Richard M. Pankratz, CFP®

BroadStreet Financial Advisers, LLC

310 Wilmette Avenue, Suite 2

Ormond Beach, FL 32174

386.615.6096 (voice)

386.615.6098 (fax)

386.299.4160 (mobile)

MAY 2016

Who Owns Gold – Commodities Market Overview

Many believe that Russian President Putin is trying to distance his country from its reliance on the U.S. dollar, which is the primary currency used to trade oil and other major commodities worldwide.

Over the past five years, Russia has been increasing its stockpile of gold bullion significantly, to over a value of $44 billion.

There have been instances when countries have imposed exchange controls or a freeze on assets, such as on foreign securities. Gold provides the essential liquidity in these circumstances. Thus central banks from around the world accumulate and hold gold to afford such benefits.

For thousands of years, gold has been one of the most sought after metals in the world. It was first used as jewelry as early as 2600 BC in ancient Mesopotamia, what today is Iraq. Gold was introduced to dentistry in 600 BC, and has since then been introduced to various other applications. Several industries such as electronics, food, medical, and manufacturing all utilize gold in some fashion. Most notably, gold plays a significant role in the international monetary markets, where countries worldwide hold gold as a reserve. Holding gold as a reserve provides diversification among assets, economic security, and liquidity.

Gold is a unique asset in that it is no one else’s liability and, is not directly influenced by the economic policies of any individual country. Its status cannot, therefore, be undermined by inflation in a reserve currency country.

According to the World Gold Council, the ten countries with the largest percentage of reserves in gold include Germany, Italy, France, China, and India, with the United States holding the largest amount of reserves.

Based in the UK, with operations in India, the Far East, Europe and the U.S., the World Gold Council is an association whose 23 members comprise the world’s leading gold mining companies, representing approximately 60% of global corporate gold production.

Sources: CIA Factbook, World Gold Council

Consumer Debt Rising – Demographical Review

In its latest Household Debt and Credit Report, the Federal Reserve Bank of New York announced that outstanding household debt increased $241 billion from the previous quarter, the largest quarter-over-quarter increase since the third quarter of 2007. The increase was led primarily by a 1.9 percent increase in mortgage debt ($152 billion) from the previous quarter.

The amount of debt that consumers carry is monitored by the Federal Reserve and economists in order to determine what the sentiment is among consumers. The thinking is that consumers tend to borrow more and spend more as their outlook on income and overall financial circumstances is positive.

 

Sources: Federal Reserve Bank of New York

 

 

Richard M. Pankratz, CFP®

BroadStreet Financial Advisers, LLC

310 Wilmette Avenue, Suite 2

Ormond Beach, FL 32174

386.615.6096 (voice)

386.615.6098 (fax)

386.299.4160 (mobile)

 

Decreasing Dollar May Be Good For Exports

As the economies and circumstances of individual countries change, so does their ability to export and import. A country’s ability to buy goods and services from other countries is based on the strength of its currency, while a country’s ability to export goods and services is based on the weakness of its currency.

As a nation’s currency lowers in value, relative to another nation’s currency, then that country will be able to export more. This may sound counter-intuitive, but devaluing a country’s currency is in itself a form of stimulus.

The benefits of a devaluing currency for a nation’s economy include an increase in exports, which may result in additional manufacturing and employment.

A significant hindrance of a devaluing currency would be imports becoming more expensive, thus indirectly causing inflationary pressures within an economy.

Since 1995, as the U.S. dollar has devalued, exports have been steadily increasing. As the U.S. dollar has been dropping, U.S. manufactured products have become less expensive for other countries worldwide. This dynamic is an important component for many U.S. companies operating globally.

Sources: Fed, Bloomberg, Commerce Dept.

Growing Number of People Are Renting, Not Buying

With loans difficult to obtain from banks, and with lower incomes than existed a few years ago, renting has become more prevalent for families across the U.S. Since the height of the housing market in 2004, homeownership rates have dropped to 65.2 percent, down from a high of 69.2 percent in 2004. From a historical perspective, homeownership rates are back to 46-year averages, as the housing bubble dissipated since its height in 2004.

Various factors account for changes in homeownership rates, such as employment, interest rates, home vacancies, aging trends, and family growth to mention a few. Even with incredibly high rates, and elevated unemployment in 1980, homeownership was still 65.5% then, not far from current levels. The 46-year average is 65.4%.

As investors have been buying properties to rent, a growing number of renters continue to seek rentals, a benefit for rental owners. Some believe that as the employment markets improve and wages rise, home ownership will increase, while demand for rentals will decrease.

Source: Current Population Survey/Housing Vacancy Survey, Series H-111 Reports, Bureau of the Census

Market Returns: All data is indicative of total return which includes capital gain/loss and reinvested dividends for noted period. Index data sources; MSCI, DJ-UBSCI, WTI, IDC, S&P. The information provided is believed to be reliable, but its accuracy or completeness is not warranted. This material is not intended as an offer or solicitation for the purchase or sale of any stock, bond, mutual fund, or any other financial instrument. The views and strategies discussed herein may not be appropriate and/or suitable for all investors. This material is meant solely for informational purposes, and is not intended to suffice as any type of accounting, legal, tax, or estate planning advice. Any and all forecasts mentioned are for illustrative purposes only and should not be interpreted as investment recommendations.