Welcome to the end of the week! Just sit back, relax, and enjoy this weeks roundup in another edition of Happy Hour.
Impact of Lower Oil
So far this year the S&P is up almost 10%. Not everything is rosy inside the S&P 500. The energy sector doesn’t want to play along. Oil stocks are the biggest losers this year. The past week, its dragged the S&P with it. Falling oil prices are the primary reason.
If you own oil companies or anything directly or indirectly associated with oil, those investments are getting crushed. And the list is growing. You can add high yield bonds, solar stocks, and a few countries in the global market.
Oil is the backbone for many countries. With lower prices, those countries need to pump more to meet annual government budgets. Those countries and companies reliant on high-priced oil might have problems depending on how long this drags out.
But it’s not all bad news. Oil is the backbone for thousands of products too, the fuel to ship that stuff, and to drive you around to buy it. Lower oil prices aren’t great for your investments but its a boon to your budget.
Lower prices at the pump means more money to spend somewhere else. Though, I’d recommend turning some of that price savings into real savings.
For companies, it means lower costs to production and shipping which is great for margins. Consumer discretionary businesses should see a boost. Overall, it’s a benefit to the economy.
The big question is – how long will it last? This cool graphic from Bloomberg illustrates how far we’ve come in our reliance on oil. For all the advances in fuel efficiency and electric cars, our dependence on gas won’t disappear anytime soon.
Oil prices won’t stay down forever. Eventually, it will be an opportunity to invest in again. So while you’re sitting around this holiday season worrying about what oil has done to your portfolio, just remember what it’s doing for your wallet.
Lending Club IPO
Lending Club IPO’d this week. A few of its competitors will follow suit, which brings free advertising and more awareness to this small but growing trend in peer-to-peer lending. Now, more people can become the at-home-banker they always dreamed of.
I’m not a bank, nor do I want to be one. P2P lending isn’t for me. I’ve covered this before – the risks are higher than the rewards. That won’t stop people from trying it, especially those who are fed up with the stock market, or hear how great it is from friends. Just beware when it gets the can’t lose stigma or people start to expect high returns indefinitely. I guarantee it reaches that point eventually.
- Efficient Frontier “Theory” for the Long Run – C. Asness
- Good Investing Hurts – M. Housel
- ETFs Are Not Always Cheaper – Morningstar
- Sometimes Markets Are Stupid – BloombergView
- Why We’re So Easily Fooled, and Why It Matters – Psychology Today
- Aswath Damodaran: The Most Reliable Investment Valuations Balance Numbers and Narratives – CFA Institute
- Blackstone’s $26 Billion Hilton Deal: The Best Leveraged Buyout Ever – BusinessWeek