Home prices fall in Southern California for the first time in 7 years.

Tuesday, May 7th, 2019

The Los Angeles Times recently reported a decline in Southern California home prices for the first time in 7 years.  This taken together with a significant drop off in the number of homes sold and a drop in national home prices, as reported by the United States Census Bureau, suggests we may be seeing a turn in the residential real estate market. If true, this could lead to a significant drag on the U.S. economy.  How all of this might affect your investment portfolio, is something worth considering.

Contact us today if this is a topic that you would like to discuss further.

To view the entire Los Angels Times article please Click Here.

Janet Yellen and the Case of the Missing Inflation

Friday, June 16th, 2017

Low unemployment and rising wages usually leads to higher inflation, but so far inflation has remained relatively low.  Click HERE to read a New York Times article on what might be causing this and how the Federal Reserve is reacting.

Economic Conditions and Earnings Matter More Than Politics

Monday, June 5th, 2017

With the intense focus on every word coming out of Washington DC, its hard to know what to focus on.  In Nuveen’s Weekly Investment Commentary, they suggest Economic Conditions and Earnings Matter More Than Politics–a point of view worthy of consideration. To view Nuveen’s entire article, please click HERE.

What To Do After Drop in Equity Markets

Saturday, August 22nd, 2015

This week we saw a significant drop in the U.S. and Global equity markets.  To those of you that I have spoken to recently, this should come as no surprise.  Earnings for U.S. companies have been declining, quarter over quarter for more than a year and in spite of this, stock prices had been increasing, causing Price Earnings ratios to grow to unsustainable levels.  Prior to this week’s pullback, P/E ratios were approaching 19 times earnings.  Today, we are closer to 17.5–still above the 5 year average of 16 but well off the peaks, which I view as a healthy outcome.

But this story is not just about earnings.  There is more at play here.  Energy prices also factor into the equation.  Over the last two years, we have seen the price of oil drop from over $100/barrel to less than $40/barrel today.  This is due to a drop in demand (as our cars and trucks become more fuel efficient) and an increase in supply as the US uses technology (Fracking) to squeeze more oil out of fields previously thought to be fallow.  For the global economy that we live in, this is certainly bad for oil producing and oil servicing companies, as seen in the declining share prices of Exxon/Mobil and Chevron/Texaco.  Furthermore, when these companies share prices drop, it can have a disproportionate effect on stock indices that are  capitalization-weighted (as most are), since the oil companies tend to be some of the largest companies on most indices.

With that said, even though declining oil prices may be bad for Oil and Oil services companies, most economist view these drops as a very positive outcome for global economies.  Since lower oil prices affect so many things, from transportation costs to manufacturing, in the long run they are usually very stimulative to the global economy.

Beyond corporate earnings, many other economic factors are still reflecting a very strong economy, including low interest rates, new home construction, resale prices for existing home, lower unemployment and increased wages, to name a few.

Bottom line, I felt like a correction was in order, but I do not believe the wheels have fallen off the economic cart.  I still see opportunity for more growth in the US economy and so for the time being, staying the course seems to be the most prudent thing to do.

As always, should you wish to discuss your individual accounts in more detail, please do not hesitate to call.  I can be reached at 949-756-2226.

Marshall Eichenauer, Jr.

ps. For more on this topic, please see the links below;

Stock Selloff Looks Overdone-Bloomberg-Businessweek

China Fears Hands Wall Street It’s Worst Day Since 2011-Reuters

Why Stocks Are Tumbling-US News and World Report

Advice After Stock Market Drops-Take Some Deep Breaths and Don’t Do A Thing-NY Times