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
Here is the first in a series of “Case Studies”:
Why we should start planning now for you and your families future financial security!
The purpose of financial planning is to attain financial security,
which everyone defines differently. In the ideal situation, we start
early, establish goals, develop a plan, and consider as many
contingencies as possible. For example, we just helped some twenty
something’s with a retirement plan, permanent insurance, and emergency
fund. Assuming they stay the course, they will never have a money care
in the world. However, it does not always work out that way.
A few years ago, we had the unfortunate situation of a sudden death.
The surviving spouse had not worked in 20 years, and we had one kid in
college and one on the way to college in two years. There were some
life insurance proceeds and a 401k that we rolled into a spousal IRA.
Working together, we were able to figure out that by paying off the
mortgage and returning to work just ten hours a week, we would have no
change in financial standard of living. We even got both kids through
college without owing a penny!
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