Consumer companies' outperformance no longer guaranteed by cheap oil

Consumer companies are offering investors a small degree of relief from the turmoil in banking and resources in a results season dominated by fears about slowing economic growth. 

But those companies say lower oil prices no longer translate into a traditional boost for spending on their products because households are using the money saved at the gas pump and on energy bills to stash cash, pay off debt or on other items.

 

"When I ran L'Oreal US ten years ago, every 10 cent, or 20 cents less in the price of the gas translated immediately into more consumption," Agon said. "We started the year, last year, with the idea that the reduction in the price of gas would probably mean an acceleration of the consumption ... and honestly, we did not see it at all."

DYI Comments:  Over the next 5 to 7 years our household debt to disposable will drop back to the 60% to 70% range over the same time period the stock market will cool off substantially as well.  Don't be surprised a few years from now the market as measured by the Dow Jones is trading under 5000 with the Shiller PE10 in single digits.

 

2/16/16 Shiller PE Ratio 24.34

Currently markets world wide are "cooling off!"  

The only two asset categories that are bargains are oil/gas/service companies and precious metals mining companies.  Bargain assets worth dollar cost averaging; buying at low prices with rebounding(beware they could go lower) share prices a few years from now.

Updated Monthly

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION -  2/1/16

Active Allocation Bands (excluding cash) 0% to 60%

83% - Cash -Short Term Bond Index - VBIRX

17% -Gold- Precious Metals & Mining - VGPMX

 0% -Lt. Bonds- Long Term Bond Index - VBLTX

 0% -Stocks- Total Stock Market Index - VTSAX

[See Disclaimer]

DYI's gold allocation is for non-dollar or assets that perform well in inflationary environments. Vanguard Funds 

Energy Fund - VGENX

Precious Metals & Mining - VGPMX

REIT Index - VGSLX

European Index - VEUSX

Pacific Index - VPADX

My objective is to reduce or eliminate assets that are overvalued and increase exposure as they become increasingly undervalued.  DYI's weighted formula does just that based upon historically driven valuations.  Simply, I'm playing the long term averages for U.S. stocks, U.S. long term bonds and gold(Dow/Gold Ratio).

DYI