By Edward Leone Jr. CFP RFC MBA DMD
Contact Information: 303-478-6793 edleonedds@gmail.com
In recent months, we have been hearing much about potentially challenged industries as a result of Federal Reserve Bank policy and the global economy. We are clearly facing threats in the finance industry regarding subprime lending in the auto industry and with student loan expansion. Default percentage is growing in both of these areas. The oil industry is also a matter of concern in the US with defaults and bankruptcies increasing among those firms involved in high cost fracking. Since prices and revenue are down, debt service is a severe challenge. Another industry which is taking a hit is US agriculture. Global surpluses with corn and soybeans due to declining demand and the strong US dollar has pushed revenues bellow the cost of production. With interest rates likely to increase as a result of recent Federal Reserve Bank action, it will be a challenge for farmers to generate production since they finance planting and make debt service at the time of harvest. National farm income has declined from $123.3 billion in 2013 to $55.9 billion in 2015. Exports are at a 6 year low. Will we see a decline in retail prices at the grocery store?
It is clear that US financial markets are reacting in a negative way to the drop in oil prices globally, economic challenges in China and Europe and the struggles to stimulate growth and deliver on debt service within emerging foreign markets. Will these factors force the US economy into another recession given our slow economic domestic growth and the decline in US exports due to the strength of the US dollar compared to other foreign currencies?
Is gold a safe haven? It has declined from $1,934 in 2011 to $ 1,150 an ounce at the end of 2015. Are we seeing significant job growth due to labor shortages? Labor force participation is at 62.6%. What are the rest of those who could be working, but are not doing? There are many more negative factors which create fear and concern within the investing public. It will be very interesting to see just how 2016 evolves and what positive and negative economic experiences will come our way.
I have no crystal ball which will help me predict future outcomes; nor, can I suggest a cookie cutter or fool proof approach to preserving and increasing assets without significant data on your individual status. I can make some suggestions which many may see as reasonable in surviving economically and growing your wealth as follows:
Create a realistic budget for life style expenses and stick with it.
Build an emergency cash reserve representing 3 to 6 months of living expenses.
Save 12 to 15 percent of income toward retirement.
Monitor and establish a favorable credit rating
Secure yourself and your family against risk with insurance products such as life and liability insurance.
Address estate planning issues such as guardianship of dependents, disposition of assets in the event of a death, powers of attorney for health and maintenance issues along with clear communication to those who are entrusted with such responsibilities for you.
It is my wish that you experience a happy, safe and prosperous New Year!
For The Record:
DJIA 16,093.51
S&P 500 1,906.90
NASDAQ 4,591.18
Suggested Reading: “The Great Depression Ahead” by Harry Dent
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