A lot has been said about falling gas prices acting in the same manner as a tax cut. This extra money will probably be spent by consumers and help the economy. Energy companies’ stocks will decline and consumer goods and services stocks will rise. If we carve up the same pie differently, do we really get a bigger pie?

There is another and possibly more important trend happening: energy and feedstock for industry. U.S. industry is about to have the lowest energy costs of any industrial country. Couple that with those industries such as chemicals and fertilizers that use petroleum as an input in their manufacturing process and you have an industrial revolution already taking place. The economic impact of new plant construction, hiring, and training will be substantial.

Add to that the fact consumer spending will increase imports and industry growth will increase exports and we get a very different view of the benefits of lower petrochemical prices.

How do we profit? Follow Warren Buffett. He is selling his oil and gas companies and spending on pipelines. Pipelines are utilities that rent space on long-term leases to oil companies. Generally, the price of the products shipped has no impact on pipeline earnings. Low prices generally increase demand; economics 101. Increased demand means higher demand for pipeline capacity and higher profits.

With tax season fast approaching, now is a good time to gather all your bank and brokerage statements and consider closing and/or consolidating accounts. We are happy to review these with you and advise you accordingly.

Sincerely,

Katz Family Financial