Updated Contribution Limits for your Retirement Savings

Please take a moment and increase your savings to your retirement plans.  And if you are 50 or older you are still allowed the same catch up amounts:  $1,000 for IRA’s and $6,000 for your 401k.  If you participate in a Simple IRA, the limits for 2019 are $13,000 with a $3,000 catch up for those 50 and older.

Rates Head Lower While Fed Holds Steady – Fixed Income Update

Overall bond prices rose in January as the prospect of the Fed raising rates in 2019 considerably lessened. The Fed announced that it would refrain from its previous strategy of increasing short-term rates as well as hold off on shrinking its balance sheet. Both monetary tactics are expected to keep interest rates at current levels without any additional increases just yet.

Interest rates fell in January as the Federal Reserve signaled that it would hold off on additional rate increases until economic data warranted a rise. Bond prices, which move inversely to bond yields, rose across all fixed income sectors, alleviating concerns of further rate increases.

It is expected that the Fed won’t raise again until it has validation about economic and wage growth producing inflationary pressures.

Central banks from around the globe continue to shrink their balance sheet, emulating the latest actions by the Federal Reserve in the United States. Shrinking or reducing a central bank balance sheet is a form of monetary tightening, thus an indirect method of raising short term rates. So far, the Fed’s balance sheet has fallen from a peak of $4.5 trillion four years ago in January 2015 to $4 trillion in January 2019.

(Sources: U.S. Treasury, Federal Reserve, Bloomberg)

U.S. Became Net Oil Exporter In 2018 – Oil Industry Overview

December marked the first time ever that the U.S. exported more crude oil and fuel than it imported, a result of ambitious U.S. production and the lifting of a decades old ban on U.S. oil exports in December 2015.

Early in 2018, the International Energy Association (IEA) projected that the United States was on track to become the world’s single largest oil producer by 2023. It was just recently that the United States surpassed Saudi & Russian oil production, eclipsing over 11 million barrels of oil production per day. Russia was the world’s largest oil producer for years until U.S. production surpassed it in 2018.

The implications of increasing U.S. production for OPEC, Saudi Arabia and Russia could be dire as the U.S. ratchets up its influence on the global oil markets. The ability for U.S. producers to influence prices and supply will only increase, allowing the U.S. ample latitude in modifying global energy policies.

The IEA estimates that the U.S. will be exporting nearly 5 million barrels of oil every day into the global markets by 2023, a dramatic increase from nearly zero when the oil export ban was lifted in December 2015. IEA projections reveal that of the 6.4 million new barrels of oil pumped globally every day between now and 2023, nearly 60% will originate in the U.S.

IEA data also noted that over 64% of world oil production has come from just 10 countries. As these countries produce oil, they have some basic options such as to refine it, consume it, export it, or store it.

With the U.S. now able to export its own oil production, both as refined and crude, it has increased stockpiling capabilities. As a result, the U.S. has been able to maintain one of the largest supplies of oil worldwide. Partially because of this over supply, Congress agreed to remove the 40-year old ban on oil exports, thus allowing the U.S. to export some of its excess supplies.

The onslaught of fracking and technological advances in drilling has led to increased U.S. production and supply growth. Saudi Arabia’s attempts to destabilize U.S. drillers with increased production and lower oil prices has essentially backfired.

The IEA also notes that as U.S. production and exports increase, it will eventually allow the United States to be energy self-sufficient.

Sources: IEA, U.S. Dept. of Energy, EIA.gov