights Center, the median annual pension benefit for a private pension is $9,262 (government employees have higher benefits). 

Here’s our yearly retirement budget:

• Personal savings $3,539
• Pension                 $9,262
• Social Security   $20,264
• Total:                   $33,065

It’s certainly possibly to live on $33,000 a year, but this would likely only work if you own your home, have low expenses and live in a low-cost part of the country. 

Even then, it would hardly be a robust retirement. 

And these are the lucky ones. Only 57% of retirees have a tax-deferred retirement account like a 401(k) or IRA. Only 56% reported receiving income from a pension. 

And that extra income largely determines whether a retiree feels good or bad about their retirement. 

In 2023, four out five retirees said they were doing at least okay financially, but this varied tremendously depending on whether retirees had sources of income outside of Social Security. Only 52% of retirees who did not have private income said they were doing at least okay financially. 

What can be done? 

To have a more robust retirement, Americans are just going to have to save more. 

One issue is investors still don’t contribute the maximum amount allowed. Only 14% of participants saved the statutory maximum amount of $22,500 per year ($30,000 for those age 50 or older). The likely reason: most felt they couldn’t afford to. 

However, only 53% of even those with income over $150,000 contributed the maximum allowed.  Given that the employee match is “free money,” one would think participants in that income bracket would rationally choose to max out their contribution. The fact that many still don’t suggests that more investor education is needed. 

Regardless, it’s very dangerous to assume that retirees are going to be bailed out by an ever-rising stock market. Another year anywhere near 2022, when the S&P 500 was down 20%, and investor confidence in their financial future will likely deteriorate.

Stock splits, long out of favor, are making a comeback.

It started with Walmart, which announced a 3-for-1 stock split on Jan. 30, with the additional shares being distributed on Feb. 23.

And from there, it picked up steam. On Thursday, Williams Sonoma announced a 2-for-1 split, and on Wednesday, Broadcom announced a 10-for-1 split.

Notable stock splits in 2024
(when distributed)
Walmart 3-1 2/23/24
CooperCompanies 4-1 2/16/24
Texas Pacific Land 3-1 3/27/24
Old Dominon Freight Line 2-1 3/27/24
Nvidia 10-1 6/7/24
Amphenol 2-1 6/11/24
Chipotle Mexican Grill 50-1 6/25/24
Broadcom 10-1 7/12/24
Williams-Sonoma 2-1 7/8/24
Cintas 4-1 9/11/24
Sony Group 5-1 10/8/24
Lam Research 10-1 10/3/24

Why the comeback in stock splits?

Stock splits are far less common than 20 or 30 years ago. During the tech and internet bubble of the late 1990s, stock splits were common. David Kostin, chief U.S. equity strategist at Goldman Sachs, noted that roughly 15% of Russell 1000 firms split their stock each year in the late 1990s, but that proved to be an anomaly.

By the mid-2000s, only roughly 5% of the Russell 1000 members split their stock each year, and after the great financial crisis in 2008-2009, stock splits practically ceased.

Importantly, splits did not increase after the market began recovering in 2010.

The likely reason is the institutional base for stock ownership has come to dominate the market. Institutional investors invest by dollar value, not by shares. They would typically buy, say, $10 million in stock and don’t care what the price is.

But recently, there are signs of a subtle shift. Some of it may be because the price of some stocks reached absurd levels. Chipotle, for example, has never split its stock and is trading over $3,200 and will soon split 50-for-1. Nvidia was over $1,200 by the time it split 10-for-1.

More importantly, some companies appear to be more interested in appealing to retail investors.

Nvidia noted that the purpose of the split was to “make stock ownership more accessible to employees and investors.” Chipotle said the same thing.

Walmart also cited these factors in its statement announcing the split: “The stock split is part of Walmart’s ongoing review of optimal trading and spread levels and its desire for its associates to feel that purchasing shares is easily within reach.

Does splitting a stock affect the price?

In theory, no. The value of the company remains the same.

However, many academic studies have noted various changes in trading patterns for stocks that split, though these changes are not uniform. One 2022 academic study filed at the Journal of Risk and Financial Management found several positive benefits:

1) trading volumes go up

2) liquidity improves (liquidity is the ability to trade a lot of shares without moving the price)

3) stock splits increase the shareholder base for the company

These changes may have subtle impacts on the stock price.

Candidates for stock split?

If companies with a retail focus are suddenly more sensitive to their prices, there are some obvious candidates. The “over $1,000” club in the S&P 500 is small and getting smaller: Chipotle ($3,230), Broadcom ($1,679) and Lam Research ($1,032) are all splitting their stocks.

The holdouts include Booking Holdings ($3,852), Autozone ($2,809), and Deckers Outdoors ($1,026).

Other high-priced stocks with a retail focus include Costco ($843) and Super Micro Computer ($872), which recently joined the S&P 500.

However, if corporate America smells that there is a trend and can attract attention by splitting stocks, retail-facing companies with much lower price profiles may also become candidates.

That might include Spotify ($305), Ulta Beauty ($397) or even ServiceNow ($715), which has never split its stock.

Bellagio, Lake Como, Italy — When boat drivers start complaining about the tourists overrunning this famous lakeside resort, where Taylor Swift and Travis Kelce stayed at the Villa Sola Cabiati in Tremezzo two weeks ago after her series of Paris concerts, you know you have a problem. 

“There are days when traffic comes to a stop, you cannot move,” our driver told us. He makes his living driving tourists up and down the lake for the famous views of the mountains and the 19th-century villas like Villa del Balbianello, where parts of “Casino Royale” and “Star Wars: Episode II” were filmed. 

He considers himself fortunate he’s a boat driver: he pities the poor tourists who rent cars or try to find an elusive taxi. 

“Some days it can take an hour to go 10 kilometers [about 6 miles],” he said, noting that the tiny two-lane roads not only can’t handle the traffic, they can’t handle the larger cars that are being built. ”Many towns can only have traffic go in one direction, so everyone has to wait,” he said. 

Can’t live with them, can’t live without them

Italy is caught in an envious trap: it can’t live without tourists, but it’s having trouble handling the influx, particularly after Covid. Sixty million tourists flooded the country last year, pumping an enormous amount of money into the economy. Travel and tourism accounted for 10.2% of Italy’s GDP in 2022, according to Statista.  The sector employs approximately 4.4 million people, about 16% of total employment. 

The problem of “too many tourists” may seem like a problem a country wants to have, but in recent years the crush of visitors has gotten so bad that Italian authorities have had to take measures to avoid damage to centuries old structures that cannot handle the crush of so many visitors. Venice has been charging 5 euros to enter the city for day travelers not staying overnight, for example. 

Want to see Da Vinci’s “Last Supper” in Milan? Good luck: tickets are sold out weeks in advance, and to avoid irreparable damage to the painting visitors are restricted to roughly 30 at a time for a maximum of 15 minutes. 

Not only are there too many tourists, there’s not enough people to serve them. 

The Italian Association of Employment Agencies (Assolavoro) noted there is a shortage of staff to work in the hotel and beach sectors this summer, which is expected to see a new record for tourists. There’s shortages of chefs and waiters in Marche. In Sardinia, about 25,000 seasonal workers are needed. 

Italy a bargain? Not quite, but there is a lot of value 

Food is still surprisingly affordable, at least compared to New York prices. An espresso in Milan, an hour away, can be had for 1 euro (about $1.10). Croissants for two or three euros. 

At the famous Trattoria Milanese in the center of Milan, a generous serving of the city’s two most famous dishes — veal Milanese, and osso bucco with risotto Milanese, will only set you back about $30-$35 apiece, and can be had much cheaper in less famous spots. Outstanding local wines can be bought for $20-$30 in restaurants and $10 in the supermarket. 

Even Milan’s famous bars are not stratospheric. At Camparino in the Galleria, one of the temples of cocktail culture in Italy, you can have a negroni or Aperol spritz for $20, prepared by ridiculously good-looking 25 year old waiters in formal wear preening for the uber-dressed-up crowd strolling past, heading for a night of opera at La Scala. 

The crush of visitors means reservations are tough to get. Here on Lake Como, it’s still nearly impossible to get a reservation at the Veranda restaurant at one of George Clooney’s favorite spots, Villa D’Este (if you’re lucky to snag one, be sure to show up: no-shows are charged 100 euros per person). 

Clooney himself lives up the street, at Villa Oleandra, which was featured in his film, “Ocean’s Twelve.” 

Of course, if you really want to hang out with A-list, there are no bargains. The famous Villa La Cassinella on the lake can be yours, for 100,000 euros a week. A wedding at Villa Balbiano can cost 320,000 euros, but we’re talking 110 people for 3 days. The same 110 wedding guests will set you back 250,00-500,000 euros at the Grand Hotel Tremezzo. 

Thinking of calling Uber? Forget it

It’s not only hard to get a reservation: it’s hard to get a taxi to get there. Or anywhere. 

Sharing the phone numbers of reliable private taxi drivers is a bit of an obsession in Lake Como, where the roads are so narrow and crowded, and taxis few and far between, that even short trips must be booked in advance. 

It was so hard to get around, even in Milan, that I just hired the cab driver who picked us up at the airport for two days. I was puzzled that the only Uber options were high-priced black cars.

My driver flew into a rage when I mentioned Uber. 

“These people are trying to steal the jobs of the taxi drivers,” he screamed. ”They are taking my job. The politicians have been paid to allow them into the country.” He was planning to go on strike next week, along with the other taxi drivers. 

He doesn’t have much to worry about. 

“The Uber service you are familiar with in North America where private individuals drive their own cars is illegal in Italy since 2015,” travel writer Rick Steves said in a note to his readers last year. 

“Only licensed taxi and limo drivers can provide that service. As a result Uber does provide a service in Italy (called Uber Black, Uber Van) but when you summon a car with Uber, a licensed official black limo driver with a luxury car will show up and as a result the price will be higher than a regular taxi,” Steves advised. 

A lot higher. Uber wanted 100 euros to take me less than a mile, a 10-minute ride, in central Milan. I paid the cab driver 170 euros for five hours. 

Still, standing in front of the “Last Supper,” even for 15 minutes, provides one of those sublime experiences that makes the hassle worthwhile. 

I was glad it only lasted 15 minutes. I had to get out to call the restaurant we were going to that night for a reservation, and make sure I had a cab to get there. Being a tourist in Italy is turning into a full-time job.

The annual two-day “SEC Speaks” event kicked off Tuesday, offering clues to what the priorities will be for the Securities and Exchange Commission in the coming year.

Sponsored by the Practicing Law Institute, it is a forum where the SEC provides guidance to the legal community on rules, regulations, enforcement actions and lawsuits. The event allows the SEC to get its main messages across, and this year a key issue is “disclosure.”

“[W]e have an obligation to update the rules of the road, always with an eye toward promoting trust as well as efficiency, competition, and liquidity in the markets,” SEC Chair Gary Gensler said in his introduction to the conference. Besides Gensler, all the SEC division heads and senior staff will be speaking.

Based on Gensler’s introductory remarks, there will be discussions about the upcoming move to shorten the securities settlement cycle from two days to one (T+1, which takes place May 28), the expansion of the definition of an exchange to include more recent trading platforms (like request-for-quote, or RFQ, electronic trading platforms), consideration of a change in the current one-penny increment for quoting stock trades to sub-penny levels, creation of a best execution standard for broker-dealers, and creation of more competition for individual investors orders (so-called payment for order flow).

You often hear SEC officials say the role of the SEC is to “protect investors, maintain fair, orderly and efficient markets, and facilitate capital formation.”

That sounds like a pretty broad mandate, and it is. Deliberately so. It came out of the disaster of the 1929 stock market crash, which was the initial event in the greatest economic catastrophe of the last 100 years: the Great Depression.

Prior to 1933, and particularly in the 1920s, all sorts of securities were sold to the public with wild claims behind them, much of which were fraudulent. After the crash of 1929, Congress went looking for a cause, and fraudulent claims and lack of disclosure were high on the list.

Congress then passed the Securities Act of 1933, and the following year passed the Securities Exchange Act of 1934, which created the SEC to enforce all the new laws. It also required everyone involved in the securities business (mainly brokerage firms and stock exchanges) to register with the SEC.

The 1933 Act did not make it illegal to sell a bad investment. It simply required disclosure: all relevant facts about an investment were supposed to be disclosed, and investors could make up their own minds.

The 1933 Act was the first major federal legislation to regulate the offer and sale of securities in the United States. This was followed by the Investment Company Act of 1940, which regulated mutual funds (and eventually ETFs), and the Investment Advisers Act of 1940, which required investment advisers to register with the SEC.

Tuesday’s conference is a chance for Gensler and his staff to tell everyone what they are doing in greater detail. The agency has six divisions, but they can be boiled down to disclosure, risk monitoring and enforcement.

Risk monitoring. To fulfill its mandate to protect investors, it’s critical to understand what the risks to investors are. There is an economic and risk analysis division that does that.

Disclosure. At the heart of the whole game is disclosure. That is the original requirement of the 1933 Act. The SEC has a division of corporation finance to make sure that Corporate America provides disclosures on issues that could materially affect companies. This starts with an initial public offering and continues when the company becomes publicly traded.

There’s also a division of examinations that conducts the SEC’s National Exam Program. It’s just what it sounds like. The SEC identifies areas of high concern (cybersecurity, crypto, money laundering, climate change, etc.) and then monitors Corporate America (investment advisers, investment companies, broker-dealers, etc.) to make sure they are in compliance with all the required disclosures. Current hot topics include climate change, crypto and cybersecurity.

The problem is that the definition of what should be disclosed has evolved over the decades. For example, there is a bitter legal fight brewing over the recent enactment of regulations requiring companies to disclose climate risks. Many contend this was not part of the original SEC mandate. The SEC disagrees, arguing it is part of the mandate to “protect investors.”

Enforcement. The SEC can use the information they gather to make policy recommendations, and if they feel a company is not in compliance, they can also refer them to the dreaded division of enforcement.

These are the cops. They conduct investigations into securities laws violations, and they prosecute the civil suits in the federal courts. This division will be providing an update on the litigation the SEC is involved in, which is growing.

Mutual funds, ETFs and investment advisers. We’ll also hear from the division that monitor mutual funds and investment advisers. Most people invest in the markets through an investment advisor, and they usually buy mutual funds or ETFs. This is all governed by the Investment Company Act of 1940 and the Investment Advisers Act of 1940. There’s a division of investment management that monitors all the investment companies (that includes mutual funds, money market funds, closed-end funds, and ETFs) and investment advisers. This division will be sharing insights on some of the new disclosure requirements that have been enacted in the past couple years, particularly rules adopted in August 2023 for advisers to private funds.

Trading. Finally, the division of trading and markets monitors everyone involved in trading: broker-dealers, stock exchanges, clearing agencies, etc. We can expect updates on record-keeping requirements, shortening the trading cycle (the U.S. goes to a one-day settlement from a three-day settlement on May 28, which is a big deal), and short sale disclosure.

Donald Trump will likely not come up at the conference, but the SEC in January considerably tightened the rules around disclosure of special purpose acquisition companies, or SPACs. Trump’s company, Truth Social, went public on March 22 through a merger with a SPAC known as Digital World Acquisition Corp. It is now trading as Trump Media & Technology (DJT), and it made disclosures Monday that caused the stock to drop about 22%.

Prior to the recent rule changes, executives marketing a company to be acquired by a SPAC often made wild claims about the future profitability of these businesses — claims that would never have been possible to make had a traditional initial public offering route been used. The new SPAC rules that the SEC adopted made the target company legally liable for any statement made about future results by assuming responsibility for disclosures.

Additionally, companies are provided with a “safe harbor” protection when they make forward-looking statements, which provide them with protection against certain legal liabilities. However, IPOs are not afforded this “safe harbor” protection, which is why forward-looking statements in an IPO registration are usually very cautiously worded.

The rules clarified that SPACs also do not have “safe harbor” legal protections for forward-looking statements, which means the companies could more easily be sued.

Like I said, Trump will likely not come up at the conference, but the message: “Disclosure!” will likely be the dominant refrain.

Word that Taylor Swift and Travis Kelce had been seen on the marina of this tiny speck (5 square miles) of an island for a vacation was met with bemusement by the tourists who had gathered to watch the magnificent sunset at the bar, and with dismay by locals, worried that their little speck of paradise was turning into the next Saint Barts.

“I hear she’s staying right up the street,” a woman sitting alone at the bar told us. She was cheerfully downing perfectly chilled prosecco in a champagne flute.   

The locals seemed unimpressed.

“It’s the two percenters who are coming, and the ultra-rich,” one shopkeeper told us, noting that business had been brisk among the wealthier Americans, Canadians and Brits that are the backbone of the economy here.   

Maybe too brisk.  

“We have 20 billionaires on this island alone. The traffic is getting to be unbearable,” she said, eyeing me suspiciously.  

I straightened up and tried looking like a two percenter, but I wasn’t sure what they looked like.

Traffic? What traffic? I looked out the window of her shop. Most people were driving around in golf carts. With a population of only 1,800, Harbour Island and its one and only town, Dunmore Town, makes Saint Barts (population 11,000) look like midtown Manhattan.

The woman herself, she explained, had moved to Eleuthera, a 10-minute water taxi ride away, where the hoi polloi rarely come, apparently.

All of which begs the question: Why on earth would anyone, let alone Taylor Swift and a bunch of billionaires, come to this tiny speck?  

Why are there so many huge yachts sitting in Valentines Marina?

Harbour Island is barely an island. It’s an island off an island, in this case Eleuthera, some 60 miles northeast of Nassau. You can’t fly in. You have to fly to Eleuthera, take a taxi to a dock a few miles away, and take a water taxi to Harbour Island.  

This inaccessibility, apparently, is a major selling point for the tiny group of people that can fit on the island, and afford to pay the steep (Saint Barts-style) prices.

The operative word is “tiny.” The largest hotel has 41 rooms; the dozen or so other hotels have less than that.  Altogether, there can’t be more than 250 hotel rooms on the entire island.  It’s unlikely you’ll see a big global chain set up shop here. I’s doubtful the infrastructure could support a large hotel.  Not surprisingly, there seems to be a brisk business renting out the few houses on the island.

Walk around the town for a few days, though, and you can see why a small group of travelers keep coming back and seem very uninterested in making it bigger:

• Pink Sands Beach: This is one of the great beaches of the Caribbean, indeed of the world. It really is pinkish, thanks to the decaying shells of microscopic sea creatures. It stays white, hundreds of feet offshore, no seaweed, no rocks, no anything, just blue water. It’s flat, and the sand is compact so you can walk without sinking in.  It’s so compact that people ride horses up and down the whole three-mile stretch.
• The restaurants: How is it possible that an island with a few hundred visitors can support so many great restaurants? There’s local places Queen Conch or Ma Ruby, which serves terrific Caribbean food and is known for its “Cheeseburger in Paradise” (It’s served on a brioche-style bun, and supposedly earned the praises of Jimmy Buffett). There’s terrific Italian food at Aquapazza, and classic Caribbean meat and fish dishes at Latitude 25 at the Coral Sands Hotel, or at the classy Dunmore Hotel, or at Malcolm 51 at the swanky all-cottage Pink Sands Resort, or the Rock House, or The Landing, or at Valentines. And still you can’t a get reservation on many nights.
• The houses: You’d think an island with so many wealthy visitors and residents would be stuffed with giant McMansions and multi-acre compounds. They are certainly here. The boat captain we hired for a day cruise quipped that “the millionaires live on the north side, the billionaires live on the south side, and everyone else lives in the middle.”  People like Bill Gates, Ron Perlman, Mickey Drexler, Barry Diller and Diane von Furstenberg, and Wayne Huizenga are said to have homes here. But Dunmore Town is full of modest, one and two-story homes that are ablaze with color: blues, yellows, reds, a veritable explosion of pastels, along with purple morning glories everywhere.
• The churches:  Walk around on a Sunday and you can hear singing.  It’s a religious country:  90% belong to some religious denomination, though it’s largely Protestant (Baptists and Anglicans), with Roman Catholics and a smattering of Jehovah’s Witnesses, Greek Orthodox, and others.  We attended the Lighthouse Church of God to hear Pastor Samuel Higgs and guitarist Rocky Sanders and a heavenly group of singers rock the house with old-school gospel music. Mick Jagger and Lenny Kravitz have also stopped by. Higgs and Sanders played clubs in Europe before coming back to the island.
• The people: The Bahamian people are famous for their warmth and friendliness, and it comes out in abundance on a small island like this. Just say “good morning” to anyone, and they will stop and say, “Good morning!  How are you?”  They’ll smile, and they mean it.

 While the locals may be complaining about traffic and rich people, don’t expect the government of the Bahamas to shut the door. Tourism accounts for 50% of the GDP of the country, and employs nearly 70% of the workforce.  Thanks to that infusion of cash, per capita income is the third largest in the Western Hemisphere (behind the U.S. and Canada).

Luxury travel may be booming, but travel to the Caribbean in general remains strong. Arrivals were up 14.3% last year, according to a recent report by the Caribbean Tourism Organization reported by Caribbean Journal.  

And while the locals may complain, any small island or city would kill to get the kind of intense loyalty places like this seem to engender.

The woman at the bar at Valentines said she had been coming here for 20 years, and had her honeymoon here.  She had flown into Eleuthera on a private plane with her husband (who owned car dealerships in the Midwest), her children, and friends of theirs. They had chartered a boat to spend a few weeks in the Bahamas, and would be going south to even smaller islands.

Why was she sitting alone at the bar?

Her family, she said with a smile, was off looking for Taylor Swift.