Not a subscriber? Click here to learn
more.
|
| Home | About Us | Resources | Archive | Free Reports | Market Window |
What Plunging Oil Prices Mean for Your Income InvestmentsBy
Wednesday, November 5, 2014
Inflation wasn't a worry last month... and it's even less of a worry this month.
This is great for you as an income investor.
It means some of world's biggest, safest yields are still available to you, if you buy now.
Before I tell you where to find these yields, let's quickly talk about the boogeyman of inflation that the media always plays up…
Last month, I described how folks are scared of inflation. They're worried that the Federal Reserve's efforts to stimulate the economy will produce a huge inflation... which could reduce the value of their retirement savings.
This worry has caused many folks to miss out on huge returns in stocks and bonds. Over the past five years, I've reminded readers of Retirement Millionaire about the facts on inflation... and why it hasn't been a concern. We've made a lot of money as a result.
As I described last month, the popular inflation measures are showing no signs of inflation. And just recently, we've received another sign that inflation will stay tame over the coming year: The price of crude oil is collapsing.
The one-year chart below shows how oil has fallen from $100 per barrel to less than $80 per barrel in just a few months (a 20% decline).
 Since we use oil's byproduct, gasoline, to transport so many goods, lower oil prices mean less pressure on consumer prices. Surging U.S. oil production will help keep the price low. How does oil match up with inflation? Very closely…
If you pair up changes in the spot price of oil with changes in the consumer price index (CPI), you can see that when oil makes big moves, so does inflation. And they move in the same direction. It's clear that oil makes up a large part of what makes for consumer prices…
 Also consider that 5% of consumer spending, on average, goes directly to gasoline and energy (which doesn't even account for indirect costs like shipping goods). The drop in oil prices means your costs will go down… which is essentially the opposite of inflation.
To sum up, inflation wasn't a concern last month. And plunging oil prices help ensure it won't be a concern any time soon. That means we can still collect safe investment income from municipal bonds and blue-chip dividend-paying stocks. If you don't own these vehicles today, start buying.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig
Further Reading:
Doc thinks fears of a slowing U.S. economy are also overblown. "Actually, the economy is healthy by virtually every measure I know," he writes. See his full analysis here.
Doc says there's a lot of hype about rising interest rates... stoking fears about a market collapse. But "rising rates won't stall the stock market," he writes. Find out why right here.
Market NotesA NEW HIGH FOR THIS "REAL-WORLD" INDICATOR Shares of Wells Fargo just hit a new high... and that's a good sign for the U.S. economy.
Last week in DailyWealth, Dr. David Eifrig made a strong case for the growing health of the U.S. economy. Contrary to the constant fear-mongering in the mainstream media, the U.S. economy is growing, albeit slowly. And the recent price action in shares of one of our favorite "real-world" indicators supports that notion...
Below, you'll see a two-year chart of Wells Fargo (WFC). With a market cap of around $275 billion, Wells Fargo is America's largest bank. It's also the nation's largest issuer of mortgages. It's very much a "play" on America.
Like almost every financial company, Wells Fargo was hammered in the 2008/2009 credit crisis. But since bottoming in 2009, it has been all recovery for Wells Fargo. The company has "digested" the bad debts of years past, and it's now increasing earnings. And despite the recent broad market sell-off, the stock just rallied to another new all-time high this week. It's yet another sign that the U.S. economy might not be booming... but it's certainly not busting.
 |
Recent Articles
|
