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The US Energy Revolution Could Be Big

 

It’s hard to believe the energy revolution that is going on in this country.  It’s being touted as a “game-changer” and “transformative”.  The US is quickly becoming the low cost provider of energy. International companies are in the process of building new manufacturing facilities in the US because energy prices are so low (especially natural gas). Just to stay competitive, they need to set up shop in the US. In the next few years, the US could be exporting energy to other countries.

This could all lead to…

  • Lower cost to do businesses (especially energy dependent ones) can lead to more profits.
  • Industries could transform. Perhaps in the near future natural gas will be a bigger player in transportation.
  • Added infrastructure and jobs to support this booming industry

More stable energy prices.  It was just a few years ago that OPEC was discussed what seemed like daily on the nightly news and price swings at the pumps would occur everytime there was a disruption in oil production abroad.

If you’re interested in reading more, visit: Blackrock

If interest rates were to rise…

There has been a lot of talk these last few months about what will happen to portfolios when the Fed eventually raises interest rates.  The Fed will only make changes to its low-interest policy when the economy confirms it will continue to improve.  The earliest the Fed would make any changes would be in September, although some experts predict it won’t happen until 2014. Below are a few key points that can help put this into perspective and explain what this means for you:

If interest rates were to rise…

  • Changing trends could provide new investment opportunities.
  • We could see certain domestic bonds decrease in value. Not all bonds but certain types, such as long-term government backed bonds, may be more affected than others when rates do rise. We see opportunities in short duration funds or funds with global diversification or a variety of sub asset classes (such as corporate bonds, senior loans, convertible bonds).
  • It could strengthen the dollar thus making stocks more attractive (both small and large cap could be buying opportunities).
  • The financial sector (regional banks, insurance companies, etc.) could be an opportunity as they historically perform well during periods of rising interest rates.
  • Large Multinational companies based in the US could see their values go down as a result of the strengthened dollar, while multinationals based outside of the US could be a better investment.

New Report on Upward Mobility

NY Times just released the results of a fascinating study about upward mobility in the United States.

The results show that a child who grows up in Bridgeport, CT area with parents who earn in the 10th percentile ($16k), ends up, on average, in the 38th percentile.

These results are indicative of the whole northeast, too.  Unfortunately, the south isn’t so lucky.

Read In Climbing Income Ladder, Location Matters.

Keeping the Fed in Perspective

It’s been a big week! But don’t lose focus on the long term.

Too many people are making a big deal over the Fed’s announcement earlier this week, resulting in traders kicking up a lot of dust in the markets and the talking heads dissecting the meaning of the announcement.  Let’s keep a few things in perspective:

1) Nothing substantially new was stated except that the Fed’s bond buying may begin to taper off at the end of this year as opposed to early next year.

2) This was not unexpected news. This was already hinted at a few weeks prior. We already knew this.

3) The life support, QE3, or Fed’s efforts to help the economy must end someday.  Did everyone forget that it was bound to happen?

4) Bernanke even stated that any policy changes would be contingent upon the economy’s CONTINUED growth.  As the economy strengthens and can stand on its own, the Fed would reduce aid accordingly.  And at that time, shouldn’t it be celebrated rather than shunned?
There is some volatility in the markets as a result this announcement.  It may continue for a while. Is it a little speed bump or is it the sign of something more?  We will wait for the dust to settle to see where things stand. We may see opportunities as the market rebounds.