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energy

Year of the Coronavirus

By | 2020, Money Moxie, Newsletter, Travel | No Comments

Coronavirus was difficult to recognize and impossible to track when first contracted around November 17, 2019. It was misunderstood in China. Dismissed in America. Many said, “it’s just the flu.” But Covid-19 is no ordinary flu. Those infected are contagious days before symptoms show. Some may never have symptoms as they spread the disease. It is a novel strand of the Cornovirus, and that means it’s new, and there is no immunity to it. Most of us are likely to catch it sometime in the next 12 months.

The healthcare system is ill-prepared for an outbreak. We have the expertise, equipment, and medicine. We do not have the capacity. This is where flattening the curve comes in. The goal of the government is to slow the spread of the virus to buy time to help those infected and those researching prevention and treatments.

In 2020, the stock market lost 20% in roughly 20 days. Historically, it has taken 400 days from the market top for it to fall by 20%. The 12-year-old bull market is over.

Over the last few years, we have had a smooth run interrupted by violent drops. The S&P 500 dropped roughly 19% in 2016 and twice in 2018. This week, it finally reached 20% and then kept going.

There is so much we don’t know, so we will focus on what we do know. American consumers will continue to spend. We are resilient. However, there is a shift in where we spend. This has led to a lack of global demand for oil. OPEC producers prefer stable prices and would like to cut oil supplies to push prices higher. Russia refused to cooperate, which has driven prices sharply lower. The United States is now a major world producer, so we find our country caught in the middle of this unexpected consequence of the current pandemic.

Falling energy prices are both bad and good. The immediate impact is bad. Energy suppliers feel the financial pinch. Some may default on debt payments, which could domino through the economy. Eventually, these lower prices reach consumers. I have never heard a friend complain about low prices at the gas pump. This leads to more flexible spending and more growth. It takes about 18 months for the low price of oil to show up in higher economic growth. Of course, the financial markets anticipate.

Don’t fight the Fed. The Federal Reserve lowered its overnight interest rate to zero and announced it will inject $1.5 trillion into the financial system to keep the markets functioning properly. This is more money than the Fed has put into the markets in the last 5 years combined. The entire Federal Government budget is $3.8 trillion. So, while the Fed can’t fight the virus, it is doing what it can to prevent a breakdown as we experienced in 2008.

When will financial markets come back up? (1) Investors need to wrap their minds around all the sudden changes to everyday life, and (2) The growth of Coronavirus cases must slow. Problems don’t have to disappear. Investors just need less uncertainty.

When all the news turns negative, any sign of hope could be the turning point. That’s what makes predicting the future so difficult. And this is why we work so hard to manage risk and be invested to participate in long-term growth.

*Research by SFS. Data from the Federal Reserve Bank of St. Louis. Investing involves risk, including the potential loss of principal. The S&P 500 index is widely considered to represent the overall U.S. stock market. One cannot invest directly in an index. Diversification does not guarantee positive results. Past performance does not guarantee future results. The opinions and forecasts expressed are those of the author and may not actually come to pass. This information is subject to change at any time, based upon changing conditions. This is not a recommendation to purchase any type of investment.

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It’s All about Energy, Your Energy!

By | 2016, Executive Message, Money Moxie, Newsletter | No Comments

Greetings Dear Friends and Financial Partners,

Today hundreds of presentations, books, articles, and seminars exist and are focused on to-do lists, productivity, efficiency, time management, and so forth. But little is said about energy—your personal energy.

At an Investment Company Institute (ICI) Conference I attended in Washington, D.C., Maddy Dychtwald from Age Wave was one of the featured speakers. (FYI: Age Wave is the nation’s foremost thought leader on population aging.)

With more than a thousand people present, Maddy asked the audience this question: “What distinguishes an older person from a younger person?” After several guesses, someone called out, “Energy!” “That’s right!” Dychtwald enthusiastically responded.

Some of us have more energy in the morning. (To quote Lucy from the Peanuts cartoon series, “Morning people are hard to love.”) Some of us have more energy in the afternoon. And some of us may have more energy in the evening. Personally, my best creative energy is in the morning. On the other hand, some moms I know perform routine tasks in the morning to save their best energy for the afternoon when their children come home. Besides homework, children often have dance and music lessons, sports’ practices, and many other extracurricular activities.

At a seminar I once attended, the late Dr. Stephen R. Covey made this observation when asked about “Creative Energy.” “We may not have all of the creative energy we want, but we have enough.”

As you gradually age, don’t think about your life just in terms of time management. At some point you will go through a paradigm shift from time management to personal energy management. Your own energy and drive may need to be front-and-center going forward.

Smedley Financial offers, “Investment Management to Maximize Your Time.®” Perhaps we should consider, “Investment Management to Maximize Your Energy.” With all that is happening in your life, we can help by reducing your financial stress. Call us.

Bullish Best Wishes,

Roger M. Smedley, CFP®
President

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Can We Really Be Energy Independent?

By | 2013, Money Moxie, Newsletter | No Comments
U.S. Energy Production is on the RiseMajor developments that have led to a boom in the energy industry have placed the United States on track to becoming the largest energy producer in the world, surpassing Saudi Arabia and Russia.1

 

In the State of the Union address, President Obama indicated that “we’re finally poised to control our own energy future.  We produce more oil at home than we have in 15 years.”2

 

According to a Citigroup report titled Energy 2020: Independence Day, “U.S. oil and gas production is evolving so rapidly—and demand is dropping so quickly—that in just five years the U.S. could no longer need to buy oil from any source but Canada.”

 

The International Energy Agency predicts that “the United States will overtake Saudi Arabia to become the world’s biggest oil producer before 2020, and will be energy independent 10 years later.”

 

New technologies like hydraulic-fracturing, or “fracking,” have made the extraction of oil and gas from shale rock profitable.

 

In Utah, towns like Vernal and Roosevelt have had an influx of workers as oil companies race to develop new oil wells. The energy boom in Utah is just a microcosm of what is happening in the nation. More energy production creates jobs, which pump money back into the economy.  It reduces our reliance on foreign countries, which allows us to control our own future.

 

Unfortunately, energy independence by itself may not lead to lower gas prices. Canada is completely energy independent, yet their gasoline costs about the same as ours. This is because there is a global market for oil and there is one price at which it is sold.3 We may only see a decrease in prices if the cost of oil drops globally.

 

Fracking also gives us access to vast natural gas reserves. Some estimates indicate we have over a 100- year supply if consumption remains at 2010 levels.4 Higher supply and lower prices are leading to more manufacturing in the United States.

 

Many power companies are switching to natural gas to fuel their electric plants. Natural gas burns cleaner than coal. Therefore, it is easier for power plants to meet emission standards. This abundance of natural gas has also made energy bills more palatable for cooling in the summer and heating in the winter.

 

The potential benefit of energy independence is not without its hurdles. Environmental concerns, limited infrastructure, and water restrictions have slowed progress. Despite these hurdles, the race towards energy independence sprints forward. Energy independence has become a reality that may improve the economy and your pocketbook.

 

(1) Mark Thompson, “U.S. to Become Biggest Oil Producer – IEA,” CNNMoney, 11/12/12.
(2) http://www.whitehouse.gov/the-press-office/2013/02/12/remarks-president-state-union-address.
(3) David Kestenbaum, “Energy Independence Wouldn’t Make Gasoline Any Cheaper”, NPR, 10/26/12.
(4) Gerri Willis,”What Obama Can’t Take Credit For in SOTU,” Fox Business, 1/24/12.
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