When I walk around New York City, I can’t help but wonder how much energy it must take to keep the lights on in the whole city. Here is a great illustration great illustration that shows you how much energy (renewable and nonrenewable) it would take to power NYC. It helps to put wind farms and hydro in perspective with coal and oil.
Our Electric Grid is Transforming
About 10 years ago, coal generated about 50% of the country’s electricity. Now it is down to 34%! This is due in a large part to natural gas and renewable energy sources. Here is a great animated graphic that illustrates the transformation that has occurred over the past 25 years:
Watch the US Electricity Grid Evolve Before Your Eyes
A 2016 Economic Outlook
Where are we headed next year? How will the US stock market do? China? Oil? Interest Rates?
Over the next 60 days, my email will be flooded with hundreds of market outlooks for 2016. Some are pretty technical, or have some sort of sales angle, or they have some odd viewpoint that doesn’t make much sense.
Every once in a while, I find one that is really clear and concise – such as the following outlook by Peter Coy of Bloomberg
He sums it up well: 2016 will be “OK-ish”
Back to the Future
I have been around for a while now; decades. I remember when investing was done by stock picking. A stock’s value is mostly the current value of its future cash flow. A good stock picker analyzes the future prospects of the underlying company, buys its stock, and rides the price appreciation as the analysis hopefully unfolds. However, today the Federal Reserve openly states that it targets the level of the stock market as a policy tool to change the “mood” of the economy and thus stimulate economic activity. The plan has been/is to boost asset prices, revive the economy’s animal spirits, which then will start to create jobs. It worked in their mathematical models, but not so much in the real world. The markets are way up, the economy not so much.
Add to this how massive pools of money have developed complicated formulas implemented rocket fast with massive computers jerking markets hundreds of points back and forth with reckless regard. These moves have little to do with underlying value or future cash flows.
How does one cope? One way would to not yield to this at all; to ignore it. Ultimately, all that matters is Fair Value. Fair Value is like gravity. What a company is and will be determines its stock price. This is Fair Value and over the long run, it always wins. So buy quality and only at a good price. Sometimes it involves a great deal of patience. Trade the euphoria of runaway advances for confidence in scary declines as computers run the markets to short run extremes. Go back to traditional stock picking to deal with the future of seemingly crazy markets.
It can be easy to do. Some of the best stock pickers are readily available through tried and true mutual funds.
Social Security Discussion
CNBC posted an article online yesterday about how to collect social security. It’s over simplified and generalizes the issues and concepts. The interesting part was the number of comments the article received. Close to 600 comments over the last 36 hours! It was scary to browse through these comments to see all the misinformation that was being spread among the commenters.
If you’re thinking about Social Security, or have questions, talk to us. We can help to think through the issues with you and help you avoid some of the common mistakes folks make.