Has Spring Arrived For Investors?

https://a-ads.com?partner=234368

https://a-ads.com?partner=234368
https://a-ads.com?partner=234368

Advertise in this spot

Advertise in this spot

[ad_1]

When reviewing the first quarter, a number of positive factors become apparent. The first is the Incoming Checks Strategy is working as I expected it would. The awful period of 2007 and 2008 is now in the history books. It was a time when the world economy could have fallen into another depression. Fortunately, while reading the book "On The Brink", by Henry Paulson, I discovered that because our Secretary of the Treasury saved us from a financial collapse, he also saved Goldman Sachs in the process.

Saving Goldman Sachs required saving AIG and Morgan Stanley. It also required arranging for the   Bank   of  America  acquisition of Merrill Lynch. Hank Paulson saved  America  (according to his book.) He also saved the world from depression. In reality, many others were involved in the major decisions the government undertook to prevent a financial collapse. I recommend "On the Brink" for a perspective on this turbulent time as well as "The Quants" by Scott Patterson.

I feel very fortunate that the economy seems to be on the mend. I would have not bet on this one year ago. True, as a nation we are now saddled with $12 trillion in debt and huge annual deficits. However, jobs are beginning to be added as evidenced by the recent addition of 166,000 jobs. Businesses are beginning to spend and consumers are beginning to feel more confident. Ford and General Motors are turning out world class cars and sales are rebounding.

The problems we are facing are debt related at all levels of government. The challenges in the future will include higher taxes, anemic growth, and inflation. These upcoming issues are related to debt and deficits. At the federal level, excessive spending can result in inflation and higher taxes. All levels of government will be borrowing money and crowding out borrowing from the private sector.

According to Warren Buffet, the best line of defense against inflation is the ownership of business. During periods of inflation, businesses can raise prices to keep pace with inflation. This means that the cash flow from businesses will go up. By contrast, the income one receives from long term bonds will not go up with inflation. As a result, the value of long term bonds, no matter how strong the ratings, will go down during periods of inflation and higher interest rates.

One of the indicators of the strength of the U.S. economy and the world economy is the price of oil. At nearly 90 dollars per barrel, oil is nearly three times where it was during the dark days of early 2009. Although oil has seemed to be in great supply, oil properties are being quietly bought up. One result of higher oil prices is higher prices of something called natural gas liquids. Natural gas liquids (NGL), not to be confused with liquefied natural gas (LNG), are liquids such as propane and ethane which are derived from natural gas when it is processed. Master limited partnerships which are involved in the process of natural gas also produce NGL"s and sell them. NGL prices are related to the price of oil. This means that certain MLPs which process natural gas make larger profits when NGL prices go up.

[ad_2]

Source by David Treat DeWitt

Advertise in this spot

Advertise in this spot

Advertise in this spot