Why use Alternative Investments?
Alternative investments make up a good percentage of our clients’ portfolios. We use alternative investments for a number of reasons, most of all, to reduce the overall volatility in the portfolio, and to get exposure to asset classes and strategies that are typically not employed by individuals and brokers. Having alternative investments in 2007-2008 would of greatly soften the blow most individuals felt. Even though people thought of asset classes such as international stocks, bonds, commodities as “alternatives,” during the panic everything was sold off that was liquid. Many individuals just wanted to “sell” and they did so without wanting to look at what the actual investments were. Due to this panic selling, correlations on most asset classes went up, that in the end it almost did not matter what the money was invested in, it all got sold and went down in price. We use alternatives that either can take advantage of such sell offs, or are not subjected to the effects of such sell offs.
We had a really interesting discussion at the office today regarding the low oil prices and whether it was a good or a bad thing for the United States. When I heard the same conversation hotly debated on CNBC on the drive back from a meeting, I knew it was time to write about it.
So what do you think? Is it a good thing or a bad thing?
Personally, I believe it is an answer of “It depends.”
In the short term, I believe it is a good thing, a good thing for consumers. Time and time again we have evidence that lower oil prices, and thus lower gas prices, leave more money in the wallets of families to spend. The United States is not a nation of savers, but rather spenders, especially around the holidays. Only in the states will you be gently jostled by your friends and coworkers because you have the iPhone 5 and not the iPhone 6 plus. Lower energy prices will no doubt increase sales and the bottom line of retailers.
Lower oil prices are also good news for airlines, cruise ship operators, industrial producers and other manufacturers. Their input costs will go down, and thus raise the profits for the shareholders. Once again, there are little doubts that this will be a positive catalyst in the short term.
What about the long term?
Lord Abbett puts out great articles with their economic perspectives. Today’s focuses on the coming shortage of people in the work force, and how immigration reform may not be a bad idea.
What do you think?
Here is the article in PDF format.
2013 Tax Summary with the taxes for this year as well as the new taxes you may be subject to come tax time. Feel free to share.