CIGX, LLC, investment counsel, offers financial planning services, including retirement planning, college planning, investment planning, and insurance planning. We take a broad and thorough approach to your financial future. The process begins with data gathering, such as asset...Read More
CIGX, LLC, capital management, offers the global strategies model portfolio series. These model portfolios range from conservative to aggressive and use a macro-economic, a.k.a top-down, fundamental analysis approach to asset management. Emphasis is placed on diversification,...Read More
Oil prices have dropped precipitously in the last few months. Today, January 12, 2015, oil dropped to below $46 at the close of business. You know what it means to your wallet, but how does this affect the markets?
It is very difficult to tell what has caused this tremendous drop in the price of oil. By any measure, consumption has not been reduced. There is more supply in the economy, as the US, Canada, Mexico, and many other countries have been drilling oil wells over the past few years. However, the supply/demand equation is not changed that much, as countries like India and China have increased their demand for oil. Africa and South America are also developing and consuming more petroleum based products.
As a result, I think this decline in oil prices is temporary. Consumers should enjoy the low prices, but not permanently budget for less expenditure in gas. The only way to really consume less gas is to drive less or drive an alternative fuel vehicle. At this time, sales of these vehicles is still negligible worldwide.
In the short term, lower fuel prices will lead to greater consumption and consumer discretionary stocks should do well. However, this sector has already enjoyed a significant upswing and their increased sales, revenue, and earnings may not be result in significant increases in the stock price as these earnings are already reflected in the stock price.
The IMF assesses that a 10% decline in oil prices leads to a 0.2% increase in global GDP. According to the Economist magazine, every dollar drop in oil prices saves China an annual $2.1 billion. In other words, they are saving 60-70 billion dollars in 2015 versus 2014, if prices stay around 50 a barrel. For the United States, the benefit of low oil prices is huge, but it is a mixed bag. The US is simultaneously the world’s largest consumer, importer, and producer of oil ! US producers are most likely to pull back on production with a significant decrease in prices. Low oil prices will most likely lead to some consolidation in the US energy sector. Again, since we consume more than we produce, the US economy benefits overall. *
Another beneficiary would be those emerging markets that are not petroleum exporters. Countries like India, Vietnam, Indonesia, Malaysia, Kenya, and Peru benefit from lower oil for their exports such as food and manufactured goods.
Monetary policy may be affected by low oil. The Federal Reserve is doing its best to cause inflation. Food prices are high, but energy prices have gone down, so this would affect their numbers. This may lead the Federal Reserve to keep interest rates low for longer than anticipated. The current consensus is that the Fed will raise rates by June of 2015.
Perhaps the best thing to do is to take those costs savings and invest in energy companies, as they will inevitably recover through a return to higher prices, market consolidation, and corporate restructuring.
Receiving an inheritance is exhilarating news, but it can present challenges. It takes away a bit of the pain of the recent loss. The general question, of course, is what do you do with the money? Some inheritances are small and some can be quite large. For some, the inheritance might have no impact at all, while for others, it could be a life-altering event. While an inheritance is a good problem to have, it is a good idea to do your best to protect this new asset.Read More
Long-term Care is a big topic. More and more people are susceptible to spending time in assisted living or a long-term care facility. Stays are getting longer as well. The problem for many people is how to pay for it. Long-term care insurance policies have historically been substandard. They paid too little and for too short of a time. Your combined premium tended to be higher than the benefit you would be able to receive. I have seen some fantastic policies that were affordable and covered 100% of costs. Insurance companies have modified their contracts, and you don’t see good policies being issued today.Read More