Sep 30, 2013 Weekly Commentary
Weekly Market Commentary September 30, 2013


The Markets

"It's deja vu all over again," Yogi Berra reportedly said as he watched Yankee teammates Mickey Mantle and Roger Maris smack back-to-back home runs for the umpteenth time.

Americans are experiencing deja vu all over again, too. Sure, the prospect of another fiscal showdown doesn't electrify a crowd like a couple of major league home runs. All the same, investors' response to the possibility the U.S. government might partially shut down on October 1 was muted. Some U.S. stock markets gave back a little for the week; others moved higher. All remained up year-to-date.

So, are investors confident America's elected officials will do the right thing? Or, have they become complacent? Are they so accustomed to debate and delay that it doesn't faze them? According to The Economist:

"[U.S.] Federal spending comes in two types: discretionary which must be authorized every year; and mandatory which is set in law. These labels are confusing because much discretionary spending is anything but: it includes funding for the justice system and defense. Since 1976 Congress has required itself to pass a dozen appropriations bills annually to cover this stuff. Unfortunately, it has missed its deadline every year since 1994. To keep the lights on it has resorted to temporary resolutions to finance discretionary spending at existing levels until agreement can be reached, sometimes after a brief pause for effect."

As it turns out, government funding has expired 10 times since 1981, and the government has closed down each time. Nine of the 10 closures occurred over weekends so they had limited impact. The tenth lasted for 21 days during 1995 and 1996. We should learn how this round will turn out pretty quickly.


MERIT-BASED SYSTEMS ARE ALL THE RAGE... One definition for 'merit' in the Merriam-Webster Dictionary is: Character or conduct deserving reward, honor, or esteem (also: achievement). If someone performs well, we want to reward them. If they don't, well, maybe we won't.

Merit-based systems are everywhere. For companies trying to retain top talent, recognition and rewards systems are essential. Almost 83 percent of employers use merit raises, according to the Compdata BenchmarkPro 2012 survey. In 2012, the average worker pay increase for merit was 2.7 percent. That's expected to increase to 2.8 percent for 2013.

Corporations aren't the only ones who tie pay to performance. In some school districts, teachers' income is linked to student performance, and about 20 percent of state aid for undergraduate students is tied to achievement in the United States. Under the Affordable Care Act, the income of public and private hospitals will be tied to performance measures such as patient outcomes and cost containment. Earlier this year, hospitals in New York City negotiated with physicians unions to link doctors pay to performance, too. A study published in The Journal of the American Medical Association in September found providing financial incentives to clinicians for achieving better health outcomes was effective over the short term.

One tricky thing about merit-based pay systems is deciding how to measure performance. According to The Wall Street Journal, CEO pay may be measured against a variety of benchmarks:

"Compensation awarded to CEOs of 300 U.S. companies rose a median 3.6% to $10.1 million, the analysis found. The total includes salary and annual bonuses, plus the value of restricted stock and stock options at the time they were granted... CEO pay increased slightly faster than profit which rose 2.1% at the companies surveyed. But, it lagged behind the median 14% increase in total shareholder return for those companies which includes share-price movement and dividends."

The article reported investor influence exercised through 'say-on-pay' votes - annual non-binding votes on CEO pay - has inspired greater consistency in CEO pay. In fact, for the first time in the history of the survey cited, the largest piece of the CEO pay puzzle was linked to financial or stock performance.


Weekly Focus - Think About It


"Success consists of going from failure to failure without loss of enthusiasm."
--Winston Churchill, British Prime Minister

Sources: http://www.nytimes.com/1999/08/08/tv/cover-story-the-games-he-played-and-the-things-he-said.html http://wsj-us.econoday.com/reports/rc/2013/Resource_Center/Archives/SE-Archive/09-30-13/index.html?cust=wsj-us&lid=0 (See "Equities by Day" chart and "Markets at a Glance" table) http://www.economist.com/news/united-states/21586866-governments-finances-get-tangled-up-fight-over-who-speaks-republican http://www.merriam-webster.com/dictionary/merit http://www.compdatasurveys.com/2012/10/10/rewards-systems-aid-in-employee-retention/ https://stateimpact.npr.org/indiana/tag/merit-pay/ http://www.nassgap.org/viewrepository.aspx (Expand Annual Surveys; expand 43rd Annual Survey; click on 43rd Annual NASSGAP Survey Report; open with Adobe Reader and click OK; go to page 17) http://www.nytimes.com/2013/01/12/nyregion/new-york-city-hospitals-to-tie-doctors-performance-pay-to-quality-measures.html?ref=health&_r=2& http://www.nih.gov/researchmatters/september2013/09232013performance.htm http://online.wsj.com/article/SB10001424127887324031404578483683405105480.html (or use this link: http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/09-30-13_WSJ-Whats_a_CEO_Worth.pdf) http://www.brainyquote.com/quotes/authors/w/winston_churchill.html#tSB1vFeOeLlDBxyv.99 * This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer. * Quantitative Easing is a government monetary policy occasionally used to increase the money supply by buying government securities or other securities from the market. Quantitative easing increases the money supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association. * The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Past performance does not guarantee future results. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision.
Sep 29, 2008 Weekly Commentary
The Markets While the politicians fiddled, Wall Street and Main Street burned.
The financial markets eagerly awaited confirmation of a government bailout last week, but all they got by last Friday was partisan bickering and finger pointing. With no deal, traders pulled in their horns and the markets fell for the week.
It also didn’t help that last week’s economic news was mostly bleak. Here are a few of the highlights:
• The four-week average of first-time claims for unemployment insurance rose to 462,500 last week. That’s the highest since November 2001, according to MarketWatch. On the positive side, some of the spike was caused by Hurricanes Gustav and Ike as opposed to economic weakness. • Second quarter GDP was revised down to 2.8% growth from a preliminary 3.3% rate, according to the Commerce Department. Over the past 12 months, GDP grew 2.1%, which is below the 2.75% growth rate most economists say is the economy’s long-run potential, according to MarketWatch. • New home sales fell to a 17-year low in August, according to data from the Commerce Department. The August rate was also 34.5% below the sales number a year ago. These weak numbers are not too surprising since weakness in housing is at the root of our current financial problem. • Orders for durable goods in August dropped a larger than expected 4.5% as demand declined in most major categories, according to data from the Commerce Department.
Now, for what we hope is some good news. Over the weekend, Washington lawmakers got serious and announced they had reached a bipartisan $700 billion agreement to bailout the financial sector. The agreement may prevent a “worst-case scenario” from unfolding in our financial markets, but it probably won’t forestall further economic weakness. As we’ve said before, it took us years to get into this mess and it could take us years to get out of it. In the meantime, we continue to work hard at preserving capital and searching for new opportunities.

THE CURRENT GLOBAL FINANCIAL MESS is a good reminder that it may pay to follow a few basic principles of good living. As a society, we’re inundated with messages that encourage us to spend, spend, spend, and buy stuff that might make us feel good in the short term, but in the long term could leave us with a migraine. For some people, the lure of easy credit and living the high life was hard to resist and they ended up getting in over their heads. By forgetting basic personal finance and life principles, some of these folks are unfortunately paying a heavy price.
As we survey the landscape, there are plenty of people and organizations who can share the blame for the situation our country finds itself in. Greedy financial institutions, hedge funds, investment banks, mortgage brokers, politicians protecting their jobs, ratings agencies, and regulators are just a few in a long list of culprits. But, at the end of the day, laying blame on other people won’t solve the problem or prevent the next one. Ultimately, we each have to be responsible for our own actions and do the best we can to make prudent decisions that protect our hard-earned assets. Here are a few basic principles that can benefit all of us:
• Live below your means. Consider saving at least 10% of your annual income. Before long, you’ll have a nice cushion that will help soften the blow if the unexpected happens.
• Buy adequate insurance. There’s no need to expose yourself to a major loss if you can insure the potential loss for a relatively small amount.
• Invest regularly. No one can predict whether the market will go up or down tomorrow, let alone next year. By investing regularly, you establish a discipline that may help smooth out some of the fluctuations.
• Don’t stress out over things you can’t control. We can’t control if there will be a thunderstorm tomorrow any more than we can control whether or not the $700 billion bailout package will be successful. What we can do though, is be proactive in preparing ourselves for whatever outcome may occur.
• Focus on what’s most important in life. We’re all given a certain amount of time on this earth and it’s in our best interest to use that time wisely. Spending time with your family, your friends, and helping others may help you stay sane in a sometimes crazy world.

Weekly Focus – From $12,000 to $30 Million in 68 Years
In 1940, surrealist artist Enrico Donati purchased a Picasso painting for a reported $12,000. Earlier this year, Donati died at age 99 and his estate is putting the painting up for auction later this year. Sotheby’s estimates the painting will fetch $30 million. What do you think is the average annual rate of return if the painting, purchased for $12,000 in 1940, sells for $30 million later this year? Would you believe about 12.2%? That’s a good example of the power of compounding!
Sep 28, 2009 Weekly Commentary
The Markets After closing at a post-recovery high on Tuesday of last week, the market headed south the next three days as investors assessed the impact of the Federal Reserve’s latest missive and digested some less exuberant economic data.
On Wednesday, the Fed said that, "Economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period." This suggests interest rates should remain low for the foreseeable future, which may be healthy for the economy and the stock market. The Fed also said it was slowing the pace of its purchase of mortgage-backed securities. This program has helped stabilize the housing market. Unfortunately, the wording of this particular sentence made some investors think that the government will take away the punch bowl (i.e., the stimulus) a little sooner than expected. After pondering it for a few moments, investors decided it was a good time to book some profits and the market sold off shortly after the release of the Fed statement.
Later in the week, a couple of disappointing housing reports and a weaker than expected durable goods number contributed to further stock market weakness. On the bright side, the Reuters/ University of Michigan Surveys of Consumers said its index of sentiment for September rose to 73.5 from 65.7 in August. That was higher than expectations, according to a Reuters poll. It was also the highest reading since January 2008.
Last week's uneven economic news suggests that this economic recovery may look like the printout of an EKG.

ONE OUTCOME OF THE FINANCIAL CRISIS may be that we have to "live with messiness." Instead of a neat and tidy explanation for everything that happens in the markets, it may turn out that humans are sometimes irrational and, as emotional creatures, we occasionally let fear and greed cloud our financial decisions. After witnessing the current financial crisis, the tech stock bubble and burst from a decade ago, and numerous other financial storms over the past 20 years, it seems that when it comes to money, humans are still working through their issues!
In a very interesting September 2 New York Times Magazine article, Nobel Prize winner and liberal economist Paul Krugman discussed the development of economic thought over the past 230 years and how the current financial crisis has thrown economic theory into disarray. Without getting into his political leanings, Krugman makes a case that almost all economists, whether they be conservative or liberal, financial or macroeconomic, missed this crisis. Despite their impressive-looking mathematical formulas and hundreds of years of history, economists, in general, failed to predict the size and timing of our current worldwide maelstrom, and, worse yet, were generally blind to the idea that a catastrophe of this size could even happen in this (enlightened) day and age.
Krugman says economists, "Will have to acknowledge the importance of irrational and often unpredictable behavior, face up to the often idiosyncratic imperfections of markets and accept that an elegant economic 'theory of everything' is a long way off." In short, he says we have to "live with messiness."
From a practical standpoint, as an advisor, it reiterates the importance of knowing that the financial markets are not perfectly rational and that they do not always behave in the way that econometric models predict. One could argue that changes in the financial markets are simply a reflection of the sentiments, fears, dreams, and hopes of us – the market participants. The markets are not separate from us – they are us!
Since we humans are, well, human, then the markets may behave in a way that reflects human behavior and that can get quite messy. Some of us are rational beings while others tip the scale in the other direction. Knowing this helps us remain aware and on guard for extreme movements in the markets.

Weekly Focus – Think About It
"He who obtains has little. He who scatters has much."
-- Lao Tzu
Sep 27, 2010 Weekly Commentary
The Markets Is inflation good or bad for our economy? After last week, we now know the Federal Reserve's answer to that question and it may have a major effect on the financial markets going forward.
While the recession officially ended in June 2009, sluggish growth since then has concerned the Federal Reserve and that helped prod them to make their inflation intentions known in a statement released last week.
In the statement, the Fed said three times that current inflation trends are too low and that it is "prepared to provide additional accommodation if needed to…return inflation, over time, to levels consistent with its mandate." According to Bloomberg, the Fed statement opened the door to more quantitative easing, which would pump more dollars into the economy and possibly lead to more inflation down the road.
By the end of the week, the financial markets were essentially saying, "bring it on."
Prominent hedge fund manager David Tepper went on CNBC last Friday morning and commenting on the Fed news said, "Government intervention in the financial markets virtually guarantees that most investment choices will go up."
Of course, nobody can guarantee anything in the financial markets, but putting Tepper's hyperbole aside, the Fed's statement is noteworthy. Like Alice going down the rabbit hole in the beloved children’s story, the effect of more Fed action could take us on an adventure into the economic and political unknown.
No matter what results from this, we will do our best to stay on top of it.

MAU PIAILUG, MASTER NAVIGATOR, DIED ON JULY 12, but his skill as a navigator can teach us a few lessons about what’s possible in business and life.
In 1976, Mau sailed a double-hulled canoe 2,500 miles from Hawaii to Tahiti without a compass, sextant, or charts. His objective was to see if ancient seafarers could have traveled this way from the south and west to populate Hawaii. In a moving tribute, The Economist said, "At that time, Mau was the only man who knew the ancient Polynesian art of sailing by the stars, the feel of the wind, and the look of the sea."
The Economist further wrote:
By day he was guided by the rising and setting sun, but also by the ocean herself, the mother of life. He could read how far he was from shore, and its direction by the feel of the swell against the hull. He could detect shallower water by color, and see the light of invisible lagoons reflected in the undersides of clouds. Sweeter-tasting fish meant rivers in the offing; groups of birds, homing in the evening, showed him where land lay.
Clearly, this was a man who understood his craft and the deep principles underlying it. While modern tools could be used to accomplish much of what Mau did by feel and perception, sometimes modern tools are no match for deep understanding.
Likewise, investors sometimes get caught up in thinking that complexity and sophistication are the ticket to stock market riches. But, as Leonardo da Vinci said, "Simplicity is the ultimate sophistication." You can still be successful without a Bloomberg terminal, without a high-frequency algorithmic trading system, and without using esoteric derivative securities.
Mau passed down his knowledge to a small number of students so his art is not lost to the world. The art of investing is not lost to the world either, and that is an area where we strive to be a continuous learner.

Weekly Focus – Think About It
"If one does not know to which port one is sailing, no wind is favorable." --Seneca
Sep 26, 2011 Weekly Commentary
The Markets The Federal Reserve did "The Twist," but the financial markets ended up in "A Knot."
In a much anticipated action dubbed "Operation Twist," the Federal Reserve announced last week it would reshuffle its balance sheet by selling $400 billion of shorter-term Treasury securities and use the proceeds to buy longer-term securities. The Fed said it hopes the action will lower longer-term interest rates and, "contribute to a broad easing in financial market conditions that will provide additional stimulus to support the economic recovery."
So far, as it relates to interest rates, the Fed’s action has worked. The yield on the 30-year Treasury bond declined from 3.2 percent the day before the Fed's announcement to 2.9 percent just two days later, according to data from Yahoo! Finance. That's a rather dramatic decline for such a short period.
Unfortunately, the stock market failed to respond positively to the Fed's announcement as the S&P 500 index lost 6.4 percent for the week. The market’s drop, though, went beyond disappointment in the Fed's action. The following also contributed to the market's red ink:
• Intensified fears of a Greek default.
• Rising concern of a world-wide financial crisis, with sovereign debt at the epicenter.
• Growing signs of sluggish economic growth in China, which had been one of the few countries immune to economic turmoil.
• A 13 percent drop in the price of copper on Thursday and Friday of last week, which is concerning because the price of copper is often viewed as a proxy for worldwide industrial growth.
Sources: Wall Street Journal, MarketWatch, Bloomberg
With the market's blood pressure rising, it reminds us of what flight attendants often say, "Ladies and gentlemen, the Captain has turned on the fasten seat belt sign. We are now crossing a zone of turbulence. Please return to your seats and keep your seat belts fastened. Thank you."
Likewise, as your "Financial Captain," we know there may be market volatility along the way, but, as always, we’re focused on trying to help you arrive safely at your financial destination.

AN OFTEN OVERLOOKED ASPECT OF SUCCESSFUL STOCK INVESTING is the importance of dividends. In bull markets, investors tend to focus on price appreciation, meaning, they look for stocks that can increase in price. In heady times like the late 1990s, investors feasted on stocks that would double or triple in a matter of months. Watching a stock go from $20 a share to $40 or $60 a share is exhilarating and makes for good cocktail party chatter. On the other hand, watching a stock sit at $20 a share for several years while you collect and reinvest a 3 percent dividend is rather boring and not worth sharing on the social circuit.
However, just like the old story about the tortoise and the hare, the slow and steady growth of dividends plays a very important role in making money grow over time.
The past 10 years is a great example of how dividends have helped improve the returns of an otherwise disappointing stock market. Here’s the data:
• For the 10 years ending September 23, 2011, the S&P 500 index had a positive average annualized return of 1.3 percent excluding reinvested dividends.
• For the 10 years ending September 23, 2011, the S&P 500 index had a positive average annualized return of 3.6 percent including reinvested dividends.
• As shown above, receiving dividends and reinvesting them added 2.3 percentage points per year to an investor’s return compared to the return generated by price appreciation alone of the underlying stocks in the S&P 500.
Sources: Morningstar, Yahoo! Finance
In today’s environment of low returns, finding a way to possibly eke out an extra 2.3 percentage points of return per year is attractive.
Over a longer period, receiving dividends and reinvesting them has accounted for one-third of the total return of the S&P 500 index over the past 80 years, according to Standard & Poor’s.
Standard & Poor’s also points out the following benefits of dividends:
• Dividends allow investors to capture the upside potential while providing some downside protection in the down markets.
• When bond yields are low, like they are now, dividend paying stocks might be a way to enhance an investor’s current income.
Just like any other investment, though, you need to figure out how dividends fit within your overall investment strategy. Are you looking for dividends to provide stability, income, or growth within your portfolio? Or, perhaps it’s some combination of all three.
Considering how dividends fit within our clients’ portfolios is just one more way that we’re trying to add value.

Weekly Focus – Think About It
"Do you know the only thing that gives me pleasure? It's to see my dividends coming in."
--John D. Rockefeller
Sep 25, 2012 Weekly Commentary
The Markets


Corporations are putting more cash in investors' pockets.

In the past week, more than half a dozen Blue Chip companies announced increases in their dividend payouts. In fact, Standard and Poor's Corporation said S&P 500 companies paid a record $34 billion in cash payments to investors in August. That's a pretty nice stimulus!

And, the largesse may continue. Howard Silverblatt, an analyst from Standard and Poor's, was quoted in MarketWatch as saying, "2012 should set a record high for cash dividend payments, 16 percent above that of 2011."

While dividend payouts look good, another part of the stock market is "diverging" and sending mixed signals.

There's a century old investment management system called "The Dow Theory" which was developed by Charles Dow through a series of editorials in The Wall Street Journal between 1900 and 1902. According to this theory, in a healthy stock market, the Dow Jones Industrial Average and the Dow Jones Transportation Average should rise in sync.

The theory is based on the idea that companies in the industrial average “make the stuff” while companies in the transportation average "ship the stuff." If there's a divergence in the movement of the industrial average and the transportation average, then you have to wonder which one is potentially giving a misleading signal about future economic activity.

So, what's The Dow Theory signaling now? It's flashing red because, as of last week, the Dow Jones Industrial Average was up about 11 percent for the year while the Dow Jones Transportation Average was down more than 2 percent. And, just last week, the industrial average was flat while the transport index dropped a significant 5.9 percent – a substantial divergence in just one week.

Like all investment systems, though, The Dow Theory is not foolproof and this divergence could just be noise. In any case, it's worth keeping an eye on it as a possible early warning sign.


CAN YOU IMPROVE YOUR INVESTMENT PERFORMANCE BY TAKING A TRIP to the local drugstore and forking over two dollars to buy a spiral bound notebook? Yes, says Nobel Prize winner Daniel Kahneman, one of the country's preeminent psychologists.

In a recent conversation with Tom Gardner of The Motley Fool, Legg Mason Capital Management chief investment strategist Michael J. Mauboussin recounted a conversation he had many years ago with Professor Daniel Kahneman. Mauboussin asked Kahneman this question – What single thing can an investor do to improve their investment performance? Kahneman said buy a notebook and when you make an investment, write down why you made the investment, what you expect to happen with the investment, and when you expect it to happen.

Hmm. How does that translate into improved investment performance?

As humans, we often succumb to what's called "hindsight bias." Hindsight bias means we tend to think our forecasts were better than they really are. For example, few people predicted the severity of the Great Recession, but, after the fact, many people said they saw the signs of a bubble about to burst. These people "misremembered" what they were thinking prior to the Great Recession.

Kahneman says writing down what you're thinking and what your expectations are – at the time you make an investment – allow you to go back after the fact and see how accurate you were. This black and white analysis helps keep you honest about your ability to make predictions and make good investment decisions. It helps you avoid becoming overconfident. Overconfidence is bad because it makes you think you're smarter than you really are which could lead to making riskier investments and losing lots of money.

Sometimes the best ideas are also the simplest.


Weekly Focus - Think About It...

"Well, I think we tried very hard not to be overconfident, because when you get overconfident, that's when something snaps up and bites you."
--Neil Armstrong, astronaut, first person to walk on the moon
Sep 25, 2012 Weekly Commentary
The Markets


Corporations are putting more cash in investors' pockets.

In the past week, more than half a dozen Blue Chip companies announced increases in their dividend payouts. In fact, Standard and Poor's Corporation said S&P 500 companies paid a record $34 billion in cash payments to investors in August. That's a pretty nice stimulus!

And, the largesse may continue. Howard Silverblatt, an analyst from Standard and Poor's, was quoted in MarketWatch as saying, "2012 should set a record high for cash dividend payments, 16 percent above that of 2011."

While dividend payouts look good, another part of the stock market is "diverging" and sending mixed signals.

There's a century old investment management system called "The Dow Theory" which was developed by Charles Dow through a series of editorials in The Wall Street Journal between 1900 and 1902. According to this theory, in a healthy stock market, the Dow Jones Industrial Average and the Dow Jones Transportation Average should rise in sync.

The theory is based on the idea that companies in the industrial average “make the stuff” while companies in the transportation average "ship the stuff." If there's a divergence in the movement of the industrial average and the transportation average, then you have to wonder which one is potentially giving a misleading signal about future economic activity.

So, what's The Dow Theory signaling now? It's flashing red because, as of last week, the Dow Jones Industrial Average was up about 11 percent for the year while the Dow Jones Transportation Average was down more than 2 percent. And, just last week, the industrial average was flat while the transport index dropped a significant 5.9 percent – a substantial divergence in just one week.

Like all investment systems, though, The Dow Theory is not foolproof and this divergence could just be noise. In any case, it's worth keeping an eye on it as a possible early warning sign.


CAN YOU IMPROVE YOUR INVESTMENT PERFORMANCE BY TAKING A TRIP to the local drugstore and forking over two dollars to buy a spiral bound notebook? Yes, says Nobel Prize winner Daniel Kahneman, one of the country's preeminent psychologists.

In a recent conversation with Tom Gardner of The Motley Fool, Legg Mason Capital Management chief investment strategist Michael J. Mauboussin recounted a conversation he had many years ago with Professor Daniel Kahneman. Mauboussin asked Kahneman this question – What single thing can an investor do to improve their investment performance? Kahneman said buy a notebook and when you make an investment, write down why you made the investment, what you expect to happen with the investment, and when you expect it to happen.

Hmm. How does that translate into improved investment performance?

As humans, we often succumb to what's called "hindsight bias." Hindsight bias means we tend to think our forecasts were better than they really are. For example, few people predicted the severity of the Great Recession, but, after the fact, many people said they saw the signs of a bubble about to burst. These people "misremembered" what they were thinking prior to the Great Recession.

Kahneman says writing down what you're thinking and what your expectations are – at the time you make an investment – allow you to go back after the fact and see how accurate you were. This black and white analysis helps keep you honest about your ability to make predictions and make good investment decisions. It helps you avoid becoming overconfident. Overconfidence is bad because it makes you think you're smarter than you really are which could lead to making riskier investments and losing lots of money.

Sometimes the best ideas are also the simplest.


Weekly Focus - Think About It...

"Well, I think we tried very hard not to be overconfident, because when you get overconfident, that's when something snaps up and bites you."
--Neil Armstrong, astronaut, first person to walk on the moon
Sep 23, 2013 Weekly Commentary
Weekly Market Commentary September 23, 2013


The Markets

We're going to do it...We're going to do it...We're not going to do it...Yet.
Last week, the U.S. Federal Open Market Committee gave stock markets a gift that, on a scale of thrills, might have been on par with Marilyn Monroe singing happy birthday to JFK. On Wednesday, the FOMC announced (without a trace of breathiness):
"Taking into account the extent of federal fiscal retrenchment, the Committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength in the broader economy. However, the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases. Accordingly, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month."
The ensuing euphoria pushed many of the world's stock markets higher. The Dow Jones Industrial Average set a new record, Germany's DAX closed at a new high, and Japan's Nikkei delivered its best performance in eight weeks. Emerging markets also reaped positive benefits.
The Quantitative Easing or QE-sugar buzz abated when St. Louis Fed President James Bullard told Bloomberg the Fed may decide to begin buying fewer bonds at its next meeting in October. This surprised some as analysts already had predicted it wouldn't happen until December which caused markets to slump a bit last Friday.
It's possible that, by mid-October, the Fed's 'lather-rinse-repeat' commentary on quantitative easing may have become background music for another event that has the potential to deliver a macroeconomic jolt: the U.S. congressional debate over the debt ceiling.
This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


THERE'S SOME GOOD NEWS AND THERE'S SOME BAD NEWS... The good news is the rate of global gross domestic product (GDP) growth increased during the second quarter, according to The Economist. Greater economic strength in developed countries helped push the world's GDP 2.4 percent higher during the second quarter of 2013 as compared to the second quarter of 2012. That's only the third time that has happened in three years. The bad news, according to The Economist, is:
"The world is dangerously dependent on China... Since the beginning of 2010 it alone has contributed over one-third of global GDP growth, with another 40% coming from the rest of the emerging world. Weighed down by debt since the financial crisis, the rich world's growth has been sclerotic. Excluding America, it has provided just 10% of global growth since 2010; America has contributed another 12.5%."
China's GDP has been growing at a pretty fair pace although the rate of growth has slowed. Forbes reported China's GDP grew at an annualized rate of 7.5 percent during the second quarter of 2013, falling just short of first quarter's 7.7 percent growth. The slowdown was expected. China is rejiggering its economy in an effort to stimulate domestic demand and consumer spending rather than continuing to rely on investment-driven growth.
Here's another tidbit to consider. Forty percent of the world's growth has been attributable to emerging markets (ex-China). Changing expectations for U.S. monetary policy have interrupted the flow of capital into those markets. The Economist's Capital Freeze Index, which assesses the vulnerability of emerging markets to a freeze in capital inflows, found that nine of 26 emerging countries examined are at relatively high risk of this happening. That has the potential to affect the world's GDP growth rate, too.


Weekly Focus - Think About It

"Our prime purpose in this life is to help others. And if you can't help them, at least don't hurt them."
--Dalai Lama, spiritual leader of Tibet


Best regards,


Sources:

http://www.federalreserve.gov/newsevents/press/monetary/20130918a.htm
http://www.theguardian.com/business/2013/sep/19/world-markets-federal-reserve-stimulus-feelgood-factor
http://www.bloomberg.com/news/2013-09-20/bullard-says-weaker-data-prompted-borderline-fomc-taper-delay.html
http://www.reuters.com/article/2013/09/20/us-usa-fed-poll-economists-idUSBRE98J0UF20130920
http://www.washingtonpost.com/world/asia_pacific/asian-stock-markets-quiet-amid-public-holidays-2-days-after-federal-reserve-fueled-big-rally/2013/09/19/a3036758-21a7-11e3-ad1a1a919f2ed890_story.html
http://www.economist.com/news/economic-and-financial-indicators/21586611-world-gdp
http://www.forbes.com/sites/simonmontlake/2013/07/14/chinas-2q-gdp-growth-slows-to-7-5/
http://www.economist.com/news/finance-and-economics/21584331-four-worlds-biggest-lenders-must-face-some-nasty-truths-giant-reality-check?zid=306&ah=1b164dbd43b0cb27ba0d4c3b12a5e227
http://blogs.cfainstitute.org/investor/2013/08/26/resources-for-the-asian-currency-crisis-currency-and-capital-flows/
http://www.economist.com/news/finance-and-economics/21586569-error-apology-and-revision-spreadsheet-different
http://www.brainyquote.com/quotes/keywords/help.html
Sep 22, 2008 Weekly Commentary
The Markets
"Historic" is not a word we use lightly, but it seems appropriate to describe what took place in the financial markets last week.
As you look at the box score below, it masks the volatility that took place in one of the wildest weeks in Wall Street history. When the dust settled, the broad S&P 500 index finished the week with a slight gain, but it took some pain to get there. Last Monday, the Dow Jones Industrial Average dropped 504 points, followed by a gain of 141, a loss of 449, a gain of 410 and it closed the week with another gain of 368 points. Whew!
By Wednesday of last week, the world financial system was teetering on the brink of collapse. Credit markets had frozen, banks were unwilling to lend to each other and stock markets were plunging. A vicious death spiral was spinning out of control. After trying a “plug the hole” policy that had failed to stem the crisis, the U.S. government threw out the playbook and decided it was time to act decisively. By late last week, the government marshaled all its resources and created a plan to try to put the crisis behind us for good. The stock market liked what it was hearing and it staged a huge rally the last two days of the week. Let’s hope it continues.

THE PAST, THE PRESENT, AND THE FUTURE OF THE CURRENT FINANCIAL SITUATION In light of the recent turmoil, this week’s report will be longer than usual. We thought it would make sense to discuss the past, present, and future of the current financial situation. This may help put things in context for you.
The Past
In order to understand how we can get out of this mess, it’s necessary to figure out how we got into it. The late 1990s is a good place to start.
No doubt you remember those “good old days.” The internet was changing the world, technology stocks were soaring, and the economy was humming along. It was a great time to be in the stock market as the S&P 500 index rose 220% for the five years ending December 31, 1999, according to data from Yahoo! Finance. That’s an average annualized return of 26% excluding reinvested dividends, which is simply phenomenal.
Of course, the good times didn’t last. The bubble popped and the S&P 500 declined by 49% between March 2000 and October 2002, according to data from Bespoke Investment Group. In order to limit the collateral damage to the economy from this steep decline, the Federal Reserve, under former chairman Alan Greenspan, embarked on a major interest rate cutting campaign to try and stimulate the economy. The Fed took the federal funds rate from 6.5% in May 2000 all the way down to 1% by June 2003, according to data from the Federal Reserve Bank of New York.
This precipitous decline in interest rates set the stage for the next bubble – real estate.
With interest rates super low and the stock market in a funk, investors turned their attention to the previously moribund real estate market. As the economy gradually improved, people started to buy homes again in a big way. And banks, mortgage companies, and Wall Street wizards were more than happy to come up with new fangled ways of getting Americans into the home of their dreams with little to no money down.
Wall Street investment banks were thrilled with this new opportunity in real estate because they weren’t making much money on their traditional business of investment banking and buying and selling securities. By coming up with new ways to package, slice, and dice mortgage securities, Wall Street firms made a boatload of money. Unfortunately, many of these new securities, which provided capital to finance the real estate boom, were highly financed themselves. Effectively, the actual equity that underpinned some of these mortgages was negligible.
When the real estate bubble became unsustainable, just like the earlier technology bubble, it all came crashing down.
With very little equity supporting billions in outstanding mortgages, a slight decline in the value of the real estate caused a ripple effect of delinquencies and defaults. As the defaults spread, it began to feed on itself like a California wildfire inhaling dry timber. Eventually, fear took over as nobody knew when the vicious cycle would be broken. Enter last week.
Investors had weathered blowups from Countrywide, Bear Stearns, Fannie Mae, Freddie Mac, and now, they were facing major problems with Lehman Brothers, AIG, and Merrill Lynch. By week’s end, Lehman had been forced into bankruptcy, AIG had been effectively nationalized by the government, and Merrill Lynch had taken refuge in the arms of Bank of America. This tumultuous turn of events propelled the government to act swiftly and decisively.
The Present
The situation is fluid and changes are happening with lightning speed. Over the weekend, the Bush Administration sent to Congress a $700 billion proposal that would give the Treasury broad authority to purchase distressed assets from U.S. financial institutions in an effort to stem the crisis. The proposal would also raise the nation’s debt ceiling to $11.315 trillion from its current $10.615 trillion limit, according to Bloomberg. To put $700 billion in perspective, that translates into an average bill of $6,500 per U.S. family, according to a report from MarketWatch. Now, it’s possible that the Treasury will turn around and sell the assets and recoup some or all of that $700 billion, but that will not be known for perhaps years.
We also don’t know how hard of a bargain the government will drive when it tries to buy these distressed assets. If it tries to buy the assets at a very low price, then the financial institutions may have to take more write-downs and raise more capital, which could keep this vicious cycle spiraling down. Conversely, if it buys the assets at a high price, then the financial institutions benefit at the expense of the taxpayers who are on the hook for any future losses.
In a surprising twist, investment banks Goldman Sachs and Morgan Stanley announced late Sunday night that they will convert their businesses into traditional bank holding companies, according to The Wall Street Journal. This will subject the companies to new regulatory oversight and possibly significantly reduce their future profit opportunities. It may also put the companies in a better position to be acquired, to merge, or to acquire a smaller bank with insured deposits.
In other news last week, the Treasury announced that it is extending bank deposit-type insurance to money market funds. The news of a money market fund that “broke the buck” prompted the government to implement this safety net as a way to limit further damage in the $3.3 trillion money market industry, according to Bloomberg. Also, on Friday, the Securities and Exchange Commission implemented a ban on short-selling 799 companies through October 2. This may ease some of the pressure on these companies and shield them from “bear raids” that could depress their stock price.
The changes announced by the government late last week helped spark a huge rally in stocks on Thursday and Friday. Nobody knows whether this is just a temporary reprieve or the beginning of a new period of stability. What we can say with some confidence is the government is all over this situation and they are trying to do all they can to prevent a replay of the 1930s.
The Future
As the old saying goes, “Forecasting is the art of saying what will happen, and then explaining why it didn't." At the risk of having to explain ourselves later, we’ll offer some comments about what the future may hold.
First, capitalism as we know it may have changed dramatically. The concept of letting free markets adjust and self-correct with minimal government intervention is likely gone. The government’s actions over the past few months indicate that there are limits to laissez faire. We may see more government regulation and that may mean lower long-term returns from securities because the regulations could remove some of the risks from investing.
Second, when a financial calamity is knocking on the door, a small number of people may assume tremendous power to make decisions that put hundreds of billions of taxpayer dollars at risk. Right now, Treasury Secretary Hank Paulson is arguably the most powerful person in America. He and his coterie of trusted advisors are massively reshaping our financial system with bullet train speed and little oversight. When the history books are written, Paulson may go down as the greatest Treasury secretary of all time or we may be throwing darts at his picture. Time will tell.
Third, we live in a global society that is highly connected through commerce and instantaneous communication. What happens in the U.S. is no longer a U.S. issue and vice versa. As a global society, we may all sink or swim together – so we all better get along. The financial crisis we’re experiencing is a great example. It’s not just isolated to the U.S. It has global ramifications.
In Closing
As we wrap up this extended commentary, we need to keep in mind that it took us years to get into this mess and it may take us years to get out of it. The government’s unprecedented action last week may have stopped the bleeding, but that doesn’t necessarily mean the patient is well. We still have a glut of homes on the market, a relatively soft economy, and a host of other headwinds. With that said, new opportunities may arise and we are always on the lookout for them.
No matter what the market may throw at us, we want you to know that we are closely following the situation and we are doing all we can as professional advisors to be good stewards of your money. If you have any questions, please let us know. Thank you for the trust and confidence you’ve placed in us. We’ve worked hard to develop it and we are working hard to keep it.

Weekly Focus – Think About It
“God, grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.” -- Reinhold Niebuhr ' style='margin: 0px 5px;' cols='100' rows='15'> First, capitalism as we know it may have changed dramatically. The concept of letting free markets adjust and self-correct with minimal government intervention is likely gone. The government’s actions over the past few months indicate that there are limits to laissez faire. We may see more government regulation and that may mean lower long-term returns from securities because the regulations could remove some of the risks from investing.
Second, when a financial calamity is knocking on the door, a small number of people may assume tremendous power to make decisions that put hundreds of billions of taxpayer dollars at risk. Right now, Treasury Secretary Hank Paulson is arguably the most powerful person in America. He and his coterie of trusted advisors are massively reshaping our financial system with bullet train speed and little oversight. When the history books are written, Paulson may go down as the greatest Treasury secretary of all time or we may be throwing darts at his picture. Time will tell.
Third, we live in a global society that is highly connected through commerce and instantaneous communication. What happens in the U.S. is no longer a U.S. issue and vice versa. As a global society, we may all sink or swim together – so we all better get along. The financial crisis we’re experiencing is a great example. It’s not just isolated to the U.S. It has global ramifications.
In Closing
As we wrap up this extended commentary, we need to keep in mind that it took us years to get into this mess and it may take us years to get out of it. The government’s unprecedented action last week may have stopped the bleeding, but that doesn’t necessarily mean the patient is well. We still have a glut of homes on the market, a relatively soft economy, and a host of other headwinds. With that said, new opportunities may arise and we are always on the lookout for them.
No matter what the market may throw at us, we want you to know that we are closely following the situation and we are doing all we can as professional advisors to be good stewards of your money. If you have any questions, please let us know. Thank you for the trust and confidence you’ve placed in us. We’ve worked hard to develop it and we are working hard to keep it.

Weekly Focus – Think About It
“God, grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.” -- Reinhold Niebuhr ' style='margin: 0px 5px;' cols='100' rows='15'>The Markets
"Historic" is not a word we use lightly, but it seems appropriate to describe what took place in the financial markets last week.
As you look at the box score below, it masks the volatility that took place in one of the wildest weeks in Wall Street history. When the dust settled, the broad S&P 500 index finished the week with a slight gain, but it took some pain to get there. Last Monday, the Dow Jones Industrial Average dropped 504 points, followed by a gain of 141, a loss of 449, a gain of 410 and it closed the week with another gain of 368 points. Whew!
By Wednesday of last week, the world financial system was teetering on the brink of collapse. Credit markets had frozen, banks were unwilling to lend to each other and stock markets were plunging. A vicious death spiral was spinning out of control. After trying a “plug the hole” policy that had failed to stem the crisis, the U.S. government threw out the playbook and decided it was time to act decisively. By late last week, the government marshaled all its resources and created a plan to try to put the crisis behind us for good. The stock market liked what it was hearing and it staged a huge rally the last two days of the week. Let’s hope it continues.

THE PAST, THE PRESENT, AND THE FUTURE OF THE CURRENT FINANCIAL SITUATION In light of the recent turmoil, this week’s report will be longer than usual. We thought it would make sense to discuss the past, present, and future of the current financial situation. This may help put things in context for you.
The Past
In order to understand how we can get out of this mess, it’s necessary to figure out how we got into it. The late 1990s is a good place to start.
No doubt you remember those “good old days.” The internet was changing the world, technology stocks were soaring, and the economy was humming along. It was a great time to be in the stock market as the S&P 500 index rose 220% for the five years ending December 31, 1999, according to data from Yahoo! Finance. That’s an average annualized return of 26% excluding reinvested dividends, which is simply phenomenal.
Of course, the good times didn’t last. The bubble popped and the S&P 500 declined by 49% between March 2000 and October 2002, according to data from Bespoke Investment Group. In order to limit the collateral damage to the economy from this steep decline, the Federal Reserve, under former chairman Alan Greenspan, embarked on a major interest rate cutting campaign to try and stimulate the economy. The Fed took the federal funds rate from 6.5% in May 2000 all the way down to 1% by June 2003, according to data from the Federal Reserve Bank of New York.
This precipitous decline in interest rates set the stage for the next bubble – real estate.
With interest rates super low and the stock market in a funk, investors turned their attention to the previously moribund real estate market. As the economy gradually improved, people started to buy homes again in a big way. And banks, mortgage companies, and Wall Street wizards were more than happy to come up with new fangled ways of getting Americans into the home of their dreams with little to no money down.
Wall Street investment banks were thrilled with this new opportunity in real estate because they weren’t making much money on their traditional business of investment banking and buying and selling securities. By coming up with new ways to package, slice, and dice mortgage securities, Wall Street firms made a boatload of money. Unfortunately, many of these new securities, which provided capital to finance the real estate boom, were highly financed themselves. Effectively, the actual equity that underpinned some of these mortgages was negligible.
When the real estate bubble became unsustainable, just like the earlier technology bubble, it all came crashing down.
With very little equity supporting billions in outstanding mortgages, a slight decline in the value of the real estate caused a ripple effect of delinquencies and defaults. As the defaults spread, it began to feed on itself like a California wildfire inhaling dry timber. Eventually, fear took over as nobody knew when the vicious cycle would be broken. Enter last week.
Investors had weathered blowups from Countrywide, Bear Stearns, Fannie Mae, Freddie Mac, and now, they were facing major problems with Lehman Brothers, AIG, and Merrill Lynch. By week’s end, Lehman had been forced into bankruptcy, AIG had been effectively nationalized by the government, and Merrill Lynch had taken refuge in the arms of Bank of America. This tumultuous turn of events propelled the government to act swiftly and decisively.
The Present
The situation is fluid and changes are happening with lightning speed. Over the weekend, the Bush Administration sent to Congress a $700 billion proposal that would give the Treasury broad authority to purchase distressed assets from U.S. financial institutions in an effort to stem the crisis. The proposal would also raise the nation’s debt ceiling to $11.315 trillion from its current $10.615 trillion limit, according to Bloomberg. To put $700 billion in perspective, that translates into an average bill of $6,500 per U.S. family, according to a report from MarketWatch. Now, it’s possible that the Treasury will turn around and sell the assets and recoup some or all of that $700 billion, but that will not be known for perhaps years.
We also don’t know how hard of a bargain the government will drive when it tries to buy these distressed assets. If it tries to buy the assets at a very low price, then the financial institutions may have to take more write-downs and raise more capital, which could keep this vicious cycle spiraling down. Conversely, if it buys the assets at a high price, then the financial institutions benefit at the expense of the taxpayers who are on the hook for any future losses.
In a surprising twist, investment banks Goldman Sachs and Morgan Stanley announced late Sunday night that they will convert their businesses into traditional bank holding companies, according to The Wall Street Journal. This will subject the companies to new regulatory oversight and possibly significantly reduce their future profit opportunities. It may also put the companies in a better position to be acquired, to merge, or to acquire a smaller bank with insured deposits.
In other news last week, the Treasury announced that it is extending bank deposit-type insurance to money market funds. The news of a money market fund that “broke the buck” prompted the government to implement this safety net as a way to limit further damage in the $3.3 trillion money market industry, according to Bloomberg. Also, on Friday, the Securities and Exchange Commission implemented a ban on short-selling 799 companies through October 2. This may ease some of the pressure on these companies and shield them from “bear raids” that could depress their stock price.
The changes announced by the government late last week helped spark a huge rally in stocks on Thursday and Friday. Nobody knows whether this is just a temporary reprieve or the beginning of a new period of stability. What we can say with some confidence is the government is all over this situation and they are trying to do all they can to prevent a replay of the 1930s.
The Future
As the old saying goes, “Forecasting is the art of saying what will happen, and then explaining why it didn't." At the risk of having to explain ourselves later, we’ll offer some comments about what the future may hold.
First, capitalism as we know it may have changed dramatically. The concept of letting free markets adjust and self-correct with minimal government intervention is likely gone. The government’s actions over the past few months indicate that there are limits to laissez faire. We may see more government regulation and that may mean lower long-term returns from securities because the regulations could remove some of the risks from investing.
Second, when a financial calamity is knocking on the door, a small number of people may assume tremendous power to make decisions that put hundreds of billions of taxpayer dollars at risk. Right now, Treasury Secretary Hank Paulson is arguably the most powerful person in America. He and his coterie of trusted advisors are massively reshaping our financial system with bullet train speed and little oversight. When the history books are written, Paulson may go down as the greatest Treasury secretary of all time or we may be throwing darts at his picture. Time will tell.
Third, we live in a global society that is highly connected through commerce and instantaneous communication. What happens in the U.S. is no longer a U.S. issue and vice versa. As a global society, we may all sink or swim together – so we all better get along. The financial crisis we’re experiencing is a great example. It’s not just isolated to the U.S. It has global ramifications.
In Closing
As we wrap up this extended commentary, we need to keep in mind that it took us years to get into this mess and it may take us years to get out of it. The government’s unprecedented action last week may have stopped the bleeding, but that doesn’t necessarily mean the patient is well. We still have a glut of homes on the market, a relatively soft economy, and a host of other headwinds. With that said, new opportunities may arise and we are always on the lookout for them.
No matter what the market may throw at us, we want you to know that we are closely following the situation and we are doing all we can as professional advisors to be good stewards of your money. If you have any questions, please let us know. Thank you for the trust and confidence you’ve placed in us. We’ve worked hard to develop it and we are working hard to keep it.

Weekly Focus – Think About It
“God, grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.” -- Reinhold Niebuhr
Sep 21, 2009 Weekly Commentary
The Markets
On Wednesday of last week, the S&P 500 index reached a milestone that has occurred only three other times since World War II.
The rare occurrence was this – the index closed 20% above its 200-day moving average. The other three times it happened were 1975, 1982, and 1986, according to Bloomberg.
So, how did the stock market perform subsequent to those feats? Well, the news is good for the bulls. A year later, the index had gains ranging from 13% to 20%, according to a research note from Birinyi Associates as quoted by Bloomberg.
On a longer-term basis, both 1982 and 1986 turned out to be good times to invest in the market. Starting in August 1982, the stock market took off on a nearly 18-year secular bull market that was one of the greatest in history. Conversely, if you got in back in 1975, you had to wait seven years before starting to participate in the new bull that began in 1982.
We will need the benefit of history to know if last week's piercing of 20% above the 200-day moving average foreshadows a new, long-term secular bull market. However, we have enough history to know the current rally is very impressive indeed.

A CONCEPT KNOWN AS "ANCHORING" may influence whether the stock market is due for a correction or not. In a famous 1974 paper titled, Judgment Under Uncertainty: Heuristics and Biases, Amos Tversky and Daniel Kahneman defined anchoring as follows:
In many situations, people make estimates by starting from an initial value that is adjusted to yield the final answer. The initial value, or starting point, may be suggested by the formulation of the problem, or it may be the result of a partial computation. In either case, adjustments are typically insufficient. That is, different starting points yield different estimates, which are biased toward the initial values. We call this phenomenon anchoring.
As it relates to the stock market, what you pick as your "initial value" may greatly influence whether you are bullish or bearish right now. Let’s illustrate this point using two hypothetical investors.
I. M. Bearish picks the March 9, 2009 bear market low close of 676 on the S&P 500 index as his initial value. This is his anchor.
I. M. Bullish picks the October 9, 2007 all-time closing high of 1,565 on the S&P 500 index as her initial value, and, hence, her anchor.
From the standpoint of I. M. Bearish, he looks at the 58% increase in the S&P 500 index between the March 9 low and last Friday and says, "After that incredible rise, this market is way overdue for a correction." Conversely, I. M. Bullish looks at the 31% decline in the S&P 500 between the October 9, 2007 high and last Friday and says, "This market has lots of room to soar since it is still well below its all-time high."
The concept of anchoring is critically important for investors because where you plant your anchor could either limit or expand your ability to understand extreme moves in the market. Anchoring on the March 9 low makes it difficult to fathom that the market can keep moving higher. Anchoring on the October 9 all-time high gives you the green light to think it can keep going up.
Anchoring applies to life, too. Dwell on an unhappy past and you are effectively tossing your anchor in a stormy sea. Focus on the possibility of a bright future and you are effectively setting sail in the azure waters of an exotic location. Some people might simply call this being a pessimist or an optimist.
Knowing where to "anchor your anchor" could be the difference between success or failure – in the markets and in life.

Weekly Focus – Think About It
"When one door closes another door opens; but, we so often look so long and so regretfully upon the closed door, we do not see the ones which open for us."
-- Alexander Graham Bell
Sep 20, 2010 Weekly Commentary
The Markets Individual investors are having a hard time deciding if they want to be bullish or bearish on the stock market.
The American Association of Individual Investors is a non-profit association of 150,000 investors. Each week, the association compiles a sentiment survey of its members which measures the percentage of individual investors who are bullish, bearish, or neutral on the stock market for the next six months. Lately, their sentiment numbers have been all over the place.
For the week ending September 15, 2010, the bullish sentiment increased to 50.9%, which was the second highest reading in two years, according to Bespoke Investment Group. That was also well above the long-term average bullish reading of 39.0%. However, just three weeks earlier, the bullish sentiment was only 20.7%, which was its second lowest reading in the past two years.
So, what changed in the past three weeks? The simple answer is a very nice stock market rally.
Between August 26 and September 16 -- the three weeks between the two surveys -- the S&P 500 index rose 7.4%, according to data from Yahoo! That rally helped turn many of the bears in the survey to bulls.
While this weekly sentiment survey is widely reported in the media, it is basically of little value unless it is at an extreme level of bullishness or bearishness. According to MarketGauge.com, bullish readings above 70.0%, “have been timely predictors of corrections in an up trend,” while bullish readings below 30.0% in a weak market, “indicate a level of fear and capitulation by individual investors which is common at market lows.”
In other words, extreme sentiment readings may actually be a contrarian indicator of where the market is heading. The takeaway is, when individual investors get extremely bullish or bearish, it may be best to do just the opposite!

SUCCESSFUL INVESTING IS NOT LIKE DRAWING A STRAIGHT LINE from point A to point B. Rather, it’s more like being able to connect the zig-zag dots along the way.
Steve Jobs, the co-founder of Apple Computer, spoke to the graduating students at Stanford University in 2005 and told a story about how on a whim, he dropped in on a calligraphy class while he was attending Reed College back in the early 1970s. At the time, he found the class utterly fascinating, but totally useless. It wasn’t until 10 years later, when he was designing the Macintosh computer, that he was able to connect the dots. He decided to take what he learned about calligraphy and incorporate it into the computer. The result was the Macintosh, which became the first computer with beautiful typography. It became a huge hit in the desktop publishing market and helped launch Apple into a multi-billion dollar company.
Like Jobs connecting calligraphy to the computer, there are many “dots” on the investment landscape that, when connected, help draw a picture of the health of the financial markets. Here are a few “dots” that we are monitoring:
• Gold setting a new all-time record high last week, according to Financial Times
• U.S. interest rates near historical lows, according to The Wall Street Journal
• Inflation nearly non-existent in the U.S., according to MarketWatch
• The U.S. dollar near a 15-year low against the Japanese Yen, according to Bloomberg
• Trillion-dollar U.S. budget deficits, according to Bloomberg
• The U.S. unemployment rate near a 27-year high, according to MarketWatch
• The rise of the Tea Party movement, according to Barron’s
• The Federal Reserve engaging in quantitative easing, according to CNBC
What are these “dots” telling us?
These “dots” suggest that numerous cross-currents are buffeting the markets and, given how inter-related the world is, we cannot view these “dots” in isolation. As your advisor, we continue to analyze how to connect them over the long-term so you can benefit from however “zig-zaggy” the line looks.

Weekly Focus – Think About It
“When nothing is sure, everything is possible.” --Margaret Drabble
Sep 19, 2011 Weekly Commentary
The Markets Are the world's economic leaders focused on solving the wrong problem related to Europe's sovereign debt woes?
As you may know, Greece and several other European countries are in debt up to their eyeballs. Much of their debt is held by European banks and there’s a big worry that if Greece or some other countries default, then some European banks may face major write-offs that could severely jeopardize their viability.
Unfortunately, what the powers that be in Europe are doing is akin to you going to the doctor and being treated for severe back pain with a heavy dose of pain medication. Rather than "heal" your back, the pain killer simply "masks" the pain.
Last week, five of the world’s leading central banks announced a coordinated action that made it easier for European banks to borrow U.S. dollars to help fund their loan needs, according to The Wall Street Journal. This move addresses the "liquidity" of European banks, but not the "solvency" of them. In other words, it helps ease the symptom of the problem without actually solving the problem.
Simply put, a liquidity problem means you are short on cash and unable to meet current payments due. Typically, it's a temporary situation that’s resolved by a loan or selling an asset to raise cash. By contrast, a solvency problem is much different. It means you have a structural defect and your revenue/assets are not high enough to support your expenses/liabilities. In effect, your business model is unsustainable. Frequently, it leads to a restructuring or bankruptcy.
In Europe, Greece has both a liquidity problem and a solvency problem. And, by extension, the banks heavily exposed to Greece and some of the other weak euro zone countries may be facing a solvency issue if they don’t raise additional capital.
So far, European leaders have been unable to agree on a once and for all solution to solve the liquidity and solvency problems facing the euro zone. Until they make the tough decisions, we may be stuck in this volatile market environment.

"BEWARE OF GEEKS BEARING FORMULAS." --Warren Buffett
On October 19, 1987, the Dow Jones Industrial Average went into a free-fall that was exacerbated by computerized “portfolio insurance” trading strategies. By the end of the day, about $1 trillion of market value evaporated, according to CNBC.
In the fall of 1998, hedge fund Long-Term Capital Management imploded and had to be bailed out by a consortium of investors orchestrated by the Federal Reserve, according to Investopedia. The fund was led by Nobel-Prize winning economists and employed sophisticated computerized trading strategies that eventually ran amuck.
During the week of August 6, 2007, as the subprime mortgage crisis was gathering speed, several large hedge funds employing quantitative investment strategies "blew up" and lost billions of dollars in just a few days, according to Scott Patterson, author of the book, The Quants.
A "Flash Crash" on May 6, 2010 wiped out $862 billion in market value in a matter of minutes and was triggered by a computer-driven sale, according to Reuters and Bloomberg. Within four days, the entire loss was recouped, according to data from Yahoo! Finance.
Last week, Goldman Sachs announced that it was closing one of its well-known hedge funds that relied on computer-driven trading strategies after it racked up substantial losses this year. At its peak, the fund had $12 billion in assets, according to CNBC.
Despite the occasional headline-grabbing failure of computerized high-frequency trading, it still accounts for roughly 50 percent of all trading volume in the United States, according to Bloomberg. Based on complex mathematics, computer-driven trading is defined as, "A technique that relies on the rapid and automated placement of orders, many of which are immediately updated or canceled, as part of strategies such as market making and statistical arbitrage and tactics based on momentum," according to Bloomberg.
With this technology takeover of Wall Street, a new element of unpredictability has entered the financial markets. The above examples show how volatile things can get when computer models go haywire.
So, some of the volatility we see in the markets these days may be exaggerated by computerized trading—both on the upside and downside. While we may not like it, we need to get used to it.

Weekly Focus – Think About It
"Interest on debts grow without rain." --Yiddish Proverb
Sep 17, 2012 Weekly Commentary
The Markets


I am the Federal Reserve, hear me roar.
Printing dollars in numbers too big to ignore.

With an apology to Helen Reddy for paraphrasing her early 1970's anthem, the Federal Reserve dropped a bombshell on the markets last week, and the reverberation may endure for years to come.

In an eagerly awaited announcement, the Fed launched another round of money printing and said it would start purchasing an additional $40 billion per month in agency mortgage-backed securities. This, on top of an existing debt buying program, will add about $85 billion per month to the Fed's balance sheet through the end of this year. While that part of the announcement was not too surprising, the twist that turned investors' heads was the following two excerpts from the Fed's statement.

1) If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability.
2) The Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens.
Source: Federal Reserve

The Fed did two new and astonishing things in these excerpts. First, they made this intervention "open-ended" whereas in the past, they put a fixed dollar amount and time frame on it. Second, they said the intervention would continue long past the time when the economic recovery strengthens, which suggests the Fed may keep pumping the economy full of gas even if the tank is already full.

With this aggressive action, two words come to mind—unintended consequences. Already, we've seen commodity prices, precious metals, and long-term interest rates rise and the U.S. dollar slump. To take a quote from Aldous Huxley and, before him, William Shakespeare, we're in a brave new world with these moves, and as your advisor, we’re doing our best to succeed in it.


"SITUATIONAL AWARENESS" IS A MILITARY CONCEPT that has some applicability to our role as a financial advisor. In the military sense, it's defined as:

Knowledge and understanding of the current situation which promotes timely, relevant, and accurate assessment of friendly, enemy, and other operations within the battle space in order to facilitate decision making. An informational perspective and skill that fosters an ability to determine quickly the context and relevance of events that are unfolding.

Metaphorically, you could consider Wall Street the "battle space" replete with friends, enemies and all kinds of noise and news that may or may not affect the battleground. Making sense of all this cuts to the heart of situational analysis.

Not surprisingly, there's a process to situational analysis. Air Force Colonel John Boyd developed the OODA Loop in the 1950s, which stands for Observe, Orient, Decide, Act. Through this iterative process, military folks observe a situation, process what it means through orientation, decide on a course of action, and then act to solve the problem. Similarly, financial advisors use a process to analyze incoming information and then take action.

In theory, this sounds like a reasonable way to make decisions in a complicated world. And, for many years, it worked for the military and advisors alike. But guess what? Times change. As the military realized, the world is evolving from being merely complicated to the more nebulous complex; one characterized by more ambiguity and hyperspeed in information.

In today's complex financial world, the OODA Loop process has lost some effectiveness. To evolve with the times, we have to become better critical thinkers. We have to challenge more assumptions and offer alternative scenarios. We have to think about unintended consequences and potential "Black Swan" events. We have to get comfortable in making decisions in a world of uncertainty and ambiguity.

Will we always get it right? No. But we can assure you we are continuous learners and strive hard to make effective decisions on your behalf.


Weekly Focus - Think About It...

"Complexity is the prodigy of the world. Simplicity is the sensation of the universe. Behind complexity, there is always simplicity to be revealed. Inside simplicity, there is always complexity to be discovered." --Gang Yu, PhD, Associate Professor, UT Southwestern Medical Center
Sep 16, 2013 Weekly Commentary
The Markets


Baseball great Yogi Berra once said, "In theory there is no difference between theory and practice. In practice there is." He may have been on to something.

Last May, Fed Chairman Ben Bernanke introduced the idea the Fed's economic stimulus program, known as Quantitative Easing (QE), might be ratcheted down sooner rather than later. The concept, that easy money - the Fed has injected about $2.75 trillion into financial markets during the past five years - could soon be behind us, threw global markets into a tizzy.

Expectations that interest rates in more developed economies would move higher as QE tapered off caused investors to pull money from emerging markets (where many had sought higher returns). This created challenges in emerging countries with large current account deficits (deficits that occur when total imports exceed total exports, making a country a debtor nation).

So, what will happen when the Fed actually begins to buy fewer bonds? Pundits are mixed in their opinions. Some believe markets may become more volatile; others believe markets have already factored in the effects of tapering. In August, the Financial Times described it this way:

"The beginning of the end for QE matters greatly as for the past five years central banks led by the Fed have actively encouraged investors to pile into risky assets. With QE suppressing interest rates and more importantly, the volatility of prices, investors duly obliged and sought risky assets. Now with the Fed thinking about reversing some support, this summer's turmoil may be a taste of what is coming in the form of higher long-term bond yields and market volatility. Some will argue the Fed's taper is pretty much reflected by the sharp rise we have seen in long-term Treasury yields since May."

We'll know more when the Federal Open Market Committee announcement is made. Over time, however, it may not be all that easy to quantify the effects of more accommodative monetary policy in the United States, if that's what the Fed chooses to do this week. There are other flashpoints that could affect markets, as well, including economic stressors in emerging markets, decisions on Syria, and upcoming Washington budget battles.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


EXPLORING THE INTERNET OF EVERYTHING… Before you read further, you may want to cue the music to Hanna Barbera's space age cartoon, The Jetsons. The Internet of Everything (a.k.a. The Internet of Things) seems to be bringing the world closer to a reality where your refrigerator can order groceries, your smartphone can start your car, and tattoos only show when you want them to be seen. Two of the keys to connecting everyday things to each other and to the Internet are radio frequency identification (RFID) chips and Near Field Communication (NFC) systems.

RFID chips are all around us. Companies use them to manage inventories, farmers use them to track livestock and, in Boston, commuters use 3D-printed, chip-embedded rings to pay for mass transit. If you've traveled overseas recently, you probably used an RFID chip. Newer American passports have chips embedded to make it easier for Homeland Security to read them. In addition, contactless smart credit cards, which rely on chips and pin codes, are the standard across most of Europe and much of South America and Asia. As a result, Americans who try to use credit cards that have magnetic stripes and require signatures sometimes face challenges when trying to pay for goods abroad.

NFC is short-range wireless communications technology that may be best known for making it easier to pay for things with your smartphone or tablet. According to Venture Beat, an online magazine that focuses on the role of technology in daily life, one of the most powerful applications of NFC technology may be tag writing and reading. How does it work? Imagine this:

"When you arrive at home you will hold your phone up to the NFC tag embedded in the door. This will turn the electronic lock, opening the door, but it will also switch your phones to "home mode," enabling it to use your home Wi-Fi network and launching an app that connects to your home server to turn on the lights. Heading to the kitchen, you might then put your tablet next to the stovetop to begin cooking the evening meal. NFC tags in the tablet and stovetop recognize each other, the tablet starts up the recipe app with instructions on cooking tonight's dinner. At the end of the evening, you'll place your device on the bedside table and the proximity to another tag will bring up the clock/alarm app."

Just think. Someday, the Internet of Everything may even include Jetsons-style flying cars.


Weekly Focus - Think About It

Ideas are like rabbits. You get a couple and learn how to handle them, and pretty soon you have a dozen.
--John Steinbeck, American writer

Sources:
http://www.brainyquote.com/quotes/authors/y/yogi_berra.html
http://www.nytimes.com/reuters/2013/09/10/business/10reuters-usa-fed-preview.html?ref=quantitativeeasing&_r=0
http://www.reuters.com/article/2013/09/13/us-usa-stocks-weekahead-idUSBRE98C0ZC20130913
http://www.ft.com/cms/s/0/ec1b9358-1003-11e3-99e0-00144feabdc0.html#axzz2eySf2Jdt (Go to this link if you are not able to read the Financial Times article:
http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/09-16-13_FT_Source_4-Pivotal_Period_Looms_After_Summer_of_QE_Tension.pdf)
http://www.ft.com/cms/s/0/20802e26-1e12-11e3-a40b-00144feab7de.html#axzz2eyyRRTUo (Go to this link if you are not able to read the Financial Times article:
http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/09-16-13_FT_Source_5-Bank_Lending_to_Emerging_Markets_Soars_to_Record.pdf)
http://www.investopedia.com/terms/c/currentaccountdeficit.asp
http://news.nationalgeographic.com/news/2013/08/130830-internet-of-things-technology-rfid-chips-smart/
http://www.digitaltrends.com/social-media/the-man-with-the-gif-in-his-hand/
http://venturebeat.com/2011/06/21/nfc-and-the-internet-of-things/
http://www.psfk.com/2013/09/rfid-subway-card-ring.html
http://www.emvco.com/documents/EMVCo_EMV_Deployment_Stats.pdf
http://www.brainyquote.com/quotes/quotes/j/johnsteinb121626.html
* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.

* Quantitative Easing is a government monetary policy occasionally used to increase the money supply by buying government securities or other securities from the market. Quantitative easing increases the money supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Past performance does not guarantee future results.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

Sep 15, 2008 Weekly Commentary
The Markets
Despite a barrel full of bad news, the stock market actually ended last week with a modest gain.
Some of the most significant news last week continued to come from the financial sector. At the beginning of the week, the government stepped in to bailout the giant mortgage lenders Fannie Mae and Freddie Mac. That was bad news for stockholders of those two companies, but the overall stock market greeted the news with excitement. On Monday, the Dow Jones Industrial Average soared 289 points. Unfortunately, the excitement was short-lived.
The very next day, investment bank Lehman Brothers took the spotlight and it wasn’t pretty. Investors were hoping the firm would find a partner to inject additional capital, but none materialized, according to MarketWatch. Lehman stock dropped nearly 45% that day and it helped send the Dow down 280 points – all but erasing the previous day’s gain.
As the week progressed, things continued to deteriorate in the financial sector as Merrill Lynch and American International Group both got caught up in aggressive selling. By the end of the week, Merrill Lynch stock had dropped 36% and American International Group had lost 46% according to data from Yahoo! Finance.
Soured real estate investments coupled with a loss of confidence are the main culprits of the declining stock prices in the financial sector. Fortunately, not all financial companies are in trouble. Some major firms avoided the brunt of the real estate crunch and, as a result, they may become stronger as the weaker players get absorbed.
On a more positive note, we did receive some good news in the oil sector. Oil prices dropped 4.8% last week and that may help keep inflation in check. The drop is even more remarkable when you consider Hurricane Ike pummeled the gulf coast region and caused a major shutdown of drilling and refining operations. It wasn’t that long ago when just the threat of a hurricane would cause oil prices to jump. Now, the psychology seems to have changed and investors are more worried about slowing demand, rather than falling supply, according to MarketWatch.
To say we live in interesting times would be stating the obvious. We have a war on terrorism; hurricanes; the political silly season; failing financial institutions; soaring, then plunging oil prices; a depressed real estate market; and a myriad of other issues. Yet through it all, we have to find a way to be resilient. Yes, the market is down and it hurts, but for those who are diversified, it’s generally not catastrophic. We remain optimistic that we’ll pull through our current problems and end up stronger down the road. As Americans, that’s the way it’s always been, and we expect that’s the way it will always be.

IF THE WORLD IS FLAT, does that mean we should allocate a higher percentage of our portfolios to foreign investments? With the economic rise of Brazil, Russia, India, China, and other foreign countries over the past few decades, the opportunities to invest overseas have multiplied dramatically. Along with that, the percentage of the world’s stock market capitalization represented by the United States has shrunk. For example, in 1970, the U.S. stock market accounted for about 66% of the world’s stock market capitalization. Currently, that figure is down to about 43%, according to a September 8 Wall Street Journal article titled, “Going Global: How Do You Get There from Here?”
This significant shift means investors who stick just to U.S. companies are bypassing more than 50% of the world’s stock market opportunities. That’s like going to your doctor and telling him less than half of your symptoms and hoping he’ll be able to make the correct diagnosis. Let’s assume for a moment that you agree that investing in foreign companies makes sense, then the logical question is, how much?
In a series of new asset allocation plans released this month by Citigroup, they recommend investors put 55% of their stock assets in foreign stocks, according to the Journal article. While that may seem high, it’s roughly in line with the percentage of the world’s stock market capitalization represented by non-U.S. stocks. Quoting from the Journal, investors who favor this type of weighting are trying to “match the world's stock-market weightings to get the best risk-adjusted returns over the long run.”
Stepping outside the U.S. may have its advantages. For example, for the five years ending December 31, 2007, the Dow Jones Wilshire Emerging Markets index rose at an average annual rate of 46.5%, including reinvested dividends, according to the Journal. That compares quite favorably to the 12.8% return of the domestic Standard & Poor’s 500 index.
But, before we get carried away, investing in foreign markets entails risks such as currency swings, different accounting standards, and potential government instability. Oh, and let’s not forget that foreign markets can go down, too. Through the first eight months of this year, the Dow Jones Wilshire Emerging Markets index was down 22.7%, according to the Journal.
Ultimately, as you have more investment options to choose from, you may have more opportunities to find winning investments. While there may not be a specific percentage of foreign investments that will work for everybody, being a “worldly” investor may open the door to greater success when compared to just staying put in the U.S.

Weekly Focus – Seven Years Ago
As we pass the seventh anniversary of the terrorist attacks, it’s a good time to remember those who lost their lives, or were injured, and to thank those who are presently risking their lives to keep us safe. We may take for granted the relative safety that most of us enjoy, but it comes with a price. Let’s be grateful for all those who are paying that price on our behalf.
Sep 14, 2010 Weekly Commentary
The Markets If you had an extra $1,000, would you use it to reduce debt or would you spend it on something discretionary?
How Americans answer that question may significantly impact economic growth over the next few years, according to an August 20 report from Federated Investors. If Americans decide to focus on debt reduction that could keep a lid on economic growth in the near term, but would likely be good for the economy over the long term. Conversely, if Americans start spending freely, it may boost short-term growth, but it might delay our day of reckoning and make it worse down the road.
Another factor that comes into play here is demographics. The leading edge of the much chronicled Baby Boom generation is now in its mid-60s and their peak spending years are behind them. When this group hit their peak spending years back in the 1980s and 1990s, the U.S. economy and stock market roared. Now that the cohort is entering their 60s, their spending is slowing down.
Generation X follows on the heels of the Boomers, but their numbers are significantly smaller so they won’t be able to pick up the slack.
From a longer-term demographic perspective, the good news is that Generation X is followed by the Millennials. Influential authors William Strauss and Neil Howe define the Millennials as people born between 1982 and 2001. At about 85 million strong, the Millennials are even larger than the Baby Boom generation, according to Advertising Age. As the Millennials reach their peak spending years, we could possibly see another economic resurgence in roughly the 2020-2040 period, according to HS Dent, an economic research and forecasting company.
Demographics help define potential longer-term trends and are useful in putting the current economic environment in context. And, with demographics in mind, Americans may be more likely to save that extra $1,000 instead of spending it on the latest gizmo.

“ANYBODY WHO THINKS MONEY WILL MAKE YOU HAPPY, HASN’T GOT MONEY,” according to billionaire David Geffen. Now we have a new scientific study that helps quantify the connection between money and happiness.
Researchers Daniel Kahneman and Angus Deaton of Princeton University analyzed data from the Gallup-Healthways Well-Being Index and tried to determine how income affects an individual’s emotional well-being and overall life satisfaction. They measured emotional well-being as an individual’s day-to-day level of happiness (e.g., how much enjoyment, laughter, smiling, anger, stress, or worry they experience each day,) while overall life satisfaction was measured as an individual’s satisfaction with their life in general.
Here’s what they found.
As a person’s annual income rises up to about $75,000, their emotional well-being, or day-to-day happiness, rises, too. But, beyond $75,000 in annual income, there was no additional boost to day-to-day happiness, according to the researchers’ article published in the Proceedings of the National Academy of Sciences and reported by Inc. magazine.
What’s the key to $75,000? According to LiveScience.com, “The researchers suggest that making anything more than $75,000 no longer improves a person’s ability to spend time with friends, avoid pain and disease, and enjoy leisure time--all factors involved in emotional well-being.”
Ah, but more money does increase overall life satisfaction. According to the Inc. article, “With every doubling of income, people tended to say they were more and more satisfied with their lives on a 10-point scale--a pattern that continued for household incomes well above $120,000.”
Do these findings match your life experience? Let us know what you think.

Weekly Focus – Think About It
“An object in possession seldom retains the same charm that it had in pursuit.”
--Pliny the Younger
Sep 14, 2009 Weekly Commentary
The Markets Rarely do you see a headline in a mainstream newspaper containing the three words, "Yale," "Harvard," and "Losers," but that's exactly what happened last week in The Wall Street Journal.
The Journal certainly wasn't talking about the Universities' academic prowess or even their athletic exploits; rather, it was the disappointing performance of their once invincible endowment funds. The value of their endowments each dropped by 30 % for the 12 months ending June 30, 2009. By comparison, a typical plain-vanilla endowment allocation of 60 % stocks and 40 % bonds lost only 13 % during that period, according to the Journal.
What's newsworthy about these losses is that Yale had pioneered an unorthodox approach to endowment investing that worked spectacularly for years (and was copied by Harvard), but like many investment ideas, it eventually ran into a brick wall. Under the leadership of David Swensen, Yale's portfolio mix changed dramatically. For example, the allocation to private equity rose from 3.2 to 20.2 %; real assets – timber, real estate, and the like, rose from 8.5 to 29.3 %; and hedge funds went from zero to 25.1 %. To accomplish this mix, the allocation to domestic stocks and bonds dropped from 71.9 to 14.1 %, according to a March 2009 article from Portfolio.
Essentially, Swensen argued that endowment funds should avoid traditional stocks and bonds and, instead, invest in higher yielding and less liquid assets that more closely match an endowment fund’s long-time horizon. That strategy was a winner for years and despite the 30 % loss last year, both Yale and Harvard's portfolios are still ahead of where a traditional 60/40 allocation would have put them.
Here's the point – even the best and the brightest such as Swensen eventually stumble, if only temporarily. Likewise for us, the cost of long-term investment success may be the periodic pain of significant declines.

WHO’S RIGHT, stock market investors or bond market investors?
The stock market set a new yearly high last week while interest rates on government securities continued to drop. A strong stock market suggests investors are willing to add more risk to their portfolios and that they are more confident in the economy. This could be a bullish sign that the worst is behind us and we're off to the races.
The reason for the recent drop in interest rates on government securities is more puzzling. Here are several traditional reasons why rates on government securities might drop:
• The government is trying to stimulate economic growth through a low interest rate policy
• The economy is fully functioning and investors perceive risks as low
• Inflation is declining
• Investors are seeking a safe haven
As a good example of the safe haven reason, back in the middle of October 2008, the 10-year Treasury yielded 4.0 %. Over the next two months, as the world financial system almost collapsed, the yield dropped nearly in half to 2.1 % as investors fled the stock market for the perceived safe haven of U.S. government debt. However, as the crisis eased, investors moved back into the stock market, which helped push the yield up to nearly 4.0 % again by early June 2009, according to data from Yahoo! Finance.
Interestingly, as the stock market hit its bear market low on March 9, 2009, the yield on the 10-year Treasury was 2.9 % – significantly above the 2.1 % "fear" low from a few months earlier. This suggests that the stock market hit its price low several months after the bond market hits its fear low. The bond market may have been saying that in early March, things weren't as bad as the stock market thought they were. Now that we’ve had a greater than 50 % pop in the S&P 500 index since that low, you'd have to score one for the bond market's predictive ability!
Moving to the present, the yield on the 10-year Treasury dipped back down to 3.3 % last week from its June high of nearly 4.0 %. Is the bond market now foreshadowing another flight to safety? Is it suggesting that the economy is weaker and the recovery will take longer than generally perceived by stock market investors? Is it betting that deflation is a bigger concern than inflation? Or, is it suggesting that the Goldilocks economy is back and economic activity is "just right?"
Right now, there is no definitive answer to what the bond market is telling us because there are several crosscurrents buffeting it. However, suffice it to say, that if the yield on the 10-year Treasury continues to decline, our alarm bells will rise commensurately.

Weekly Focus – Think About It
"The bravest are surely those who have the clearest vision of what is before them, glory and danger alike, and yet notwithstanding go out to meet it."
-- Thucydides
Sep 12, 2011 Weekly Commentary
The Markets Are we heading toward a "currency war?"
When there's turmoil in the stock market or in the geopolitical environment, investors sometimes flee toward perceived "safe havens" in the hope of protecting a portion of their assets. While there's no guarantee that any investment will be free from risk, the following assets have sometimes been on the receiving end when times get tough:
*U.S. dollar
*Swiss franc
*Japanese yen
*U.S. Treasury securities
*Gold
Sources: Goldline.com, U.S. Census Bureau
For example, Europe's debt woes have soured investors on the euro (the European common currency) and pushed investors to the Swiss franc. This flight to the franc has been so strong that in early August, the franc hit a record high against the euro, according to The Wall Street Journal.
Unfortunately for the Swiss, the high value of the franc created countrywide economic problems. The Wall Street Journal said the soaring franc, "pushed some weaker Swiss exporters into bankruptcy, and sent others scrambling to slash prices to hold onto business." In addition, "Tourists, an important source of income for the Swiss economy, now find it more expensive than ever." Essentially, the strong franc created domestic havoc.
Well, last week, the Swiss National Bank decided enough was enough. The bank announced that it would cap the value of the soaring franc and, "buy euros in 'unlimited quantities' whenever the single currency fell below 1.20 francs," according to The Wall Street Journal. Within minutes of that announcement, the value of the franc plunged 8 percent against the euro, according to Bloomberg.
Without getting bogged down in the details, this was an extremely bold move by the Swiss and could lead to, "a currency war, in which a growing band of countries seek to lower the values of their currencies to protect their economies," as reported by The Wall Street Journal.
Dramatic currency intervention like this adds one more wrinkle to the uncertain worldwide economic environment. While we can't control situations like this, it's on our radar and we'll monitor it and adjust for it on your behalf as best we can.

9/11 – 10 YEARS LATER
The past week was filled with remembrances of that tragic day 10 years ago when we lost nearly 3,000 of our loved ones and the country lost its feeling of peace and security. We will never forget the grief, the heroism, and the pulling together of the nation as we all tried to heal in the days and months following that fateful event.
Much has changed since then and, in a way, we all lost some of our innocence and perhaps some of our optimism. But, as Americans, we are a resilient nation. We've endured tragedy and war before and we always found the strength and the courage to overcome. The pain of the terrorist attacks is still with us, the images still vivid, the effects still lingering, but persevere we do and prevail we will.
While it pales in comparison to the human toll of 9/11 and its aftermath, the U.S. financial markets and the economy have been relatively weak in the years since that day. Here are some examples:
*Over the 10 years between September 10, 2001 and September 9, 2011, the S&P 500 index rose only 5.6 percent -- that's a compound average annual return of only 0.6 percent excluding dividends. Source: Yahoo! Finance
*Over the 10 years between September 10, 2001 and September 9, 2011, the price of one ounce of gold rose 581.8 percent -- that's a compound average annual return of a whopping 21.2 percent. The rise partly reflects inflation concerns, currency debasement, and a general flight to safety. Source: London Bullion Market Association
*The U.S. experienced two recessions since 2001. Source: National Bureau of Economic Research
From the terrorist attacks and their aftermath to the sluggish economy, it's been a difficult 10 years for our country. And, just like it has taken time to process the 9/11 tragedy, it will take time for our global financial system to deleverage and cleanse itself. As this unwinding continues, there will be setbacks. But, over time, our human spirit will strengthen, our economy will improve, and the world will be a better place.

Weekly Focus – Think About It
"Enjoy the little things, for one day you may look back and realize they were the big things." --Robert Brault
Sep 09, 2013 Weekly Commentary
The Markets


Confluences are the building blocks of the world's waterways. When two or more rivers meet, changes in velocity and turbulence tend to result in geologic scouring; erosive activity that may alter the shape of the river and its bed. The action may produce a 'scour hole' downstream from the confluence. For a river runner, a hole creates "potential for trouble and the need for deft maneuvers." America may be heading toward a scour hole that is being shaped by a confluence of factors and events, domestic and global, economic and demographic.

Several of these factors were highlighted by last Friday's employment report which showed unemployment has fallen to 7.3 percent. This may seem like a positive development until you realize just 63 percent of working-age Americans have a job or are looking for one. According to The Washington Post, that's the lowest workforce participation rate in 35 years.

The change in American employment is rooted in the Great Recession and relatively slow pace of economic recovery, as well as a confluence of demographic trends. Younger Americans of working age are staying in school longer before looking for a job. In addition, and perhaps more importantly, the Baby Boom generation has begun to retire at a rate of about 10,000 a day or 300,000 a month, according to PBS NewsHour.

America's changing employment picture may be a significant challenge to economic growth, but other factors will influence the shape of our future, as well. Congress returned from recess on Monday. They may not get to all of it this week, but their agenda includes determining: America's response to Syria, the government's operating budget, the debt ceiling, and funding for the Affordable Healthcare Act.

As if that weren't enough, next week, the Federal Reserve will be making an important decision about tapering quantitative easing (which could be complicated by a potential government shutdown and debt ceiling expiration if Congress waffles).

We live in interesting times.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


IN 1835, IN DEMOCRACY IN AMERICA, ALEXIS DE TOCQUEVILLE SAID:

"AMONG the novel objects that attracted my attention during my stay in the United States, nothing struck me more forcibly than the general equality of condition among the people... it gives a peculiar direction to public opinion and a peculiar tenor to the laws; it imparts new maxims to the governing authorities and peculiar habits to the governed... The more I advanced in the study of American society, the more I perceived that this equality of condition is the fundamental fact from which all others seem to be derived and the central point at which all my observations constantly terminated."

One wonders what he would make of the difference in pay between lawmakers in various states today. A recent chart published in The Economist showed pay for state legislators ranges from nothing in New Mexico, where the median household income from 2007 through 2011 was about $44,600, to more than $90,500 in California where the median household income was about $61,600 during the same period.

If you believe having a greater number of legislators means the opinions of the masses are better represented, then it would seem citizens in states that pay lawmakers more are less well represented. The average number of legislators per million people in the 10 states that pay the most is about 22. In the 10 states that pay the least, it's about 112 per million people. The exceptions appear to be Alaska, which pays about $50,000 a year and has about 82 legislators per million people, and Texas which pays less than $10,000 and has about 7 legislators per million.

The Economist pointed out lawmaking may be less costly in other ways, too, in states that offer lower salaries to policymakers. As it turns out, about one-third of state legislatures are part-time. States like Texas, Montana, Nevada, and North Dakota, where lawmakers meet every second year, tend to spend less than states where legislators meet more frequently.


Weekly Focus - Think About It

"Democracy cannot succeed unless those who express their choice are prepared to choose wisely. The real safeguard of democracy, therefore, is education.
--Franklin D. Roosevelt, American President

Sources:
http://www.scialert.net/fulltext/?doi=jas.2012.289.295&org=11
http://test.ourhomeground.com/entries/definition/hole
http://data.bls.gov/timeseries/LNS14000000
http://www.washingtonpost.com/business/economy/economy-added-169k-jobs-in-august-as-the-recovery-grinds-along/2013/09/06/696820dc-16ef-11e3-a2ec-b47e45e6f8ef_story.html
http://www.pbs.org/newshour/businessdesk/2013/08/is-baby-boomer-retirement-behi.html
http://finance.yahoo.com/blogs/the-exchange/ready-washington-quadruple-witching-hour-204821773.html
http://xroads.virginia.edu/~Hyper/DETOC/preface.htm
http://quickfacts.census.gov/qfd/states/35000.html
http://quickfacts.census.gov/qfd/states/06000.html
http://www.economist.com/news/united-states/21584997-some-work-nothing
http://www.brainyquote.com/quotes/keywords/democracy.html
* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.

* Quantitative Easing is a government monetary policy occasionally used to increase the money supply by buying government securities or other securities from the market. Quantitative easing increases the money supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Past performance does not guarantee future results.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

Sep 09, 2012 Weekly Commentary
The Markets


It's about time.

Believe it or not, the U.S. stock market as measured by the S&P 500 index hit an all-time record high last week when you include reinvested dividends, according to Bloomberg. Now, you may not have seen that headline in the news last week because the index itself is still 9.3 percent below its all-time high reached on October 9, 2007.

Here are a few other interesting stats to ponder:

1) In 2012 alone, the rise in the U.S. stock market added $1.9 trillion to investors' wealth.
2) As of last week, the S&P 500 index rose 112 percent from its 12-year low reached in March 2009.
3) Even though economic growth is sluggish, U.S. corporate earnings are projected to reach a record high this year. If reached, this would place earnings about 20 percent higher than 2007's – the year the U.S. stock market hit its all-time high.
4) By historical standards, "The S&P 500 is trading 13 percent below its average valuation since the 1950s."
5) World central banks expanded their balance sheets by about 9 trillion dollars since the financial crisis started.
Sources: Bloomberg; Barron's

Number 5 above is an important point to keep in mind. Easy money has greased the world economy and now there's talk of even more monetary stimulus in Europe and the U.S., according to MarketWatch. What remains unanswered is, how much of the market's rise has been stimulated by the stimulus and what happens when the stimulus is no longer available or effective? Can the economy stand on its own?

Barron's framed it this way, "At some level, the market gets priced not simply for the monetary-easing cure to remedy economic ills, but for that drug being administered to a healthy patient for recreational purposes." Translation – if central banks overshoot and markets get addicted to the easy money high, the inevitable withdrawal of the money drug may be painful.


CAN GOOD NEWS BE GOOD FOR THE WRONG REASON? Last week, the government released the eagerly awaited monthly payroll report. It showed a modest 96,000 increase in non-farm jobs in August compared to the month before. While that number was disappointingly low, the unemployment rate showed a surprising (and positive) drop to 8.1 percent; down from 8.3 percent the previous month.

Here's where it gets tricky: the drop in the unemployment rate occurred for the wrong reason, according to The Economist. The main reason why the unemployment rate dropped was 368,000 people left the labor force. With fewer people being counted in the labor force, the unemployment rate looks better than it might be otherwise.

A related statistic, called the labor force participation rate, measures the share of the working-age population either working or looking for work. This figure fell to 63.5 percent last month – a three-decade low, according to The Economist.

Is a declining labor force participation rate a bad thing? According to Matthew O'Brien writing in the Atlantic, "Less people in the labor force means, all else equal, that we will produce less stuff in the long run. And, less stuff means we have less wealth, lower stock prices, and fewer taxes to pay for retirement."

So, why are people leaving the labor force? Here are a few reasons:

• Going back to school
• Raising children
• Retiring
• Going on disability
Source: The Wall Street Journal

Now, there's one more big reason why people leave the labor force – they get discouraged and simply stop looking for a job even though they want one. Conveniently, the government tells us there are, unfortunately, nearly 7 million of those folks as of the end of August; that's up from about 4.4 million near the end of 2007.

Fed Chairman Ben Bernanke recently called the unemployment level a "grave concern" and the numbers seem to support him. Bottom line, even though the unemployment rate dropped, it dropped for the wrong reason and we still have a long way to go to get this country working again.


Weekly Focus – Think About It...

"Laziness may appear attractive, but work gives satisfaction."
--Anne Frank, The Diary of a Young Girl
Sep 08, 2009 Weekly Commentary
The Markets The 2000s are turning into a lost decade for investors and for jobs.
The stock market, as measured by the S&P 500 index, is lower today than it was at the start of the decade excluding reinvested dividends, according to data from Yahoo! Finance. Likewise, the private sector of the economy has lost a net 233,000 jobs between August 1999 and August 2009, according to MarketWatch. While the net result has been down, it's been a dizzying roller coaster ride over the past 10 years.
In the late 1990s, we witnessed an incredible stock market rally that pushed stock prices to an all-time high. Then poof, the bubble burst and stock prices dropped dramatically. Concerned about the potential fallout from the market decline, the Federal Reserve quickly implemented a low interest rate policy, which helped spark a multi-year housing bubble. Stocks eventually recovered and the S&P 500 index set a new all-time high in October 2007. Since then, we've had a dual drop in stock prices and the housing market, which took the economy – and jobs – down with them.
Like it or not, capitalism seems to engender boom and bust cycles. We're currently in a decade-long bust cycle; however, it was preceded by two booming decades as the S&P 500 index had an annualized total return of 18.2% in the 1990s and 17.5% in the 1980s, according to Vanguard.
The good news is, while we don't know the timing of it, booms generally follow busts.

WITH THE RISE IN OUR BUDGET DEFICIT and the quantitative easing taking place, there is some concern that the value of the U.S. dollar could drop significantly (i.e., become cheap). Why should we care? An extremely weak dollar could lead to the following:
Higher prices on imported goods because of a low exchange rate
Higher prices on imported goods could lead to unacceptable levels of inflation
Our exports may become cheap, but foreign countries may retaliate for a weak dollar by imposing trade barriers
Despite the potential pitfalls, a weak (but not too weak) dollar does have at least one major benefit – it tends to rev up exports because our products become cheap when converted into foreign currencies. Because of this benefit, the government may not mind if the dollar is weak as long they can keep the disadvantages of a weak dollar under control.
China is a good example of how a weak currency can be beneficial. In mid-July of this year, you could buy a McDonald's Big Mac for $3.57 based on the average price in four major U.S. cities, according to the Economist magazine. By contrast, in China, you could buy a Big Mac for the equivalent of just $1.83. Based on this very simple analysis, some would argue that China's currency, the yuan, is (unfairly) cheap. Perhaps not surprisingly, China's GDP grew 7.9% in the second quarter while much of the rest of the world struggled, according to Shanghai Daily.
With a cheap yuan, China becomes a desirable place for foreign countries to outsource their manufacturing because they can get more bang for their buck (currency). And, guess which country is one of the biggest outsourcers to China? Yes, that would be us.
The U.S. seems to tolerate a cheap yuan because China has been an eager buyer of our Treasury securities, which helps fund our budget deficit, according to the Treasury department. On the downside, it's been brutal to our manufacturing sector.
As we rack up trillions of dollars in deficit spending over the next few years, we need a willing buyer like China to keep snapping up our greenbacks. If our dollar collapses, China will lose because they hold hundreds of billions of our dollars. If they lose money on their dollar holdings, they may stop financing our deficits, which could lead to much higher U.S. interest rates. So, we have a strong interest in preventing the dollar from collapsing.
Here's the main point of this rather lengthy piece on the value of the dollar – the U.S. has to maintain some level of fiscal and monetary discipline or else we run the risk of a run on the dollar and a resulting economic debacle. To help us identify if we are heading toward a dollar disaster, we are monitoring the value of the dollar, gold prices, commodity prices, and interest rates.
Whew. Let's end with something lighthearted. Ten years ago, a Big Mac cost $2.43, according to the Economist. Today, it costs $3.57. That's a 47% increase. Do you think the taste of a Big Mac improved by that much over the past decade? If so, then maybe this wasn't a lost decade after all.

Weekly Focus – Think About It
"It doesn't work to leap a twenty-foot chasm in two ten-foot jumps."
--American Proverb
Sep 08, 2008 Weekly Commentary
The Markets Earlier this year, some investors thought the key to a rising stock market was to see a big drop in the price of oil. Well, we've now seen a 27% drop in the price of oil since its July 3 closing high, but, as of last Friday, stock prices were still languishing near their July lows, according to Associated Press. So, what’s the deal?
The deal is investors can be fickle. They’re prone to quickly changing their minds based on which way the wind is blowing. Oil is a good example. Here’s a brief chronology of investors’ fickleness toward oil:
• For the first few months of 2008, we kept hearing about how strong economic growth in China, India, Brazil, and other emerging economies was pushing up the price of oil and that it wasn’t a bubble, rather, it was a simple case of supply and demand. • During that same time, the U.S. stock market weakened as investors fretted that higher energy prices would ignite rampant inflation and tip the U.S. into a recession. • As oil prices rose to $145 per barrel in July and the U.S. stock market entered a bear market, economic pundits started suggesting that if oil prices would drop significantly, that would be the spark necessary to jumpstart our economy and fire up the stock market. • As if on cue, by Friday, September 5, oil prices ended the day down 27% from their July 3 high, while the Dow Jones Industrial Average was up only 2% during that same period, according to data from Yahoo! Finance. • Now, some market pundits are saying that falling oil prices are due to weakening demand from faltering global economies, according to Associated Press. That could be bad news for our stock market because strong exports have been one bright spot in corporate earnings. If export demand weakens, that could translate into lower corporate profits and lower stock prices.
That sure makes a neat and tidy narrative, doesn’t it? Wall Street talking heads love to take the complexities of investing and turn them into short stories that can be easily understood. We’re all in favor of a good story well told, but when it comes to investing, we prefer non-fiction to fiction. Part of our job as stewards of your money is to try to separate the fictional stories from the non-fictional. And, when the story changes frequently – like it has recently – we become especially alert.

DO FINANCIAL MARKETS EFFICIENTLY AND EFFECTIVELY reflect all available relevant information? Some academicians believe that you cannot “beat” the stock market. They believe that the market is smarter than any one individual and that stocks always trade at their fair value. As such, they suggest it is not possible—over a long period of time—for an investor to outperform a broad-based stock index. They call this the “efficient market hypothesis.”
Critics of the hypothesis point to super investors like Peter Lynch and Warren Buffett who have long-term track records that show they’ve outperformed the market. Academics don’t dispute that some people have beat the market, but the academics chalk that up to luck and statistical anomalies. They also point out that it is near impossible to identify ahead of time the next Peter Lynch or Warren Buffett, so, most people can’t benefit from those few outliers.
Putting the debate aside for a moment, in the investing world, there appears to be three camps. There’s the “If you can’t beat’em, join’em” camp that says markets are efficient and you might as well just invest in products designed to mimic broad market averages. These folks tend to focus on making an appropriate allocation to various asset classes. The second group says, “Yes, I can beat’em.” They think discipline and research may lead to superior market returns. Then there’s a third group that is in the “A little of both” camp. They think the other two sides have merit and it makes sense to manage portfolios using both passive and active strategies.
So, which camp is right? Like many things in investing, it’s not always black and white. Reasonable people could make a case for each of these three strategies. And, at any given time, one strategy might work better than the other. Understanding that may make all of us better investors.

Weekly Focus – Key to Health and Happiness
Various researchers have concluded that one key to health and happiness is to actively try to become more grateful in our everyday lives, according to an article in Great Good magazine. Here are four steps we can all take toward that end:
Write a letter of gratitude to someone you’ve never properly thanked and deliver it in person.
1. Keep a gratitude journal of everything for which you’re grateful.
2. Savor life’s little joys that come your way.
3. Think out of the box and thank people that you might not ordinarily thank.
4.
Give these ideas a try and see if your life improves!
Sep 06, 2011 Weekly Commentary
The Markets Two four-letter words -- "debt" and "jobs" -- are hanging over the economy like a noose that keeps tightening.
This is not news; we've known for several years that debt is too high and jobs too scarce. Unfortunately, they’ve become intractable problems with no solution in sight.
Last week, the government reported the U.S. economy had a net gain of zero new jobs in August. On top of that, the unemployment rate remained stuck at a disappointingly high 9.1 percent and the number of unemployed people rose to 14 million -- including more than 6 million workers who have been out of work for 27 weeks or longer, according to MarketWatch.
With jobs hard to come by, consumer confidence is suffering, too. The Conference Board reported its consumer-confidence index for August fell to the lowest level since April 2009, according to MarketWatch.
The weak economy and uncertain outlook have led to a dramatic decline in interest rates. The yield on the 10-year Treasury dropped to 2.0 percent last week and the 30-year Treasury yielded just 3.3 percent, according to Bloomberg. This decline in longer-term interest rates is, "a sign of heightened fears about a recession in the U.S. and more actions from the Fed," according to The Wall Street Journal.
When you put the pieces of the economic puzzle together, it starts to paint a picture that a new recession may be looming. While we’re not in the business of making projections like that, we do monitor the economy and, right now, it’s sending unsettling signals.
Whether a new recession is coming or not, we continue to do our job of helping you reach your financial goals regardless of what the market and economy may put in our way.

THERE'S THIS PESKY LITTLE THING CALLED THE P/E RATIO and changes in this number could have a big effect on whether stock prices rise or fall. Normally, stock prices are driven by earnings. As earnings rise, stock prices tend to rise and vice versa. Granted, it's not a straight-line relationship. Instead, it tends to come in sync over time -- even though "over time" could mean several years.
We now have some great examples of how changes in the P/E ratio can dramatically affect the returns on certain stocks.
First, a definition. The P/E ratio is simply the price of a stock divided by its previous 12 months earnings per share. For example, if XYZ Company earned $1 per share in the past 12 months and its stock is selling for $15 per share, then it has a P/E ratio of 15.
For a real example, let's look at Microsoft. Ten years ago, on August 23, 2001, Microsoft stock traded at $26.60 per share. Ten years later, on August 23, 2011, Microsoft stock traded at $24.72 per share. As you can see, the stock price actually declined over that 10-year period. However, during those 10 years, Microsoft's earnings per share actually skyrocketed by 193.33 percent, according to a September 3 Barron’s article.
The obvious question is, "How can Microsoft's earnings nearly triple in 10 years while the stock price drops during that period?" The answer is… the P/E ratio declined dramatically.
The next obvious question is, "What causes the P/E ratio to change?" Ah, that's the million-dollar question. Barron's pointed out that back in 2001, companies like Microsoft were viewed as exciting growth companies and investors were willing to pay a higher than normal premium for each dollar of earnings. Flash forward 10 years and Microsoft did indeed grow its earnings dramatically. But today, Microsoft is viewed more as a “steady Eddie” and the multiple on each dollar of earnings that investors are willing to pay is less, hence, the slight decline in its stock price over the past 10 years.
There are a couple lessons here for investors.
First, when you buy a stock, it’s important to know the P/E ratio. If it's higher than the market average, then you need to be extra careful. You could run into a Microsoft situation where the earnings actually rise, but the stock price doesn’t.
Second, buying a stock with a low P/E ratio is not necessarily a bad thing. Using Microsoft again as an example, its P/E ratio is currently low relative to 10 years ago. If the ratio starts to expand, then the stock price could actually rise faster than its earnings over the next few years. Microsoft is mentioned as an example and not meant as a buy or sell recommendation.
Nobody said investing was easy and figuring out the direction of a stock's P/E ratio is one reason why.

Weekly Focus – Remembering 9/11
"Time is passing. Yet, for the United States of America, there will be no forgetting September the 11th. We will remember every rescuer who died in honor. We will remember every family that lives in grief. We will remember the fire and ash, the last phone calls, the funerals of the children."
--President George W. Bush
Sep 04, 2012 Weekly Commentary
The Markets


Now that the traditional end to summer has arrived, things might heat up on Wall Street as traders return to their stations and face a host of pressing risks.

The omnipresent Mohamed El-Erian of PIMCO took to the airwaves on Bloomberg last week and laid out his list of the four major risks facing the global economy:

1. The looming fiscal cliff – in which automatic tax increases and spending cuts are set to take effect at the first of the year in the U.S.
2. The continuing sovereign debt crisis in Europe.
3. Geopolitical risk in the Middle East and elsewhere.
4. The economic slowdown and pending political transition in China.
Source: Bloomberg

One could argue that the first two on the list are within the power of western politicians to solve without causing global harm. Of course, so far, politicians have engaged in a game of “kick the pressing problems down the road.” However, sooner or later – and likely sooner rather than later – that road will end. Only time will tell if our politicians solve the problems before they hit a dead end.

The last two are trickier. Geopolitical risks are always unpredictable, particularly in the highly combustible Middle East. And, China, that's another wildcard. The country's economy is clearly slowing down, albeit from a very high rate compared to American standards. The upcoming once-in-a-decade political transition is also a cause for reflection as the Bo Xilai affair disrupted what party officials hoped would be a smooth political transition.

Yet, despite these four risks, the U.S. stock market is still near a post-crisis high. The fact is, there's always something to worry about and sometimes the stock market defies expectations and keeps climbing the "wall of worry."


DOES STRONG ECONOMIC GROWTH ALWAYS LEAD TO RISING STOCK PRICES? Typically, strong economic growth translates into rising corporate profits. Rising profits, over time, tend to lead to rising stock prices – or so one would think.

Consider China. For many years we've heard how China is supplanting the U.S. as a manufacturing and economic powerhouse. And, in many respects, it's true. Between 1989 and 2012, China's gross domestic product rose at an annual rate of 9.3 percent – dramatically above the growth rate in the U.S. – according to Trading Economics. Today, China has the world’s second largest economy and it's projected to overtake the U.S. in just four years, according to the International Monetary Fund as reported by BusinessWeek.

So, yes, China is an economic powerhouse. But, has their economic growth translated into stock price growth?

Let's go back about 12 years, November 10, 2000 to be exact, and see how the Chinese stock market has performed as measured by the Shanghai Stock Exchange Composite Index. The Shanghai Composite is a capitalization-weighted index that tracks the daily price performance of all A-shares and B-shares listed on the Shanghai Stock Exchange.

Back on November 10, 2000, the Shanghai index closed at 2,047, according to data from Yahoo! Finance. Now, almost 12 years later, where do you think the Shanghai index closed last week?

Shockingly, the Shanghai index closed at 2,047 – exactly the same price as it was nearly 12 years ago! This flat stock market performance occurred despite the fact that the Chinese economy grew by more than 500 percent between 2000 and 2011, according to The World Bank.

Now, before we conclude there's no connection between economic growth and stock prices, we have to go back even further. On December 19, 1990, the Shanghai index was created with a starting value of 100. At last week's closing price of 2,047, this means the Chinese stock market, as measured by the Shanghai index, has risen more than 1,900 percent between 1990 and 2012. On an annualized basis, that's more than 14 percent per year – an exceptionally high return.

Okay, after all these numbers, what can we conclude? A couple things:

1. Fast economic growth in any given year does not necessarily translate into rising stock prices that year.
2. Fast economic growth eventually shows up in stock prices, although some of the growth may be "pulled forward" and "priced in" to stocks well ahead of when the growth actually occurs—as happened in China.

This lack of a linear relationship between economic growth and stock prices is one more variable we have to consider when developing portfolios.


Weekly Focus – Think About It...

"Without labor nothing prospers."
--Sophocles, ancient Greek playwright
Sep 03, 2013 Weekly Commentary
The Markets


Last week was crunch time in the National Football League (NFL}. With the 2013 regular season approaching rapidly, NFL teams cut about 700 players from their rosters over the Labor Day weekend. That was a big cut-about a 40 percent drop in player employment-as rosters were pared from 90 to 53 players. However, it's not likely to have a significant effect on U.S. unemployment data-and that's really what the week ahead is all about.

Last week, markets jittered and slumped on news that Syria was thought to have used chemical weapons against civilians. According to The New York Times, 70 percent of stocks that trade on the New York Stock Exchange finished Friday lower, and 73 percent of those listed on the NASDAQ lost value.

There were signs of renewed optimism on Labor Day. Although U.S. markets were closed, world markets responded well to news that there would be no immediate American military action against Syria. Encouraging economic data from China and Europe helped share prices, too, although it didn't do much for government bonds, gold, or the Japanese yen.

Post Labor Day, investors will be anticipating employment data with the zeal of Green Bay Packer fans decked out in foam cheeseheads awaiting the opening kickoff at Lambeau field. The Financial Times, a British publication that has little interest in American football but great interest in U.S. Federal Reserve policy, put it this way:

"Members of the U.S. Federal Reserve open market committee will get their last pieces of information about the labor market before their all-important September meeting, which has been heavily trailed as posing the first real opportunity for the Fed to embark on a taper... The US economy has been recovering at a painfully slow but steady rate for more than two years now and with no sign of any step-up in the pace of improvement, the Fed policy-makers face a finely balanced decision."

No matter what happens, emotions are likely to be running high this week.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


SOBERING STATISTICS AND INVESTMENT IDEAS SOMETIMES go hand-in-hand. When one of America's favorite fast food chains unveiled a new product in Japan, some people wondered how long it would be before this fine innovation - a three-quarter pound, 1100 plus calorie serving of potatoes called Mega Fries- would reach our hungry shores. Others deliberated on the ways in which higher consumption of nutritionally deficient foods may affect obesity rates and illness in countries around the world. They may even have done a Google search to ascertain which companies are working on cures for diabetes, developing treatments for heart ailments, or bio-engineering organ replacements.

A key measurement in evaluating the ill effects of diseases and health conditions is the Disability-Adjusted Life Year or DALY. According to the World Health Organization:

"One DALY can be thought of as one lost year of "healthy" life. The sum of these DALYs across the population, or the burden of disease, can be thought of as a measurement of the gap between current health status and an ideal health situation where the entire population lives to an advanced age, free of disease and disability...DALYs for a disease or health condition are calculated as the sum of the Years of Life Lost (YLL) due to premature mortality in the population and the Years Lost due to Disability (YLD) for people living with the health condition or its consequences..."

It's depressing to note that mental disorders and drug and alcohol abuse are the biggest drivers of disability. They account for more than 7 percent of DALYs. That's more than diabetes, HIV, or tuberculosis, and almost as many as cancer. Globally, in 2010, depression and anxiety were responsible for about 11 million lost years of healthy life in the 20- to 24-year-old age group. Drug use also appears to peak at about this age. The number of DALYs for depression and anxiety appears to decline with age.

Perhaps the best idea is corporate wellness programs. Research published by Harvard University in 2010, found that medical costs declined by about $3.27 for every dollar spent on wellness programs. In addition, the cost of absentee days decreased by about $2.73 for every dollar spent.


Weekly Focus - Think About It

"When you are offended at any man's fault, turn to yourself and study your own failings. Then you will forget your anger."
Epictetus, Greek Stoic philosopher

Sources:

[1] http://www.cbssports.com/nfl/eye-on-football/23400230/final-nfl-cuts-teams-trim-rosters-down-to-53-players
[2] http://www.cbssports.com/nfl/writer/pat-kirwan/23434009/five-things-to-know-what-goes-into-finalizing-nfl-rosters-at-53
[3] http://www.nytimes.com/2013/08/31/business/daily-stock-market-activity.html?_r=0
[4] http://www.reuters.com/article/2013/09/02/us-markets-global-idUSBRE96S00E20130902
[5] http://www.ft.com/cms/s/0/f898538c-1166-11e3-a14c-00144feabdc0.html#axzz2dkbb9FMl
[6] http://www.investopedia.com/stock-analysis/053113/investing-global-diabetes-epidemic-mcd-nvo-rvp-wst-bdx-podd-mnkd-dva-lly-sny.aspx
[7] http://www.who.int/healthinfo/global_burden_disease/metrics_daly/en/
[8] http://www.economist.com/blogs/graphicdetail/2013/08/daily-chart-20
[9] http://dash.harvard.edu/handle/1/5345879
[10] http://www.brainyquote.com/quotes/authors/e/epictetus.html#VeJmMsEEgfrbFEyK.99
* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.

* Quantitative Easing is a government monetary policy occasionally used to increase the money supply by buying government securities or other securities from the market. Quantitative easing increases the money supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity.

* The Standard & Poor's 500 (S&P 500} is an unmanaged group of securities considered to be representative of the stock market in general.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT} industry as calculated by Dow Jones.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Past performance does not guarantee future results.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

Sep 02, 2008 Weekly Commentary
The Markets As we wrapped up the traditional end of summer last week, buyers and sellers were scarce on Wall Street.
For the first three trading sessions last week, volume on the New York Stock Exchange was the lowest of the year, according to Briefing.com. Apparently, investors decided it was time to relax a bit. Unfortunately, for those investors who did stick around, it was a bumpy ride. The market experienced three days when the Dow Jones Industrial Average rose or fell more than 100 points, according to Barron’s. Two of those instances were negative.
Despite the lack of trading volume, there was no shortage of market-moving news. On Monday, the Dow dropped more than 200 points on renewed credit crunch jitters, according to The Wall Street Journal. On Thursday, the Commerce Department released revised GDP numbers, which showed that the economy grew a solid 3.3% in the second quarter, up sharply from the original estimate of 1.9%. That positive news helped spark a more than 200-point gain in the Dow, according to MarketWatch. And, then on Friday, weak personal income numbers and a downbeat earnings report from Dell Computer contributed to a 171 point loss in the Dow, according to MarketWatch. Of course, Hurricane Gustav didn’t help matters either.
The relatively light volume last week probably exaggerated the market swings. However, when the market moves sharply in different directions within the same week, it may be a sign that investors lack conviction. To investors who believe the market is simply efficiently reacting to new information, those swings are normal. Other investors look at the swings as further indication that this market is still trying to find direction and that it lacks conviction.
No matter which set of investors is right, the market seems stuck in a broad trading range. This yo-yo effect can be frustrating, but we understand that investing is not a sprint; it’s more like a marathon. And, we continue to do all we can to keep you prepared to go the distance.

BOILED DOWN TO ITS CORE, what is the simplest formula for making money in the stock market? Arguably, you could boil it down to “buy low, sell high.” Conceptually, it’s hard to argue with that cliché, but practically, it’s hard to act on it. But, what if we could add some “practicality” to the cliché? Would that improve our odds of being a successful investor? Let’s find out.
One of the most important questions we have to answer is, what is low and what is high? When it comes to investing, low and high are only discernable in hindsight. For example, back in May 1997, Amazon stock was selling for less than $2 per share on a split-adjusted basis, according to Yahoo! Finance. One year later, in May 1998, the stock was selling for more than $7 per share, split-adjusted. Now, one could argue that Amazon was “low” in May 1997 and “high” in May 1998 because the stock had more than tripled in one year. Would May 1998 have been a good time to sell Amazon?
If we fast-forward a bit and look at the following 11-month period from May 1998 to April 1999, the data shows that Amazon stock rose from a little more than $7 per share to more than $100 per share. So, what looked like a high price in May 1998 actually turned out to be a low price when viewed just 11 months later. The point is simply that “low” and “high” only become clear with the benefit of hindsight. However, sharp investors apply some other measures to help them discern what’s low and what’s high. Here are a couple examples.
In a December 14, 1996, article in Financial Times titled “Get Smart…and Make a Fortune,” super investor Jim Rogers discussed how learning to spot periods of extreme “conviction of certainty of all the participants” is one way to become a successful investor. By this he meant when you read in the media about “the new era” or your cab driver starts talking to you about stock tips, then you know that we may be near a top in the market. The same is true near the bottom of a market. When all you hear is doom and gloom and the magazines start heralding “The Death of Equities,” that may be a time to get in because the market may be near a low point.
Rogers went on to say, “It is learning to listen to the gloom and doom at bottoms and question it, and to the exultation at tops and question this as well, that makes a sharp investor.” In other words, he’s suggesting you be a contrarian and go against what the crowd is doing at times of either extreme exuberance or devastating despair. No doubt it is hard to go against the crowd, but that’s what many successful investors have done. Rogers ended his article by saying the smart investor, “Learns to buy fear and panic and to sell greed and hysteria.”
A second investor that you’re probably more familiar with is billionaire Warren Buffett. Adding more context to Rogers’ comments, Buffett said, “You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.” Buffett has no problem going against the crowd and when he does, it’s based on detailed analysis and sound reasoning. Frequently, he buys stocks that are somewhat out of favor (i.e., low in price, but high in potential value) and he reasons that eventually the crowd will come around to his point of view.
In another insightful comment, Buffett said, “An investor should act as though he had a lifetime decision card with just twenty punches on it.” His point was we have to be patient. Great investment opportunities don’t come around that often so, rather than swinging wildly at lots of pitches, we should wait for those times when the odds appear to be in our favor.
Both Rogers and Buffett understand the concept of buy low and sell high and they seem to be experts at understanding investor psychology and turning that knowledge into winning investments. They also seem to have enough patience to wait for the opportunities to arrive. As we look at the stock market today, it’s clearly down from its highs and there are many naysayers. Rogers and Buffett have successfully used these two ingredients to make winning investments in the past. And while no strategy can assure success or protect against loss, we continue to monitor opportunities and we’ll do our best to take advantage of them on your behalf.

Weekly Focus – Think About It
“In every walk with nature, one receives far more than he seeks.”
– John Muir
Oct 31, 2011 Weekly Commentary
The Markets After 14 summits in 21 months, have European leaders finally solved their sovereign debt problem? Judging by the stock market's reaction, you might think the answer is yes.
In marathon sessions last week, European leaders agreed on a new, three-point deal to stave off a deeper debt crisis. The deal includes:
1. A commitment by banks and other private bondholders to accept a voluntary 50% writedown on Greek government debt.
2. A boost in the lending power of the euro-zone bailout fund.
3. A 106 billion euro ($148 billion) recapitalization of European banks.
Source: MarketWatch
Even though details were still a bit sketchy, investors threw caution to the wind and bid up stock prices. U.S. stock prices rose 3.8 percent last week and 14 percent for the month with just one trading day left, according to Bloomberg.
With Europe’s debt crisis tempered for the moment, attention now turns to the U.S. On the positive side, the U.S. economy grew at a 2.5 percent clip in the third quarter, which was the fastest pace in a year. In addition, third-quarter earnings are still coming in strong as about 75 percent of the companies reporting so far have beaten expectations, according to Bloomberg.
Looming on the horizon, the congressional supercommittee has about one month left before making its recommendations on how to cut at least $1.2 trillion from the federal budget. If the supercommittee fails, then across the board budget cuts of a like amount would ensue.
As of last week, investors were happy to breathe a sigh of relief that Europe seems to have dodged a disaster (at least for now) and the U.S. economy still has some life.

THE WEATHER AND THE STOCK MARKET HAVE A LOT IN COMMON – they’re both very unpredictable! This past weekend, the Northeast got walloped by a surprisingly strong snowstorm that dumped as much as two feet of snow in parts of Massachusetts. Central Park in New York City even set an October record with 1.3 inches of snow. And, this all happened before Halloween!
Likewise, the stock market has a habit of surprising investors with its ability to rise or fall dramatically in short periods of time. For example, remember the “Flash Crash?” On May 6, 2010, the U.S. stock market plunged for no apparent reason and briefly erased $862 billion from stock values in less than 20 minutes, according to Bloomberg. It then quickly rebounded.
As it relates to weather, we always know what season we’re in. One look at the calendar tells us whether its winter, spring, summer, or fall. And, depending on where you live, you have a pretty good idea – based on history – of what to expect for each day’s temperature. But, just like the Northeast experienced, you can have an “out of season” experience that messes up your best-laid plans.
The stock market doesn’t have four seasons, but it does have bull and bear markets, which are further divided into secular and cyclical. Market analysts have some general criteria that they use to categorize the markets into these buckets. Yet, like the weather, you could be in a bull market, but still have a nasty market drop that temporarily derails the path of the bull.
Bottom line, just like weather forecasters, market analysts may have a sense for general conditions in the market, but surprises still happen.

Weekly Focus – Think About It
“Sunshine is delicious, rain is refreshing, wind braces us up, snow is exhilarating; there is really no such thing as bad weather, only different kinds of good weather.”
--John Ruskin, leading English art critic of the Victorian era
Oct 30, 2012 The Markets



Who’s right, consumers or businesses?

As it relates to the U.S. economy, consumers seem to feel optimistic about it while businesses are hunkering down.

This split showed up in last week’s release of the first estimate of third quarter gross domestic product (GDP), defined as the output of goods and services produced by labor and property located in the United States. The government said GDP grew a modest 2.0 percent. How we got to the 2.0 percent growth rate is where it gets interesting.

For background, GDP consists of 4 major components:

1) Personal consumption expenditures
2) Business investment
3) Government spending
4) Net exports of goods and services
Source: Department of Commerce

Of these four components, the first one – personal consumption expenditures – typically accounts for about 70 percent of the total. So, if consumers are optimistic and in a shopaholic mood, that bodes well for economic growth. And, in the third quarter, they were as consumer spending accounted for most of the 2.0 percent increase in GDP.

Businesses, on the other hand, were rather subdued. Capital spending actually declined in the third quarter as, “Slower world growth and worries about a budget crisis at home have spurred U.S. business to take a more cautious stance on hiring and investment,” according to MarketWatch.

Now, all we have to do is get businesses to drink the same Kool-Aid as consumers and we’ll be off to the races!

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


DO YOU PREFER TO BUY THINGS when they go on sale or do you prefer to pay full price? Now, before you snicker, consider that many people do prefer to pay full price. Why? Take clothing as an example. If you want to be trendy, you’ll likely pay full price since most clothing stores don’t put the latest fashions on sale.

Other folks, while still “fashion conscious,” prefer to wait until an item goes on sale so they can get it at a “bargain” price. And, chances are, if you’re patient, you can get that desired piece on sale as the store makes room for the next season’s clothes.

How people shop for clothes can be very instructive in how to invest successfully in the financial markets. Here are several comparisons to think about:

1) Buy what’s on sale. Like clothing, investments occasionally drop to a point where they seem like a bargain. Just as smart shoppers like to buy clothes on sale, shrewd investors like to buy securities they believe are temporarily out of favor.
2) Buy at full price. Well, maybe not. It’s fine to buy trendy clothes at full price because of the psychic rewards of being sharply dressed. But, investors should focus on making money, not on having bragging rights at the cocktail party about owning the latest high-flying, change-the-world Internet company.
3) Buy only what you need. Consumer’s closets have limited space so most clothes shoppers have a limit on how many suits or coats they buy. Likewise, investors should buy only what they need to help meet their goals and objectives. Specifically, there’s no need to take extra risk if a lower-risk portfolio has a reasonable chance of helping you meet your goals.

Interestingly, investors often think very differently about how they approach buying clothes and making investments. With clothes, many people prefer to wait for a sale and are apt to buy more if they can get them at a deep discount. Conversely, when investments go “on sale,” meaning, their price has dropped, investors often shy away.

As an advisor, part of our job is to help make investing more like bargain clothing shopping. We look for investments that are on sale, that meet your needs, and will last for more than one season. Unlike tie-dyed shirts, we think this type of investment strategy will never go out of style.


Weekly Focus – Think About It…

“You don't want too much fear in a market because people will be blinded to some very good buying opportunities. You don't want too much complacency because people will be blinded to some risk.” --Ron Chernow, American biographer

Fisher Financial Partners, Inc. offers securities through Regal Securities, Inc., member FINRA/SIPC. Advisory Services offered through Regal Advisory Services, Inc. Fisher Financial Partners, Inc. is not affiliated with Regal Securities, Inc. or Regal Advisory Services, Inc.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Past performance does not guarantee future results. * You cannot invest directly in an index.
* Consult your financial professional before making any investment decision.
Oct 29, 2007 Weekly Commentary
The Markets
Black gold (oil) and the shiny yellow metal we simply call gold both seem to be coveted items these days.
Last week, crude oil prices reached an intraday all-time high of $92.22 per barrel on the New York Mercantile Exchange, according to Barrons. Thats up nearly 30% from its price on August 24th. Surprisingly (and were not complaining), prices at the gas pump have not moved up nearly as much as oil prices. So whats driving the spike in oil? According to MarketWatch, you can point to falling energy supplies, global political tensions, and weakness in the U.S. dollar.
Its interesting to note that with all the talk about global warming, going green, and the search for alternative sources of energy, youd think thered be less demand for oil and hence, a dropnot a risein oil prices. Sometimes, the market appears to be illogical, but long term, it usually comes to its senses.
Gold is another eye-opening situation as it closed at $787.50 per ounce last week on the New York Mercantile Exchange. According to Action Economics, gold shot to its "highest level since January 1980 on a combination of inflation concerns and safe-haven buying in the wake of a sensitive geopolitical environment and renewed concerns about the U.S. growth outlook." Throw in a weak dollar and the possibility of more interest rate cuts and you may have a recipe for continued strong gold prices, they added.
It was way back on January 21, 1980, that gold set its all-time record high of $875.00 per ounce, according to MarketWatch. Of course, after adjusting for inflation, current gold prices are dramatically below their 1980 high, whereas oil prices are very close to their inflation-adjusted all-time high.
With so many things to invest in these days besides the stock market, it seems like theres always something thats going up. Thats one good reason why it makes sense to diversifyyou may have a better chance to own one of those things thats going up.

LAST WEEK, THE INTERNAL REVENUE SERVICE (IRS) released its cost of living adjustments for contributions to a variety of retirement saving vehicles. The limits affecting 401(k) plans, the federal governments Thrift Savings Plan (TSP), and other similar programs provided for by Section 402(g)(1) remain the same at $15,500. However, the limitation for defined contribution plans under Section 415(c)(1)(A) increased from $45,000 to $46,000 and the annual benefit limitation for a defined benefit plan under Section 415(b)(1)(A) increased from $180,000 to $185,000. Other increases include:
The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) increased from $83,000 to $85,000. Additionally, the applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers (other than married taxpayers filing separate returns) increased from $52,000 to $53,000. The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant, but whose spouse is an active participant, increased from $156,000 to $159,000.
The adjusted gross income limitation under Section 408A(c)(3)(C)(ii)(I) for determining the maximum Roth IRA contribution for taxpayers filing a joint return or as a qualifying widow(er) increased from $156,000 to $159,000. The adjusted gross income limitation under Section 408A(c)(3)(C)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) increased from $99,000 to $101,000.
These arent exactly huge changesbut every little bit helps.

HAS THE NEWSPAPER GONE THE WAY OF THE DRIVE-IN MOVIE when it comes to a job search? According to a recent study, our nations job seekers are steadily increasing their use of the Internet. The Conference Board reported last week that of workers who searched for a job between January and September 2007, 73% reported using the Internet compared to 66% of job seekers during the same time period in 2005.
The research shows that the Internet is being used for a variety of job search functions, from gathering employer/job information (59% of job seekers) and submitting resumes and applications (57%) to posting resumes on a website (40%) and signing up for email notifications (30%).
Just how many jobs are posted online? Hold on to your mouse. In September 2007, there were 4,270,000 online advertised job vacancies according to The Conference Board Help-Wanted OnLine Data Series (HWOL). That amounts to 2.78 advertised vacancies online for every 100 persons in the labor force in September.
Although still a vital job-seeking tool, newspapers are dropping in popularity. Used by 75% of job seekers in 2005, only 65% used them in 2007. The survey also found over half (51%) of job seekers reported networking through friends and colleagues as part of their job search and roughly one quarter (24%) used other methods, such as employment agencies.
Whatever tools they use, job seekers are successful. According to the Bureau of Labor Statistics, over the course of this year, jobless rates were down in 25 states and the District of Columbia, up in 23 states, and unchanged in two states. The national unemployment rate was essentially unchanged in September at 4.7%.

Weekly Focus A Little Math
Each of the following letters stands for a different digit. Determine their values to solve the subtraction problem. This puzzle comes from Scientific American Mind magazine.
A N T E E T N A = N E A T
See the end of the commentary for the answer. Good luck!


Answer to the puzzle: A = 7, E = 1, N = 6, T = 4.
Oct 28, 2013 Weekly Commentary
Weekly Market Commentary October 28, 2013


The Markets

Contrarians probably are waiting for the other shoe - or, in this case, U.S. stock markets - to drop.

If you're not familiar with contrarian investing, the theory goes something like this: Consensus opinion is often wrong. When the majority of investors have a bullish outlook and believe stocks are going to move higher, the chances are stock values will drop. Likewise, when the majority has a bearish outlook and believes stocks are going to move lower, the chances are stock values will rise.

Why would Contrarians expect markets to head south? One reason is bullish sentiment is high. On October 23, the American Association of Individual Investors' Investor Sentiment Survey, which measures the percentage of individual investors who are bullish, bearish, and neutral on the stock market for the next six months, shows 49.2 percent are bullish and just 17.6 percent are bearish (the rest are neutral). The long-term averages for bullish and bearish sentiment are 39 percent and 30.5 percent, respectively.

Contrarians also are eyeballing the fact that stock markets in the United States have run up for 519 sessions without as much as a 10 percent correction, according to Barron's. That means markets have weathered bombs at the Boston marathon, chemical weapons in Syria, monetary policy uncertainty, U.S. government shutdown, and Miley Cyrus' VMA performance. Of course, 519 sessions is not the longest winning streak ever, not even close. In fact, if we assume about 250 trading sessions in a year, then the current rally would have to last until about 2018 to match the record (1,767 sessions) set between October 1990 and October 1997.

Investors aren't the only bullish faction. Money managers who participated in Barron's latest big money poll also seem to have adopted Alfred E. Neuman's motto: What, me worry? Their outlook seems to focus on the Fed's loose monetary policy. According to Barron's, "Four of five money managers in our big-money poll expect stocks to be the best-performing asset over the next year, even as 71 percent see U.S. shares as already fairly valued. Thanks to unending central bank support, we all expect above-par stock returns from sub-par economic growth."

So, what's going to happen? Only time will tell.



WHERE ARE INTEREST RATES HEADED? According to the Federal Reserve, economists assume interest rates will move toward equilibrium or a 'natural' real rate of interest that takes into account inflation over the long term.

The idea of a natural rate of interest was first introduced by Swedish economist Knut Wicksell. Recognized as an economist's economist in the late 1800s and early 1900s, Wicksell is known for his macroeconomic text Interest and Prices which noted the difference between the real rate of return on capital (aka: the natural rate of interest) and the market rate of interest (aka: the rate borrowers pay). According to The Economist:

"If the financial rate is below the natural rate, businesses can reap unlimited profits by borrowing as much as they can and plowing it into high-returning projects. Eventually, though, all that additional spending pushes up prices, money and credit, and, eventually, financial interest rates.

Wicksell saw financial rates as those set by banks competing to make loans. That job is now performed by central banks. They still think in Wicksellian terms: the natural rate prevails when the economy is at full employment. Set the policy rate above the natural rate and the economy tips into depression. Set it below, and inflation results - or, some worry, speculative credit booms."

So, where are interest rates headed? Apparently, they're going to move higher. According to the Federal Reserve's September 2013 economic projections, the federal funds rate (the rate at which banks lend to each other overnight) is expected to reach 2 percent by the end of 2016. Currently, it is at 0.25 percent. (The Fed also expects the United States will be close to full employment at that time with the unemployment rate nearing its long-term average of 5.2 to 5.8 percent.)

Weekly Focus - Think About It


"It has always seemed strange to me... the things we admire in men, kindness and generosity, openness, honesty, understanding and feeling, are the concomitants of failure in our system. And those traits we detest, sharpness, greed, acquisitiveness, meanness, egotism and self-interest, are the traits of success. And, while men admire the quality of the first, they love the produce of the second."

--John Steinbeck, Pulitzer and Nobel Prize-winning American author



Sources:
http://www.investopedia.com/terms/c/contrarian.asp
http://www.aaii.com/sentimentsurvey
http://online.barrons.com/article/SB50001424053111904897104579149482465343894.html?mod=googlenews_barrons (Or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/10-28-13_Barrons-The_Rally_That_Just_Wont_Quit.pdf)
http://www.frbsf.org/economic-research/publications/economic-letter/2003/october/the-natural-rate-of-interest/
http://www.econlib.org/library/Enc/bios/Wicksell.html
http://www.economist.com/news/finance-and-economics/21588354-central-banks-ignore-century-old-observation-their-peril-natural
http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20130918.pdf
http://www.bankrate.com/rates/interest-rates/prime-rate.aspx
http://www.brainyquote.com/quotes/authors/j/john_steinbeck.html#FU0ZPZMKKk5pwDOJ.99"
Oct 27, 2008 Weekly Commentary
The Markets Almost, but not quite.
As we awoke early last Friday morning and turned on our computers, we saw something that doesn’t happen very often. Pre-market opening indicators were suggesting a massive drop in the U.S. stock market when trading opened at 9:30 am Eastern time, according to MarketWatch. We already knew that many overseas markets had plummeted since most of them start trading well before the U.S. market opens. Japan’s main stock market index, for example, had dropped more than 9% prior to the start of trading in the U.S., according to MarketWatch. With that backdrop, investors nervously awaited the opening bell in New York. As the bell rang that morning, stocks dropped significantly in the first few minutes. But then, something surprising happened—no panic ensued. After see-sawing throughout the day, the Dow Jones finished with a disappointing 3.6% loss, but that was greeted with relief by many investors, who feared a much steeper decline.
It’s almost become a parlor game now with market pundits trying to call the bottom in the market. Many of them seemed to be waiting for the big washout-type capitulation day that takes the market down by double digits on record volume. Some people thought last Friday would be the day, but it didn’t happen.
With so many people looking for a big capitulation day, there’s a reasonable chance that it may not happen. According to an October 25 Wall Street Journal article, “Bear markets often end not in a crescendo of selling but [in] a cloud of indifference.” Ultimately, bear markets may end when stocks get so cheap that buyers step in and start bidding up prices.
Nobody knows whether this bear market will end with a record-breaking capitulation day or end unspectacularly as the selling pressure just peters out. This market has confounded so many “experts” that it’s anybody’s guess. Instead of worrying about calling a bottom, we’re trying to identify where the compelling values are and take advantage of them on your behalf.

ARE HUMAN EMOTIONS PARTLY RESPONSIBLE for the volatility we’re seeing in the financial markets? There’s no doubt that volatility is running rampant right now. The VIX, which is a widely used to measure of market risk often referred to as the “investor fear gauge,” rose to a record high last week, according to Bloomberg. But, is this fear rational? Do the fundamentals of our economy support the worldwide declines we’ve seen in the past month?
Clearly, the U.S. economy and many overseas economies are experiencing a significant slowdown. The ultimate severity of this downturn will not be known for quite some time. However, we do know that the financial markets are reacting violently to what’s happening. Could our emotions be getting in the way of sound investment judgment?
Westcore Funds/Denver Investment Advisers, LLC, developed a chart, which illustrates how volatility in the financial markets may cause us to turn off our rationality switch and replace it with some degree of either fear or greed. Below is a brief summary of what they call The Cycle of Market Emotions:
As markets rise, investors’ optimism begins to grow, excitement builds, and making money becomes thrilling. Over a period of time, the bull market finally reaches a crescendo, euphoria and greed set in and unbeknownst to most investors, this is the point of maximum financial risk. In hindsight, this could describe the first quarter of 2000, when the technology bubble reached its zenith. Inevitably, the market starts to drop, anxiety builds, and denial, fear, and desperation set in. Eventually, panic is followed by capitulation as some investors throw in the towel and say “I can’t take this anymore.” Capitulation is followed by despondency and it’s right here where you may find the point of maximum financial opportunity. Depression ensues, but then, when people realize the world is not coming to an end, the markets start to turn up. Hope turns into relief, which then leads to optimism and then the cycle starts all over again.
Since the current bear market is still unfolding, it’s not possible to say where we may be in this cycle. However, it would not be going out on a limb by saying we’re probably at least in the desperation/panic area. If true, we may see more pain before the next gain.
We need to keep in mind that successful investing takes more than just doing good research. It also takes strong emotional control and the ability to swim against the tide at times. By understanding the cycle of market emotions, and not letting fear or greed become dominant, you may be able to better tolerate and ultimately profit from market fluctuations. We do our best to embody these skills on your behalf.

Weekly Focus – Can You Solve This Puzzle?
Study this paragraph and all things in it. What is vitally wrong with it? Actually, nothing in it is wrong, but you must admit that it is most unusual. Don't just zip through it quickly, but study it scrupulously. With luck you should spot what is so particular about it and all words found in it. Can you say what it is? Tax your brain and try again. Don't miss a word or a symbol. It isn't all that difficult.
See the end of this commentary for the answer.
(Source: www.Brainbashers.com)


Puzzle answer -- The paragraph does not contain an “E,” but it does contain all of the other letters though.
Oct 26, 2009 Weekly Commentary
The Markets What do Caterpillar, Netflix, Apple and Microsoft have in common? They all posted quarterly earnings last week that exceeded analyst expectations—and they are not alone.
We are about one-third of the way into the quarterly earnings season and a remarkable 78% of the S&P 500 companies have delivered a positive earnings surprise, according to HSBC as reported in Financial Times. Only 12% have missed to the downside. The huge stock market surge since March has foreshadowed these strong results and companies are delivering.
Generally speaking, the better-than-expected earnings are still being driven by lower expenses rather than higher revenue. For the stock market to continue its meteoric rise, investors want to see year-over-year revenue growth—not just more cost cutting.
The next big test for the markets may be the upcoming Holiday shopping season. If consumers shake off their frugality and spend freely, that could pump up corporate earnings into next year and keep this rally roaring. So this year, your gift purchases may deliver a double benefit—a big smile to the gift recipient and a big smile to you in the form of higher stock prices.

PRETEND YOU ARE ON A GAME SHOW WITH MONTY HALL and he offers you the following scenario as described in a 2003 article from the Journal of Experimental Psychology.
You face three doors and behind one door is a car, while the other two hide goats. Your goal is to pick the door that hides the car. Here are the rules. First, the car and the goats were placed randomly behind the doors. Second, after you choose a door, the door remains closed for now. Third, Monty knows what is behind each door. Fourth, he has to open one of the two remaining doors. Fifth, the door he opens must have a goat behind it. Sixth, if both remaining doors have goats behind them, he chooses one randomly.
After Monty opens a door with a goat, he will ask you to decide whether you want to stay with your first choice or switch to the last remaining door. Pretend you chose Door 1 and Monty opens Door 3 containing a goat. With only Doors 1 and 2 remaining—one of which contains a car—he asks you, "Do you want to switch to Door 2?"
From a probability standpoint, are you more likely to win the car by staying with your original choice of Door 1, switching to Door 2, or does it make any difference at all if you stay or switch? Before reading further, think of your answer then return to the next paragraph.
As you contemplated your answer, you may have reasoned that since one of the two remaining doors contains the car, you have a 50/50 chance of winning, so there is no need to switch. That may sound reasonable, but it is not correct. Presented with this three-door scenario, you should always switch, in fact, by switching, you have a 2/3 probability of picking the car.
Here's the explanation, according to Michael Shermer writing in the February 2009 issue of Scientific American.
At the beginning of the game you have a 1/3 chance of picking the car and a 2/3 chance of picking a goat. Switching doors is bad only if you initially chose the car, which happens only 1/3 of the time. Switching doors is good if you initially chose a goat, which happens 2/3 of the time. Thus, the probability of winning by switching is 2/3, or double the odds of not switching.
Over countless studies using this "Monty Hall" problem, the vast majority of participants think that staying and switching are equally good alternatives. So, if you are in that camp, you have lots of company.
For investors, the fact that the majority of people who take the "Monty Hall Challenge" get it wrong suggests that there may be times when the majority of investors are "wrong," too. At crucial turning points in the stock market, when there is evidence to support two opposite directions for the major averages, the majority of investors may "misread" the data (as in the Monty Hall Challenge) and draw a conclusion that subsequently turns out to be incorrect. While we will not always be "smarter" than the crowd, we do realize that, like the Monty Hall problem, the crowd is not always right. And because of our open mind, our willingness to think differently, we are constantly scanning for opportunities or turning points that may be overlooked by the crowd.
Sidebar: Are you still shaking your head about the answer to the "Monty Hall" problem? Here’s another way to look at it from mathforum.org.
What if there were 1,000 doors? You would initially have a 1/1,000 chance of picking the correct door. If Monty opens 998 doors, all of them with goats behind them, the door that you chose first will still have a 1/1,000 chance of being the one that conceals the car, but the other remaining door will have a 999/1,000 probability of being the door that is concealing the car. Here switching sounds like a pretty good idea.
Weekly Focus – Think About It
"How wonderful that we have met with a paradox. Now we have some hope of making progress."
--Niels Bohr
Oct 25, 2010 Weekly Commentary
The Markets Would you like to buy a 10-year U.S. Treasury note that yields 14% and matures in 30 years? Believe it or not, that's what the government was offering you back in November 1981, according to Morningstar.
It didn't last, though, because that marked the end of a 40-year bear market in bonds that started in 1941. The ending of that bear ushered in a bull market in bonds that some say exists to this day -- some 29 years later.
Since 1941, we've essentially made a round trip in interest rates. The yield on the 10-year note went from 2.0% in 1941 to 14.0% in November 1981 (the bear market) and back down to 2.1% in December 2008 (the bull market), according to Federal Reserve data. As of last week, the yield had risen to 2.6%. If we’ve seen the low in the yield, then December of 2008 may have been the beginning of a new bear market in bonds.
Notice how the bond market has traveled in a very long cycle. It was in a 40-year bear market and then flipped into a 29-year bull market that may or may not be over yet. Not coincidentally, that 29-year bull market in bonds overlapped significantly with a major bull market in stocks.
So, in addition to the day-to-day noise and the year-to-year fluctuations, investments, such as bonds and stocks, tend to bob up and down within a sweeping arc of bull or bear markets. Accurately knowing where you stand within one of these sweeping arcs is one key to successful long-term investing.

WHEN IT COMES TO INVESTING, why do you behave the way you do? A study released last month by the Institute for Financial Research in Sweden tried to identify what factors affect the way an individual invests and approaches risk. Is it something pre-programmed in our genes ("nature") or does the environment ("nurture") or individual characteristics, such as age, gender, education, and wealth play the biggest role?
It turns out that our genetic makeup ("nature") accounts for about one-third of our investing behavior. This conclusion was reached after reviewing portfolios of more than 37,000 twins.
The study found that the environment ("nurture") shared by the twins as they were growing up did have an important effect on their investment behavior, too. However, this effect disappeared over time as the twins grew up and had their own experiences. Individual characteristics, such as age, gender, education, and wealth played a role, too, but they were less important than the genetic role.
To some extent, then, we can say that great investors are born, not made!

Weekly Focus – Think About It
"Time is your friend; impulse is your enemy." --John Bogle
Oct 24, 2012 The Markets


Twenty-five years later, are there any lasting lessons from the October 1987 stock market crash?

You may recall that on October 19, 1987, the Dow Jones Industrial Average plummeted 22.6 percent. This drop was far steeper than the 12.8 percent decline on October 28, 1929, the day many consider the start of the Great Depression and it “immediately raised fears of an international economic crisis and a recession in the United States,” according to the Los Angeles Times.

Although the crash was mind-boggling and is firmly etched in investment lore, on a long-term performance chart, it shows up as just a blip. In fact, in the first eight months of 1987, the Dow rose more than 40 percent, and, despite the crash, the Dow – amazingly – finished the year with a gain.

With the benefit of 25 years, here are a few investment lessons to remember:
1. Don’t panic. The crash was painful, but the market was back to breakeven just two years later.
2. Valuation matters. Traditional valuation metrics such as price earnings ratios and dividend yields were flashing red back in 1987 which suggested the market was ripe for a fall – so pay attention to valuation.
3. Stay diversified. Even though correlation among asset classes tends to rise during times of market stress, it’s still important to own a variety of asset classes as over time, it may help balance your portfolio.
4. Invest responsibly. People who borrowed money to invest in the stock market or made high-risk bets got burned when the market crashed. Always invest within your risk tolerance so a repeat of 1987 won’t put you out of business.
Sources: Los Angeles Times; The Motley Fool; Forbes

When asked what the stock market will do, the great banker J.P. Morgan replied, “It will fluctuate.” Indeed, as October 1987 shows, stocks do fluctuate – sometimes dramatically. Knowing that and remembering the four lessons above could help make you a better investor.

Securities offered through Regal Securities, Inc., Member FINRA/SIPC. Advisory Services offered through Regal Advisory Services, Inc. Fisher Financial Partners, Inc. is not affiliated with Regal Securities, Inc., or Regal Advisory Services, Inc.
This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


HOW GOOD ARE YOU at predicting the future? Well, despite a bazillion bits of information at our fingertips and unbelievable computing power, humans are still pretty bad at it.

Let’s use an example that gets to the heart of the financial crisis. As described in Nate Silver’s book, The Signal and the Noise, back in 2007 Standard & Poor’s Corporation (S&P) gave investment ratings to a particularly complex type of security called collateralized debt obligation (CDO). For CDO’s that were rated AAA – the highest rating possible – S&P said the likelihood that a piece of debt within those CDO’s would default within five years was a miniscule 0.12 percent. That’s about one chance in 850.

Now, you probably know where this is going. Guess what the actual default rate was? According to S&P, it was around 28 percent. Simple math says the actual default rate was more than 200 times higher than S&P predicted and, as Silver wrote, “This is just about as complete a failure as it is possible to make in a prediction.”

It’s easy to poke fun at bad predictions; however, there is a larger point here. First, we can’t predict the future so we always need a plan B. And, second, we need to differentiate between risk and uncertainty.

Economist Frank Knight said risk involves situations where we can calculate the probability of a particular outcome. For example, actuaries can calculate the probability of a 60-year old male dying within 10 years because they have historical mortality statistics that don’t change much from year to year.

By contrast, uncertainty has no historical data to use as a solid basis for making a prediction. For example, predicting the outcome of war in Syria is not knowable because there’s no set of historical data or probability distribution on which to base the prediction.

It’s just our luck that the financial markets seem to contain elements of risk and uncertainty. However, we can try to use that to our benefit by being cognizant when the risk/reward seems to be in our favor while at the same time, having plan B in case uncertainty tries to spoil the party.


Weekly Focus – Think About It

“It is a truth very certain that when it is not in our power to determine what is true we ought to follow what is most probable.”
Descartes, French philosopher, mathematician, writer

Securities offered through Regal Securities, Inc., Member FINRA/SIPC. Advisory Services offered through Regal Advisory Services, Inc. Fisher Financial Partners, Inc. is not affiliated with Regal Securities, Inc., or Regal Advisory Services, Inc.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
Oct 24, 2011 Weekly Commentary
The Markets "Good news is good and bad news is bad, but a lack of bad news can be good, at least for investors," so wrote Vito Racanelli in the current issue of Barron's.
Since the recent October 3 low, the S&P 500 index has risen 12.6 percent on the back of "a lack of bad news," according to data from Yahoo! Finance.
Here's what we could classify as a lack of bad news in the past few weeks:
Corporate earnings are coming in okay so far this quarter as 75 percent of the 118 companies that reported earnings have beaten estimates, according to financial data provider FactSet.
• Economic news has generally supported the idea that the economy, while soft, is not collapsing.
• • European leaders, after months of tough talk, but little action, may finally be on the verge of taking “comprehensive” action to quell (at least temporarily) the sovereign debt crisis, according to Phil Orlando, chief equity market strategist at Federated Investors.
Whether this “lack of bad news” turns into good news or bad news going forward, remains to be seen. Either way, we’ll work hard to profit from it.

THE WORLD’S POPULATION IS EXPECTED TO HIT 7 BILLION on October 31, according to the United Nations’ population division. That’s up from 2.5 billion in 1950. To put 7 billion people in perspective, see if you can correctly answer the following question.
If 7 billion people stood shoulder to shoulder, which of the following geographic areas is the smallest that could accommodate them?
Zanzibar (about 650 square miles)
A) Maui (about 727 square miles)
B) Rhode Island (about 1,033 square miles)
C) Sicily (about 9,925 square miles)
D) Cuba (about 42,845 square miles)
E) F) New Zealand (about 103,733 square miles)
The answer… in a moment.
Here are some interesting facts regarding the rate of growth of the world’s population.
It took…
250,000 years for the world to reach a population of 1 billion (hit in 1804)
• 123 years for the next billion (2 billion in 1927)
• 33 years to reach the next billion (3 billion in 1960)
• 14 years to reach the next billion (4 billion in 1974)
• 13 years to reach the next billion (5 billion in 1987)
• 12 years to reach the next billion (6 billion in 1999)
• Sources: The Economist; United Nations World Population Prospects: The 2000 Revision, Volume III: Analytical Report
And, the growth continues… we’re projected to hit 9.3 billion by 2050.
For decades, experts have argued over whether or not our planet can handle this growth. What is not up for debate, though, is the fact that a growing population will affect the demand for goods and services. Food, of course, is high on the list.
The World Bank says, “Between 2005 and 2055 agricultural productivity will have to increase by two-thirds to keep pace with rising population and changing diets.” Okay, this is interesting, but why should we pay attention to this type of information?
As financial advisors, we want to monitor trends that could impact the demand for goods and services, which, in turn, may suggest areas ripe (no pun intended!) for investment. By keeping a finger on the pulse of long-term trends -- like the rising world population -- we might get an early read on investment opportunities.
Getting back to the population/geography question, The Economist says the answer is A) Zanzibar. Does that surprise you?

Weekly Focus – Think About It
"The investor of today does not profit from yesterday's growth." --Warren Buffett
Oct 22, 2007 Weekly Commentary
The Markets
After a 10% rally in the Dow Jones Industrial Average between August 16th and October 9th, the Dow lopped off some of its frothiness last week.
By coincidence, last Friday marked the 20th anniversary of Black Monday, the day the Dow recorded its largest one-day decline in history. As you may remember, the Dow dropped a stunning 22% that day as nervous investors sold stocks indiscriminately. Now that we have 20 years behind us, was October 19, 1987, a good time to buy stocks?
Here's how the Dow Jones Industrial Average has performed over the 5, 10, 15, and 20-year periods following the October 19, 1987, market decline:

Average annualized return of the Dow Jones Industrial Average
5-year period ending October 19, 1992 12.9%
10-year period ending October 20, 1997 16.4%
15-year period ending October 21, 2002 11.2%
20-year period ending October 19, 2007 10.8%
Source: Yahoo! Finance. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Assumes dividends are not reinvested.

With those juicy double-digit returns, it turns out that "buying the dip" may have been a good strategy coming out of the 1987 crash. The above returns would be even more attractive if we added reinvested dividends.
The point here is simple. The old Wall Street adage, "Buy low and sell high" tends to be a good one.

YOU DON'T NEED A PEW RESEARCH CENTER SURVEYto tell you that the way you pay your monthly bills is very different from the way your parents did, but a new Pew study does uncover some interesting statistics. Not surprisingly, a sizable minority of Americans do most of their transactions online. Nearly three-in-ten adults (28%) say the most common way they take care of their regular monthly bills is online or by electronic payment. Just more than half, 54%, use checks, and 15% of respondents deal in cash.
Interestingly, the survey also found bill-payers focused on line items that didn't exist a generation ago. At or near the top of the public's list of regular expenses were cable or satellite television service (78% say they pay such bills every month), cell phone service (74%), and internet connections (65%). When survey respondents were given a list of common household expenses, the only one they cited as often as these three information age expenses was housing (76%).
Another regular expense for most Americans? Credit card bills. Among the 58% of adults who say a credit card payment is a regular household expense, about four-in-ten (41%) report that they generally pay their credit card bills in full each month while 53% usually make just a partial payment.
Finally, in interviews with married people, the Pew survey tried to determine which spouse spends more time each month paying the bills. Most wives say they do and most husbands agree that their wives do more of the bill paying. But, here's where it gets interesting - while 63% of all wives say they pay the bills, just 51% of all husbands say their wives pay the bills. Hopefully, that lack of precision doesn't carry over into other financial matters.

THE NUMBER OF WORKERS WITH RETIREMENT SAVINGS PLANS, such as 401(k) plans and individual retirement accounts (IRAs), grew significantly in the late 1990s into the early 2000s. According to the Employee Benefit Research Institute (EBRI), 401(k)-type plans reached just over 30% of workers ages 21 to 64 in 2004, up from 24% in 1996. At the same time, the average contribution for those participating in a plan increased from about $3,600 to just over $4,000 in 2004 dollars. What's more, the percentage of those making a contribution at the maximum dollar amount allowed under Internal Revenue Service (IRS) regulations also increased, from 3.2% in 1996 to 6.3% in 2004.
IRA ownership increased from 15.9% in 1996 to 21.4% in 2004. According to EBRI, in 2004, about 38% of IRA owners contributed the maximum amount allowed by law.
The percentage of workers invested in both of these retirement savings plans increased, too, from just 5.9% in 1996 to 11.2% in 2004.
According to EBRI, as of 2006, about $7.5 trillion in assets were held in IRAs and private-sector defined contribution plans such as 401(k)s, up from about $4.8 trillion in 2000. The good news is American workers are taking more responsibility in saving for retirement.

Weekly Focus - Watching TV Broadcasts Online
Close to 16% of Americans using the Internet watch television broadcasts online. In fact, according to research organizations the Conference Board and TNS, the number of us who view entire episodes on the Internet has doubled from a year ago. What's driving online viewership? Personal convenience and the ability to avoid commercials. The research firms found nearly 73% of online households use the Internet for entertainment purposes on a daily basis and an additional 15% search for entertainment several times a week.
Oct 21, 2013 Weekly Commentary
Weekly Market Commentary October 21, 2013


The Markets

Curse of Chucky, Scream 2, Final Destination 5, Freddy vs. Jason... You know Halloween is nearly upon us when you can't surf channels without exposing yourself to or relishing in a multitude of horror flick sequels.

Propagating alarming situations seems to be all the rage in Washington, too. Last week, a last-minute deal raised America's debt ceiling, saving us from a debt default and ending the government shutdown - until next January. In the meantime, hoping to avoid a sequel just three months down the road, the members of Congress agreed to put their heads together and produce a 10-year budget plan by mid-December.

Like the hero or heroine of many a terror-filled fantasy, stock markets generally have proved resilient despite facing formidable challenges. Just last week, the Standard & Poor's 500 Index hit a new all-time high. According to Barron's:

"Since the rally began, in March 2009, there has been the flash crash, the Greek default drama, the U.S. debt-ceiling debacle, the Standard & Poor's credit-rating downgrade of the U.S., the sequester, and the great taper scare. Each of these, we were told, could have ushered in a new bear market. Instead, the S&P 500 squirmed out of the traps and headed higher. And, for its latest trick, the market had to avoid the double whammy of a government shutdown and a potential default."

The short-term resolution of budget and debt-ceiling issues doesn't mean markets have escaped the (choose one: axe-wielding maniac, flesh-eating demon, Stay-Puffed Marshmallow Man) quite yet. Looking ahead, they'll have to confront the menace of potentially contentious budget negotiations, the possible end of quantitative easing, and the phantasm of resolute fiscal policy.

IT MAY BE THE HOLY GRAIL OF INVESTING... If you could accurately predict how share prices would move, you'd probably be quite wealthy. If you could offer insight that helps analysts and investors do a better job predicting such things, you might win the Nobel Prize. That's what happened last week when American economists Eugene Fama and Lars Peter Hansen from the University of Chicago, and Robert Shiller from Yale University, jointly received the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2013. They were recognized for their empirical analysis of asset prices.

Eugene Fama is best known for his work on the efficient frontier which demonstrated stock prices are extremely difficult to predict over the short term because new information is incorporated into prices very quickly. His research not only influenced future research, many credit the emergence of Index-linked investments to his theories.

Robert Shiller, a student of behavioral economics, challenged Fama's efficient markets hypothesis with the belief that markets are driven by human psychology which can and does create large and sustained pricing errors. Shiller established when the ratio of prices to dividends for stocks is high, prices tend to fall, and when the ratio is low, prices tend to increase.

Lars Peter Hansen developed the Generalized Method of Moments, or GMM, which proposed a "straightforward way to test the specification of the proposed model... Hansen's work is instrumental for testing the advanced versions of the propositions of Fama and Shiller... If you want to do serious analysis of whether changing risk premia can help rationalize observed asset price movements, Hansen's contributions will prove essential."

According to the Nobel committee, "There is no way to predict the price of stocks and bonds over the next few days or weeks. But, it is quite possible to foresee the broad course of these prices over longer periods, such as the next three to five years... The Laureates have laid the foundation for the current understanding of asset prices. It relies in part on fluctuations in risk and risk attitudes, and in part on behavioral biases and market frictions."

Weekly Focus - Think About It
"Many men go fishing all of their lives without knowing that it is not fish they are after."
--Henry David Thoreau, American naturalist and author

Sources: http://www.economist.com/news/leaders/21588091-none-deeper-problems-american-government-was-solved-week-worse-europe http://blogs.barrons.com/stockstowatchtoday/2013/10/17/sp-500-touches-new-all-time-high/ http://online.barrons.com/article/SB50001424053111904462504579135591722386768.html?mod=BOL_twm_col http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2013/ http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2013/press.html http://www.washingtonpost.com/blogs/wonkblog/wp/2013/10/14/the-economics-nobel-goes-to-eugene-fama-lars-hansen-and-robert-shiller/ http://marginalrevolution.com/marginalrevolution/2013/10/lars-peter-hansen-nobel-laureate.html#sthash.Hzxzqq9I.dpuf http://www.brainyquote.com/quotes/topics/topic_sports.html#uAeCUqJdACi5efG8.99
Oct 20, 2008 Weekly Commentary
The Markets High volatility continued last week, but when the closing bell rang on Friday, investors were smiling as the Dow Jones Industrial Average recorded its biggest one-week gain in more than five years, according to The Wall Street Journal.
On Monday of last week, the Dow rose a stunning 936 points, but on Wednesday, it took a 733-point dive. And, for good measure, it popped higher by 401 points on Thursday. These dramatic daily swings suggest that investors still lack strong conviction on which direction the market is heading.
The government intervention in the financial markets continued last week and investors were left trying to figure out what it all means. At one end of the spectrum, you have people who are thrilled that the government is stepping in and preventing more firms from going under. At the other end, you have free-market champions who are furious that the government is propping up weak firms that otherwise might fail because of their bad decision-making. If nothing else, these historic times are keeping bloggers and opinion page writers busy arguing their particular point of view.
One surprising piece of news last week was the opinion page article penned by super investor Warren Buffett that was published in the New York Times. The normally tight-lipped investor went on the record as saying he was buying stocks last week for his personal portfolio, according to CNBC. Buffett also said, “Fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups as they always have. But, most major companies will be setting new profit records five, 10, and 20 years from now.”
Buffett says one rule dictates his buying: “Be fearful when others are greedy, and be greedy when others are fearful.” Right now, with these tremendous daily swings, there appears to be plenty of fear. And, if Buffett is right, then the prices we see today might look pretty attractive five or more years from now.

WHAT WILL BE THE CLOSING PRICE of the Dow Jones Industrial Average five years from now? While nobody knows the answer to that question with 100% certainty, it is worthwhile to look at several different scenarios. By understanding what might happen, we may be able to put ourselves in a better position to profit from what actually happens. Here are three possible scenarios:
Scenario 1: The stock market is significantly lower five years from now. In order for this to happen, we would likely need a severe and long-lasting recession that borders on a depression. In light of what’s happened over the past few months, this is not entirely out of the question; however, we think the likelihood of this happening is small. The U.S. government’s massive intervention in the economy and the global response to this crisis will likely prevent this type of complete meltdown.
Scenario 2: The stock market is about even five years from now. This could happen if we have a major recession that puts a multi-year crimp in corporate earnings. This wouldn’t be as bad as the meltdown in Scenario 1, but it would probably have to be on par or slightly worse than the early 1980s recession. Even if this were to happen, there could still be some profit-making opportunities in the stock market. For example, between 1929 and 1934 during the depth of the Great Depression, there were 9 bear and 8 bull markets as defined by an increase or decrease of 20% or more in the Dow Jones Industrial Average, according to data from Bespoke Investment Group. So, even though the Dow experienced an overall drop between 1929 and 1934, there were several significant rallies in between that offered potential profit-making opportunities.
Scenario 3: The stock market is higher five years from now. This might be the most likely scenario given the significant drop we’ve already experienced. Here are several pieces of information that help support the likelihood of this scenario coming to fruition:  First, as we mentioned earlier, Warren Buffett said he’s started to buy stocks for his personal portfolio. That’s a comforting sign for many investors.  Second, noted investment manager John Hussman mentioned in his October 13 market commentary that, “Stocks are now at the same valuations that existed at the 1990 bear market low. Relative to 30-year Treasury yields, the S&P 500 is priced to deliver the highest excess return since the early 1980s.” In effect, he seems to suggest that the downside risk from here may be small and that there may be some significant upside available.  Third, noted investment manager Jeremy Grantham, who is chairman of the $120 billion money management firm GMO, wrote in an October 17 letter to clients, “At under 1,000 on the S&P 500, U.S. stocks are very reasonable buys for brave value managers willing to be early.” Grantham had been bearish on the market for many years, so this is a big turnaround for him.  Fourth, corporate insiders are buying much more stock than they are selling as of October 10, according to Vickers Weekly Insider Report as reported by Mark Hulbert at MarketWatch. This insider buying ratio was the best in nearly 10 years, which is often a bullish sign for future stock prices.
Short of getting a copy today of The Wall Street Journal that will be printed five years from now, we know that any forecast about the future is subject to error. With that said, as outlined in Scenario 3, we think there are numerous reasons to be optimistic about the future. That doesn’t mean it will all be rosy from here. We’ll likely experience more harrowing hiccups, but, eventually, the crisis should pass, the excess should be cleared out, and the market should move higher. Time tends to heal all wounds.

Weekly Focus – Think About It
“Our interviews, experience, and involvement with people at mid-life have led us to believe that nothing is more important to fulfillment in the second half of life than the willingness to ‘risk walking new ground.’” -- Richard Leider and David Shapiro
Oct 19, 2010 Weekly Commentary
The Markets When is a dollar not worth a dollar?
A McDonald's Big Mac costs an average of $3.71 in the United States, according to an October 14 article from The Economist. Just across the border in Canada, that same burger costs $4.18 based on the October 13 exchange rate. In the Euro area, you’d have to shell out $4.79 to quench your Mac attack. But, if you’re really hungry, you should forget going to Switzerland because a Big Mac there will set you back a whopping $6.78 at the going exchange rate.
So, a dollar is not worth a dollar when its value declines relative to another country's currency such as the ones above. The dollar is also weak against the Japanese yen, where it fell to a 15-year low last week, and the Australian dollar, where it fell to a nearly 30-year low, according to MarketWatch.
What's going on here?
Essentially, the combination of economic weakness in the U.S., extremely low interest rates, and our country's easy money policy, have conspired to reduce the value of our currency relative to some other countries. And, as our government knows, a weak currency can be a net positive -- as long as it doesn't get too weak.
According to an October 1 weekly update from Linda Duessel at Federated Investors, "Currency depreciation is the most politically palatable way to deal with both deficits and slow growth. Unfortunately, history suggests depreciating the dollar is the worst possible way to deal with public debt. It spawns inflation, stifles growth and eats away at earnings."
The relatively weak value of the dollar may not crimp your day-to-day lifestyle right now. However, as an advisor, it's an important macro indicator that could impact the value of your portfolio -- and your pocketbook -- if it gets too far outside of historical norms. It bears watching.

WHILE THE PURCHASING POWER OF THE DOLLAR can be analyzed using a Big Mac, it can also be analyzed using something less edible -- gold. Gold has been considered a medium of exchange for several thousand years, according to the National Mining Association. And, for some people, it is the soundest "currency" in existence today because it is scarce, it can’t be printed (mined) freely, and it has a long history of being valuable and tradable.
Measuring the value of the dollar in terms of gold is quite simple. All you do is plot the dollar cost of one ounce of gold over time. Back in the early 1930s when our country was on the gold standard, gold was set at a fixed price of $20.67 per ounce, according to The Economist. In the early 1970s, the last vestiges of the gold standard were removed and the price of gold was allowed to reach a "market" price. As of last week, that market price was over $1,300 per ounce.
The rise of gold from $20 an ounce to over $1,300 an ounce was effectively a massive devaluation of the dollar, according to The Economist. Had you bought an ounce of gold in 1930 for $20 and held it to today, you could sell it for more than $1,300. Had you just sat on your $20, it would still be worth $20, but it would buy you less than 1/50th of an ounce of gold.
The funny thing about gold is that it’s not an "investment" in the traditional sense because it does not pay a dividend and it does not generate cash flow. It just sits there and looks really pretty. However, given that its price in dollar terms has risen dramatically over the past 80 years, it's clear that people do place a value on it.

Weekly Focus – Think About It
"More gold has been mined from the thoughts of men than has been taken from the earth." --Napoleon Hill
Oct 19, 2009 Weekly Commentary
The Markets The good news is the Dow Jones Industrial Average rose above 10,000 last week. The bad news is it first rose above 10,000 more than 10 years ago – March 1999 to be specific.
A lot has changed in those 10 years! Let’s look at a few differences between 1999 and today, according to Peter Boockvar, equity strategist at Miller Tabak as reported in a Yahoo! Finance article.
· Total U.S. public debt was about $5.6 trillion back in March 1999 versus about $12.0 trillion today, according to the Treasury Department. By contrast, U.S. gross domestic product has only grown from $11 trillion in 1999 to about $13 trillion today.
· In fiscal 1999, the U.S. had a budget surplus of $125 billion. In fiscal 2009, we had a budget deficit of $1.4 trillion, according to the Congressional Budget Office.
· Unemployment was 4.2% in March 1999. Last month it was 9.8%, according to the Bureau of Labor Statistics.
· The value of the U.S. dollar has dropped about 25% since 1999 against a basket of currencies. This means that it costs us about 25% more to buy foreign denominated goods and services than it would have had the dollar maintained its value.
· The DJ-UBS Commodity index was in the upper 70s in March 1999. Last week it closed at 134, which indicates prices for commodities have risen significantly, according to Dow Jones.
· Gold was about $280 per ounce in early 1999. Today it is over $1,000.
· Oil was selling for about $16.50 a barrel in early 1999. Today it is over $75 a barrel.
The numbers above show that as our country has gone deeper into debt over the past 10 years, the stock market has flat lined and the value of the dollar has declined significantly, while hard assets such as gold and oil have more than tripled in value and commodities in general have risen in the high double digits. Unlike in the “rock, paper, scissors” game of our childhood, the financial markets are telling us rock (hard assets) beats paper (currency and IOUs).

CHICAGO LOST ITS BID to host the 2016 Olympics, but the federal government is running its own kind of Olympian relay race. This metaphorical four-person relay team consists of the federal government competing against a spiraling downward economy. Seeking to get off to a fast start, the federal government ran the first leg and pushed through a $787 billion stimulus program last February. With dollars in hand (the “baton”), the federal government handed off to not one, but two runners for the second leg – corporate America and state and local governments. Figuring that growing businesses and growing state and local governments would lead to job creation, the federal government hoped that more jobs would lead the final runner in the relay race – the consumer – to start spending and sprint to victory over the declining economy.
So, who’s winning the relay race? The short answer is, the race still has a ways to go, but the federal government’s team is in the lead.
Like it or not, the stimulus package, coupled with ultra low interest rates, appears to have helped arrest the slide in the economy, but may have simply pushed the “day of reckoning” further into the future. Corporate America is on a roll as 79% of the companies that have reported third quarter earnings are beating estimates, according to CNBC. Taking a cue from the improving earnings picture, stocks are up dramatically since the March 9 low. However, state and local governments are generally still hurting so that’s a weak link. And then there’s the consumer.
With unemployment at 9.8%, it’s hard to imagine that consumers can run a strong final leg. Consumer spending accounts for roughly 70% of economic activity, according to CNBC, so in order to win this race, consumers need jobs that allow them to spend money.
The big unanswerable question is, “What happens to the economy after the stimulus runs out?” Will the economy have enough momentum to grow on its own or will it slip back into recession? Judging by the surging stock market, investors seem to think we’ve filled the government relay team with enough juice to keep them on a path to victory. Since the race is still in progress, we need more time to determine if the juice was “nutritional” enough to ensure victory or spiked with sugar that leads to bonking on the final lap.

Weekly Focus – Think About It
“Thrift comes too late when you find it at the bottom of your purse.”
-- Seneca
Oct 17, 2011 Weekly Commentary
The Markets What happened to the economy?
Less than three weeks ago, it seemed like the economy was falling off a cliff. Firms like the Economic Cycle Research Institute were saying a new recession was on its way and there's nothing the government could do to stop it, according to MarketWatch. The stock market was sensing economic weakness, too, as it slumped to its lowest level in a year on October 3.
But, now, just two weeks later, the S&P 500 stock index is up a whopping 11 percent since October 3 and trading at the top end of a range that it’s been stuck in for more than two months, according to Bloomberg.
Has the economy suddenly turned the corner? Well, economic reports in the last couple weeks came in better than expected. According to The Wall Street Journal, "Auto sales rebounded to their highest level since April. Chain-store sales posted year-on-year growth of 5.5 percent. The economy added 103,000 jobs, and manufacturing sentiment improved a bit." On top of that, the Commerce Department said retail sales rose 1.1 percent in September -- above the 0.8 percent expected by economists surveyed by MarketWatch.
While the recent positive economic data is encouraging, it would be premature to ring the metaphorical bell for an all-clear signal. The economy still has lots of repairs to make before happy days are here again. In the meantime, we'll keep doing our job which is to help you meet your financial goals and objectives.

LOOKING BACK ON THE DECADE OF THE 1930s, which includes the Great Depression, it's hard to imagine that it may have been, "the most technologically progressive decade of the century," according to economic historian Alexander Field. And, those advancements -- in the midst of our country's worst economic slump -- may have set the stage for our post-World War II boom.
Like our Great Depression experience, could the current economic downturn be laying the seeds for a new American renaissance in the coming years?
In his recent book, A Great Leap Forward, Field argues that technological advancement and innovation flourished during the Great Depression. In a New York Times interview he said, "There is evidence that for some organizations and industries, just as for some individuals, adversity summons reservoirs of initiative and creativity that have long-term positive consequences. And, based on Depression experience, we can be optimistic that when exciting technological paradigms are ripe for exploitation, work will continue on them, slump or no slump."
If necessity is indeed the mother of invention, then right now there may be exciting new technologies and innovation growing under the radar that will bear fruit in the years to come. As David Leonhardt wrote in The New York Times, the U.S. has several advantages over other countries including, "The world's best venture-capital network, a well-established rule of law, a culture that celebrates risk taking, (and) an unmatched appeal to immigrants." Those advantages may be working overtime now creating the next "big thing."
Don't forget that 20 years ago, the internet was only known to scientists and academics. Today, it's ubiquitous and would be hard to live without. Twenty years from now we could be writing about something entirely new that changes the way we work and live -- and employs millions of people.
It's easy to throw up your arms in frustration about the challenges our world faces. And, yes, we do have challenges and many people are experiencing economic hardship. Yet, there is reason for hope. Seeds were sown during the adversity of the Great Depression that bore fruit in the decades to follow. It could be happening again.
It's never wise to bet against the United States.

Weekly Focus – Think About It
"The American, by nature, is optimistic. He is experimental, an inventor, and a builder who builds best when called upon to build greatly." --John F. Kennedy
Oct 15, 2012 Weekly Commentary
The Markets


Two widely watched indicators just hit five-year extreme levels – and that's a positive for the economy.

Consumer sentiment hit a five-year high in the preliminary October reading, as measured by the University of Michigan-Thomson Reuters sentiment gauge. This gauge "covers how consumers view their personal finances as well as business and buying conditions," according to MarketWatch. Higher levels of sentiment could translate into higher consumer spending and help propel the economy.

And, the second indicator, housing foreclosure filings, hit a five-year low in September, according to RealtyTrac. Foreclosure filings include default notices, scheduled auctions, and bank repossessions. In September, there were 180,427 foreclosure filings. By contrast, that number was above 350,000 in mid-2009, so, yes, foreclosure filings have improved significantly over the past few years.

And, for good measure, let's throw in a third indicator – weekly jobless claims – which fell to their lowest level in more than four years for the week ending October 6, according to Bloomberg. Lower claims "may mean employers are seeing enough demand to maintain current staff, a necessary first step to bigger gains in hiring," according to Bloomberg.

While these three indicators look good, "Earnings pessimism among U.S. chief executive officers is climbing to levels last seen when the Standard & Poor's 500 Index was mired in bear markets," according to Bloomberg. In fact, analysts are now forecasting a 0.9 percent decline in corporate earnings for the just completed third quarter, according to Bloomberg.

Good news, bad news, what's an investor supposed to take from this? Well, like the movie by the same title, it’s complicated. The economy continues to recover and rebalance from the Great Recession and this leads to some indicators looking good, others looking bad, and some looking just plain normal.


DO YOU WANT TO KNOW THE SECRET to Warren Buffett's remarkable investment success?

First, some background. Buffett partially owns a company called Berkshire Hathaway and he uses this as his vehicle for making investments in other companies. So, when people say Buffett is a great investor, they're looking at the performance of Berkshire Hathaway stock which, in turn, tends to reflect the performance of the companies Berkshire owns.

Further, a recent academic paper by Andrea Frazzini, David Kabiller, and Lasse H. Pedersen, titled Buffett's Alpha, said, "Buffett's performance is outstanding as the best among all stocks and mutual funds that have existed for at least 30 years."

Now, here's the secret to Buffett's spectacular returns according to the paper's authors:

We find that the secret to Buffett's success is his preference for cheap, safe, high-quality stocks combined with his consistent use of leverage to magnify returns while surviving the inevitable large absolute and relative drawdowns this entails.

Let's look at each of those components:

1) Cheap: defined as value stocks with low price-to-book ratios 2) Safe: defined as stocks with low beta and low volatility 3) High-quality: defined as stocks of companies that are profitable, stable, growing, and have high dividend payout ratios 4) Leverage: perhaps shockingly, the authors discovered that Berkshire magnified its returns by leveraging its capital by 60 percent financed partly using insurance float with a low financing rate Source: Buffett's Alpha paper

This is not a buy or sell recommendation on Berkshire Hathaway stock, rather, it shows Buffett latched on to a good strategy early in his career, used leverage to magnify his returns, and stuck to the strategy even when it suffered large declines.

Now that we know "how" Buffett achieved his outstanding return (including the surprising leverage), does this in any way diminish his results? No. In fact, it's probably just the opposite. Buffett figured this strategy out more than 30 years ago and researchers are just now catching up with him!


Weekly Focus - Think About It...

"Research is to see what everybody else has seen, and to think what nobody else has thought."
--Albert Szent-Gyorgyi, Hungarian biochemist
Oct 13, 2008 Weekly Commentary
The Markets "Past performance is no guarantee of future results."
That's a phrase you hear often in the securities business, in fact, securities regulators require that disclosure in certain written communication. It's most common usage is to warn investors that if an investment has performed extremely well in the past, it's no guarantee that the investment will continue to perform well in the future. Conversely, it could also mean that a poorly performing investment is not guaranteed to continue performing poorly in the future.
Here's a third way to interpret that statement. The past performance of stock market indicators is no guarantee that those indicators will hold up in the future. What we mean by that is, historically, investment analysts have developed ratios, technical indicators, chart patterns, and various other tools to help them determine if stocks are “properly” valued. These tools help guide investors in making investment decisions. Unfortunately, the swiftness and the degree of this decline are rendering many of these indicators less useful.
With that said, this is no time to throw up your hands and cry “uncle.”
The depth and speed of this worldwide decline, coupled with the seizing up of the credit markets, is unprecedented in our lifetime and it caught many people off guard. For example, here are a few quotes that show how wrong some people in power were:
• On March 28, 2007, Fed Chairman Ben Bernanke told Congress that subprime defaults were “likely to be contained.''
• On June 20, 2007, Treasury Secretary Hank Paulson said that subprime fallout “will not affect the economy overall.”
• On June 27, 2007, Stan O'Neal, then the CEO of Merrill Lynch, called subprime defaults “reasonably well contained.”
Today, there’s no doubt that the situation we’re dealing with is serious and despite their tardiness, government and business leaders clearly understand that. They’re doing what they can to solve this problem as are we. As your advisor, it’s our job to keep digging and keep searching for better ways to manage and protect your investments. When the historical indicators no longer work, then it’s our job to find new ways to analyze the situation and respond as we think appropriate.
Please be assured that we’re not crying uncle. Instead, we realize that it’s times like these that the seeds of opportunity are sown. Major market disruptions as we’re witnessing now may lead to unprecedented opportunities down the road. We’re keeping our eye on that road and doing our best to take advantage of any opportunities we find along the way.
If you have any questions or concerns, please let us know. We are here for you.

WHAT HAS TO HAPPEN for this market to find a bottom? With an 18% decline in the Dow Jones Industrial Average last week and a 40% decline over the past 12 months, trying to call a bottom in this market has been futile. While nobody can predict exactly when we’ll hit bottom, here are a few things to monitor:
• First, a credible government action plan could help put a floor under stock prices. So far, our government’s piecemeal approach to this crisis hasn’t worked. However, if they’re able to get their act together and work in coordination with their G-7 and G-20 counterparts, then we may see some confidence return to the markets and a bottom could begin to form.
• Second, “Bottoms are made when selling becomes exhausted and long-term participants perceive value and lift stocks sharply off their lows,” according to Brett Steenbarger, Ph.D. As of last week, we still haven’t seen the long-term participants enter the market and lift stocks. Instead, we’ve seen one down day followed by another. It’s been a vicious cycle of selling that feeds on itself. At some point, though, we expect the strong selling pressure to abate and bargain buyers to emerge. Let’s hope that happens sooner rather than later.
• Third, the credit markets need to get back to some semblance of normality. Currently, banks are afraid to lend money and this constriction of credit is causing major problems for consumers and businesses. Too much credit and too little credit are both bad things. We need to strike a balance in order for commerce to function. Right now, credit constriction is putting a crimp in commerce.
One way to help determine if the credit freeze is thawing is to look at the “TED spread.” This is the difference between 3-month LIBOR (an average of interest rates offered in the London interbank market for 3-month dollar-denominated loans) and the 3-month Treasury bill rate. According to Bespoke Investment Group, “Elevated readings in the indicator indicate an increased level of risk aversion in the market, as investors flock to short term T-bills, which due to their credit quality and short time horizon, are considered risk free, while Eurodollar futures are more representative of the credit quality of corporate borrowers.” Historically, the TED spread has stayed below ½ of 1%, meaning the LIBOR interest rate has usually been less than ½ of 1% higher than the T-bill rate, according to Econbrowser. However, last Friday, the spread was a record 4.6%, according to Bloomberg. This extraordinary reading suggests banks are very leery of lending money and, when they do, they demand a significant premium. This number will likely need to come down dramatically before we see the stock market stabilize.
In summary, keep your seatbelts fastened. There may be more turbulence ahead, but we’re doing all we can to get you to your destination as safely as possible.

Weekly Focus – Think About It
“Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble – i.e., to give way to hope, fear, and greed.” – Benjamin Graham
Oct 12, 2009 Weekly Commentary
The Markets The S&P 500 index jumped 4.5% last week as a weakening dollar and a positive earnings report from Alcoa helped keep the bulls in charge.
Early last week, Australia surprised the world and became the first central bank of the Group of 20 Nations to raise its benchmark interest rate during this economic cycle, according to MarketWatch. This helped send the dollar lower as currency investors realized that countries such as Australia may offer better growth prospects – and higher returns on interest-bearing investments – than the United States.
Alcoa, traditionally the first company in the Dow Jones Industrial Average to report quarterly earnings, started the reporting period with a bang as it reported revenues and earnings that exceeded Wall Street expectations, according to CNBC. As an aluminum maker, Alcoa’s products are used in manufacturing and the company’s results may provide a glimpse on how that sector of our economy is performing. While the quarter was above analyst expectations, the expectations were low. Alcoa’s revenue was down 37% from a year ago while its earnings per share were off 89%, according to CNBC.
The economy still has a long way to go before it regains its former glory days, but the financial markets are wasting little time in trying to recoup their bear market losses.

GOLD PRICES HIT AN ALL-TIME HIGH last week driven by a weak dollar and concerns over potential inflationary pressure, according to CNBC. Many people consider gold to be a good inflation hedge. Is it true? Let’s look at some examples.
Way back in January 1980, gold prices peaked at approximately $850 per ounce. Last week, it closed at $1,051 per ounce according to the London Bullion Market Association (LBMA). This represents a gain of about 24%. By comparison, between January 1980 and August 2009, inflation, as measured by the consumer price index, rose approximately 179%, according to the 2009 Ibbotson® SBBI® Classic Yearbook and the Bureau of Labor Statistics. Score one for inflation beating gold.
If gold prices had kept pace with inflation since January 1980, gold would sell for roughly $2,400 an ounce in today's dollars, according to MarketWatch. This is one reason why some investors feel gold could move to $2,000 an ounce without too much trouble.
However, before we get too carried away, let’s look at the other side of the story.
Like many statistics, what you pick as your starting point can greatly influence your results. By picking the January 1980 gold price peak as the starting date – after gold had already risen more than 2,000% in the previous 10 years – the returns between 1980 and today look weak.
A more representative analysis of the inflation-fighting benefits of gold would start in June 1973. By June 1973, all currencies were allowed to “float” freely without regard to the price of gold and the U.S. was a couple years past exchanging dollars for gold at a fixed price, according to the National Mining Association. In other words, by June 1973, we had a market-based price for gold that reflected supply and demand and we were just prior to the start of a major inflation binge in the U.S. The price of gold that month was approximately $120 per ounce, according to the LBMA.
Here are a couple numbers to consider.
First, between the June 1973 price of $120 per ounce and the January 1980 price of $850 per ounce, gold had risen 608%. By contrast, inflation rose 76% during that same period, according to the 2009 Ibbotson® SBBI® Classic Yearbook. Clearly, gold was an excellent inflation hedge during the inflationary 1970s. Score one for gold beating inflation.
Second, between the June 1973 price of $120 per ounce and last week's price of $1,051, gold had risen 776%. By contrast, inflation rose approximately 385% during that same period, according to the 2009 Ibbotson® SBBI® Classic Yearbook and data from the Bureau of Labor Statistics. Clearly, gold has been an effective hedge against inflation since 1973, although past performance is no guarantee of future results. Score another one for gold beating inflation.
Here are some conclusions to ponder.
First, gold has historically been a solid inflation hedge over a long period of time. However, there is no guarantee this will hold true in the future.
Second, between the 1980 gold price peak and last week, gold has significantly underperformed inflation. However, it is misleading to say "gold is selling well below its inflation-adjusted 1980 price" as a reason why gold should easily move to $2,000 per ounce. It is misleading because gold had already moved up more than 2,000% during the 1970s, as measured from gold's January 1970 price of $35 per ounce.
Third, gold has historically moved in long cycles. In the 1970s, it had a strong up move. In the 1980s through the early 2000s, it was in a down move. Since the early 2000s, it has been in a strong up move.
Presently, gold could be on the rise due to inflation expectations or as a hedge against a declining dollar. Most likely, it is a combination of both.
Because of its long history, gold enjoys a special place in society. It can be an investment. It can be a hedge. It can be worn on your body as jewelry. It can be exchanged for cash. And, because of its special place, we will likely still be talking about gold over the next millennium.

Weekly Focus – Think About It
"Thinking to get at once all the gold the goose could give, he killed it and opened it only to find - nothing."”
-- Aesop
Oct 11, 2010 Weekly Commentary
The Markets Investors seem to be putting a lot of faith in the Federal Reserve right now.
Since the financial crisis began in 2008, the Federal Reserve and other branches of government have engaged in creative and somewhat unorthodox ways to try and shock the economy back to good health. While reasonable people disagree on the effectiveness of the government’s intervention, it’s fair to say that, so far, we avoided a repeat of the Great Depression. Whether that avoidance was due to, or in spite of, the government’s intervention will be debated by academics for years.
One thing that we can say with confidence is that government intervention has distorted the financial markets to some degree. For example, over the past couple years, the Federal Reserve bought about $1.75 trillion of agency debt, agency mortgage-backed securities, and longer-term Treasury securities. These purchases helped reduce government bond yields. In turn, these low interest rates have put pressure on the value of the U.S. dollar, helped boost oil and commodity prices, and helped send gold to record highs.
Last Friday, another distortion became clear when the Department of Labor released the payrolls report, which showed a loss of 95,000 jobs in September. That was worse than the expected loss of 5,000 jobs, according to Bloomberg. This “bad” news didn’t phase the stock market as it rose for the day. The logic behind this “bad news is good news” idea is that with the job market still quite soft, this makes it even more likely that the Fed will step in with another round of quantitative easing. So, investors put their faith in the Fed thinking that it will swoop in to the rescue and flood the system with cheap money, which, in theory, could help the economy.
Federal Reserve and U.S. government intervention in the financial markets is not new. However, the degree to which it is occurring is rather stunning. While it may keep the economy and the financial markets propped up, the question becomes, for how long? If the juice from the government runs out, will the economy run out, too? Or, will the juice last long enough for the patient to get well and lead us into a vibrant economic expansion?

HOW LONG IS THE LONG-TERM? Financial advisors commonly tell their clients to “invest for the long-term,” but how long is that? Well, how about 100 years?
Mexico, of all places, issued a government bond on October 6 that yields 6.1% and matures in 100 years, according to Financial Times. That’s longer than the average life expectancy for a baby born today. Despite the extremely long maturity, there is a legitimate reason for this type of bond.
The greatest demand for these bonds came from U.S. insurance companies, which makes sense. Insurance companies have a very long time-horizon because they insure people’s lives. And, while 100 years is longer than the average term of a life insurance policy, it gives insurance companies a little more predictability on the source of income that they can use to fund death claims.
Jeffrey Rosenberg, global credit strategist for Bank of America Merrill Lynch, pointed out in a CNBC article that issuing a 100-year bond is also a side-effect of the Federal Reserve’s easy money policy. Rosenberg said, “Lack of yield in risk-free alternatives forces investors out the risk spectrum -- either down in quality or out in maturity -- in search for yield.” In this case, investors were doing both, i.e., dropping down in quality and extending their maturity.
While a 100-year bond might work for an insurance company, the general public seems to prefer shorter-term bonds that have more liquidity. After all, in this day and age, you never know when you might need access to your investments on short notice.

Weekly Focus – Think About It
“There is a time for departure even when there's no certain place to go.” --Tennessee Williams
Oct 10, 2011 Weekly Commentary
The Markets Sometimes a little spark is all you need.
At one point last Tuesday, October 4, the S&P 500 index dropped below 1,091, which represented a 20 percent decline from the April 29 closing high, according to MarketWatch. That’s a key number because many investors consider a 20 percent decline to signify a bear market. But, lo and behold, just when it looked like the market might go from bad to worse, the Financial Times (FT) published a story that hit the internet that afternoon and the U.S. stock market staged a massive positive reversal.
The FT story said, “European Union finance ministers are examining ways of coordinating recapitalizations of financial institutions after they agreed that additional measures were urgently needed to shore up the region’s banks.”
That story prompted a huge 3.7 percent rally in the S&P 500 index in the last hour of trading on Tuesday, according to Bespoke Investment Group. Interestingly, the reversal propelled the index well above the key 1,091 level and prevented us from starting a new bear market in the U.S.
The key point about the late day reversal on October 4 is not so much that it saved us from printing a new bear market – although that’s good! Rather, the amazing thing is the key reversal was prompted by mere “talk” of another plan to help save the euro-zone from sovereign debt abyss.
Last week’s market action reinforced the notion that macro issues like the sovereign debt problem – rather than company-specific news – are still a significant driver of the overall stock market.
Until the macro issues get resolved, we should be prepared for major market moves – both up and down – based on the latest headlines.

THREE KEY IDEAS FROM STEVE JOBS
With the passing of Steve Jobs, we wanted to share three of his ideas that you may find helpful.
Steve Jobs' business career is remarkable by any standard. His ability to go from boy wonder co-founder of Apple Computer, to Chairman and CEO of Pixar, to the largest individual shareholder of The Walt Disney Company, to ousted executive who returned to save Apple and turn it into a seemingly unbeatable brand, is simply amazing. While he made plenty of mistakes in his youth, he matured into a very successful businessman with some insightful thoughts on success. Here are three of his ideas worth sharing:
“Connect the dots.”
Over time, all of us have incredible life experiences – some positive, and some not. Regardless of the outcome, they ultimately shaped the person you are today. Everything that has happened to you in your past has the ability to positively affect you in the present – if you connect the dots.
At a 2005 Commencement address at Stanford University, Jobs told a story about how on a whim, he dropped in on a calligraphy class while attending Reed College back in the early 1970s. At the time, he found the class utterly fascinating, but totally useless. It wasn’t until 10 years later, when he was designing the Macintosh computer, that he was able to connect the dots. The result: the Macintosh became the first computer with beautiful typography and it became a huge hit in the desktop publishing industry.
Think for a moment about some of your life experiences. What lessons have you learned? What stories can you create from these lessons that you can share with your family, friends, or business associates? Stories are one of the best ways to connect with people so consider connecting the dots of your life experiences and turn them into a meaningful message.
“Say no.”
There is no shortage of opportunities in life. However, there is often a shortage of conviction. Rather than trying a little bit of everything and successfully completing nothing, Jobs did the opposite. He was an obsessive focuser on a small number of things that were truly important to him.
Apple sells essentially just four products: the Macintosh computer, the iPod, the iPhone, and the iPad. With just four main product lines, Jobs led Apple to the world’s most valuable company with a $350 billion market value, according to The Wall Street Journal. Despite the temptation, Jobs resisted the call to offer a multitude of lower-end products and milk the company’s great brand. He said, “It’s only by saying no that you can concentrate on the things that are really important.”
Ask yourself, what can you say “no” to in your personal or business life so you have room to say “yes” with complete conviction to something else that’s more important?
“Quality, not quantity.”
At Pixar, where Jobs built the firm from peanuts into a company that he sold to The Walt Disney Company for $7.4 billion, there is no 80/20 rule. It’s more like the rule of 100—every effort gets 100 percent support. Accordingly, Pixar delivered an average of only one movie every 18 months; a weak pace by major movie studio standards. However, the result was anything but weak. Pixar has generated more than $7.0 billion in worldwide box office receipts since 1995 – and they’ve had no bombs, according to The Numbers.
Like Pixar, life is not about quantity. It’s about quality. When you spend more time focusing on quality – such as in relationships – life satisfaction will multiply.
In a 2004 BusinessWeek interview, Jobs reflected on his personal growth that resulted from him successfully bouncing back from cancer. He said, “I realized that I loved my life. I really do. I’ve got the greatest family in the world, and I’ve got my work. I love my family, and I love running Apple, and I love Pixar. And I get to do that. I’m very lucky.”
By following these simple ideas – connecting the dots, saying no to the unimportant and focusing on quality, not quantity – you, too, can end up with a life you love. Do that and you’ll be one of the lucky few in this life who can look back at the end of their days and say with great conviction, “It was a life well lived.” RIP.

Weekly Focus – Think About It
“I want to put a ding in the universe.” --Steve Jobs
Oct 09, 2012 Weekly Commentary
The Markets


Encouraging, but still lackluster.

That's how one analyst described the September jobs report released last Friday by the Labor Department. On the encouraging side, the unemployment rate dropped to its lowest level since January 2009 and the previous two month's reports were revised upward to show 86,000 more jobs were created than originally reported. On the lackluster side, "At the recent pace of job growth, it would take about 28 months to recoup all the jobs lost during the last recession," and "The U.S. is still short about 4.1 million jobs compared to its pre-recession peak," according to MarketWatch.

This middle of the road jobs report continues the tug-of-war trend we've seen in the economy. Neither the recessionary forces nor the expansionary forces in the economy can gain an edge. Like a chess match that ends in a draw, the opposing economic forces seem to just about neutralize each other and we end up with modest growth that doesn't please anybody.

So, what has to happen for the economy to shake off its lethargy and get back to an energizing growth level? Here’s a top six wish list:

1) Solve the upcoming fiscal cliff situation.
2) Solve the European sovereign debt situation.
3) Reduce the stubbornly high long-term joblessness rate and the alarmingly high youth joblessness rate.
4) Complete the de-leveraging process for certain sectors of the economy, including the banking and household sectors.
5) Complete a smooth transition of leadership in China and light a fire under its economy.
6) Replace the highly partisan atmosphere in Washington with constructive collaboration.
Source: The Guardian

What are the odds of resolving some of these issues? Well, if you believe the stock market, the odds look reasonable as the Dow Jones Industrial Average continues to hover near a five-year high. Going forward, we need to turn the "hope of solving" into the "reality of solving" to keep Wall Street's optimism from turning to pessimism.

Is The United States' Market Like Japan's? Over the years, analysts have compared the "lost decade" in the U.S. stock market to the ongoing "lost two decades" in Japan's stock market and wondered if we are heading down the same path. With a wink to the 1980 New Wave hit from The Vapors, let's take a look.

Japan

On December 29, 1989, Japan's Nikkei 225 stock average, the broad measure of the Japan's stock market, peaked at 38,916. Five years later, it closed at 19,753, representing a loss of 49 percent. But, it didn't stop there.

As of last week, after more than 22 years since the 1989 peak, the Nikkei 225 is still down. In fact, it closed at 8,863 – a stunning loss of 77 percent.

Despite this dramatic decline and the tremendous indebtedness of the country, Japan's economy and society have not imploded. Japan is still the third largest economy in the world, unemployment is low, and the society is civil.

United States

Our stock market, as measured by the S&P 500 index, peaked on October 9, 2007 at 1,565. That peak was followed by a more than 50 percent decline. However, unlike Japan, the U.S. market bounced back strongly and, as of last week, the S&P 500 index closed at 1,461, representing a decline of about 7 percent over the past five years.

Now, some people say we should go back to the March 24, 2000 peak in the S&P 500 index of 1,527 and consider that the starting point for a lost decade. Fair enough. Using that date, the U.S. stock market is down about 4 percent over the past 12½ years, excluding reinvested dividends.

Despite this weak stock market performance and the growing indebtedness of our country, we still have the world's largest economy, our society is civil (mostly), and, while unemployment is lackluster, it's not disastrous.

Comparison

Five years removed from the peak in each market, Japan was down 49 percent, while the U.S. market was down just 7 percent.

From the peak of Japan's stock market through last week – a stretch of more than 22 years – its stock market average is down 77 percent. In the U.S., using our March 24, 2000 peak, we're down only about 4 percent over the intervening 12½ year period.

While reasonable people can argue about our government's policies and the Federal Reserve's actions, we can take some comfort in knowing that our economy and stock market, while lackluster, are still persevering.

Weekly Focus – Think About It...

"The measure of success is not whether you have a tough problem to deal with, but whether it is the same problem you had last year."
--John Foster Dulles, former Secretary of State
Oct 06, 2008 Weekly Commentary
The Markets There's only one word to describe what took place in the financial markets last week - ugly.
You probably don't need to glance at the box score below to know that stocks dropped significantly last week. Monday's dizzying drop of 777 points in the Dow Jones Industrial Average, attributed to the House of Representative's failure to pass the bailout bill, set the tone. That was the largest point drop in Dow history, but in percentage terms, the 7.0% drop was not even in the top 15, according to MarketWatch. Interestingly, since the Dow was created in 1896, it has averaged a 7% or greater decline every 7 years. Coincidentally, the last time the Dow dropped more than 7% was on September 17, 2001 – just a fraction more than 7 years ago. While that offers little comfort, it does indicate that Monday’s decline was well within historical norms.
Monday’s decline was very broad based. Out of the 500 stocks in the S&P 500 index, 499 of them declined that day, according to Bespoke Investment Group. Can you guess the name of the only stock to rise that day? Here are a couple hints. First, when we’re feeling sick, our moms typically encourage us to eat the kind of food this company processes. And, second, for art lovers, Andy Warhol turned this company’s main product into pop art. You may have guessed that the company was none other than Campbell’s Soup. How ironic.
By the end of last week, lawmakers had approved a revised version of the bailout bill that included enough sweeteners to garner a few more “yes” votes. What started as a three-page treatment from Treasury Secretary Hank Paulson turned into a 451-page behemoth by the time President Bush signed the bill last Friday. Unfortunately, the added girth only weighed it down and investors sent the Dow to a 157-point loss on the day it was signed.
Where do we go from here? As much as we like to be optimists and say everything will be rosy starting this week, we know that would be disingenuous. Frankly, we cannot predict the future, but we are doing everything in our power to anticipate it and respond appropriately on your behalf.
Perhaps the best way to summarize our thoughts is to quote Admiral Jim Stockdale, the highest ranking U.S. prisoner during the height of the Vietnam War. In describing how he survived eight years of torture and imprisonment, he said, “You must never confuse faith that you will prevail in the end – which you can never afford to lose – with the discipline to confront the most brutal facts of your current reality, whatever they might be.” Simply put, having faith in the future and realism about your present situation is a good way to live and to manage money.

THIRD QUARTER REVIEW
STOCKS TOOK IT ON THE CHIN
There were few places to profitably park money in the stock market in the third quarter. The Dow Jones Industrial Average closed the quarter with a 4.4% loss while the S&P 500 ended with a 9.0% loss. In the strange way that Wall Street works, the three biggest gainers in the Dow for the quarter were bank stocks. Bank of America, J.P. Morgan Chase, and Citigroup rose 46%, 36%, and 22%, respectively, for the quarter, according to The Wall Street Journal. Moving overseas, the picture was no better as shown in the chart below.
Overall, the Dow Jones World Stock Index, excluding the U.S., dropped a stunning 22% in dollar terms during the quarter, according to the Journal.

CREDIT MARKETS WERE ROILED
Credits markets tried to withstand the government seizure of Fannie and Freddie, Lehman Brother’s bankruptcy, AIG’s $85 billion lifeline, Merrill Lynch’s shotgun marriage to Bank of America, and the conversion of Morgan Stanley and Goldman Sachs into bank holding companies. Were they up to the challenge? Not quite.
Here’s how the October 1, Wall Street Journal summed up the quarter: “Credit markets came nearly to a standstill. Investors fled anything that seemed the slightest bit risky and rushed into super-safe Treasurys. Borrowing costs for companies soared, if they could borrow at all. Overnight and other short-term credit markets seized up as banks stopped lending, even to one another.”
Investors were so scared at one point during the quarter that yields on the 13-week Treasury bill essentially dropped to zero, according to data from Yahoo! Finance. Apparently, the return of principal was more important than the return on principal.
What’s really frustrating about the credit situation is that there’s no shortage of money. Banks and other financial institutions have money, but, the problem is, they’re hoarding it. They are so scared of lending money and not getting paid that they’ve decided to simply sit on some of their cash and beef up their balance sheet. Now, we’re not arguing that beefing up the balance sheet is a bad idea. The trick is to balance the need to shore up their capital base with the economy’s need for credit to grease the wheels of commerce.
An analogy might help here. The economy is like the human body with the heart representing consumers, the brain representing businesses, and the lungs representing the government (notice how the brain does not represent the government). What helps keep our human organs functioning is the circulatory system. Credit is effectively the circulatory system of our economy. With too little credit, the economy shuts down. With too much of it, the economy blows up. Finding the right balance so we can keep the economy functioning smoothly is our current struggle. Right now, banks are being too stingy and the economy is shutting down. The aim of the bailout bill is to get the bad loans off the books of the banks so they will stop hoarding cash and begin lending again.

COMMODITY MARKETS FELL BACK TO EARTH After a tremendous run in the first half of the year, many commodity markets lost steam in the third quarter. The Wall Street Journal said it was the worst three-month stretch for the commodity sector since at least 1970 as prices dropped 29.0%. Blame it on the financial crisis and a deteriorating outlook for global growth.

It’s astonishing how quickly sentiment changes in this market environment. For example, it seems like one day we’re talking about running out of oil with demand far outstripping supply, then the next day global growth cools, demand declines, and oil prices plunge. What ever happened to the so-called “rational investor?”

THE DOLLAR FOUND ITS GROOVE
An explosive rally in the dollar saw it gain about 5% for the quarter when measured against a broad range of currencies in a Federal Reserve index, according to The Wall Street Journal. The rally was even more impressive when compared to the euro, where it gained 11.8%, and the British pound, where it gained 12.0%. According to Richard Clarida, global strategic adviser at Pacific Investment Management Co. and an economics professor at Columbia University, as quoted in The Wall Street Journal, the dollar strengthened “not because the U.S. looked better, but because the rest of the world looked worse.”
The outlook for the dollar is uncertain because we have several crosscurrents coming into play. For example, the currency’s historical view as a safe haven in times of crisis may help support it, but the government’s need for hundreds of billions of dollars to support the bailout may put pressure on it. Of course, if the government starts printing money to jumpstart the “circulatory” system, then all bets for a strengthening dollar are off.

SUMMARY
We’re probably not out of the woods yet even though the bailout bill is now law. As Warren Buffett said on CNBC last Friday in reference to the bill, “This does not solve all our problems.” Hopefully, it will be a catalyst to get the financial system back on its feet. If not, the Federal Reserve, Treasury, and Congress may have to swing back into action with more goodies. No matter what happens, we remain focused on serving you. If you have any questions or concerns, please let us know. Thank you.

Weekly Focus – Think About It
“Some of the secret joys of living are not found by rushing from point A to point B, but by inventing some imaginary letters along the way.”
-- Douglas Pagels
Oct 05, 2009 Weekly Commentary
The Markets As we enter the home stretch for 2009, let's review what transpired in the financial markets over the past three months.

STOCK MARKET RALLY CONTINUED
Rising a stunning 15.0%, the S&P 500 scored its largest quarterly gain since 1998, according to The Wall Street Journal. International markets did well, too, as the Dow Jones Global Index, excluding the U.S. Total Stock Market Index, rose 19.2% in the third quarter. The gains reflected continued improvement in some aspects of the worldwide economy, as well as anticipation that the improvements will continue.
Year-to-date, worldwide stock market returns have been remarkable. Since the March 9 low, global stock markets have added about $20 trillion in market value, according to an October 4 Bloomberg article. Now that's what we call "stimulus!"

INTEREST RATES DROPPED
Disappointed with low short-term rates and meager returns from perceived safe investments such as money market accounts, many investors fled the short-end of the yield curve and moved out to the longer – and riskier – end. So far, that has paid off as bond prices generally rose in the third quarter, according to The Wall Street.
If inflation becomes a problem or the dollar goes into a freefall, you could see interest rates reverse course and start to rise. Of course, that could lead to a potential setback for the economy so the government is trying to walk a fine line between flooding the economy with liquidity – to help it grow – but not flooding it too much that it would lead to rampant inflation.
With the significant decline in most interest rates over the past few months, investors appear comfortable with how the government has walked this fine line. However, there is a definite concern that down the road, perhaps one to three years from now, we could be in for inflation that rivals the worst of the late 1970s/early 1980s period.

THE VALUE OF THE DOLLAR DECLINED
Big budget deficits, concerns about inflation, and a desire for riskier assets helped push down the value of the dollar last quarter. According to The Wall Street Journal, the dollar dropped 4.1% against the euro, 6.8% against the Japanese yen, and 9.5% against Australia's currency.
In an August 18 op-ed piece in the New York Times, Warren Buffett opined that a continued rise in the debt-to-G.D.P. ratio could cause the U.S. dollar to "melt." When Buffett gets involved, you know it's time to take notice. Fortunately, if the dollar does liquefy beyond recognition (i.e., "melt"), other investments may rise in value and we would do our best to position for that accordingly.

SUMMARY
To say it's been a wild ride in the financial markets this year is an understatement. We started the year with a massive decline and then after March 9, the markets exploded to the upside on faint signs of economic stabilization. While parts of the economy are working better, unemployment is staying painfully high. Some economists expect unemployment to hit or exceed 10.0% before it starts falling and that presents some strong headwinds for the markets in coming months.

Weekly Focus – Think About It
"In times of change, learners inherit the Earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists."
-- Eric Hoffer
Oct 04, 2010 Weekly Commentary
The Markets Third Quarter Review
STOCK MARKET RISES SHARPLY
ically treaded water in July and August as it digested the second quarter’s big drop and the uncertain economic environment. By the time September rolled around, investors decided that the weak economy might actually be good news for the stock market. How? In the (il)logical way that the market sometimes works, investors began to believe that the economy was weak enough that the Fed would step in at some point with another round of quantitative easing. If that happened, interest rates might drop, the economy might get a lift, and stock prices might follow. That’s the theory, anyway, and investors followed it by bidding up stock prices.
ECONOMY STILL STUCK IN LOW GEAR
Normally, deep recessions are followed by strong growth. But, not this time. More than a year after the recession officially ended, we’re still stuck with a 9.6% unemployment rate and an economy that grew at a 1.7% annualized rate in the second quarter, down from 3.7% in the first quarter, according to The Wall Street Journal and Bloomberg.
On September 24, a concerned Ben Bernanke said, “A concerted policy effort has so far not produced an economic recovery of sufficient vigor to significantly reduce the high level of unemployment.” That was followed on September 30 by comments from New York Fed president William Dudley who said, “Further action is likely to be warranted unless the economic outlook evolves in a way that makes me more confident that we will see better outcomes for both employment and inflation before too long.” Together, these comments suggest to some market participants that the Fed is gearing up to dole out more goodies to reignite growth.
INTEREST RATES KEEP DROPPING
Investors still have a large appetite for bonds and the government and corporations stepped in to supply it “as new-debt issuance broke records and interest rates fell toward generational lows” in the third quarter, according to The Wall Street Journal. Like a coin, there are two sides to low interest rates.
On the plus side, low rates are a boon to corporations and banks as it lowers their borrowing costs and encourages them to reinvest in their businesses. It also helps the government because it lowers their borrowing costs.
On the negative side, savers get pinched. According to Dan Dekta, chief investment officer at Smith Breeden Associates, “The Fed has effectively been taxing money-market funds [by cutting short-term interest rates] to recapitalize the financial system and to make things easier on borrowers.” So, if you’re a saver, you get near zip on your savings while borrowers reap the savings.
THE DOLLAR DILEMMA
“The dollar seems to be the ugliest girl at the dance,” according to Lane Newman, director of foreign exchange at ING Groep NV in New York as quoted in Bloomberg. With the U.S. economy still relatively weak, investors are losing enthusiasm for the dollar because they fear the Fed will drive down interest rates even further. Low interest rates make the dollar less attractive relative to other countries that may offer higher rates. This concern helped drive the dollar to a third quarter loss that was its worst quarterly loss in eight years, according to MarketWatch.
A weak dollar does benefit U.S. exporters because it makes our products less expensive to foreign consumers. A strong export economy could help lower our unemployment rate and that’s one reason why our government is not too concerned about a weak dollar. Here’s the catch, though. Other countries may want a cheap currency, too, so they can revive their own exports. Since the value of a currency is only measured in relation to another currency (or a precious metal like gold), if too many countries try to devalue their currency, then it becomes a “race to the bottom.” In that scenario, it’s likely nobody will win.
And, speaking of gold, it hit record highs in the third quarter. John Roque of WJB Capital was quoted in Barron’s as saying, “all the price of gold tells you is what paper money isn't worth.” And, as gold keeps going higher, that suggests people are getting less and less comfortable with the value of paper money.
SUMMARY
The big rally in the third quarter was preceded by a big drop in the second quarter. Net, net, after nine months, the S&P 500 index is up 2.3% for the year. Despite a lot of huffing and puffing, we’re still just about where we started the year. So, yes, the trading range is still alive and well.

Weekly Focus – Think About It
“Live as if you were to die tomorrow. Learn as if you were to live forever.” --Mahatma Gandhi
Oct 03, 2011 Weekly Commentary
The Markets The word "volatile" has been so overused in the media, but it's hard to find a better way to describe recent movements in the financial markets. On any given day, the markets can rise or fall based on the latest thinking about euro-zone sovereign debt problems, a possible U.S. or Chinese recession, weak banks, inflation, deflation, or poor job numbers.
In the just completed third quarter, uncertainty (there's another overused word!) was in full bloom as the three major U.S. stock market indices posted double-digit declines, according to Barron’s. Was the market sniffing out a new recession? Possibly. Last week, the respected Economic Cycle Research Institute was quoted in MarketWatch as saying, "The U.S. economy is headed for another recession that government intervention cannot prevent."
Along those same lines, Goldman Sachs said we may be moving from the 2007-2009 “Great Recession” to an upcoming “Great Stagnation.” As quoted by Bloomberg, Goldman Sachs said a “Great Stagnation” would be characterized by “‘high and sticky’ unemployment, an average 0.5 percent growth rate in per capita gross domestic product, and stock markets that underperform historical averages.”
But, not everyone agrees with that assessment. Warren Buffett told CNBC last week, “it’s very, very unlikely we’ll go back into a recession.”
So, who are you going to believe? The market’s jumpiness may reflect the fact that smart people have completely different views of the economy.

WHAT TO WATCH IN THE FOURTH QUARTER
Here are a few things that made the headlines in the third quarter and may affect the markets over the final three months of the year:
• The S&P 500 index dropped 14.3 percent in the third quarter and is now down 10.0 percent for the year. •
What to Watch: Third quarter corporate earnings will start rolling in soon and investors will scour them for any sign of weakness. For the past few quarters, strong earnings helped the market recover from the Great Recession. While some earnings weakness may already be priced in the market, we have to wait for the actual earnings to see how the market reacts.
Commodities and precious metals experienced significant price movements during the quarter. Gold prices finished the quarter up 8 percent, while silver dropped 14 percent, according to MarketWatch. Oil prices declined 17 percent for the quarter, while copper dropped a stunning 26 percent. On the agricultural side, corn prices finished the quarter down 25 percent from their June 10 all-time high, according to The Wall Street Journal.
• What to Watch: Recent declines in oil and copper prices are particularly noteworthy because they may presage a slowing worldwide economy. If the declines continue, it may not bode well for stock prices.
• The housing market is still weak and that puts a significant drag on economic growth. According to the most recent S&P/Case-Shiller Home Price Indices, housing prices around the country are back to where they were in the summer of 2003. •
What to Watch: Mortgage rates are at a record low yet the housing market is still in the doldrums, according to Bloomberg. Any sign that housing is turning the corner could bode well for the economy and the markets.
• Interest rates on U.S. government securities dropped significantly in the third quarter as the flight to safety continued. The yield on the 10-year Treasury note recently hit a paltry 1.67 percent -- the lowest yield since the 1940s. While low rates are good for businesses and our indebted government, it’s bad for savers who rely on interest income to support their living expenses. •
What to Watch: If interest rates keep dropping in the fourth quarter, it may suggest investors are still in a fearful state. Ironically, it could be a good thing to see interest rates rise -- as long as it’s due to economic growth and not due to money printing by the Federal Reserve.
• Sovereign debt woes in Europe and budget wrangling in the U.S. weighed on the financial markets in the third quarter. •
What to Watch: Continued bad news here could be very problematic. However, if there’s any concrete resolution to the Euro-zone debt problems or a credible bi-partisan budget solution in Washington -- look out. The financial markets could rally strongly on that kind of news.
With the above issues looming, you can see why the markets are a bit nervous. Yet, even if the market swoons in the fourth quarter, it could make valuations so compelling that it sets the stage for the next bull market.

Weekly Focus – Think About It
"I wanted a perfect ending. Now I’ve learned, the hard way, that some poems don’t rhyme, and some stories don’t have a clear beginning, middle, and end. Life is about not knowing, having to change, taking the moment and making the best of it, without knowing what’s going to happen next. Delicious Ambiguity." --Gilda Radner
Oct 02, 2012 Weekly Commentary
The Markets


Despite all the concern about the fiscal cliff, the sovereign debt crisis, and saber-rattling in the Middle East, the U.S. stock market has posted a strong year-to-date gain.

With just three months left in the year, the Standard and Poor's 500 index is up 14.6 percent, while the NASDAQ composite index, which measures more than 3,000 stocks on the NASDAQ exchange, is up 19.6 percent.

Drilling down to the U.S. economy, it's like a tale of two cities.

In the "depressed" city, economic indicators such as orders for durable goods (e.g., cars, planes, machinery, and washing machines), GDP growth, and manufacturing activity are weak. In fact, last week the Commerce Department released its final report on second quarter GDP – the broadest measure of economic activity in the U.S. – and it wasn’t pretty. It was revised downward to show just 1.3 percent growth. That's down from the previous estimate of 1.7 percent and is barely above stall speed.

Moving down the interstate to the "booming" city, we have other indicators showing a healthier economy. Housing prices and sales volume, for example, are both up in double-digit percentages from a year ago. Consumer confidence is at a four-month high. On the jobs front, unemployment is still unacceptably high, but the unemployment rate has declined this year as has the number of people filing for new weekly unemployment claims. And, the biggie – the stock market – has risen steadily and recently hit a nearly five-year high.

So, which "economic city" will overtake the other as we head into the final stretch of the year?

Well, to a large degree, the answer may reside in the hands of the Fed, Congress, and the political dealmakers in Europe. The Fed's trying to do its part by greasing the economy with cheap money. Congress, on the other hand, has yet to step up to the plate and show it can prevent the fiscal cliff from tanking the economy. And, in Europe, Spain is in the crosshairs as market watchers nervously calculate the impact of each attempt – or non-attempt – to solve the country's huge debt and unemployment crisis.

While Dickens' Tale of Two Cities was a bit dark, we suspect the U.S. economy will eventually find a way to rise to the occasion, even if there are some additional bumps along the way.


HERE ARE A FEW STATS about wealth in the U.S. and in the world:

• There are 2,160 billionaires in the world.
• The combined wealth of these billionaires is $6.2 trillion.
• There are 187,380 people in the world worth at least $30 million.
• The combined wealth of the people worth $30 million or more is $25.8 trillion.
• Eighteen of the 40 richest people in the world are from the United States.
• The net worth of the median American family in 2010 was $77,300.
• The net worth of the median American family in 2007 was $126,400. The majority of the decline in net worth between 2007 and 2010 was due to the crash in housing prices.
• The top 10 percent of American households had an average income of $349,000 in 2010.
• The average net worth of these top 10 percent households was $2.9 million.
Sources: CNBC, Bloomberg, New York Times

Do any of these numbers surprise you? No doubt they'll be a hot topic for discussion as politicians negotiate the upcoming fiscal cliff situation.


Weekly Focus - Think About It...

"The most important thing in life is to stop saying 'I wish' and start saying 'I will.' Consider nothing impossible, then treat possibilities as probabilities."
--Charles Dickens, English writer and social critic
Nov 30, 2009 Weekly Commentary
The Markets Two steps forward, one step back might be an appropriate description of the financial markets these days.
We started the week on a good note as the National Association of Realtors said existing home sales rose 10.1% in October to the highest seasonally adjusted annual rate since February 2007. Later in the week, the Commerce Department said new home sales rose 6.2% in October, which was well above the number that economists surveyed by MarketWatch had expected. And, the Labor Department said 466,000 Americans filed for unemployment benefits for the week ending November 21. That was the lowest number since September 2008. The stock market liked these numbers and by Wednesday of last week, the S&P 500 index had hit a 13-month high, according to MarketWatch.
Then came Thursday. As most of us were celebrating Thanksgiving, Dubai World – the investment arm of the country of Dubai, announced that it was delaying repayment on much of its debt. That surprise announcement sent stocks, bonds, and commodities around the world into a tailspin. By Friday, cooler heads prevailed and the decline in the U.S. market was limited. For the week, the S&P 500 was flat.
This week, investors will likely focus on the early read from "Black Friday" sales to determine if the consumer has any oomph left. Additional news from Dubai may also move the markets. While the S&P 500 is up about 60% from its March 9 low, last week’s surprise news from Dubai indicates that there may be lingering effects from the recession for some time to come.

EXPERTS HAVE DEVELOPED MANY RULES OF INVESTING, some of which work better than others. It would make our lives easier if we found some rules that worked in all situations and at all times, but, of course, we haven’t found those rules, yet! Nonetheless, here are several from veteran investor and market observer Dennis Gartman that are worth considering. Gartman published these rules in a book edited by John Mauldin titled, Just One Thing.
RULE # 1
Never add to a losing position. Gartman says the market knows best and, if an investment is going down in value, then you should get out, not add more.
RULE # 2
Mental capital trumps real capital. Yes, you lose money (real capital) by holding onto a losing position, but Gartman says the emotional cost of holding onto a losing position is even more costly as you toss and turn about what to do. Better to take your loss and move on to something more promising.
RULE #3
Sell markets that show the greatest weakness; buy markets that show the greatest strength. This is similar to the old saying, "The trend is your friend." You may not agree with the trend, but the market doesn’t really care what you think; it responds to what the majority of investors think.
RULE #4
Keep your trading system simple. Some of the most "sophisticated" investors were the biggest losers in 2008. Gartman says, "Complexity breeds confusion; simplicity breeds an ability to make decisions swiftly, and to admit error when wrong. Simplicity breeds elegance."
RULE # 5
Do more of that which is working and do less of that which is not. Sounds simple, doesn't it? Essentially, it's add to your winners and sell your losers.
Rules-based investing is only as good as the "programmer" of those rules, the investor's ability to implement those rules, and the markets' desire to follow those rules. In reality, the financial markets reflect the combined actions of investors around the world. Trying to come up with rules that accurately reflect this human herd at all times in all situations is, if not impossible, right next to it. However, rules can be helpful as a guide.

Weekly Focus – Think About It
"All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies."
--Warren Buffett
Nov 29, 2010 Weekly Commentary
The Markets Interest rates are rising in the U.S. and that may actually portend good news for the economy.
Since a recent low of 2.38% on October 8, the yield on the 10-year Treasury note rose to a high of 2.91% last week, according to data from Yahoo! Finance. Similarly, yields on the 5-year Treasury rose from 1.04% on November 4 to a high of 1.56% last week.
Rising rates can be either good or bad -- the key is the reason behind the rise. For example, if rates are rising because of a lack of confidence in a country’s ability to pay its debt obligations, such as is happening in Ireland and Portugal, then a rise in rates is a bad signal about the country’s future. On the other hand, if rates are rising due to strong economic growth, then that could suggest happy days are on the way.
Now, nobody would argue that the U.S. is experiencing strong economic growth; however, there are some positive signs that are being picked up by bond investors and that’s putting some upward pressure on bond yields, according to Bloomberg.
The recent good news includes weekly jobless claims, which fell last week to the lowest level since July 2008, according to MarketWatch; consumer spending, which rose for the fifth straight month in October, according to Bloomberg; and a better-than-forecast increase in consumer sentiment, which boosted the outlook for holiday-season spending at retailers, according to Bloomberg.
Rising rates also benefit savers because they receive a higher interest rate on their savings. But, just like eating too much pumpkin pie, a good thing can be taken to an extreme. If rates rise dramatically from here that would likely cause some economic indigestion. So far, we’re not in any danger of that scenario.

GOLD PRICES ROSE 0.5% LAST WEEK AND ALSO ROSE 3.8% LAST WEEK, according to The Financial Times. Confused? Welcome to the world of currency translation.
When measured in terms of the dollar, gold prices rose 0.5% per ounce on the New York spot market last week (and rose 0.9% in dollar terms based on the afternoon fix from the London Bullion Market Association as shown in the chart above). However, when measured in terms of the euro, the New York spot price of the beautiful bullion rose 3.8% per ounce last week. The difference occurred because the value of the dollar rose about 3.0% last week relative to the euro, according to The Financial Times article.
While this currency translation stuff might seem a bit esoteric and only of interest to financial wonks, it actually has a real-world implication for your investments. When you own investments that are denominated in other currencies -- which can happen when you own multi-national companies or invest in funds that own foreign companies or foreign bonds -- you have an added "currency risk." And, as the world becomes more globally intertwined, the chance of a positive or negative currency translation effect may become larger.
From a practical standpoint, as the dollar gets stronger, it makes the return from overseas investments fall. Conversely, as the dollar gets weaker, it makes overseas investments rise as the overseas prices get translated into more dollars (because with a weaker dollar, it takes more dollars to "buy" the foreign currency). In recent years, the value of the dollar relative to a basket of six other currencies (the US Dollar Index) has bounced all over the place, but in the three years ending last week, the value of the dollar is up close to 6% against this basket, according to data from StockCharts.com. Due to the currency risks, as well as other risks such as political instability, international investing may not be suitable for all investors.
As an advisor, trying to build a portfolio that goes up in value or provides steady income is only part of the equation. We also have to keep in mind how a stronger or weaker dollar affects you.

Weekly Focus – Think About It
"All the gold which is under or upon the earth is not enough to give in exchange for virtue."
--Plato
Nov 26, 2012 The Markets



What fiscal cliff?

Stock prices rose last week to their best weekly gain in five months as investors cheered the start of the holiday shopping season, encouraging economic data from Germany and China, improved housing data, and confidence from President Obama and Congressional leaders that the fiscal cliff will be avoided.

Is this the beginning of a “Santa Claus rally?”

Jordan Kotick, global head of technical strategy at Barclays, told CNBC, “We are about to head into the best seasonal time for the equity market.” Despite this seasonal tailwind, the market’s near-term direction may still depend on how Washington handles the pending budget and tax cliff. So far, the market seems to be pricing in a compromise that will avoid the worst-case scenario.

Beyond the fiscal cliff and a potential Santa Claus rally, what’s in store for the U.S. economy? Well, here’s a not-so optimistic take from famed money manager Jeremy Grantham:

The U.S. GDP growth rate that we have become accustomed to for over a hundred years – in excess of 3% a year – is not just hiding behind temporary setbacks. It is gone forever. Yet, most business people (and the Fed) assume that economic growth will recover to its old rates.

In his view, our economy will grow at a snail’s pace of about 1 percent per year after inflation for the next several decades. Without getting bogged down in details, his gloomy case rests on population and productivity changes.

However, there are some potential bright spots on the horizon. Please read the second half of this commentary to learn about one important part of our economy that could turn Grantham’s pessimistic view upside down.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


THE YEARS 2020, 2030, AND 2035 could turn out to be pivotal years for the United States and the geopolitics of global energy. Here’s why. The International Energy Agency (IEA) predicts the following will happen by those years:

• 2020 – The U.S. will overtake Saudi Arabia as the world’s largest producer of crude oil.
• 2030 – The U.S. will become a net exporter of crude oil.
• 2035 – The U.S. will become effectively self-sufficient in meeting its total energy needs through domestic sources.
Source: International Energy Agency World Energy Outlook 2012

Today, the U.S. imports about 20 percent of its total energy needs. Can you imagine a world in which the U.S. is energy self-sufficient and not beholden to foreign energy sources? This could deliver a huge boost to our economy.

Five years ago, the IEA predicted the U.S. would pump 10.1 million barrels of oil per day by 2020. In this year’s report, the IEA’s new estimate is 11.1 million barrels per day by 2020. This projected increase in production is, “driven by the faster-than-expected development of hydrocarbon resources locked in shale and other tight rock that have just started to be unlocked by a new combination of technologies called hydraulic fracturing,” according to MarketWatch.

So, we have Jeremy Grantham stating the bear case for the U.S. economy then we have the IEA publishing a report that puts the U.S. in the driver’s seat for the world energy market in the next couple decades.

Now, here’s the thing. Both Grantham and the IEA are making long-range forecasts based on data available today. Yet, we know things can change just as the IEA raised its oil production estimate from 10.1 million barrels of oil per day to 11.1 million.

Trends take time to develop and then, all of a sudden, they could change due to some new technology – as in the case of “fracking.” We do keep an eye on these long-term trends, but we also understand that investment decisions to buy and sell have to be made based on what’s happening now. This “bi-focal” approach is one of the many tools we use to manage your assets.


Weekly Focus – Really?

“Whoever said money can't buy happiness simply didn't know where to go shopping.”
--Bo Derek, American actress

Fisher Financial Partners, Inc. offers securities through Regal Securities, Inc., member FINRA/SIPC. Advisory Services offered through Regal Advisory Services, Inc. Fisher Financial Partners, Inc. is not affiliated with Regal Securities, Inc. or Regal Advisory Services, Inc.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
Nov 26, 2007 Weekly Commentary
The Markets
Here is one place where insider trading is legaland its sending us a bullish signal.
Officers, directors, and large shareholders are considered insiders by the Securities and Exchange Commission and as a result, they are required to report their buy and sell transactions in their companies stocks. A company called Argus Research publishes the Vickers Weekly Insider Report and its one of several companies that tracks how heavily these insiders are buying and selling their stocks. So whats recent insider trading activity telling us? According to a report at MarketWatch.com by Mark Hulbert, publisher of the Hulbert Financial Digest, It turns out that insiders in recent weeks have dramatically cut back the pace of their selling. In the Vickers Weekly Insider Report published Monday (November 19, 2007), Argus Research reported that in the week ended Friday (November 19, 2007), the average insider sold just 1.68 shares for every one share that he bought. That's well below the historical average for this ratio, and well below where the ratio stood as recently as early November, when it stood at 3.04-to-1.
Hulbert went on to say, This is good news for the bulls. After all, if insiders did not believe that their companies' stocks would soon go back up, they would have reacted to the recent decline by immediately selling. That they did not must mean those shares will recover relatively quickly.
Insiders are not always right, however, the fact that they slowed down their selling in recent weeks may be seen as a bullish sign for the markets. Well see.

DESPITE A SLUMPING HOUSING MARKET, RISING OIL PRICES AND A WEAK DOLLAR, the U.S. economy will not slip into recession, according to University of Michigan economists.
There is enough resilience in the economy to keep output expanding, said Saul Hymans, University of Michigan professor emeritus of economics, in a November 15, 2007 news release. The Federal Reserves recent action to contain the credit crisis stemming from problems in the subprime mortgage market appears to be averting the development of a system-wide credit crunch, and lower interest rates are lending support to economic activity.
In their annual economic forecast, Hymans and colleagues Joan Crary and Janet Wolfe note, however, that national economic output growth (as measured by real Gross Domestic Product) will remain sluggish in the short termdue to the ongoing decline in residential construction and subdued growth in consumer spending. They estimate the rate of economic growth will be just 2.1 % this year, down from 2.9 % in 2006.
According to their forecast, residential construction and existing home sales will begin an upturn in the second half of next year. They expect housing starts, which are down 35 % since 2005, to continue to fall from 1.35 million this year to 1.21 million in 2008, before increasing to 1.55 million the year after. Existing home sales, they say, will keep sliding from last years 5.71 million to 4.94 million this year and to 4.14 million in 2008, then head back up to 4.84 million in 2009.
On the energy front, although oil prices have jumped more than 50 % since the end of last year (from $60 per barrel to more than $90), the economists predict a 15 % decline over the course of 2008. Additionally, they say interest rates will hold steady throughout 2008, but should rise in 2009.
The University of Michigan forecast is based on the Michigan Quarterly Econometric Model of the U.S. Economy and compiled by the U-M Research Seminar in Quantitative Economics (RSQE).

AS THIS YEARS HOLIDAY SEASON APPROACHES, your credit card transactions may be a little more secure thanks to the Common Vulnerability Scoring System (CVSS) Version 2 developed by the National Institute of Standards and Technology (NIST) and Carnegie Mellon University.
When you swipe your card at a checkout counter or make an online transaction, your personal payment information is sent to a payment-card server, a computer system often run by the bank or merchant that sponsors the particular card. The server processes the payment data, communicates the transaction to the vendor, and authorizes the purchase.
NISTs Peter Mell, lead developer of CVSS Version 2, describes these payment-card servers as houses with many doors, each representing a potential vulnerability. Attackers check to see if any of the doors are open, and if they find one, they can often take control of all or part of the server and potentially steal financial information, such as credit card numbers, he noted in a November 8, 2007, report.
According to the NIST, for every potential vulnerability, CVSS Version 2 calculates the risks of private information being compromised on a scale from zero to 10 and reports to payment card vendors. By June 2008, all Approved Scanning Vendor (ASV) scanners must use the current version of CVSS to identify and score security vulnerabilities. According to Bob Russo, general manager of the Payment Card Industry Security Standards Council, requiring the use of CVSS, will promote consistency between vendors and provide solid information to better protect electronic transactions.

Weekly Focus Making Life a Little Easier
Are you traveling over the holidays? The Universal Packing List at http://upl.codeq.info/ can customize your packing list for your destination, even for the weather. If you are traveling overseas, www.coinmill.com can help you to convert U.S. dollars into foreign currencies. (Print a Coinmill rate table and slip it in your wallet.) Finally, log on to http://wakerupper.com/ to request wakeup calls sent to your cell phone.
Nov 25, 2013 Weekly Commentary
The Markets

Really?! Okay. Okay. If you've been trekking through Siberia or Patagonia for about a year, then maybe it surprised you to hear the minutes from the Federal Reserve Open Market Committee meeting showed it expects to begin tapering Quantitative Easing (QE) in the coming months.

However, since the Fed has been telling anyone who will listen - telling them over and over and over again - that its intent is to slow the pace at which it buys bonds as the U.S. economy strengthens (and since most people haven't been exploring the hinterlands where the convenience of modern communications may not be readily available), it's difficult to understand why that information was so surprising that it pushed stock and bond markets significantly lower.

It might have been easier to understand market declines if they had occurred on Tuesday after the Organization for Economic Cooperation and Development (OECD) released its revised economic outlook. In his speech, OECD Secretary-General Angel Gurria said:

"The recovery of the global economy is progressing at a moderate and uneven pace. World GDP growth, which averaged about 4 percent per year in the decade up to the onset of the global crisis, is expected to reach only 2.7 percent in 2013, the lowest rate since 2009. While we expect global growth rates to move again towards 4 percent in 2015, the world will continue to be affected by the harsh social legacy of the crisis... The recovery itself is exposed to potential downside risks, including fiscal brinkmanship in the United States, unresolved banking problems in the euro area, the high debt burden in Japan, and financial vulnerabilities in some large emerging-market economies."

Gurria also said, in the OECD's long-term view, economic weakness was the result of investment remaining anemic, credit growth remaining subdued, trade growth gaining sluggishly, and growth in emerging economies faltering.

Regardless, the markets' downward foray was short-lived. On Friday, the Standard & Poor's 500 Index closed above 1800 for the very first time. Other U.S. markets moved higher as well.


AN OH-SO-BRIEF BRIEF ON DIGITAL MONEY... If you read or watched the news during the past few months, you may already know this, but there has been an explosion of interest in digital money. That's the reason you may be hearing and reading about dozens of companies that are rushing to coin virtual currency that has real value. It just seems so 21st Century, doesn't it?

Odds are you've already used digital money. For example, you used it the last time you purchased something online. Digital money is what we use when we pay or are paid electronically. Think smart phones and credit cards. Digital money is not tangible; however, it is possible to convert digital money that is part of a large centralized banking system into paper money by making a withdrawal from an ATM.

In the United States, the Federal Reserve is responsible for maintaining the integrity of U.S. bills and coins by setting monetary policy. Digital currency companies offer a parallel currency universe; a means of transferring electronic money from one person to another without using traditional banking or money-transfer systems.

Digital money companies appear to be delivering American economist Milton Friedman's dream, according to The Economist. Years ago, Friedman suggested the Federal Reserve be abolished and replaced by an automated system that would increase money supply at a steady, pre-set rate. He believed such a system would better control inflation, making spending and investment decisions more certain. The Economist article said:

"In theory, then, the system ought to keep a lid on inflation - making it attractive to critics of interventionist monetary policy of the sort practiced since 2008 by America's Federal Reserve under the label quantitative easing... It offers other apparent benefits, too. The currency can be used by anyone (unlike credit cards, for instance), anywhere. Transaction costs are also likely to be lower than those for traditional payment systems, though these are not in fact zero..."

The Economist goes on to point out a key difference between central-bank-controlled currencies (which often offer both bills and coins and digital currencies) and digital currency companies is the former are backed by a country's regulations and laws; the latter are answerable to online communities using the currencies.


Weekly Focus - Think About It

"A business that makes nothing but money is a poor business."
--Henry Ford, American Industrialist

Sources:
http://www.nytimes.com/2013/11/21/business/daily-stock-market-activity.html?_r=0
http://www.oecd.org/about/secretary-general/oecd-global-economic-outlook.htm
http://online.wsj.com/news/articles/SB10001424052702304337404579213362199412366
http://www.investopedia.com/terms/d/digital-money.asp
http://www.minneapolisfed.org/community_education/teacher/history.cfm
http://www.reuters.com/article/2013/05/31/us-digitalcurrency-regulation-bitcoin-idUSBRE94U17X20130531
http://www.economist.com/blogs/babbage/2011/06/virtual-currency
http://www.brainyquote.com/quotes/topics/topic_money.html#1E8TcF3HWirjdW91.99
Nov 24, 2008 Weekly Commentary
The Markets "Hope springs eternal," wrote Alexander Pope back in the 1700s and, after a rocky start, we ended last week on a hopeful note.
If you look at the numbers in the chart below, it was another disappointing week in the stock market. Last Wednesday and Thursday didn't help matters as the Dow Jones Industrial Average posted back-to-back 400 point plus declines. That set the stage for another nail biter as markets opened on Friday morning. Fortunately, the markets opened steady and after see-sawing above and below the previous day's close, the Dow soared more than 6% in the final hour as word leaked that President-elect Obama would nominate Timothy Geithner as Treasury Secretary, according to MSN Money.
Geithner is currently president of the Federal Reserve Bank of New York and has been deeply involved in all the recent machinations at the Fed and Treasury as they plotted to thwart a systemic failure of our financial system. While no one thinks Geithner will single-handedly solve all our problems, his potential appointment shed some clarity on this important position and offered a glimmer of hope, which helped Wall Street close the week on a positive note.
Being hopeful and optimistic are certainly desirable traits and studies show they are associated with good physical and mental health. Unfortunately, those studies don't tell us anything about how to manage investments. Successful money management takes hard work and we’re doing all we can to try and help you reach your goals and objectives. And, while we remain hopeful and optimistic that we'll be successful in the long term, we don’t simply rely on having a sunny outlook to get there.

JUST A FEW MONTHS AGO, inflation was a big concern. Back then, the price of a barrel of oil had skyrocketed to an all-time high of $147, gas prices were over $4 a gallon, and other basic commodities and foodstuffs were shooting higher, too. Today, the world economy is slowing down and few people are talking about short-term inflation; instead, we’re starting to hear talk about the dreaded “D” word – deflation.
Deflation is a persistent decline in the level of consumer prices that’s typically caused by a decline in demand or a restriction of credit, or both. On the surface, you might think it’s a good thing because we’d all like to pay less for something rather than more, right? That sounds good in theory, but, when spread throughout the economy, deflation is an insidious condition that could cause serious harm.
Here are three dangers of deflation as identified by Nouriel Roubini, Professor of Economics at New York University's Stern School of Business:
1. Falling prices may lead companies to cut production and employment levels because of reduced demand. With more people unemployed, it may exacerbate a vicious cycle of falling prices as fewer and fewer people have the money to buy goods and services.
2. Falling prices encourage consumers to hold off on purchases because they know they can buy the goods and services at a cheaper price in the future. This also feeds a vicious cycle of declining prices.
3. Falling prices increase the real rate of interest, which helps stunt future economic growth. For example, if consumer prices drop 2% in a year, the real interest rate is 2% even if the actual interest rate (nominal rate) is 0%.
Last week, the Labor Department said overall consumer prices in October declined at a seasonally adjusted rate of 1%, which was the largest amount since records began in 1947. This was the third month in a row that prices dropped. The core rate, which excludes food and energy, declined at a 0.1% rate – its first decline sine 1982.
While the headline number looks a little scary, some of the decline occurred because of a huge drop in gas prices, according to MarketWatch. Of course, we can’t count on gas prices dropping to zero, so we’d have to see other categories experience declines before we could say deflation has arrived.
The government does have some tools at its disposal to combat deflation should it occur. One of those tools is to spend massive amounts of money to re-inflate the economy. The government has started to do that and it may accelerate when the new administration takes office. The trick is to add enough liquidity to the system to keep it running well, but not too much that we end up with runaway inflation—a delicate balance to say the least.

Weekly Focus – Word of the Week
“Hypocorism.” It’s a noun that means a pet name or the practice of using a pet name. For example, “Mike started calling Peggy by her hypocorism, “Bubbles,” when they were sweethearts in high school.” Just for fun, see if you can use “hypocorism” in a sentence this week.
Nov 23, 2009 Weekly Commentary
The Markets Would you willingly give the government your money and expect nothing in return? Last week, that is exactly what happened.
Treasury bills maturing in January 2010 actually yielded -0.01% last Friday. The last time interest rates were negative was at the height of the credit crisis in late 2008 as panicked investors sought refuge in short-term government paper, according to The Wall Street Journal. Fortunately, this time around, panicked investors were not the reason for the negative rates.
Many large institutional investors have reaped significant gains in this year's bull market and, rather than risk giving back some of those gains in an end-of-the-year swoon, some of those investors decided to park their cash in ultra-short Treasury bills. This strong demand for the bills, plus a temporary shortage of T-bills available for investment, helped drive the yields to effectively zero.
While the above explanation for the zero interest rates makes sense, there is always the possibility that there is more to the story. If large investors felt the rally would continue, would they risk missing it? We are always mindful that what "makes sense" may not always make money. Accordingly, we remain vigilant for any sign that the bull market is tired and ready to take a nap.

A COMMON MISTAKE MADE BY INVESTORS is to confuse the performance of the economy with the performance of the stock market. Logically, you would expect the economy and the stock market to move somewhat in synch. That is, if the economy does well, the stock market should do well and vice versa. Directionally, that is usually correct, but the degree of the moves could vary significantly.
This year is a great example of how the economy and the stock market are moving in the same direction, but the degree of the moves in each are way out of proportion. Specifically, the economy is slowly stumbling its way out of the recession while the stock market has been on a tear with the S&P 500 index rising more than 20% year-to-date.
How can stocks rise so dramatically when the economy is still lethargic? In a word – earnings. As the economy started to tank last year, corporate America quickly slashed costs. With a lowered cost structure, it only took a small up-tick in business to produce outsized earnings. In fact, Thomson Reuters said 80% of the S&P 500 companies reported third-quarter earnings that beat Wall Street estimates. To be fair, the earnings were better than Wall Street expected, but they were still generally down from all-time highs.
UBS stock-market strategist Thomas Doerflinger came up with a clever way to describe this rapid improvement in earnings against a slow moving economy. He called it a "‘V’ shaped recovery in profits in a ‘U’ shaped economy." Major cost-cutting essentially levered corporate earnings power so a small improvement in the economy could translate into a much larger profit improvement.
For bulls, this leverage means we could see record corporate profits before we see record corporate revenue. Sadly, for employees, this could be a "jobless recovery," but for investors, it could be a profitable one.

Weekly Focus – Think About It
"Would our disappearance leave the world poorer, or just less crowded?"
--Harold Kushner
Nov 22, 2010 Weekly Commentary
The Markets Among the many economic differences between China and the United States, one of the most glaring is that China is trying to slow down its inflation rate, while the United States is trying to ignite it.
Unlike in the U.S., China’s economy is growing rapidly. Its voracious appetite for goods and services is rippling through the country and led to the inflation rate rising to 4.4% in October from a year earlier. That was China’s highest level in more than two years, according to Reuters. Strong demand from China is also affecting worldwide commodity prices, which have risen 41% since March 11, 2009, according to data from the DJ-UBS Commodity Index.
In response to the growth, China raised banks' required reserves by 0.5% last week, which was the fifth increase this year. It also raised interest rates back in October, according to CNBC. Both moves are designed to put a lid on inflation and prevent the economy for overheating.
The U.S. has the opposite problem.
Sluggish growth and deleveraging have kept our economy stuck in neutral and inflation nearly non-existent. Last week, the Labor Department reported that the core Consumer Price Index, which strips out the volatile food and energy sector, rose a modest 0.6% for the one-year period ending in October. That was the smallest increase since records began in 1957, according to Reuters.
In response to our weak growth, a concerned Federal Reserve is now pumping hundreds of billions of dollars of fresh liquidity into our economy to try and revive our "animal spirits," according to MarketWatch.
What's interesting about this split is that the U.S. and China are the two largest economies in the world, according to Bloomberg, yet their economic trajectories are vastly different. For investors, this has investment implications.
For more than 100 years, the phrase, "Go West, Young Man," has guided folks seeking their fortune. Given growth in China and other developing Asian economies, it may be time to change direction.

LITTLE DID WE KNOW THAT MR. MIYAGI, OF KARATE KID FAME, was way ahead of his time when he instructed his student Daniel in the art of "wax on, wax off." Never mind the fact that Mr. Miyagi was talking about how to wash a car; his phrase has become a popular way to describe the nature of our present day financial markets.
There was a time, not long ago, when many investors would call themselves a "bottom-up investor," which meant they analyzed individual investments based on the specific merits of that investment. Little emphasis was given to how "macro issues" -- such as the overall economy, interest rates, geopolitical issues, or other big picture items -- could potentially affect that investment. The thought was a "good" investment would do fine regardless of what happens at the macro level.
Ah, but times change.
Today, the concept of wax on, wax off, which is also referred to as, "risk on, risk off," has grabbed the headlines and pushed bottom-up investing off to the side. Instead of referring to washing a car, the current concept of wax on, wax off refers to days in the financial markets when investors act as a herd and pile into or out of asset classes without much regard to the specific merits of any particular investment within that asset class, according to a September 22 article by BNY ConvergEx as published by zerohedge.com.
For example, on "wax on" days, "The mood of investors is confident and they flood into stocks and other investments perceived as risky such as junk bonds, emerging markets, and commodities," according to The Wall Street Journal. Conversely, on "wax off" days, "Money comes sloshing out of those investments and into so-called safe-haven investments such as U.S. Treasuries, the U.S. dollar, or Japanese yen."
Why the shift? BNY ConvergEx cites several reasons including the rise of index investing, artificially low interest rates, globalization, and high-frequency trading.
Ultimately, a "good" investment is still a good investment, but as long as wax on, wax off remains a prevailing characteristic of financial markets, we should expect higher volatility and a potentially longer time frame for these "good" investments to pay off.

Weekly Focus – Think About It
"Venturing out of your comfort zone may be dangerous, yet you do it anyway because our ability to grow is directly proportional to an ability to entertain the uncomfortable."
--Twyla Tharp, Choreographer
Nov 19, 2012 The Markets



The announcement last week that Hostess Brands, the maker of iconic treats such as Twinkies and Ding Dongs, was going out of business highlights the need for investors to have a solid risk management strategy.

As you contemplate making an investment, here are three things important to know:

1. The rationale for the investment and the research behind it.
2. What constitutes “fair value” for the investment.
3. What would trigger you to sell the investment.

Number three above is where many folks trip up – they don’t have a sell discipline. Although Hostess Brands long ago ceased being a publically traded company, it’s an example of how a company with well-known brands can run into trouble and fail. To avoid riding an investment all the way down to zero, it’s critical to have a system in place to monitor your investments and hit the sell button if there’s a material change that makes the original investment thesis no longer valid.

Sometimes a risk management strategy causes you to sell an investment only to see it turn around and go right back up. While frustrating, that’s better than not having any sell discipline in place and holding on to an investment that drops dramatically and never comes back.

Viewed another way, it’s better to take a small occasional loss than to hang on to everything forever and be exposed to a potential big loss down the road on your irreplaceable capital.

Risk management is back in the forefront as U.S. stocks continued their post-election slide last week. And, while we would all prefer to see the market go up, we remain focused on our risk management discipline as a key component of our overall portfolio management process.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


ARE LOW INTEREST RATES GOOD OR BAD for the stock market? As you are painfully aware, interest rates in general are very low. There are three main reasons for this:

1. Consumer demand for interest-bearing products is relatively high.
2. Business demand for loans is relatively low.
3. Central banks in many developed nations are engaged in an “easy money” policy.
Source: The Economist

All three of the above are associated with the fact that our economy is relatively weak. In difficult economic times like today, central banks have a vested interest in keeping rates low. The thinking is low rates will reduce the “hurdle rate” for businesses to reinvest and, as a result, encourage them to expand and hire new people. As businesses expand, the economy will grow and begin a new virtuous circle.

So, let’s see if this virtuous circle of low interest rates applies to the stock market, too.

Using data from the Barclay’s Capital Equity-Gilt study, The Economist took a look at U.S. stock market returns between 1926 and 2011 and sliced the data into periods when the real rate on Treasury bills (the rate after subtracting inflation) was positive and negative. What they discovered was startling:

“In the 33 years where real yields have been negative, the average gain from equities has been 2.3%; in the years when real yields were positive, the average gain was 6.2%.”

In other words, low real interest rates (which we have today) have typically been associated with low stock market returns.

As we all know, data can often be presented in ways that support whatever position you’re taking (just like in the past election cycle!). So, putting that aside, the key is to interpret the data. Since we’ve been in a low rate environment for a long time, stock prices have likely had time to adjust accordingly. The key now is to watch for the turning point – the time when rates start a new rising trend.

When rates start to rise, that could signal the economy is on the mend as businesses start demanding more money for loans to expand and central banks pull back on the easy money policy to avoid too much inflation. This would be a “good” reason for rates to rise. Alternatively, rising rates could signal investors are losing faith in our country’s ability to pay its bills. This would be a “bad” reason for rates to rise.

We’re watching interest rates closely for any sign of a new trend and, importantly, the reason behind that trend. It’s just one of many indicators we monitor as we keep a close eye on your investments.


Weekly Focus – Ode to an Icon…

“I love Twinkies, and the reason I am saying that is because we are all supposed to think of reasons to live.” --Stephen Chbosky, novelist, screenwriter, director, and author of The Perks of Being a Wallflower

Fisher Financial Partners, Inc. offers securities through Regal Securities, Inc., member FINRA/SIPC. Advisory Services offered through Regal Advisory Services, Inc. Fisher Financial Partners, Inc. is not affiliated with Regal Securities, Inc. or Regal Advisory Services, Inc.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
Nov 19, 2007 Weekly Commentary
The Markets
Recent volatility in the stock market has been good for the bond market.
When investors get nervous, sometimes they flee to the presumed safety of government bonds. This so-called flight to safety has helped drive the 10-year Treasury bonds yield down to 4.15 percent, as of November 16, according to Barrons. Thats the lowest yield in more than two years. Lower bond yields may help revive the housing market and, ironically, may eventually lure investors back into the stock market.
If we go back a few years, the yield on the 10-year Treasury bond hit a cyclical low of 3.10 percent on June 13, 2003, according to data from Yahoo! Finance. On that same day, the Dow Jones Industrial Average closed at 9117. Fast forward to last Friday and the Dow has risen nearly 45 percent since the 10-year bond hit its low. Now, the rise in the Dow over that period is not solely due to investors fleeing the bond market and putting their money in stocks. However, low interest rates tend to lubricate the economy in a variety of ways such as lowering borrowing costs and improving corporate earnings.
As the current credit crunch and business slow down works its way through our economic system, interest rates may continue to drop. And as long as were patient, it may be setting us up for the next positive move in the stock market.

THE FEDERAL OPEN MARKET COMMITTEE (FOMC) ANNOUNCED LAST WEEK that, as part of its ongoing commitment to improve the accountability and public understanding of monetary policy making, it will increase the frequency and expand the content of the economic projections that are made by Federal Reserve Board members and Reserve Bank presidents and released to the public.
Since 1979, projections of economic growth, unemployment, and inflation have been published semiannually in the Federal Reserves Monetary Policy Report to the Congress. According to a press release from the Federal Reserve, the FOMC now will compile and release projections four times each year rather than twice a year. In addition, the projection horizon will be extended to three years, from two.
Federal Reserve Chairman Ben Bernanke, in a speech at the Cato Institute 25th Annual Monetary Conference, in Washington, D.C. on November 14, 2007, noted that theres considerable evidence that indicates that central bank transparency increases the effectiveness of monetary policy and enhances economic and financial performance. These changes, he said, will provide a more-timely insight into the Committee's outlook, will help households and businesses better understand and anticipate how our policy decisions respond to incoming information, and will enhance our accountability for the decisions we make.
We welcome the increased frequency of the central bank's analyses and forecasts. You can read full text of Benankes remarks at http://federalreserve.gov/newsevents/speech/bernanke20071114a.htm.

ABOUT 73 MILLION U.S. HOUSEHOLDS NOW HAVE DISCRETIONARY INCOME, up from about 57 million in 2002, according to a recent report by The Conference Board. The percent of the U.S. population with discretionary income has increased to nearly 64 percent, up from 52 percent in 2002. Total discretionary income in the U.S. topped $1.7 trillion in 2006, with the household average at $24,335. Its noteworthy, however, that nearly 78 percent of all discretionary income is held by households earning more than $100,000. Average discretionary income for this segment, $66,451, is 2.7 times the national average.
Where is the discretionary income concentrated? The region with the wealthiest concentration of households is New England (including Connecticut, Massachusetts, Maine, New Hampshire, Rhode Island and Vermont). About 63 percent of households have discretionary income, with an average amount of $27,337. Household discretionary income is lowest in the West North Central region (including Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota). Average household discretionary income in this region is $20,749. California, the most populous state, has the largest number of households with discretionary income 8 million. These households hold $224.7 billion in total discretionary income.
Also interesting: Of the 43.7 million households of baby boomers (born between 1946-1964), more than two-thirds have discretionary income. As the largest group, the boomer segment also has the highest average discretionary income, $29,754.
Households with discretionary income, as defined by the study, are those whose spendable income exceeds that held by households with similar demographic features.

Weekly Focus Thanksgiving
In the spirit of the upcoming Thanksgiving holiday -- Let us remember that, as much has been given us, much will be expected from us, and that true homage comes from the heart, as well as from the lips, and shows itself in deeds." Theodore Roosevelt
Nov 18, 2013 Weekly Commentary
The Markets

If you found holiday songs or Beatles tunes humming through your head last week, it may have been your subconscious processing world and market events.

Over the river and through the woods/To Grandmother's house we go... Janet Yellen, current Vice Chairman and nominee to be the next Chairman of the Federal Reserve System, testified at her confirmation hearing before the U.S. Senate's Committee on Banking, Housing, and Urban Affairs on Thursday. Her comments were widely interpreted as indicating that current stimulus measures will remain in place. This made investors happy and helped push global stock markets higher.

In the United States, the Dow Jones, S&P 500, and NASDAQ, all appear to be headed toward milestones. The Dow is nearing 16,000, the S&P is closing in on 1,800, and the NASDAQ is approaching 4,000.

You say you want a revolution/Well you know/We all want to change the world... China's third plenum of the 18th Central Committee, which also is being referred to as a blueprint for reform, a reform manifesto, and the Decision on Major Issues Concerning Comprehensively Deepening Reforms, is ambiguously phrased, according to The Economist. However, it appears to encourage:

"...Experimentation in everything from trading rural land to the freeing of controls on interest rates. Barriers to migration will be further broken down and the one-child policy relaxed. A widely resented system of extra-judicial detention, known as laojiao (re-education through labor), will be scrapped."

China's leaders also promised to elevate the role of markets in the economy. That news helped push Shanghai Composite Index higher last week.


HAVE YOU BEEN OFFERED A LUMP SUM DISTRIBUTION? Not too many employers offer pension plans anymore. You know, pension plans. The kind of retirement plans that employers used to offer; the type where employees generally didn't contribute and the benefits they received in retirement were determined by their salaries, length of employment, and other factors.

If you've ever worked for a company that had one, it's possible that the offer of a lump sum distribution may be headed your way. If you accept a lump sum distribution, you're choosing to receive a pile of cash today instead of monthly or annual pension payments in retirement. Basically, you're agreeing to take responsibility for investing the money and generating a stream of income during retirement so your employer doesn't have to do those things.

Why are companies offering lump sum distributions? The Pension Protection Act of 2006 (PPA) established new accounting rules. Companies with pension plans must recognize their plans' funded status on their balance sheets each year. Since balance sheets are scrutinized by analysts and investors, and lots of pension plans are underfunded, companies decided it was time to take action.

How underfunded are these plans? A Wilshire Associates report cited by Reuters found the difference between the amount that S&P 500 companies will owe to retired workers and the amount those companies have set aside to pay retirees is more than $1.5 trillion. How much is that? Well, if you took one trillion one-dollar bills and strung them end-to-end, the chain would stretch further than the distance from the earth to the sun!

Anyway, having an underfunded plan became a corporate finance headache. Two-thirds of companies that have pension plans are trying to limit the effect of those plans on their financial statements (69 percent) and cash flows (58 percent), as well as reduce the overall cost of their plans (41 percent), according to a recent Towers Watson survey. CFO Research in collaboration with Mercer said employers plan to do this by:

- Adopting more conservative investment strategies - Transferring pension obligations to insurance companies by purchasing annuities - Offering lump-sum payouts to retired and current employees

In many cases, accepting a lump sum payout rather than having income from a pension may have a significant impact on your retirement.


Weekly Focus - Think About It

"The average 401(k) account balance fell 34.8 percent in 2008, then rose from 2009 to 2011. Overall, the average account balance increased at a compound annual average growth rate of 5.4 percent over the 2007-2011 period, to $94,482 at year-end 2011... The median 401(k) account balance (half above, half below) increased at a compound annual average growth rate of 11.5 percent over the period, to $42,082 at year-end 2011."
-- Employee Benefit Research Institute, June 2013 [12]

Sources:
http://www.reuters.com/article/2013/11/15/us-markets-global-idUSBRE96S00E20131115
http://www.usatoday.com/story/money/markets/2013/11/17/stock-market-in-milestone-heaven/3576739/
http://www.economist.com/news/china/21589869-communist-party-calls-wide-ranging-economic-reforms-and-gives-itself-new-tools-implement
http://www.economist.com/blogs/analects/2013/11/reform-china
http://www.bloomberg.com/news/2013-11-15/china-s-stock-index-futures-rise-as-oil-refiners-may-move.html
http://www.investopedia.com/terms/d/definedbenefitpensionplan.asp
http://ww2.cfo.com/retirement-plans/2013/04/the-great-pension-derisking/
http://www.reuters.com/article/2013/04/07/us-corporate-pensions-wilshire-idUSBRE9360CC20130407
http://www.marketwatch.com/story/more-us-companies-formalizing-plans-to-de-risk-defined-benefit-pension-plans-towers-watson-survey-finds-2013-11-12?reflink=MW_news_stmp
http://www.ehd.org/science_technology_largenumbers.php
http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/11-18-13_CFO_Research_and_Mercer-Evolving_Pension_Risk_Strategies-June_2013.pdf
http://www.ebri.org/publications/ib/index.cfm?fa=ibDisp&content_id=5283
Nov 17, 2008 Weekly Commentary
The Markets On second thought, maybe that wasn't such a good idea.
Treasury Secretary Hank Paulson did an about face last week as he told Congress that the administration was backing away from the original plan of using the $700 billion bailout fund to purchase toxic mortgages. Instead, he said they would like to “consider using (the) remaining bailout funds on a second round of purchases of preferred shares in both banks and non-bank institutions that would match privately raised funds,” according to CNBC. Wall Street panned the flip-flop as the Dow Jones Industrial Average dropped 411 points on the day of Paulson’s change of heart.
To his credit, Paulson didn’t stubbornly stick to a plan that may have been less than optimal as new information became available. Wall Street took it hard because the swift change just reinforced how quickly things are changing in the economy. Wall Street doesn’t like uncertainty and this change was another example of the unpredictability of our current environment.
Glum retail sales, weak corporate earnings reports, and another jump in initial jobless claims added to the negative tone in the markets last week, according to MarketWatch. Last Thursday was the lone bright spot. After the Dow Jones Industrial Average dropped below 8,000, it staged a dramatic comeback and finished the day up a stellar 6.7%. This 11.5% intraday swing was the third biggest one-day swing in the past 46 years, according to Barron’s. Although the market finished up for the day, this stomach-turning volatility kept investors nervous and the market sold-off again the next day.

IN 1958, A SEISMIC SHIFT OCCURRED in the relationship between dividend yields and bond yields. Fifty years later, that shift is close to reversing. If it does, what does that mean for investors?
Prior to 1958, the dividend yield on common stocks was always higher than the yield on long-term government bonds, according to Stocks for the Long Run by Jeremy Siegel. As a refresher, the dividend yield is simply the annual dividend divided by the price of a stock. For example, if a stock pays a $2 annual dividend and the price of the stock is $80, then the dividend yield is 2.5%. Fifty years ago, investors felt it was normal for stocks to yield more than bonds because stocks were riskier than bonds. Investors felt they had to be compensated for this risk by receiving a higher yield.
As 1958 unfolded, the stock market soared more than 30% and that dropped the dividend yield to below the yield on long-term government bonds and it’s been that way ever since, according to Siegel. Over the ensuing 50 years that stocks have yielded less than bonds, investors have gradually concluded that even though stocks may be riskier than bonds, the lower yield is justified because stocks may offer more growth opportunity. In other words, stocks offer the chance for a capital gain and a dividend, whereas long-term bonds bought at par and held to maturity only offer an interest payment.
Fast forward to last Friday. According to The Wall Street Journal, the dividend yield on the S&P 500 index was 3.5%, while the yield on 10-year government bonds was 3.75%. As you can see, we’re getting very close to parity after a 50-year hiatus.
In order for the dividend yield to surpass the bond yield, we would need to see stock prices continue to drop, bond prices continue to rise (remember: bond yields move opposite of bond prices), or some combination of the two. Here are some thoughts on each of those scenarios:
First, if stock prices continue to drop, the relative attractiveness of stocks may improve. With a high dividend yield, investors can take some comfort in knowing they’ll receive a payment for holding stocks, while still offering the chance for capital appreciation down the road.
Second, if bond prices rise, which leads to lower bond yields, then the economy may get some extra ammunition to spark economic growth. Lower interest rates may lead to more business investment, which could lead to higher corporate profits and, hopefully, higher stock prices.
Third, if both scenarios happen, it may set us up for a big recovery at some point in the future.
If the dividend yields end up surpassing bond yields, this reversal of a long-term trend may be a major signal that something momentous is about to happen. This “something momentous” could be a change in investor psychology that keeps stock prices low for a long period of time or it could be a sign that we’re nearing a trough in stock prices and that they’re poised to head up.
Regardless of what happens and what it may signal, we keep working diligently on your behalf to help you meet your long-term goals and objectives.

Weekly Focus – Think About It
“We don't stop playing because we grow old; we grow old because we stop playing.” --George Bernard Shaw
Nov 16, 2009 Weekly Commentary
The Markets Can Sir Isaac Newton's first law of motion help explain the continuing surge in the stock market?
In 1686, the great mathematician and physicist first presented his three laws of motion. The first law stated that, "Every object will remain at rest or in uniform motion in a straight line unless compelled to change its state by the action of an external force." Well, some unknown "external force" compelled the stock market to change its downward spiral in early March and since then, it's been up, up, and away.
Last week, the S&P 500 index rose another 2.3%, stopping just shy of the 1,100 mark. Better than expected earnings from companies such as Disney and Abercrombie plus more merger and acquisition activity (Hewlett-Packard agreed to buy 3Com at a large premium) helped keep the market in upward motion. Gold continued its fabulous run and finished the week with its ninth gain in the past 10 trading days, according to Associated Press. And, the U.S. dollar became cheaper last week against most of its major counterparts, partly due to reports showing other countries are recovering faster than the U.S., according to Bloomberg.
We are keeping our eyes and ears open for early signs of an “external force” that may change the upward course of the markets. In the meantime, enjoy the ride.

WHEN IS MONEY A GOOD INVESTMENT? Back in 1962, artist Andy Warhol completed a hand-drawn silkscreen painting titled “200 One Dollar Bills.” True to its title, the massive 7½-foot wide painting depicted 200 one dollar bills reproduced in tones of black on grey, according to Bloomberg. The owner of the work, Pauline Karpidas, a London-based collector, purchased the painting with her husband back in 1986 for $385,000. Last week, Ms. Karpidas sold the painting for – are you ready for this – an incredible $43.8 million! And we all thought the dollar was depreciating.
From $385,000 to $43.8 million in 23 years translates into an average annual return of nearly 23%. Not bad for a painting. By contrast, the S&P 500 index rose at a modest-by-comparison average annual rate of approximately 6.5% from mid-1986 to today, according to data from Yahoo! Finance.
As the stunning value of the Warhol painting shows, investment opportunities may show up in places you wouldn’t normally think of. Unlike the financial markets, though, there are no easy ways to invest in masterpiece paintings on behalf of our clients. However, the point of mentioning Warhol is that we do search far and wide to try and find investment opportunities that may help offset the volatility of the stock and bond markets. Fortunately, innovation in the financial markets over the past few years has expanded the types of products available and we continue to analyze and perform due diligence on them to see how they might benefit our clients.

Weekly Focus – Think About It
"Money is neither my god nor my devil. It is a form of energy that tends to make us more of who we already are, whether it's greedy or loving."
--Dan Millman
Nov 15, 2010 Weekly Commentary
The Markets Befitting the two steps forward, one step back nature of this recovery, the good news from two weeks ago was followed by four sobering pieces of news last week.
First, a prominent technology company which, according to CNET in March 2000, was the most valuable company in the world in terms of stock market capitalization, delivered an earnings outlook last week that was well below analysts' expectations, according to The Wall Street Journal. The dour news caused some investors to reassess the robustness of technology spending and that helped send stock prices lower for the week.
Second, the Federal Reserve began its bond buying program, dubbed QE2, but instead of interest rates falling, they actually rose for the week, according to The Wall Street Journal. Higher rates tend to make it harder for the economy to grow.
Third, sovereign debt woes hit Europe again as concerns rose that Ireland would be the next country to receive some type of bailout, according to The Wall Street Journal. Spain and Portugal's financial situations appear weak, too, and the cost to insure all three countries' bonds against default rose to record levels last week.
Fourth, home prices fell in the third quarter of 2010 compared to the same quarter a year ago in nearly half of U.S. metropolitan areas, according to a report released by the National Association of Realtors last week. The housing market is still trying to regain its footing after the expiration of government tax credits earlier this year.
Now, here's a question. Are the above reasons the "real" reasons why the stock market dropped last week? Maybe. What we do know is financial journalists always try to ascribe a reason to every movement in the market. As humans it makes us feel good that we can come up with a "reason" as to why things happen because it gives us some sense of control or understanding of our environment. But, in reality, we don’t always know why things happen. Last week’s drop in the market may simply have been a natural pause from a strong upswing over the previous couple months.
Regardless of the reasons for the market's movements, it doesn't change our objective which is to help you meet your financial goals and objectives.

FEW AMERICANS WOULD ARGUE that our annual federal budget deficits are unsustainable. What people do argue about is what to do about them. Last week, a bipartisan White House commission released its preliminary plan to cut the growth of the federal debt by $3.8 trillion by 2020, according to Bloomberg. And, of course, the sniping about the plan began as soon as it was released.
To be sure, the plan was bold. Sacred cows were skewered and, according to a co-chairman of the committee, "We have harpooned every whale in the ocean and some of the minnows." Here are a few of the commission’s suggestions:
• Raise the Social Security retirement age to 69 by about 2075
• Reduce or eliminate the deduction for home-mortgage interest
• Reduce farm subsidies
• Lower and simplify individual tax rates
• Lower the corporate tax rate to 26%
• Reform medical-malpractice law
• Slow the growth of the Medicare program
• Cut the federal workforce by 10%
• Permanently ban congressional earmarks
• Cut $100 billion from military spending
As financial professionals, one of the things that keeps us awake at night is the inability of our government -- both Democrats and Republicans -- to adequately address our budget deficits. Should they fail to eventually get the deficits under control, we may all pay a heavy price in the form of a lower standard of living. How the government progresses on reining in the deficits is something we’ll be watching closely into 2011.

Weekly Focus – Solve This
Mary needed 400ml of vegetable stock for a recipe she was following. However, the only measuring containers she had were 300ml and 500ml. How can she measure out exactly 400ml?
See below for the answer.

Answer: She should fill the 500 ml container first and use this to fill the 300ml container, thereby leaving 200 ml in the larger jug. Then she could empty the 300ml container back into the stock jar and pour the 200ml from the larger container into the 300ml container. If she once again fills the larger container from the jar and, again, fills the smaller container from this, the smaller container needs 100ml to fill it, which will leave 400ml in the larger container.
Nov 14, 2011 Weekly Commentary
The Markets Greece and Italy just dumped their political leaders and are hoping that new leadership will calm the financial markets and drive important structural reform.
One of the insightful bits of investing wisdom is that you don't have to recoup a loss using the same investment that caused the loss. In other words, it's okay to sell a loser and redeploy the money in another investment that may have a better chance of going up in value. That seems to be what Greece and Italy are doing with their leadership change.
Greece is now counting on Lucas Papademos and Italy is counting on Mario Monti to lead their countries out of their debt mess.
If these guys take swift action and gain credibility, it could help the markets. As Barron's pointed out this past weekend, "In the absence of new and nasty headlines or evidence of acute market stress, the default mode of stocks – at least for now – is to hang firm or to climb a bit."
As of last Friday, the S&P 500 index turned positive on a year-to-date basis. We'll have to wait and see if political change in Europe is enough to kick start the markets.

RIP VAN WINKLE SLEPT FOR 20 YEARS AND AWOKE TO DISCOVER that his world had changed dramatically. The U.S. stock market has been "asleep" for about 13 years now and in another seven, we may find our world is much different, too.
In the nearly 13 years between January 11, 1999 and last Friday, the S&P 500 index rose as high as 1,565 and dropped as low as 676. During that volatile period, we witnessed numerous impactful events including the following:
*The bursting of the dot-com bubble
*The rise of the euro
*9/11
*The war on terrorism
*The rise and fall of the real estate bubble
*The spectacular rise of the price of gold
*The Southeast Asia tsunami and the Japan tsunami
*The rise of social media
*The Great Recession
*The sovereign debt crisis
Yet, with all those world events and the tremendous moves in the S&P 500 – both up and down – during those nearly 13 years, guess how much the S&P 500 price changed between January 11, 1999 and last Friday?
Exactly zero!
That's right. The S&P 500 closed at 1,263 on January 11, 1999 and at 1,263 last Friday, according to data from Yahoo! Finance.
Does this mean you should never invest in the stock market because it's been flat for so long? No. Here are five things to understand from this long market malaise:
1. Dividends matter. While there was no price change between these two time periods, reinvesting dividends or owning investments that pay dividends may have generated a positive return.
2. Diversification matters. The S&P 500 was flat, but some other asset classes did fine over the past 13 years, so it’s important to search far and wide for investment opportunities.
3. Perspective matters. It’s easy to get caught up in the large day-to-day swings in the market, but understanding the broader trend or context of the market is important to help prevent day-to-day volatility from causing you to make bad investment decisions.
4. Patience matters. As long-term investors, we're more like the tortoise than the hare. Short-term, rapid traders create a lot of noise and may lead the pack from time-to-time, but we’re focused on winning at the end, not at each checkpoint.
5. Valuation matters. The bubble-like values placed on some companies in the late 1990s were so out of whack with normalcy that it's taken the market many years to work off those excesses. So, while patience is important, it’s also necessary to understand that valuation at the time you make your investment could have a major impact on how long it takes to get a return on your investment.
Nobody knows if the market will remain "asleep" for another seven years to match Mr. Van Winkle. Regardless, the world will be different and we’ll keep searching for ways to help you reach your destination without nightmares.

Weekly Focus – Think About It
"Rip Van Winkle, however, was one of those happy mortals, of foolish, well-oiled dispositions, who take the world easy, eat white bread or brown, which ever can be got with the least thought or trouble, and would rather starve on a penny than work for a pound."
--Excerpt from Rip Van Winkle by Washington Irving
Nov 12, 2012 The Markets



Special Post-Election Analysis

With the election behind us, what’s next for the economy and the financial markets? In this special analysis, we’ll take a look at what the election means, how the markets are reacting, and where we go from here.

What the Election Means

For starters, the political makeup of the country hasn’t changed much. President Obama remains in the White House, the Democrats are still in charge of the Senate, and the Republicans retain the House. With no significant change in the balance of power, both parties will have to find ways to compromise in order to keep the country moving forward and to avoid the economy falling off the looming fiscal cliff.

Economically, our politicians need to tackle two major issues – the fiscal cliff and unemployment.

The fiscal cliff is perhaps the biggest and most immediate of the two. As a result of previous legislation, deep, automatic federal spending cuts and tax increases will take place in January unless the President and Congress agree to some alternative plan. If they fail to reach an agreement, going over the cliff, “would not only risk another recession, but would intensify anxiety about the dysfunction of the U.S. political system,” according to The Wall Street Journal.

On a related note, our ever-growing national debt is deeply entwined with the fiscal cliff issue. If Washington can effectively solve the cliff issue, it might also put the deficit on a path to sustainability – and that could be great news for the economy and the markets.

The second issue is unemployment and it is deeply entwined with economic growth. While the unemployment rate has come down, it’s still too high as, “roughly 3.6 million Americans have been without work for a year or more and are still looking,” according to The Wall Street Journal. Government policies and regulations have a major impact on corporate America’s desire to hire and expand. If our leaders can enact pro-economic growth policies, it might encourage businesses to reinvest and hire more people.

Here are several other things to keep in mind as a result of the election:

• Health care overhaul. Love it or loathe it, it’s here to stay. Among other things, companies with 50 or more full-time equivalent employees will be required starting in 2014 to provide health-insurance benefits or pay a penalty. While small businesses may not be happy about that, at least they can now plan for it.
• Tax increases. President Obama has said he’d like to see taxes rise for couples earning more than $250,000 a year. Also, tax rates on dividends and capital gains may rise. Of course, these won’t happen unless Congress passes them.
• Tax breaks. Both sides seem to agree that certain tax breaks and loopholes will have to go as part of any compromise. And, while this might avoid raising tax rates, it would mean a tax increase for those affected.
• Entitlement reform. Any “grand bargain” on the deficit will likely mean changes to Social Security and Medicare. In other words, we could see Democrats agreeing to reductions in benefits in exchange for Republicans agreeing to tax increases or closing tax loopholes.
• Easy money. With the President’s reelection, Federal Reserve policy is likely to remain “easy.” This could mean more rounds of quantitative easing and continued low interest rates.
The economic issues facing our country are serious and the folks in Washington know it. They also realize it will take compromise to get things done. As CNN said, “Both sides agree the best outcome would be a broad deal addressing the overall need for deficit reduction, including reforms to the tax system and entitlement programs such as Social Security, Medicare, and Medicaid.” Let’s hope our politicians put politics aside and do what’s best for our country to get us growing strongly on the road to economic prosperity.

How the Markets Are Reacting

With the polls showing the President in the lead going into Election Day, the financial markets shouldn’t have been surprised when he won – but it appears they were. U.S. stocks dropped 3.6 percent in the two days after the election before finishing slightly higher on Friday, according to data from Yahoo! Finance.

Looking at history, it’s interesting to note that the stock market performed quite well during President Obama’s first term. The S&P 500 index rose 76 percent from inauguration day to last week’s Election Day. By contrast, it declined 13 percent during George W. Bush’s first term, rose 60 percent during Bill Clinton’s first term, and rose 25 percent during Ronald Reagan’s first term, according to MarketWatch. How much of those returns can be attributed to each President’s policies is anybody’s guess, so it’s hard to draw solid conclusions from them.

In terms of sectors to monitor, MarketWatch says the following might benefit from the election results:

• Healthcare. Drug companies and insurers might benefit from the healthcare mandate as coverage expands over time.
• Home construction and real estate. Continued quantitative easing and low interest rates may bode well for the housing market. This could be very beneficial for the economy as housing plays a significant role in economic growth.
• Precious metals. Gold prices rose last week as investors think continued quantitative easing could be bullish for the shiny metal.

Where We Go From Here

Putting the election behind us has removed one hurdle to moving the country forward. With campaigning out of the way, Washington can get back to work.

As Congress and the President engage in posturing and gamesmanship over the fiscal cliff and the tax and entitlement reform issues, be prepared for volatile stock prices over the next couple months. Ironically, politicians may not take decisive action on these issues until forced to through the pressure of lower stock prices.

Aside from the pressing issues, is there a reason for optimism on the economy? Yes. According to Bloomberg, “The median prediction of 37 economists surveyed by Blue Chip Economic Indicators is that during the next four years, economic growth will gather momentum as jobless people return to work and unused machinery is put back into service.” Bloomberg also pointed out the following positive indicators:

• Banks have strengthened their balance sheets.
• Most households, which borrowed too much during the housing bubble, have pared their debt back to normal levels through a combination of frugality and default.
• Upper-income households’ balance sheets are in good shape, although mortgage debt remains a heavy burden at lower-income levels, says Mark Zandi, chief economist of forecaster Moody’s Analytics as quoted by Bloomberg.
• Housing prices have gone from falling to rising, buoying confidence.
• Increased consumer spending should induce more business investment in a virtuous circle.
• There’s pent-up demand for residential and commercial construction.

Stepping outside the U.S., we still have major economic and budget issues in Europe, China is going through a once in a decade leadership change while its economy slows down, and the Middle East, as always, is a wildcard.

As you can see, we have a lot on our plate to monitor! And, as your advisor, we’re doing our best to keep you well positioned to benefit no matter what Washington throws at us. This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


Weekly Focus – A Salute to Our Veterans


As we honor our Veterans, we’d like to share an excerpt from the President’s Veterans Day Proclamation:

“Whether they fought in Salerno or Samarra, Heartbreak Ridge or Helmand, Khe Sanh or the Korengal, our veterans are part of an unbroken chain of men and women who have served our country with honor and distinction. On Veterans Day, we show them our deepest thanks. Their sacrifices have helped secure more than two centuries of American progress, and their legacy affirms that no matter what confronts us or what trials we face, there is no challenge we cannot overcome, and our best days are still ahead.”

Thank you to all who are serving, who have served, and to the families and friends supporting our Veterans. We truly appreciate all you do for our country.

Fisher Financial Partners, Inc. offers securities through Regal Securities, Inc., member FINRA/SIPC. Advisory Services offered through Regal Advisory Services, Inc. Fisher Financial Partners, Inc. is not affiliated with Regal Securities, Inc. or Regal Advisory Services, Inc.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
Nov 12, 2007 Weekly Commentary
The Markets
It was a bit rocky on Wall Street last week.
The list of headline-grabbing news included: the resignation of Citigroup CEO Chuck Prince over subprime losses, a $39 billion quarterly loss from GM (mostly from a one-time charge), a falling dollar, soaring gold and oil prices, declining consumer sentiment, and a weak October retail sales report, according to various reports from Barrons and MarketWatch. The net result was falling stock prices.
While the market declined last week, we have to keep it in perspective. As indicated in the chart below, stock prices are still up for the year. Also, the Dow Jones Industrial Average dropped a get your attention 360 points last Wednesday. However, on a percentage basis, it equated to about a 2.6% decline, according to MarketWatch. By contrast, when the Dow dropped 508 points on October 19, 1987, it represented a 22.6% decline. Since the Dow has risen dramatically in the past 20 years, a comparable 508-point drop based on last Fridays close would only equate to a 3.9 % drop.
Just as fine wines improve with ageso may the stock market. Yes, well see bumps along the way like last week, but over time, cooler heads tend to prevail.

ARE YOU ONE OF THE MILLIONS OF AMERICANS WHO READS the Farmers Almanac for its long-range weather predictions and gardening and household advice? The Stock Traders Almanac offers investors similar information and historical data, tracking, since 1966, stock market history, cycles and patterns.
A compilation of the markets seasonal trends and tendencies combined with a calendar and designed for use by non-institutional investors, the Stock Traders Almanac has introduced many statistically predictable market phenomena-- from the four-year Presidential Election Cycle to the Santa Claus Rally.
According to the almanac, some days of the week and months of the year are better for stocks than others. In fact, November has been a good time to be a bull. Since 1971, November has been the best month for the S&P 500, the second best for the Nasdaq, and the third best for the Dow. November also begins a favorable six-month period in which the almanac says the market tends to make almost all its gains for the year.
However, before you embark on a buying spree, its important to recognize that not all stocks, or sectors, follow historical trends. Accordingly, theres a significant risk involved in embracing seasonal trends as a market barometer. Rather, its wise to use the information the almanac offers on seasonal trends as one tool among many to evaluate market opportunities.

SO WHAT MAKES A GREAT STOCK? According to money manager Louis Navellier, there are eight fundamental characteristics that add up to a great stock: positive earnings revisions, positive earnings surprises, increasing sales growth, expanding operating margins, strong cash flow, earnings growth, positive earnings momentum, and high return on equity.
As Navellier notes on his blog, however, a stock must not only be fundamentally superior, but quantitatively strong. That is, he seeks stocks with low risk relative to potential. In addition, he favors assembling a diverse stock portfolio that tends to "zig and zag against each other, thus helping to achieve higher and smoother returns." Theres nothing to argue with in that approach.
Navellier also explores how behavioral forces lure us away from what we know to be a rational investment strategy, making the point that the herd mentality often forces analysts into a conservative pack. Their thinking: Its better to be wrong and be wrong in a group than take an unpopular position and risk being fired if it doesnt work out.
Navellier is considered a growth investor in that he favors stocks that are growing rapidly. Value investors, on the other hand, look for beaten down stocks that are selling at what appear to be cheap prices. Both types of investors have the potential to make profitable investments so it tends to make sense to own a little growth and a little value. Thats another way of sayingdiversify! Remember, no strategy assures success or protects against loss. Investing in the market can result in loss of principal.

Weekly Focus End Annoying Calls
The Federal Trade Commissions (FTC) Do-Not-Call Registry continues to have great success. According to a recent Harris Poll, just under three-quarters (72%) of Americans have registered their telephone numbers for the Do-Not-Call Registry. Of those who have registered, very few people say they get as many telemarketing calls as before they signed up (6%) and only one percent say they get more than before they signed up. One in five (18%) report that they currently get no telemarketing calls while three in five (59%) say they still get some, but far less than before they signed onto the Registry.
You can register for the Do-Not-Call Registry online at www.donotcall.gov or by calling 1-888-382-1222 from the number you wish to register. Registration is free.
Nov 11, 2013 Weekly Commentary
Weekly Market Commentary November 11, 2013 The Markets

After last week's surprisingly strong employment report, it's almost possible to picture Ben Bernanke slapping trail dust from his leg, ducking his head, and saying, "Just doin' my job."

After all, running the economy is as laden with complications and unexpected events as a cattle drive. Richard Graboyes, an economist who was once the Director of Education for the Federal Reserve Bank of Richmond, wrote that driving cattle seems "arduous, but simple - walk some cattle from point A to point B. But, the endeavor is fraught with natural and human risks for both rancher and driver."

Clearly, the head of the Fed and the head of a cattle drive face different challenges. According to The Federal Reserve System: Purposes and Functions publication:

"The Federal Reserve sets the nation's monetary policy to promote the objectives of maximum employment, stable prices, and moderate long-term interest rates. The challenge for policymakers is that tensions among the goals can arise in the short run and that information about the economy becomes available only with a lag and may be imperfect."

Last week, the employment numbers seemed to support the idea the economy is gaining steam. According to Forbes, employers added more than 200,000 jobs in October, which was far more than economists had anticipated. The government continued to employ fewer people (employees furloughed during the government shutdown were still counted as being employed). There were 12,000 fewer government jobs in October, and 94,000 fewer for the year. The biggest employment gains were in the hospitality, retail, technical services, manufacturing, and health care sectors.

It's not time to whoop and holler, though. The New York Times reported the labor force participation rate fell to 62.8 percent, which is a 35-year low. More than 700,000 jobs disappeared during October which was the largest monthly drop since the end of 2009. A smaller labor force can make overall unemployment rate appear to be lower than it is. Let's hope the labor force isn't like a herd of cattle that moves too fast and arrives at market a lot skinnier and worth a lot less.


IF YOU WERE ASKED TO COMPARE TEACHERS' SOCIAL STATUS TO THAT OF other professions, how would it compare? Are teachers like doctors? Librarians? Social workers? Nurses? Local government officials? Web designers? Lawyers? Policemen? Engineers? Accountants?

Education and training have a profound effect on economies and individuals. In the United States, people who have graduated from college tend to earn more than those who have graduated from high school. Earning an MBA, JD, or MD can translate into significantly higher earnings over a lifetime. Clearly, becoming educated has a significant economic value.

What value, then, do we place on those who provide education? How much respect do we have for the people who teach and train us? As it turns out, the answer varies widely from country to country. According to the Varkey GEMS Foundation's Global Teacher Status Index survey, which surveyed 21 countries to determine the status of teachers, people in China, Greece, and Turkey have the highest level of respect for teachers and their social standing.

So, how does the teaching profession compare to other professions? In the Czech Republic, Egypt, Switzerland, and many other countries, survey respondents said teachers have the status of social workers. In Brazil, France, Turkey, and the United States, people think teachers are roughly on par with librarians. The Japanese think teachers have the same status as local government managers. More than one-third of Chinese participants said teachers had the same status as doctors. According to the report:

"The U.S. ranked in the middle of the Teacher Status Index with a score of 68.0. Notably, the ranking of primary school teachers is at the higher end of the table and above all the European countries. U.S. respondents scored consistently across the different variables in the study, demonstrating moderate to positive respect for their teachers."

As you might expect, the more respect a country had for teachers, the more likely people in that country were to encourage their children to enter the profession. Parents in China, South Korea, Turkey, and Egypt were most likely to encourage kids to become teachers.


Weekly Focus - Think About It

"Education is the key to success in life, and teachers make a lasting impact in the lives of their students."
-- Solomon Ortiz, Former U.S. Representative from Texas

Sources:
http://www.robertgraboyes.com/writings_files/Cattle%20Drive%20Contracts.pdf
http://www.federalreserve.gov/pf/pdf/pf_2.pdf
http://www.forbes.com/sites/samanthasharf/2013/11/08/jobs-report-u-s-economy-added-204k-jobs-in-october/
http://www.nytimes.com/2013/11/09/business/economy/us-unemployment-rate-rises-to-7-3-204000-jobs-added.html?_r=0
http://www.bls.gov/emp/ep_chart_001.htm
https://www.varkeygemsfoundation.org/sites/default/files/documents/2013GlobalTeacherStatusIndex.pdf (Page 7)
http://www.brainyquote.com/quotes/authors/s/solomon_ortiz.html
Nov 10, 2008 Weekly Commentary
The Markets Last week's business news underscored the severity of the current economic slowdown.
We all know October was a bad month in the financial markets. What we didn't know until last week was how bad the economy was faring during the market meltdown. Well, on Friday, the Labor Department delivered the dreaded news that our economy shed 240,000 non-farm jobs in October. And, if that wasn’t bad enough, they significantly revised the September payroll numbers to show a decline of 284,000 jobs. The data led to a 6.5% unemployment rate in October, which is the highest rate in 14 years, according to MarketWatch.
The way the stock market responded to this news is rather instructive.
In the two days prior to the release of the employment numbers, the S&P 500 index declined a whopping 10%, according to Bespoke Investment Group. That was the largest two-day decline since the market crash of October 1987. What triggered the drop? While we’ll never know for certain, it appears that some investors were selling ahead of the anticipated bad employment numbers. According to a Reuters article, “Goldman Sachs analysts had expected up to 300,000 jobs may have been cut from non-farm payrolls in October. So, when the Labor Department reported 240,000 jobs lost last month, that did not send the stock market into a tailspin even though the figure exceeded the median forecast of 200,000.”
This is an example of how the stock market tends to anticipate what’s going to happen and, then, reacts accordingly. On the day the employment numbers were released, the S&P 500 index actually rose nearly 3%. In effect, it was a “sell on the rumor, buy on the news” strategy.
Even armed with the knowledge that markets tend to anticipate what’s going to happen, it’s still difficult to try and profit from it. There are a couple reasons why. First, one never knows exactly what news is already baked into stock prices; hence, it’s hard to predict how the market will react when the news is released. Second, at times the market may predict things that don’t actually happen. For example, there’s an old Wall Street saw that says, “The stock market has predicted nine of the last five recessions.” Clearly, Wall Street’s crystal ball is not always “crystal clear.”
Wishful thinking aside, it appears that this time the market is accurately predicting a recession.

ISN’T IT IRONIC that one of the major causes of our current financial predicament – borrowed money – is exactly what the federal government is using to try and solve the crisis? One has to look no further than the Federal Reserve’s balance sheet. The Fed has pulled out all the stops and flooded our financial system with all kinds of “new facilities” that have dramatically expanded its assets and liabilities.
As of November 5, the Fed’s balance sheet had ballooned to over $2 trillion in assets. That’s up more than 100% in less than 60 days, according to data from the Fed. And, it may not stop there. Richard Fisher, president and CEO of the Federal Reserve Bank of Dallas, said in a November 4 speech that, “I would not be surprised to see them [assets] aggregate to $3 trillion – roughly 20% of GDP – by the time we ring in the New Year.” The thought that the Fed’s balance sheet could triple to $3 trillion in the span of four months shows how serious the Fed is about trying to minimize the impact of this financial and economic crunch.
So, where does the Fed get the money to expand its balance sheet? By borrowing, of course! Last week, the Bush administration announced plans to borrow a record $550 billion between now and the end of the year, according to Associated Press. That’s necessary to help fund our federal budget deficit, which some experts predict will hit $1 trillion this fiscal year (2009). For the full year, government borrowing could total $2 trillion, according to Mark Zandi, chief economist at Moody's Economy.com. Boy, a trillion here, a trillion there, and before you know it, we’re talking serious money.
But, just like us normal people, the government can’t continue to borrow money indefinitely without major repercussions. The government’s ability to borrow is generally limited by somebody else’s willingness to lend. And, those lenders have increasingly been countries such as Japan, China, and the United Kingdom.
At the end of August, the national debt of the U.S. was approximately $9.6 trillion, according to the Treasury Department. Of that, just three countries, Japan, China, and the United Kingdom, held about $1.4 trillion of the total. If these countries, or any of our other lenders, decide that they don’t want to own any more of our paper, then we may run into trouble financing our deficits. That, coupled with the specter of rising inflation if we juice the economy too much, may act as a governor on the government’s ability to add liquidity to the economy.
With that said, it appears that the government still has takers for our treasury securities and that inflation is not currently a big concern. Consequently, the government may continue to borrow money to help jumpstart the economy. Hopefully, they’ll borrow just enough to get us out of this economic funk, but not so much that we end up drowning in debt from which we can’t escape.

Weekly Focus – Stock Ticker
During this week in 1867, the first stock ticker was unveiled in New York City. It replaced mail and messengers and allowed investors around the country to receive up-to-the-minute stock prices. But, most importantly, the tape from the machines made for great parades!
Nov 09, 2010 Weekly Commentary
The Markets The potential economic ramifications of last week's news are, to put it mildly -- huge.
Three big things happened that could have long-term effects on your portfolio and your financial well-being. First, on Tuesday, the Republicans scored a major victory in the mid-term elections and now have the upper hand in shaping the legislative agenda over the next two years. Should they succeed in cutting taxes and reducing spending, it could usher in a new era of fiscal conservatism that might cause short-term pain, but could lead to long-term gain. On the other hand, we could just end up with gridlock, finger-pointing, or compromises that please no one.
Second, on Wednesday, the Federal Reserve cranked up the printing presses again and announced that they will buy up to $600 billion of additional Treasury securities by the end of June 2011, according to MarketWatch. In a November 4 Op-Ed piece in The Washington Post, Fed chief Ben Bernanke justified the action by saying, "Easier financial conditions will promote economic growth... lower mortgage rates will make housing more affordable and allow more homeowners to refinance... lower corporate bond rates will encourage investment… higher stock prices will boost consumer wealth and help increase confidence." On the other hand, some critics suggest that this action will lead to high inflation, a weak dollar, and perpetuate global imbalances, according to CNBC.
Then, on Friday, the Labor Department reported that the U.S. economy created 151,000 jobs last month, which was well above the forecast of 60,000 jobs, according to Bloomberg. On top of that, the previous two months’ payrolls were revised upward to show 110,000 more jobs created than previously reported. Could the U.S. economy finally be on the cusp of a new wave of job creation?
The net result of these three sweeping things was that stock prices roared to their highest level in more than two years, according to Bloomberg. In addition, yields on two- and five-year Treasury notes dropped to record lows and gold prices surged to all-time record highs. Whew!
Barry Knapp, chief U.S. equity strategist at Barclays Plc in New York summed up the week very nicely by saying, "The elections point to the stabilization between the government and the private sector. The Fed purchases will go on for at least seven months, and the stronger-than-expected payrolls report creates an encouraging macro-environment going forward."

FOR ADDITIONAL CONTEXT, here are a couple more things to consider. First, we are in the midst of the strongest bull market since World War II. Yes, that does seem hard to believe, but here's the fact. Since the credit-crisis low reached on March 9, 2009, the S&P 500 is up more than 80%, which is the biggest advance at that stage (605 days) among any of the bull markets since World War II, according to Birinyi Associates as reported by CNBC. By comparison, "the next most powerful bull began in 1974 and was up just 61% through the very same time period."
And, second, sometimes it makes sense to leave our U.S. centric point of view and see what people in other parts of the world are saying about us. Here’s what the London-based Economist had to say in an October 28 article:
Despite its problems, America has far more going for it than its current mood suggests. It is still the most innovative economy on earth, the place where the world's greatest universities meet the world's deepest pockets. Its demography is favourable, with a high birth rate and limitless space into which to expand. It has a flexible and hard-working labour force. Its ultra-low bond yields are a sign that the world’s investors still think it a good long-term bet. The most enterprising individuals on earth still clamour to come to America.
Succinctly, the U.S. may now be at a pivotal point. The current momentum could carry us, "up, up, and away," or, the recent strength could be nothing more than a mirage fueled by trillions of dollars of fiscal and monetary stimulus that eventually comes crashing down. Either way, we are here to help you navigate the road ahead.

Weekly Focus – Think About It
"Despite the monster gains off the bottom, the S&P 500 is still just at the highest level since September 2008. It will take another bull market, or gains of more than 20%, to get it back near its all-time high reached in October 2007." --John Melloy, CNBC, November 4, 2010
Nov 09, 2009 Weekly Commentary
The Markets Take your pick - gold surging past $1,100 an ounce, the jobless rate hitting double digits, Warren Buffett's, "all-in wager on the economic future of the United States," a 3.2% rise in the S&P 500 index – there was something for everyone last week in the economy and the financial markets.
The price of the shiny yellow metal keeps on rising despite little sign of rampant inflation or extraordinary fear in the markets. Prices jumped last week on news that India purchased 200 metric tons of gold from the International Monetary Fund as a way to diversify its foreign-exchange reserves. Gold bulls took that as a cue to get on the gold bandwagon.
The jobless rate and the economy seem to be living in alternate universes. The economy grew 3.2% in the third quarter, yet the jobless rate continued to spike, hitting a rate not seen since the early 1980s. Yes, they say employment is a lagging indicator, but, at some point, we have to start seeing a net increase in jobs or else we risk a double-dip recession.
Warren Buffett made perhaps the last major purchase of his lifetime by agreeing to acquire the remaining shares of Burlington Northern Santa Fe Corporation that he did not already own in a $44 billion deal. Surprisingly, for a debt-adverse investor, he will borrow roughly $8 billion to complete the deal.
And the stock market? No matter the news, it seems to take it all in stride as the Dow Jones Industrial Average closed above the 10,000 mark. The bulls are making it difficult for the bears to find an opening.

THERE IS A FINE LINE between having the conviction to stick to an investment position that is temporarily going against you versus being flexible enough to change your mind as the situation changes. Knowing how to discern that line is an important part of successful investing.
Before you make an investment, here are three things you should know:
1. The rationale or thesis behind your investment.
2. The level at which your investment would become "fully valued."
3. What would have to happen for you to realize that your rationale or thesis was no longer valid.
Having clarity on those three items makes it easier for you to know where that line between conviction and flexibility lies.
The British economist John Maynard Keynes famously said, "When the facts change, I change my mind. What do you do, sir?" Since nobody knows for certain what the future holds, we have to review the data as it arrives. If that data is materially different from our original thesis and the market is responding to it, then that will likely cause us to change our mind. This concept of conviction versus flexibility is something we are conscious of and we use it to help us be better – and more flexible – investment managers.

Weekly Focus – Think About It
"An oak and a reed were arguing about their strength. When a strong wind came up, the reed avoided being uprooted by bending and leaning with the gusts of wind. But the oak stood firm and was torn up by the roots." -- Aesop ' style='margin: 0px 5px;' cols='100' rows='15'>
The price of the shiny yellow metal keeps on rising despite little sign of rampant inflation or extraordinary fear in the markets. Prices jumped last week on news that India purchased 200 metric tons of gold from the International Monetary Fund as a way to diversify its foreign-exchange reserves. Gold bulls took that as a cue to get on the gold bandwagon.
The jobless rate and the economy seem to be living in alternate universes. The economy grew 3.2% in the third quarter, yet the jobless rate continued to spike, hitting a rate not seen since the early 1980s. Yes, they say employment is a lagging indicator, but, at some point, we have to start seeing a net increase in jobs or else we risk a double-dip recession.
Warren Buffett made perhaps the last major purchase of his lifetime by agreeing to acquire the remaining shares of Burlington Northern Santa Fe Corporation that he did not already own in a $44 billion deal. Surprisingly, for a debt-adverse investor, he will borrow roughly $8 billion to complete the deal.
And the stock market? No matter the news, it seems to take it all in stride as the Dow Jones Industrial Average closed above the 10,000 mark. The bulls are making it difficult for the bears to find an opening.

THERE IS A FINE LINE between having the conviction to stick to an investment position that is temporarily going against you versus being flexible enough to change your mind as the situation changes. Knowing how to discern that line is an important part of successful investing.
Before you make an investment, here are three things you should know:
1. The rationale or thesis behind your investment.
2. The level at which your investment would become "fully valued."
3. What would have to happen for you to realize that your rationale or thesis was no longer valid.
Having clarity on those three items makes it easier for you to know where that line between conviction and flexibility lies.
The British economist John Maynard Keynes famously said, "When the facts change, I change my mind. What do you do, sir?" Since nobody knows for certain what the future holds, we have to review the data as it arrives. If that data is materially different from our original thesis and the market is responding to it, then that will likely cause us to change our mind. This concept of conviction versus flexibility is something we are conscious of and we use it to help us be better – and more flexible – investment managers.

Weekly Focus – Think About It
"An oak and a reed were arguing about their strength. When a strong wind came up, the reed avoided being uprooted by bending and leaning with the gusts of wind. But the oak stood firm and was torn up by the roots." -- Aesop ' style='margin: 0px 5px;' cols='100' rows='15'>The Markets Take your pick - gold surging past $1,100 an ounce, the jobless rate hitting double digits, Warren Buffett's, "all-in wager on the economic future of the United States," a 3.2% rise in the S&P 500 index – there was something for everyone last week in the economy and the financial markets.
The price of the shiny yellow metal keeps on rising despite little sign of rampant inflation or extraordinary fear in the markets. Prices jumped last week on news that India purchased 200 metric tons of gold from the International Monetary Fund as a way to diversify its foreign-exchange reserves. Gold bulls took that as a cue to get on the gold bandwagon.
The jobless rate and the economy seem to be living in alternate universes. The economy grew 3.2% in the third quarter, yet the jobless rate continued to spike, hitting a rate not seen since the early 1980s. Yes, they say employment is a lagging indicator, but, at some point, we have to start seeing a net increase in jobs or else we risk a double-dip recession.
Warren Buffett made perhaps the last major purchase of his lifetime by agreeing to acquire the remaining shares of Burlington Northern Santa Fe Corporation that he did not already own in a $44 billion deal. Surprisingly, for a debt-adverse investor, he will borrow roughly $8 billion to complete the deal.
And the stock market? No matter the news, it seems to take it all in stride as the Dow Jones Industrial Average closed above the 10,000 mark. The bulls are making it difficult for the bears to find an opening.

THERE IS A FINE LINE between having the conviction to stick to an investment position that is temporarily going against you versus being flexible enough to change your mind as the situation changes. Knowing how to discern that line is an important part of successful investing.
Before you make an investment, here are three things you should know:
1. The rationale or thesis behind your investment.
2. The level at which your investment would become "fully valued."
3. What would have to happen for you to realize that your rationale or thesis was no longer valid.
Having clarity on those three items makes it easier for you to know where that line between conviction and flexibility lies.
The British economist John Maynard Keynes famously said, "When the facts change, I change my mind. What do you do, sir?" Since nobody knows for certain what the future holds, we have to review the data as it arrives. If that data is materially different from our original thesis and the market is responding to it, then that will likely cause us to change our mind. This concept of conviction versus flexibility is something we are conscious of and we use it to help us be better – and more flexible – investment managers.

Weekly Focus – Think About It
"An oak and a reed were arguing about their strength. When a strong wind came up, the reed avoided being uprooted by bending and leaning with the gusts of wind. But the oak stood firm and was torn up by the roots." -- Aesop
Nov 07, 2011 Weekly Commentary
The Markets This Europe problem just won't go away and it's keeping the financial markets on edge.
Despite an October 27 agreement that strengthened the bailout of Greece, the "Greek Tragedy" continues as the country’s government is a mess, Prime Minister George Papandreou is reportedly stepping down and the populace is protesting. And, with each day of delay, Greece is running out of money and European leaders are running out of patience.
Meanwhile, across the Ionian Sea from Greece, Italy is quickly becoming the next problem. Its 10-year government bond yield rose to a euro-era record of 6.4 percent last Friday. The Wall Street Journal says, "The 6% mark on the 10-year bond is seen as crucial because a breach of that level in the past has portended a sharp rise in bond yields of other fiscally frail countries."
When bond yields rise dramatically, it increases a country's borrowing costs and suggests investors are losing faith in that country’s ability to pay its bills.
Even though Greece is grabbing most of the headlines, Italy is much more crucial to world markets than Greece because Italy’s government bond market is the third largest in the eurozone behind Germany and France. If Italy goes the way of Greece, that would elevate the European crisis to a whole new level.
Ultimately, there's just too much debt in the worldwide monetary system. Until it gets cut to a manageable level, the markets may behave erratically.

ONE OF THE CORE BELIEFS OF MODERN INVESTING TURNED OUT TO BE not so true. Investors have long believed in "stocks for the long run" and that stocks outperform bonds over a long period of time. Well, we need to re-evaluate that old truism.
New data shows that for the 30 years ending September 30, 2011, long-term government bonds outperformed stocks. During that period, bonds rose by 11.5 percent a year on average, beating the 10.8 percent increase in the S&P 500, according to Jim Bianco, president of Bianco Research in Chicago, as reported by Bloomberg. That’s the first time bonds beat stocks over a 30-year period since the Civil War!
Is this an argument for dumping stocks and just owning bonds? No. The recent outperformance of bonds over stocks was partially a function of the starting point and the “lost decade” for stocks. Specifically, in 1981, long-term government bonds yielded in the 13 to 15 percent range while, last Friday, the yield was down to 3.1 percent, according to data from Yahoo! Finance. As the yield drops, the price of the bond rises, thus, giving investors a capital gain on top of the interest return.
With yields so low now, you won’t get the same capital gain boost from bonds that we experienced over the past 30 years. In fact, Professor Jeremy Siegel, author of Stocks for the Long Run, says, “It’s absolutely mathematically impossible for bonds to get any kind of returns like this going forward.”
Bonds also benefitted from the “lost decade” in stocks as stocks experienced two bear markets in the past 11 years.
This historical data does two things for us:
1. It suggests that there are no “absolutes” when it comes to investing, except, perhaps, that there are no absolutes. Key takeaway – be flexible.
2. It suggests that there is a time and a place for each asset class and placing each asset class within historical context is important. Key takeaway – know history.
Oh, we should add a third key takeaway from this data – be a continuous learner!

Weekly Focus – Think About It
“I'm interested in the way in which the past affects the present and I think that if we understand a good deal more about history, we automatically understand a great more about contemporary life.” --Toni Morrison, Nobel Prize and Pulitzer Prize-winning American novelist, editor, and professor
Nov 05, 2012 The Markets



Special Note:
As the week wore on, the devastation from Hurricane Sandy became ever more apparent. And, while we talk about the financial markets in this commentary, we know that what happens on Wall Street pales in comparison to the tragedy and hardship facing many people in the northeast. Our thoughts and prayers go out to them.

**************

In addition to the human toll, Hurricane Sandy caused the New York Stock Exchange to close for two days. This closure reminded us of a quote from Warren Buffet who said, “I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.”

This quote contains a couple important lessons:

1) Think long term. Rather than flipping investments on a frequent basis, it makes sense to approach investing with a five-year or longer time frame.

2) Don’t check your investments daily. Imagine you planted some tulip bulbs. Would you pull them out everyday to check and see if their roots grew? Likewise, give your investments time to grow.

Keep in mind that stock prices tend to fluctuate much more than changes in the intrinsic value of the underlying companies, according to Investopedia. Unfortunately, these daily fluctuations often scare people into making bad investment decisions. To overcome this tendency, try to ignore the daily noise and take comfort in knowing we are focused on monitoring any changes to the long-term, underlying value of your investments.

And, yes, it’s finally election week. The good news… no more annoying robo calls and attack ads! This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


“TODAY, WE’RE LOOKING AT SCIENCE FICTION BECOMING TOMORROW’S REALITY,” said California Governor Jerry Brown in late September at Google’s headquarters in Mountain View, CA. So, what “science fiction” was the governor referring to and what are the investment implications?

About 120 years ago, a German mechanical engineer named Karl Benz coupled an internal combustion engine with a chassis and four wheels. Today, we know it as the automobile. While the internal combustion engine was the transforming technology that made the modern automobile possible, we don’t define, value, and think of cars in terms of how well they process gas. Instead, we think of what cars can do for us.

Cars dramatically changed our lifestyle. They allowed the rise of suburbs. They enhanced the family vacation. They played host to many dates and first kisses. They created millions of jobs in road construction, manufacturing, dealerships, repair shops, and, in fuel exploration, processing and distribution.

Likewise, Governor Brown’s announcement of a new law making it legal for driverless – yes, driverless – cars to travel on public roadways in California could dramatically reshape the impact cars have on our lives.

Here are a few ways society could change:

1) With no need for steering wheels, pedals, and other manual controls, manufacturers of those parts would be out of luck.
2) With no driver and very few road accidents, say goodbye to expensive car insurance policies.
3) With few road accidents, say goodbye to most of the roughly 2 million hospital visits per year in the U.S. caused by car accidents (many lives saved!) and say goodbye to all the time and resources spent by doctors, nurses, and staff, devoted to helping these accident victims.
4) Say goodbye to taxi drivers and limo drivers and hello to a driverless “Zipcar” or similar type service.
5) Say hello to electronics and software companies who will provide the sensors and computing power needed by these cars.
6) Say hello to an expanding suburb and rising suburban housing prices as the driverless car will make a long commute more palatable since you can work or play while the car goes on its merry way.
7) Say hello to increased mobility for people with certain disabilities.
Sources: The Economist; Forbes

The driverless car is no longer science fiction. Google already has a fleet of them and some of its employees “drive” them to work.

From an investment standpoint, this is an example of the type of deep research and thinking we do on your behalf as we strive to meet your goals and objectives.


Weekly Focus – Think About It…

“The best way to predict the future is to create it.”
Peter Drucker, management consultant, educator, author

Fisher Financial Partners, Inc. offers securities through Regal Securities, Inc., member FINRA/SIPC. Advisory Services offered through Regal Advisory Services, Inc. Fisher Financial Partners, Inc. is not affiliated with Regal Securities, Inc. or Regal Advisory Services, Inc.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Past performance does not guarantee future results. * You cannot invest directly in an index.
* Consult your financial professional before making any investment decision.
Nov 05, 2007 Weekly Commentary
The Markets
Ask and you shall receive. Investors were asking for another interest rate cut and the Federal Open Market Committee (FOMC) delivered last week as they lowered the federal funds rate by a quarter percentage point. The markets reaction to the cut that day was positive, but by the end of the week, additional influences came in to play and the broad market ended down, as measured by the Standard & Poors 500 index.
At any point in time, as the FOMC ponders interest rate moves, they keep two key objectives in mind. First, they try to keep inflation under control and second, they try to ensure steady economic growth. If inflation is too high, the FOMC tends to raise interest rates, which increases borrowing costs and frequently results in slower economic growth. If economic growth is too slow, the committee tends to lower interest rates, which reduces borrowing costs and frequently leads to a stronger economy.
As you can see, the FOMC has to walk a fine line here by trying to peg interest rates at a level that will balance these two key objectives. In the statement that accompanied last weeks interest rate cut, the FOMC said, The upside risks to inflation roughly balance the downside risks to growth. This means the committee is in a neutral position and that they are about as likely to lower rates in the future as they are to raise them.
Investors tend to wait with baited breath each time the committee meets and then they tear apart the accompanying statement for any clues to the direction of the economy. At the end of the day though, the committee members are fallible just like everybody else. Sometimes they get it right and sometimes they dont. However, despite the committees fallibility, investors still tend to put a lot of weight in the committees actions.

THE NATION IS DIVIDED ON THE QUESTION OF WHETHER household finances have improved or gotten worse over the last year. When compared to a year ago, two in five (39%) say their households financial condition has improved while almost the same number (38%) say it has gotten worse. Almost one-quarter (23%) of survey respondents say it has remained the same.
Regionally, there are some differences in household finances. Those in the West are most likely to think things are going well as 45% say things have improved and just three in ten (31%) say things have worsened. They are followed by those in the East and South where four in ten (40%) in each region say their households finances have improved and 36% each say their finances have gotten worse. The Midwest is the region with the most financial trouble; just three in ten (30%) say their households finances have improved while almost half (48%) say their financial conditions have gotten worse compared to last year.
Asked to look six months into the future, Americans display their characteristic optimism as almost half (46%) say they expect their households financial situation to be better while just over one-quarter (26%) say it will be worse and 29% believe it will remain the same.
The most agreement came over inflation. Asked if they expect prices for things they normally buy to increase, decrease, or remain the same six months from now, more than four in five adults (82%) believe prices will increase, while 13% say they will remain the same. Just 5% of Americans expect prices to decrease.
Its important to note that this survey was conducted in early September 2007, before the Federal Reserves most recent interest rate cut. The effect of that cut on the economy and consumers moods remains to be seen.

COLLEGE DEBT HAS A PROFOUND EFFECT ON FINANCIAL SECURITY, according to The College Debt Crunch, a survey of college graduates, recently released by Alliance Bernstein Investments, Inc. The results illuminate the fact that how a family funds college has implications for more than just the students four years in school. Notably, of the 69% of respondents who reported that they or a spouse are still paying off undergraduate or graduate debt, 39% said it will take them more than 10 years to wipe the slate clean. The average outstanding balance? More than $29,000.
How does debt like that impact a graduates life? Asked whether they would describe themselves as living paycheck-to-paycheck, 42% of respondents with college debt said that described them very well, compared to just 24% of those who graduated without debt. More than one-third (34%) of those with college debt reported having sold personal possessions such as furniture, clothing and CDs to make ends meet compared with just 17% of those living debt free.
Of those with debt, 44% have delayed buying a house; 28% have delayed having children; and 32% were forced to move back in with a parent or guardian or live at home longer than expected. Respondents who graduated with no college debt are also more likely to have higher accumulated average savings ($53,900 vs. $36,500).
Debt also impacts career choices. Among those graduating college with debt, 43% report having postponed graduate school, compared with 25% of the debt-free.
Clearly, these results underscore the importance of saving for college and were always happy to discuss strategy. Think about it, what better gift could you give your child or grandchild?
Weekly Focus Creative versus Methodical Thinkers

Why do some people solve problems more creatively than others? Are creative thinkers different from methodical thinkers? A new study by John Kounios, professor of Psychology at Drexel University and Mark Jung-Beeman of Northwestern University reveals a distinct pattern of brain activity, even at rest, in people who tend to solve problems with a sudden creative insight. The pair say creative solvers exhibit greater activity in several regions of the right hemisphere which is involved in processing remote associations between the elements of a problem, an important component of creative thought.
Creative and methodical solvers also exhibit different activity in areas of the brain that process visual information. For example, the pattern of alpha and beta brainwaves in creative solvers was consistent with diffuse rather than focused visual attention. As noted in the Drexel press release, This may allow creative individuals to broadly sample the environment for experiences that can trigger remote associations to produce an Aha! Moment. For example, a glimpse of an advertisement on a billboard or a word spoken in an overheard conversation could spark an association that leads to a solution. In contrast, the more focused attention of methodical solvers reduces their distractibility, allowing them to effectively solve problems for which the solution strategy is already known, as would be the case for balancing a checkbook or baking a cake using a known recipe.
Nov 04, 2013 Weekly Commentary
The Markets

Exceptional... exceeds expectations... meets expectations... needs improvement... unsatisfactory. It's a rating system familiar to anyone who has ever received a performance review. Right now, the performance of inflation is not meeting expectations - and that may be a good thing.

Critics of loose monetary policy and rock bottom interest rates have had high expectations for inflation. That is, they have predicted inflation will rise. In March 2012, Martin Feldstein, a professor of economics at Harvard and President of the National Bureau for Economic Research, explained the massive liquidity created in the United States by the Federal Reserve's easy money policies created a risk of rising inflation. A rapid increase in bank credit would boost the money supply and the rate of inflation unless the Fed raised interest rates in a timely way and on an adequate scale.

So far, low interest rates and unusually aggressive monetary policies haven't led to higher inflation in the United States or other at-risk regions. The Conference Board's Harmonized Index of Consumer Prices (HICP), an inflation measure, showed prices in the United States increased by 0.8 percent in September 2013. That's slower than the 2.1 percent increase reported for 2012. In the Eurozone, the inflation rate for October fell to 0.7 percent, which was the lowest in almost four years. A recent article in The Economist explained it like this:

"So, why haven't we had the inflation that some predicted in the wake of quantitative easing? The reason is that central banks are not the only, nor indeed the main, money creators. Money is usually created by the private banking system and that has been trying to shrink. If the money supply is a bath, then the central banks may have turned on the taps, but the commercial banks have pulled out the plug."

That may mean, despite stable and falling inflation rates in some regions, we're not out of the woods yet. As Mr. Feldstein wrote last March, commercial banks could begin to lend funds to firms and households. If that happens, "Loans could add to deposits and cause the money supply to grow. They would also increase spending by the borrowers, adding directly to inflationary pressure."


HOW DO YOUR STATE'S TAXES STACK UP? It all depends on who you ask and what types of taxes you're considering.

The Tax Foundation's State Business Tax Climate Index for 2014 reported the most tax-friendly states for business were Wyoming, South Dakota, Nevada, Alaska, and Florida. The least tax-friendly were Rhode Island, Minnesota, California, New Jersey, and New York. Every state has property taxes and unemployment insurance taxes, but those in the top ranks tend not to have one or more of the major taxes: corporate income tax, individual income tax, or sales tax. According to the Foundation, "Wyoming, Nevada, and South Dakota have no corporate or individual income tax; Alaska has no individual income or state-level sales tax; Florida has no individual income tax." It is interesting to note three of the top states are among the least populated in the United States.

Kiplinger's says that Delaware, Wyoming, Louisiana, Mississippi, and Arizona are some of the most tax-friendly states for individuals because they levy some of the lowest taxes in the country. California, Connecticut, New Jersey, New York, and Hawaii are far less friendly. All have high income tax rates and assess above-average property taxes, which puts them at the bottom of the list of tax-friendly states for individuals. According to state tax policy director for the Institute on Taxation and Economic Policy Meg Wiehe, who was quoted in Kiplinger's, "Low tax revenues may give a state less money to spend on education, transportation, public safety, and other services important to you and your family... Low taxes don't necessarily lead to a higher quality of life."

If you're retiring soon or have already retired, then you may want to consider a move to Alaska, Wyoming, Georgia, Arizona, or Mississippi which have some of the lowest taxes for retirees in the United States. According to Kiplinger's assessment of state tax laws, retirees may want to avoid Rhode Island, Vermont, Connecticut, Minnesota, and Montana which are some of the least generous with retiree tax credits.

If, after reading this, you're considering a move to the Equality State (aka the Cowboy State), here are some other things Wyoming has to offer: Yellowstone, the Grand Tetons, Jackson Hole, and about 172 days a year with a temperature below freezing!

Weekly Focus - Think About It

"A lie gets halfway around the world before the truth has a chance to get its pants on."
-- Winston Churchill, British Prime Minister

Sources:
http://blogs.wsj.com/economics/2013/11/01/feds-lacker-admits-inflation-fears-proved-unfounded/
http://www.nber.org/feldstein/projectsyndicatemarch2012.pdf
http://www.economist.com/blogs/buttonwood/2013/11/economics-and-markets
http://taxfoundation.org/sites/taxfoundation.org/files/docs/2014%20State%20Business%20Tax%20Climate%20Index.pdf
http://www.census.gov/popest/data/maps/2012/popsize-2012.html
http://www.kiplinger.com/slideshow/taxes/T054-S001-10-most-tax-friendly-states-in-the-u-s/index.html (These states are listed in the first six slides in the slide show)
http://www.kiplinger.com/slideshow/taxes/T054-S001-10-least-tax-friendly-states-in-the-u-s/index.html (These states are listed in the first six slides in the slide show)
http://www.kiplinger.com/slideshow/retirement/T006-S001-10-most-tax-friendly-states-for-retirees/index.html#KpQEfyMK0E4oYdBE.99 (These states are listed in the first six slides in the slide show)
http://www.kiplinger.com/slideshow/retirement/T006-S001-10-least-tax-friendly-states-for-retirees/index.html (These states are listed in the first six slides in the slide show)
http://www.statesymbolsusa.org/Wyoming/NicknameWyoming.html
http://www.climate-zone.com/climate/united-states/wyoming/cheyenne/
http://www.brainyquote.com/quotes/authors/w/winston_churchill.html#JXbav5Ajq8l7XLIB.99'
Nov 03, 2008 Weekly Commentary
The Markets Thank goodness, October is over.
Market historians were busy last month rewriting the record books on what seemed like a daily basis. Unfortunately, many of the new records were the type that we'd prefer to have remained unbroken. Here are a few of the new entries:
• October was the most volatile month in the S&P 500 index since November 1929, as measured by moves of at least 1% higher or lower, according to MarketWatch.
• As of October 28, this bear market represented the fourth largest decline in the S&P 500 index (on a closing basis) without a 20% rally. The only three other periods where we had deeper declines without an intervening 20% rally were in 1931, 1938, and 1974, according to Bespoke Investment Group.
• On a positive note, the Dow Jones Industrial Average rose 946 points, or 11.3%, last week. Barron’s said it was the Dow’s biggest one-week point gain on record and its largest percentage rise in 34 years. However, the end of the month heroics couldn’t overcome the early in the month carnage as the Dow still lost 14.1% for the month, according to Barron’s. • Crude oil prices dropped more than 32% in October, the largest one-month drop on record, according to CNBC. That’s good news for those of us who drive because the fall in oil prices has led to a dramatic drop in gas prices.
• The Conference Board Consumer Confidence Index™, fell to an all-time low of 38 (1985 = 100) in October, according to data from the Conference Board as reported by MarketWatch. This does not bode well for upcoming holiday sales.
• Gold futures prices dropped 18% in October, which was the largest one-month decline since February 1983, according to data from the Comex division of the New York Mercantile Exchange, as reported by MarketWatch.
They say records are meant to be broken. Well, we broke our fair share in October. Let’s hope the next broken record is a positive one such as, “The fastest return to an all-time high after experiencing a 40% decline in the S&P 500 index.” All in favor, say “Aye.”

HOW DO YOU DETERMINE IF THE STOCK MARKET is overvalued, fairly valued, or undervalued? On the surface, you might think that with the S&P 500 index down 35% over the past year, the market should be undervalued. Whether it is or not, we won’t know until we look back in hindsight. However, it’s helpful to look at history and see if we can place the current market in context. With the caveat that past performance is no guarantee of future results, here are some thoughts:
• Market analysts use many different measures to value the market. Some measures are quantitative in nature, while others are rather arcane, such as Kondratieff Waves and astrological cycles. We’ll just stick with the quantitative for now. One common measure is to compare the price of an index to the earnings of the underlying companies in the index. For example, if the price of the S&P 500 index is 1,000 and the underlying 500 companies in the index earned a total of $50 per share over the previous 12 months, then the index would be trading at a price-earnings ratio (P/E ratio) of 20 (1,000/50). By comparing the P/E ratio of today’s market to historical P/E ratios, we can see how this market compares to previous markets. Generally speaking, high P/E ratios are associated with high market valuations, while low P/E ratios are associated with low market valuations. Other factors may affect whether a given P/E ratio represents a high or low market valuation, but for our purposes, the above description is sufficient.
• As of last week, the S&P 500 index had a P/E ratio of 21 based on its trailing 12 months earnings, according to data from Birinyi Associates as reported by Barron’s. That’s above the index’s 60-year average P/E ratio of 17.8. So, this means the market is overvalued, right? Not necessarily.
• The stock market tends to look to the future and if it expects earnings to rise next year, then that would increase the “E” in the P/E ratio and, all other things being equal, would lower the P/E ratio as future earnings come to fruition. For example, a recent Barron’s survey of five Wall Street market strategists indicated they expect the S&P 500 companies to earn approximately $70 per share in 2009. If we apply the historical average multiple of 17.8 to the $70 earnings number, we end up with a projected S&P 500 index of 1,246 at some point in the future. That’s an increase of nearly 29% from last week’s closing S&P 500 value of 968. So, that would suggest the market may be undervalued, right? Again, not necessarily.
• Merrill Lynch’s top down estimate for 2009 S&P 500 earnings is only $60, according to Barron’s. If we apply the historical average multiple of 17.8 to Merrill’s number, then we end up with a projected S&P 500 index of 1068, which is still about 10% higher than last week’s close. So, we’re still potentially undervalued in today’s market, right? Well, you’re seeing a pattern here, so the answer is… not necessarily.
In the three examples above, we held the P/E constant at the historical average of 17.8. The bad news is, in some past economic recessions, the P/E ratio of the S&P 500 fell dramatically below the historical average. In fact, in 1975 and in 1980, the P/E ratio on the S&P 500 sank to around 7, according to Barron’s. You probably know where this is heading so, take a deep breath… if we apply a P/E of 7 to the $60 earnings estimate, that would leave us with the S&P 500 index at 420 at some point in the future. Based on last week’s closing price of 968, that means we could be in for a further decline of 56%. Ouch!
Now, before you get too worried, we think the likelihood of the S&P 500 dropping to 420 is extremely remote. We’re only showing it to you for educational purposes. And, to be fair, we should show you the other extreme, too. According to the St. Louis Federal Reserve Bank, during the bubble year of 1999, the P/E ratio on the S&P 500 hit 36. If we apply a 36 multiple to Merrill’s $60 earnings estimate, we get an S&P 500 index of 2,160. That’s a 123% increase from last week’s closing value.
Have we confused you yet? Here’s the bottom line. Whether you think the market is over, under, or fairly valued depends on many factors, two of which include future expected earnings and the multiple investors put on those earnings. Depending on where you stand, today’s market could be grossly overvalued, fairly valued, or grossly undervalued. There’s data to support pretty much any view you want. The constant tug of war among investors who think we’re overvalued, fairly valued, or undervalued may be one reason why we’re seeing so much volatility in the markets.

Weekly Focus – Think About It
“To buy when others are despondently selling and to sell when others are greedily buying requires the greatest fortitude, even while offering the greatest reward.” --Sir John Templeton
Nov 02, 2009 Weekly Commentary
The Markets Have we solved the problems in our economy or just postponed them?
Last week, the government announced that third-quarter GDP grew a solid 3.5%. That was quite a relief coming off four consecutive quarters of negative growth. Gains in the auto and home building sectors led the charge. Those two sectors in particular benefited from federal stimulus programs and without the stimulus, "Real GDP would have risen little, if at all, this past quarter," according to Christina Romer, president of the White House Council of Economic Advisers.
Proponents of stimulus spending say it's doing exactly what it should do – it's helping the economy grow. Critics say we're just delaying another inevitable deep economic adjustment and it's better to take our medicine now than suffer death by a thousand cuts.
The stock market seems confused lately as to which strategy – more stimulus or the end of stimulus – is better. Last week, for example, the Dow Jones Industrial Average experienced three triple-digit declines and one triple-digit advance as investors vacillated between a positive and negative outlook for the economy. This volatility may suggest that after a substantial rise in the markets since early March, investors are pausing to reflect on where we go from here.

THE UPSIDE TO THE RECESSION OF THE PAST TWO YEARS is that it may have unleashed a new wave of innovation and corporate growth that otherwise would have been buried in better economic times. When times are tough, companies are forced to work smarter, be more creative, and jettison old methods of business that are no longer working. The net result is a changing of the guard in the business world as those companies that are unable to make the switch get passed by their nimbler competitors.
A study by management consulting firm Bain & Company showed that during the 1991-92 recession, there was a significant re-ordering of the pecking order of companies in a wide variety of fields. Specifically, companies that were in the bottom quartile in their industry jumped to the top quartile of their industry at twice the rate during recessionary times as compared to non-recessionary times, according to the study as reported in The Economist. Other studies have reached similar conclusions that recessions bring out the best – and the worst – in companies.
From an investment standpoint, this suggests that the winners coming out of this recession may be quite different from those who went into it as winners. This "changing of the guard" may create new investment opportunities and we are diligently doing our best to find the

Weekly Focus – Think About It
"There is no comparison between that which is lost by not succeeding and that lost by not trying."
-- Francis Bacon, Sr.
Nov 01, 2010 Weekly Commentary
The Markets What do you think the inflation rate will average in the United States over the next 5 years?
Before you answer that question, here is some additional information to consider. During the peak of the financial crisis back in late 2008, investors were predicting that prices would decline by a small fraction of 1% for 10 years, i.e., we would have 10 years of deflation, according to a January 29, 2009 Bloomberg article.
To determine what investors expect inflation to average in the future, we simply calculate the difference in yield between Treasury Inflation Protected Securities (TIPS) and a similar maturity U.S. Treasury security. For example, if the yield on a 10-year Treasury was 2.6% and the yield on a 10-year TIPS was 0.6%, then that suggests investors expect inflation to average 2.0% over the next 10 years. This difference of 2.0% is called the "breakeven rate."
Unlike a regular Treasury security, the principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price Index. When a TIPS matures, investors are paid the adjusted principal or original principal, whichever is greater, according to the Treasury Department. Hence, TIPS are considered a hedge against inflation, according to The Wall Street Journal.
Okay, do you have your 5-year inflation rate guess now? Unlike late 2008, investors now expect inflation to average 1.59% over the next 5 years, according to an October 25 Wall Street Journal article. For historical reference, inflation has averaged 3.0% per annum compounded annually from the beginning of 1926 to the end of 2008. On a 5-year basis, it averaged a high of 10.1% per annum compounded annually for the 5 years ending December 31, 1981 according to the Ibbotson SBBI 2009 Classic Yearbook.
By historical standards, the expected 5-year inflation rate of 1.59% is low. However, the Federal Reserve is doing what it can to stoke inflation in an attempt to prevent deflation and as a way to pay down our federal debt using "cheaper" dollars.

INFLATION IS ALIVE AND WELL on college campuses, according to an October 28 report from the College Board as reported by BusinessWeek. While consumer inflation may be rising at less than 2% per year, published prices for tuition and fees at in-state public universities rose 7.9% for the 2010-2011 academic year to $7,605. That's up from last year's increase of 6.5%. Part of the rise is due to cuts in state funding of higher education. Essentially, students are asked to pick up a bigger share of the cost.
If you are planning on sending your kids to one of the elite private schools, be prepared to hand over more than $200,000 for that 4-year education. For the less affluent, though, financial aid and work programs are available and that could reduce the cost significantly.
One complaint about government inflation statistics is that some people feel they don't accurately reflect what consumers actually buy. The rapid rise in the cost of education is one example of a common consumer expenditure that is rising much faster than the reported government inflation statistics.

Weekly Focus – Stretch Your Brain
Picture an arrow in flight that is moving toward a target. For the arrow to reach the target, the arrow must first travel half of the overall distance from the starting point to the target. Next, the arrow must travel half of the remaining distance and then half of that remaining distance and so on.
For example, if the starting distance was 10 yards, the arrow first travels 5 yards, then 2.5 yards, then 1.25 yards, and so on. By extending this further, you can imagine the resulting distances getting smaller and smaller.
Here's the question: Will the arrow ever reach the target?
See below for the answer.

Answer to Brain Stretcher:
Yes. This is because the sum of an infinite series can be a finite number. We can see that 1/2 + 1/4 + 1/8 + 1/16... is moving closer to 1. This series will go to infinity, but each term is getting smaller and smaller. Thinking about it, the terms will approach zero as they get infinitely large, and each term will bring the series closer to summing to 1. At infinity, the sum will be 1 and, hence, the arrow hits its target.
May 28, 2013 Weekly Commentary
The Markets


Like guests feeling the first rain drops at a Memorial Day barbeque, markets responded uncertainly to Federal Reserve Board Chairman Ben Bernanke's congressional testimony and the newly released Federal Open Market Committee (FOMC) minutes last week.

Generally, both Bernanke's comments and the FOMC minutes reiterated what the Fed has been saying for some time. According to FOMC minutes, quantitative easing - the Fed's purchase of $40 billion of mortgage-backed securities and $45 billion of longer-term Treasury securities each month - will continue "until the outlook for the labor market has improved substantially in a context of price stability." The minutes also suggested the Fed's other method for stimulating the economy - low interest rates - "will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens."

Initially, stock market investors responded positively to these messages. On Wednesday morning, both the Dow Jones Industrial Average and the Standard & Poor's 500 Indices gained more than 1 percent. By afternoon, the indices had lost more than 1 percent each. By week's end, the indices had experienced their first weekly losses since late April.

Uncertainty about the future of quantitative easing affected bond and gold markets, as well. By Friday, the yield on benchmark 10-year U.S. Treasury note had risen above 2 percent, reaching its highest level in two months. Gold prices firmed during the week.

Fed policymakers will meet twice before Labor Day - in mid-June and late-July. The minutes of those meetings will be released three weeks after each meeting. If markets respond as they did last week, investors may experience a bumpy ride this summer.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


THE TAXMAN COMETH.

If your ears are burning, it may be because the people who run state and federal governments have been discussing where to find revenue to fill budget shortfalls. Currently, the solutions they're pursuing focus primarily on U.S.-based companies.

As corporate profits have increased, the tax strategies employed by U.S.-based multinational corporations have come under Internal Revenue Service scrutiny. According to The Economist, America's corporate profits are at an all-time high. Yet, corporate contributions to Uncle Sam's coffers have been far lower than they were in the past. In 1947, corporate profits were about 10 percent of Gross Domestic Product (GDP) and corporate taxes were about 4 percent. Last year, corporate profits were about 12 percent of GDP and corporate taxes less than 2 percent.

The United States government recently called a U.S.-based multinational to task because it had employed "a complex web of offshore entities to pay little or no tax on tens of billions of dollars it had earned outside America." The company responded to the inquiry by pointing out it paid billions of dollars in American taxes during fiscal 2012 and was probably one of the biggest corporate taxpayers in the country.

Internet retailers and catalogue companies also are becoming part of the hunt for tax revenue. Under current law, states cannot compel out-of-state retailers to collect the sales and use taxes owed by residents and businesses. It is up to individuals to declare and pay those taxes. The National Conference of State Legislatures estimates the inability to have Internet businesses collect taxes resulted in about $23 billion in lost tax revenue during 2012. In an effort to help states collect these taxes, Congress created the Marketplace Fairness Act. If it becomes law, states that adopt a simplified tax code will be able to enforce sales and use tax collection by Internet retailers and catalogue companies. The Act was passed by the Senate early in May.


Weekly Focus - Think About It

"Adversity is the diamond dust Heaven polishes its jewels with."
--Thomas Carlyle, Scottish philosopher

Sources:
http://www.economist.com/blogs/freeexchange/2013/05/week-american-monetary-policy
http://news.yahoo.com/column-many-interpretations-ben-bernanke-164318124.html
http://www.federalreserve.gov/newsevents/press/monetary/20130501a.htm
http://www.reuters.com/article/2013/05/27/usa-stocks-weekahead-idUSL2N0E80JW20130527
http://www.miamiherald.com/2013/05/24/3415072/how-the-dow-jones-industrial-average.html
http://www.reuters.com/article/2013/05/27/markets-precious-idUSL3N0E809S20130527
http://www.reuters.com/article/2013/05/26/us-usa-fed-summer-idUSBRE94P07T20130526
http://www.economist.com/blogs/graphicdetail/2013/05/daily-chart-14
http://www.economist.com/blogs/schumpeter/2013/05/apples-tax-arrangements
http://www.ncsl.org/issues-research/budget/collecting-ecommerce-taxes-an-interactive-map.aspx
http://www.forbes.com/sites/davidmarotta/2013/05/12/marketplace-fairness-act-adds-automation-to-tax-confusion/
http://www.prnewswire.com/news-releases/senate-passes-marketplace-fairness-act-208385131.html
http://www.brainyquote.com/quotes/authors/t/thomas_carlyle.html

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
May 27, 2008 Weekly Commentary
The Markets Oil prices up, stock market down. That just about sums up last weeks market action.
After rising 57% in 2007, the price of a barrel of crude oil has risen another 38% so far in 2008and its starting to hurt, according to Barrons. Oil is a key ingredient in so many different products that many companies are now passing along their cost increase to consumers. For example, Kimberly-Clark Corp. just announced that this summer, prices will rise 6 8% on Kleenex facial tissue, Cottonelle and Scott bathroom tissue, Viva paper towels, Huggies diapers and Pull-Ups training pants. Thats on top of a 4 7% increase on those same products just three months ago, according to MarketWatch.
Airlines are one of the industries most directly affected by high energy prices since a significant percentage of their costs come from jet fuel. Over the past year, jet fuel has risen 86% and the airlines are scrambling to adjust, according to Reuters. American Airlines announced last week it was cutting its capacity by 11 12% and instituting a $15 fee for each checked bag, according to Briefing.com. United Airlines announced it was raising round-trip fares by as much as $60, according to Barrons.
It may be too little too late for the airlines. Last week alone, the stock price of United Airlines dropped 46%, American Airlines dropped 31%, and Northwest Airlines dropped 29%, according to data from Yahoo! Finance.
Its expensive to fly. Its expensive to drive. Maybe video-conferencing will turn out to be the next best thing to being there.
With Memorial Day behind us and the summer season ahead of us, well closely monitor whether this will be a long, hot summer on Wall Street, or a turning point to a new bull market.

IF YOURE LIKE MANY AMERICANS, theres a good chance you saw the new Indiana Jones movie over the Memorial Day weekend. Did you notice the cost of your ticket and the cost of that popcorn and soft drink? Well, thanks to the rising cost of energy, dont be surprised to see the price of your movie ticket rise by as much as 30% this year, according to Richard Gil, a University of Santa Cruz economist.
So whats the relationship between the price of a movie ticket and rising energy prices? In a wordcorn.
Those outrageous prices for movie theater popcorn, soft drinks and candy actually subsidize the price of a movie ticket by about 25%, according to a May 19 Advertising Age article. And guess whats happening to the price of corn? Its skyrocketing because corn is a key ingredient in ethanol. As much as 35% of this years corn crop will go toward ethanol production, thus leaving less for us to munch on at the theater, according to an Agriculture Department report.
Without much room to raise the already high popcorn, soft drink and candy prices, theater owners will likely have to raise ticket prices to maintain their margins. And to make matters worse, Advertising Age reported that in the past 18 months, the cost of coconut oil used for popping corn has risen 24%and the price of the paper pulp to produce popcorn tubs has jumped 40% in the past 36 months, making the tub more expensive than the corn inside it.
If its any consolation, the Motion Picture Association of America said that adjusted for inflation, a movie ticket costs less today than it did 31 years ago. So the moral of the story is, enjoy those cheap movie ticket prices while they last.

Weekly Focus Memorial Day
A hero is someone who has given his or her life to something bigger than oneself.
--Joseph Campbell

As another Memorial Day gives way to summer, lets not forget the sacrifices our brave men and women made to secure our freedom. They paid the ultimate price and we are forever grateful.
May 26, 2009 Weekly Commentary
The Markets One key to an economic recovery is a thawing of the credit freeze. Let's look at three indicators that suggest we're making some progress in this area.
• First, the LIBOR is coming down. LIBOR stands for London InterBank Offered Rate and it is the interest rate that banks charge to borrow from each other. A high rate indicates banks are nervous about getting repaid while a low rate suggests banks are confident they'll get repaid. The 3-month LIBOR peaked at 4.82%n October 10, 2008 in the throes of the credit crisis. Last Friday, it closed at 0.66%, according to Bloomberg. This dramatic drop is a good sign that banks no longer fear a collapse of the international banking system.
• Second, the 3-month TED Spread is coming down, too. This is the difference between 3-month LIBOR and the 3-month Treasury bill rate. A large spread suggests investors are concerned about default risk while a small spread suggests investors are less concerned. The TED Spread peaked at 4.65% on October 10, 2008 and closed last Friday at 0.48%, according to CNBC.
• Third, junk bond yields have come down significantly in recent months. The Merrill Lynch High Yield Constrained index, which limits individual issuer concentration to 2%, yielded 14.4% last Friday, according to The Wall Street Journal. While that is still high, it's a big decline from its peak yield of 22.5% in the past 12 months.
Other areas of the credit market, such as consumer credit, business credit, and the mortgage market, have shown improvement, but they are still a bit tight. Overall, credit is flowing and interest rates are generally low, so the credit environment is constructive, but there is still room for improvement.

"Wall Street never changes, the pockets change, the suckers change, the stocks change, but Wall Street never changes, because human nature never changes." --Jesse Livermore
Jesse Livermore is a famous early 20th century trader and speculator who was immortalized in the 1923 book, Reminiscences of a Stock Operator by Edwin Lefevre. Many of today's top traders consider Livermore one of the greatest traders and speculators who ever lived. Now, we're not mentioning Livermore because we think aggressively trading and speculating in your account is the way to go. Instead, we want to highlight the above quote from Livermore and discuss its relevance to today.
"Wall Street never changes." From the standpoint that Wall Street is all about making money, that statement is true. It was as true in "The Roaring 20s" during Livermore's lifetime as it was during the internet bubble of the late 1990s.
"The pockets change, the suckers change, the stocks change." Wow, that statement is spot on. Wall Street continues to come out with new products that they think the public will buy even if they make little economic sense. Do you remember all those shaky limited partnerships from the 1980s? How about the dot-com IPOs of companies that had little revenue and no profits? And more recently, we had newfangled mortgages that let you buy a house with no money down or skip payments or just pay the interest only, among other options.
"But Wall Street never changes, because human nature never changes." This is the key quote. In particular, as humans, our emotions have a tendency to get the best of us. In good times, we tend to get greedy and make decisions that under normal circumstances would be too risky for us. In scary times, we tend to panic and "get out at all costs." We like to keep up with our neighbors so we behave in a herd-like fashion. We extrapolate the most recent trends and expect that they will continue indefinitely. All these tendencies have the ability to work against us and preclude us from reaching financial security.
The "smart" people on Wall Street understand our human frailties and, unfortunately, some of them use it to their advantage. As your advisor, we are also your advocate. We do our best to understand how markets work and, equally important, how human behavior works. Our advice may sometimes go against popular opinion because as history shows, what's popular may not always be what's best for you. Our advice won't always be right, but it will always be given with integrity and with your best interests in mind.

Weekly Focus – Memorial Day
To the men and women who serve our country and help protect us from danger – thank you. And for those who have given their life in the name of our country, we will never forget the great sacrifice you have made on our behalf.
May 24, 2010 Weekly Commentary
The Markets
The U.S. stock market just entered its first correction of 10% since the March 2009 bear market low, according to Barron's magazine. In the paraphrased words of economist Michael Darda as reported by Barron's, are we experiencing an aftershock of the 2008 market crisis or are we having a relapse?
Catalysts for this recent correction are varied. China is clamping down on its easy money policy. Several European countries are in the midst of a liquidity/solvency problem. In the U.S., jobless claims unexpectedly rose last week and the Conference Board reported a surprising drop in its index of leading economic indicators. Both reports raised concerns that the economic rebound in the U.S. may be losing some strength, according to Bloomberg.
The case for optimism is also in plain sight. U.S. News and World Report says two new surveys out last week suggest, "We might be on the verge of experiencing the Great Shopping Comeback of 2010." Higher consumer spending could propel the economy and create jobs. In corporate America, first quarter earnings for the S&P 500 companies grew 55% from a year earlier and 77% of them beat their Wall Street estimate, according to Bloomberg. And, according to Federal Reserve Bank of New York President William Dudley as reported by Bloomberg, "The U.S. economy is recovering and we are now seeing the first signs of significant employment growth."
Economist Darda answered his own question and said we're simply having an aftershock, not a relapse. Even if he turns out to be correct, aftershocks could still generate some "scary headlines" in the near future. As always, we do our best to stay on top of these types of evolving situations.

"History provides a crucial insight regarding market crises: They are inevitable, painful, and ultimately surmountable." --Shelby M.C. Davis, legendary investor
It's been said that we can count on death and taxes. We should also add "market crises" to the list. It seems like the market is always either in a crisis, recovering from a crisis, or anticipating the next crisis. According to a January 2010 Morningstar article, we've experienced numerous "crises" over the past four decades including the following:
In the 1970s, we had stagflation, oil shocks, high inflation, and a stock market that dropped 44% in 2 years.
In the 1980s, we had the collapse of Drexel Burnham Lambert and the stock market crash of October 1987, which sent the Dow Jones Industrial Average down more than 20% in one day.
In the 1990s, we had the savings and loan crisis, the bailout of hedge fund Long Term Capital Management, and the Asian financial crisis.
In the 2000s, we had two bear markets, the subprime mortgage meltdown, and the financial crisis of 2008-2009.
But, guess what? Despite these market crises, the Dow Jones Industrial Average rose from 800 at the beginning of 1970 to 10,193 at the end of last week, according to data from Yahoo! Finance. That's nearly a 13-fold increase.
It's easy for investors to let the events of the day or the "crisis du jour" cloud their thinking. However, successful investors take a wider view and realize that crises happen, crises get resolved, and while they can sometime be scary, they should not lead you to panic mode.

Weekly Focus – Think About It
"Close scrutiny will show that most 'crisis situations' are opportunities to either advance or stay where you are."
--Maxwell Maltz
May 23, 2012 Weekly Commentary
The Markets There wasn't much to 'Like' in the financial markets last week as stocks took a hit on another round of global worries. High on the list of concerns were:
-Continuing anxiety over Greece's ability to avoid default and remain in the euro.
-Rising borrowing costs for Italy and Spain.
-Ongoing fears of an economic slowdown in China.
-Loss of faith in the banking system due to JPMorgan's $2 billion (and growing) bad bet.
-A very tepid response to the highly anticipated stock market debut of Facebook.
Source: CNNMoney
Investors are particularly frustrated that the European debt situation keeps popping up like dandelions. After two years and 17 euro zone summits, the issue is still not resolved. In fact, it might be worse than ever as Europe is quickly running out of road to kick the can down, according to BusinessWeek.
Greece is at the epicenter of this worldwide concern despite the fact that its population is less than the state of Ohio. Like the subprime crisis before it, investors are concerned that Greece may be the falling domino that kicks off a series of undesirable effects. If Greece has a disorderly collapse, it could spread to other weak European countries and then ripple out to the rest of the world.
Unfortunately, the time for easy solutions has long passed. Central banks and governments around the world have already added trillions of dollars to their balance sheets so they don't have much room to maneuver. And, here in the U.S., we have a potentially bruising election and looming tax and fiscal matters to deal with by the end of the year.
When you add it up, 2012 is on track to be another dramatic year in world affairs.

WOULD YOU GIVE YOUR MONEY TO THE U.S. GOVERNMENT for 10 years and lock in a negative yield? Well, that’s exactly what happened last week as investors handed over $13 billion to the government and, in return, received 10-year Treasury Inflation Protected Securities (TIPS). These securities were sold at a record low negative yield of 0.39 percent, according to The Wall Street Journal.
TIPS are a bit different from traditional government securities because, "The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price Index. When a TIPS matures, you are paid the adjusted principal or original principal, whichever is greater," according to the Treasury Department.
Now, why would anybody buy a TIPS with a negative yield when they could buy a traditional 10-year government security with a yield of about 1.7 percent last week? The answer lies in the difference between the two yields.
As reported by Bloomberg, the yield difference between a 10-year TIPS and a comparable 10-year Treasury security was 2.04 percentage points on May 17. Analysts call this the "break even inflation rate." It means investors were expecting inflation to average 2.04 percent over the next 10 years. When you add the 2.04 percent expected inflation rate to the negative 0.39 percent yield of a TIPS, you get close to the yield of a traditional 10-year government security.
From an investment standpoint, if inflation averages more than 2.04 percent over the next 10 years, then owning TIPS might be a better deal than owning the traditional 10-year government security. Likewise, if inflation averages less than 2.04 percent over the next 10 years, then owning the traditional 10-year security might be better, according to The Vanguard Group.
With its built-in inflation protection component, TIPS are traditionally viewed as a hedge against inflation rather than a play on interest income.
As an advisor, it's important for us to know the break even inflation rate that is embedded in TIPS. Knowing the market’s best estimate of inflation provides data we can use to help us value and analyze other investments that may be affected by changes in investors’ inflation expectations.
Weekly Focus – Did You Know...
There is only one word in the English language with all five vowels in reverse order. Try to guess what it is before reading below for the answer.
The answer is "subcontinental."
May 23, 2011 Weekly Commentary
The Markets "It's deja vu all over again." --Yogi Berra
Let's look back for a moment on a few flameouts from the late 1990s tech stock craze:
• The Internet community site theglobe.com set a record in November 1998 with an initial public offering (IPO) that soared 606% on its first day of trading. Despite that strong debut, it was delisted from the NASDAQ in April 2001 and today is a shell company with no significant assets or revenue. • Pets.com (remember the “Sock Puppet?”) appeared in a Super Bowl commercial in 2000 and received $300 million in funding. It went public in February 2000 and was bankrupt just nine months later. • The online toy seller eToys went public in 1999 and rose 280% on its first day. At its peak, the company was valued at more than $8 billion. It went bankrupt in March 2001. Source: Investor’s Business Daily
Last week, we witnessed a late 1990s “déjà vu moment” with the IPO of LinkedIn, one of a new crop of social-media companies like Facebook, Groupon, and Twitter that are generating excitement among the investing public, according to MarketWatch and Barron’s. LinkedIn soared more than 100% on its opening day and finished the week with a market value of $8.8 billion, according to Bloomberg. Not bad for a company, “that doesn't expect to be profitable this year, as it ‘invests for future growth,” according to Barron’s.
While it may be fun to marvel at the explosive debut of LinkedIn, we are not yet close to the heady days of 1999 when 308 technology companies went public, according to The New York Times. By comparison, in 2010, only 20 technology companies went public.
One of the keys to success as an investor is to pay attention and learn from the past. The stock market was “irrationally exuberant” in 1999 as evidenced by its subsequent collapse over the next three years. Is the euphoria over LinkedIn an early sign of the next “irrationally exuberant” market?
We’re not suggesting that you should buy or sell LinkedIn or “party like it’s 1999.” Rather, we want you to be aware that we are paying attention to the “mood of the market” and that we plan on keeping our wits about us even if others start losing theirs.

THE UNITED STATES IS LIVING ON BORROWED TIME and in debt to the tune of $14.3 trillion, according to The Wall Street Journal. Last week, the Treasury hit its Congressionally-authorized debt limit and was in danger of not being able to pay its existing bills. However, thanks to some “extraordinary measures” by the Treasury Department, we won’t actually run out of money until early August.
Not to fear, though, Congress has raised the debt limit 51 times since 1978 and most people expect them to do it again, albeit with a dogfight between the Democrats and Republicans, according to The Wall Street Journal.
Policymakers and economists have worried about our deficits since at least the 1980s when the “twin deficits” of the federal budget and the current account grabbed national attention, according to the Institute for International Economics. Yet, since then, our deficits have soared and Congress has kept raising the debt limit.
What happens if the government gets so in debt that nobody will lend to it and we end up defaulting? According to a May 2 letter sent to Congress by Treasury Secretary Timothy Geithner, “Default by the United States on its obligations would have a catastrophic economic impact that would be felt by every American.” He went on to say, “A default on the Nation’s legal obligations would lead to sharply higher interest rates and borrowing costs, declining home values, and reduced retirement savings for Americans. Default would cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover.”
Clearly, our deficit situation is serious.
Are we finally at a point where lawmakers say, “enough is enough” and they get serious about reducing our deficit?
Well, we have the summer to find out. Stay tuned…

Weekly Focus – Think About It
“Neither a borrower, nor a lender be; for loan oft loses both itself and friend, and borrowing dulls the edge of husbandry.” --William Shakespeare
May 20, 2013 Weekly Commentary
The Markets


Much like elementary school children trying to capture the attention of someone they have a crush on, the American economy sent lots of mixed signals last week.

Conflicting reports emerged about consumer sentiment during the week. The Conference Board, a non-profit research organization, reported consumers remained somewhat pessimistic about the direction of the economy. In contrast, the University of Michigan's consumer sentiment survey rose to a six-year high, according to ABC News. The Index moved from 76.4 in April to 83.7 in May indicating consumers are feeling more confident about the economy.

On the employment front, more people filed first-time unemployment claims last week than had filed the week before; however, claims remained well below the levels experienced from mid-2008 to 2011. Additionally, data shows during the past six months the average length of unemployment has dropped, the number of hours worked has risen, and earnings have increased.

Messages from the Federal Reserve were more consistent than economic data. Members of the Philadelphia, Dallas, and San Francisco Federal Reserve Banks suggested it may be time to begin slowing quantitative easing. Currently, the Federal Reserve's quantitative easing efforts have it buying about $85 billion of Treasuries and mortgage-backed securities each month as it works to support the economy. According to reports, quantitative easing could slow to a stop during 2013. Fed comments helped push yields on 10-year Treasuries higher for the week.

Stock markets remained undaunted by uncertain economic conditions and the prospect that quantitative easing may end soon. The Dow Jones Industrial Average and the Standard & Poor's 500 Indices surged to new highs last week. Markets rallied across the pond, as well, with some major European stock indices reaching levels last seen five or more years ago, according to Reuters.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


HEURISTIC IS JUST ANOTHER NAME FOR A SHORTCUT.

When academics look to psychology and economics to explain why people make financial decisions the way they do, it's called behavioral finance. This field of study describes a phenomenon called "heuristics." In general, a heuristic is a mental shortcut that lets someone solve a problem using a rule of thumb. Heuristics may be handy, but they may not take you exactly where you mean to go. For example, consider some of the shortcuts investors have developed to predict the direction of the stock market. You may have heard of the:

• Hemline Index: In 1926, George Taylor suggested the length of women's skirts was a useful market predictor. Short hemlines were a positive predictor while long hemlines were a negative predictor. Taylor later became Professor of Industrial Relations at Wharton and became known as the father of American Arbitration.

• Super Bowl Indicator: Washington and Lee professor George Kester introduced the idea the Super Bowl winner could predict market performance. His theory was the market would move higher for the year when an original National Football League team won the Super Bowl and lower when an original American Football League team won.

• Presidential Election Cycle Theory: The idea behind this gem is the stock market follows a predictable pattern during each American President's term. The year after an election produces the weakest stock market performance while the third year offers the strongest.

Anyone who remembers The Chicago Daily Tribune's headline, Dewey Beats Truman, or CNN and Fox News' headlines indicating the Supreme Court struck down the individual mandate, knows predicting the future can be challenging. In general, it's a good idea to remember that the drivers of market performance tend to be economic factors, investor sentiment, and company fundamentals.


Weekly Focus - Think About It

"The pursuit of truth and beauty is a sphere of activity in which we are permitted to remain children all our lives."
--Albert Einstein, theoretical physicist

Sources:
[1] http://www.marketwatch.com/story/leading-economic-indicators-rise-in-april-2013-05-17
[2] http://abcnews.go.com/blogs/business/2013/05/consumer-confidence-rises-to-6-year-high/
[3] http://www.npr.org/blogs/thetwo-way/2013/05/16/184451558/conflicting-signals-from-latest-economic-indicators
[4] http://www.marketwatch.com/story/philly-feds-plosser-slow-then-end-bond-buys-2013-05-14
[5] http://www.bloomberg.com/news/2013-05-17/treasuries-are-little-changed-before-consumer-confidence-report.html
[6] http://www.bloomberg.com/news/2013-05-16/fed-s-fisher-urges-cutting-mortgage-bond-buys-to-avoid-disorder.html
[7] http://www.reuters.com/article/2013/05/16/markets-usa-bonds-idUSL2N0DX21420130516
[8] http://www.reuters.com/article/2013/05/17/us-markets-global-idUSBRE88901C20130517
[9] http://www.investopedia.com/university/behavioral_finance/
[10] http://psychology.about.com/od/hindex/g/heuristic.htm
[11] http://www.marketwatch.com/story/hemline-index-falls-out-of-fashion-2010-11-24
[12] http://www.wharton.upenn.edu/125anniversaryissue/taylor.html
[13] http://www.forbes.com/pictures/el45ejhkg/the-super-bowl-stock-market-predictor/
[14] http://www.forbes.com/sites/financialfinesse/2012/03/21/financial-tips-during-a-presidential-election-season/
[15] http://www.brainyquote.com/quotes/quotes/a/alberteins148832.html

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
May 19, 2008 Weekly Commentary
The Markets
Do you remember when Jimmy Carter was President? That's how long it's been since consumer confidence was as low as it is now.
The Reuters/University of Michigan index of consumer confidence sank to 59.5 in May, according to a Reuters report. Thats the lowest level since June 1980, the waning days of the Carter administration. Back then, Inflation was roaring at a 14.3% annual rate while the unemployment rate was 7.5%, for a 21.8% misery index (the sum of the jobless and inflation rates), according to Barrons. By contrast, the current misery index is only 8.9%a mere fraction of what it was the last time consumer confidence was this low.
Something seems a bit out of whack here. Consumer confidence is at a 28-year low yet inflation is not out of control, the unemployment rate is only around 5%, the economy, while slow, is not in dire straits and the Dow Jones Industrial Average is within 9% of an all-time high. Hmm.
So, why are consumers so glum? Most likely, its a combination of factors including high gas and food prices, declining housing prices, a never-ending political season and the announcement on April 8 by NBC that ER will end its run in February 2009. ER aside, consumers are in a bad mood, but they still snatched up stocks last week as all the major averages posted solid gains.
Despite low consumer confidence, affluent investors think this may be a good time to buy stocks. According to the annual Bloomberg/Los Angeles Times poll of investors, Forty-four percent of those with household incomes of $100,000 or more viewed it as a good time to buy stocks, versus 15% who said it isn't. Time will tell if they end up putting their money where their mouth is.

IT LOOKS LIKE ITS GETTING HARDER to keep up with the Joneses. Last week, we published some data from the IRS on how income and income taxes are distributed in the U.S. This week, wed like to share a chart, which shows the minimum level of adjusted gross income (AGI) you need in order to reach certain percentiles. For example, in 2005, you needed an AGI of $103,912 to be in the top 10% of all taxpayers.
Its interesting to note that over the 19952005 time period, the minimum AGI needed to be in the top 1% grew nearly twice as fast as the minimum AGI needed to be in the top 50%. Looking at it another way, in 1995, you needed to earn about nine times the 50th percentile AGI in order to reach the top 1% of all tax payers. By contrast, in 2005, you needed to earn about 12 times the 50th percentile AGI in order to reach the top 1%.
The inescapable conclusion is the price of admission to the top AGI ranks has grown at an increasingly faster rate over the past 10 years.

Weekly Focus Look in the Mirror
With graduation season in full swing, its an opportune time to sample some wisdom from Steve Jobs, who gave the commencement address at Stanford University in June 2005. Heres a snippet from what he told the students that day.
"For the past 33 years, I have looked in the mirror every morning and asked myself: If today were the last day of my life, would I want to do what I am about to do today? And whenever the answer has been "No" for too many days in a row, I know I need to change something."
How would you answer Jobs question? Is there anything you need to change? Is it something we can help you with?
May 18, 2009 Weekly Commentary
The Markets Warren Buffett has said his favorite holding period is forever. Does he follow his own advice?
Buffett's Berkshire Hathaway recently posted its worst quarterly loss in more than 20 years and a big chunk of that was due to what Buffett called a "major mistake." Less than a year ago, with oil prices nearing their all-time high, Buffett dramatically upped his stake in oil giant ConocoPhillips and became its largest shareholder. Unfortunately, his timing was horrible. ConocoPhillips stock subsequently plunged along with the price of oil and as of last Friday, the stock was down about 50% from its high of last summer, according to Yahoo! Finance.
So, here's your question: You're Warren Buffett, your favorite holding period is forever, and a stock you recently paid billions of dollars for is now down by billions of dollars in just a few months, what do you do?
Well, Mr. Buffett hit the sell button. In the first quarter of this year, he sold 13.7 million shares of ConocoPhillips and took a $1.9 billion loss, according to Bloomberg. But, that may not be the end of his losses. As of March 31, Berkshire still held 71.2 million shares.
There are two good investing lessons here.
First, if you make an investment and the facts change, don't be afraid to cut your losses and move on to a potentially more rewarding opportunity. Remember, you don't have to recover your loss in the same way that you generated your loss.
Second, taking a capital loss may offer some tax benefits. In Buffett's case, the $1.9 billion loss may allow Berkshire to recover as much as $690 million in previously paid capital gains, according to Berkshire's quarterly report. Tax benefits shouldn't be the only reason for selling an investment, but they can be part of the equation.
Oh, and by the way, Berkshire entered into long-term derivative contracts in recent years that are more than $13 billion in the hole as of March 31, 2009, according to Berkshire’s quarterly report. These contracts have expiration dates between 2019 and 2028 so there is time for them to recover, but $13 billion is a big hole to climb out of.
Yes, even the greatest investors make mistakes. However, one thing that makes them great is their willingness to embrace change, cut their losses, and move on.

ARE WOMEN BETTER INVESTORS THAN MEN? In a battle of the sexes, finance professors Brad Barber and Terrance Odean crunched the trading data on over 35,000 households from a large discount brokerage firm. They built upon psychological research, which indicates that in the area of finance, men tend to be more overconfident than women. Additional research shows that overconfident investors tend to trade more often than less confident investors. Armed with this data, Barber and Odean went to work.
They hypothesized that men traded more frequently than women and that this excessive trading hurt their performance more than it hurt the performance of women. Here's what they found in a 2001 study published in The Quarterly Journal of Economics:
1. Men overall traded stocks 45% more frequently than women.
2. Single men traded stocks 67% more frequently than single women.
3. Women overall earned annual risk-adjusted returns that were 1.0% greater than men.
4. Single women earned annual risk-adjusted returns that were 1.4% greater than single men.
So yes, based on this study, women are more successful investors than men because they earn a higher annual return. An interesting sub-point from the study is that the out-performance by women was solely due to their lower trading frequency. Women were no better than men at security selection; instead, their advantage came from making fewer trades.
Let the bragging begin!

Weekly Focus – Think About It
"A man's errors are his portals of discovery."
--James Joyce
May 17, 2010 Weekly Commentary
The Markets "Hot potato" is a favorite children's game. Unfortunately, as adults, we're playing an economic version that has the potential for much more serious consequences.
It started with consumers going into debt over their heads to help fund an ever-increasing lifestyle.
For example, total household debt rose from $1.1 trillion in 1978 to $13.5 trillion at the end of 2009, according to the Federal Reserve. That's more than a 12-fold increase over the past 31 years. By contrast, our economy, as measured by gross domestic product, grew from $5.3 trillion to $13.3 trillion during that same period--a more modest 2.5-fold increase, according to the Department of Commerce.
Then it moved to the financial sector racking up huge liabilities on the back of newfangled derivative securities.
Total financial sector debt, which includes various government-related enterprises and private financial institutions, rose from $0.4 trillion in 1978 to $15.6 trillion at the end of 2009, according to the Federal Reserve. That's a 39-fold increase over the past 31 years. With this high leverage, is it any surprise that our banking system nearly went kaput in 2008?
Then it moved to the local, state, and federal governments incurring unsustainable debt to keep the world economy from collapsing.
Total U.S. local, state, and federal governmental debt rose by a factor of 11 from 1978 to 2009, according to the Federal Reserve. Overseas, the picture looks bleak, too, as many of the European Union countries are sitting on huge piles of IOUs that look increasingly less likely to be paid back in full. Not surprisingly, gold prices hit a record high last week as people turn to the perceived safety of the yellow metal in times of doubt, according to the Financial Times.
With the potato of debt having passed from party to party over the past three decades, the financial markets are now saying the potato stops here. As John Mauldin, president of Millennium Wave Advisors, LLC, says, "You don't cure a debt problem with more debt unless you have a clear path to grow your way out of the debt." In the U.S., we can grow through population growth and productivity gains. That, coupled with higher taxes and lower spending, may do the trick. In Europe, structural headwinds make the growth story much more difficult and that's partly why the value of the euro is declining and street protests are rising.
How this unwinding of debt plays out with the world populace will likely affect the financial markets for years to come.

WHAT IS ONE OF THE BEST INVESTMENTS you can ever make? No, we're not talking about the stock market, commodities, or gold. Instead, we're talking about investing in your own education. As the chart below shows, there is currently a direct correlation between the level of formal education and the unemployment rate. The more educated you are, the less likely you are to be unemployed.
Educational Attainment Unemployment Rate April 2010 Less than high school diploma 14.7% High school graduate, no college 10.6 Some college or associate degree 8.3 Bachelor's degree and higher 4.9 Source: Bureau of Labor Statistics
The fact that the most highly educated people in our population have a relatively low unemployment rate of 4.9% may help explain why consumer spending hit an all-time high in March, according to MarketWatch. People with a higher education tend to earn more and since 95% of that demographic is employed, that has helped reinvigorate consumer spending.
The overall unemployment rate of 9.9% is unacceptably high and understandably grabs the headlines, but looking at the composition of that number suggests the damage to the economy might not be as bad as first thought. Digging beneath the headlines like this helps us make better assessments of the current economic and investing environment.

Weekly Focus – Think About It
It's a shallow life that doesn't give a person a few scars."
--Garrison Keillor
May 16, 2012 Weekly Commentary
The Markets Even the smartest guy in the room sometimes makes mistakes.
Jamie Dimon, CEO of the huge U.S. bank JP Morgan, has been called the smartest guy in the room for his ability to effectively steer the bank through the economic crisis. And, while most of the other big U.S. banks have tarnished reputations, Dimon’s firm was the one that stood out from the crowd.
Unfortunately, that all changed last week.
In a hastily arranged conference call with investors, Dimon revealed that the bank lost $2 billion in just the past six weeks on “bets aimed at shielding the bank from the market fallout of Europe's deepening mess,” according to The Wall Street Journal. These “bets” lost money due to “unusual movements in the relationships between various derivative indexes focused on investment-grade and junk-bond corporate debt, both in the U.S. and Europe,” according to the Journal.
This debacle points to three important investment lessons:
1. Keep it simple. Trading fancy derivatives or using complex black box trading strategies might give you an air of sophistication, but it may also lead to your downfall. As Leonardo da Vinci said, “Simplicity is the ultimate sophistication.”
2. Pick and track your investments closely. In describing the trades that blew up, Dimon said, “The new strategy was flawed, complex, poorly reviewed, poorly executed, and poorly monitored,” according to Bloomberg. Clearly, in this ever-changing world, a “set it and forget it” investment strategy won’t cut it.
3. Be humble. Even a smart guy like Dimon can trip up. One of the biggest errors in investing is self-deception – thinking and acting like you are the smartest guy in the room. It’s better to worry about what could go wrong – and plan for it – than think you’re invincible.
The investment landscape is littered with formerly sharp investors who forgot these three lessons. We plan on keeping them front and center.

DOES IT MAKE SENSE that a painting sells for $120 million in this economic environment?
You may have seen the recent headline that Edvard Munch’s painting, “The Scream,” sold for a record-breaking $120 million. It made us wonder what the implications are of an anonymous bidder forking over that kind of cash for a pastel on canvas just three years out from a horrible economic crisis. Does this mean happy days are here again?
Placed in broad context, the high sale price for a work of art might be symptomatic of policymakers’ response to the economic crisis, according to The Wall Street Journal. When the economy began collapsing in 2008, governments around the world responded by cutting interest rates and flooding their economies with monetary stimulus. All this money sloshing around had to end up somewhere – and some of it might have found its way into hard assets such as commodities, precious metals, collectibles, and, yes, an Edvard Munch painting.
There’s something called the law of unintended consequences, which means solving one problem might inadvertently create a new one. In this case, the massive stimulus in recent years propped up the economy in the short run, but it may have unintentionally masked the real problem and simply delayed a day of reckoning.
With the following economic and political issues in play, that day of reckoning may be nearing:
-Eleven European countries have experienced two consecutive quarters of economic contraction.
-The unemployment rate across the eurozone has matched a record high.
-Job growth in the U.S. is slowing.
-The Chinese economy is slowing.
-The political situation in Greece is chaotic.
-France has a new Socialist president.
Sources: MarketWatch, The Wall Street Journal
Now, the good news. In any economic environment, there will be winners and losers. As the steward of your financial life, we do everything we can to try and help you land on the winning side regardless of what the economy and markets throw in our way.

Weekly Focus – Think About It
“Nature is pleased with simplicity. And nature is no dummy.”
--Isaac Newton, English physicist, mathematician, astronomer, natural philosopher, alchemist, theologian… yes, a really smart guy!
May 16, 2011 Weekly Commentary
The Markets What are two things people tend to buy less of when the price goes down?
Normally, people like a bargain. When we go shopping, we feel much better buying things when they're 20% off or "Buy one, get the second at half price." But, there are two things that tend to buck this trend of buying when the price goes down. If fact, with these two things, people tend to buy more of them after their price has run up. Do you have your guess on what they are?
How about real estate and stocks?
According to the most recent S&P/Case-Shiller Home Price Indices, home prices on average across the U.S. are back to their summer of 2003 level, meaning, they're the cheapest they've been in about eight years. So, are Americans clamoring to buy homes? Nope. In February, new home sales in the U.S. fell to a record low on a seasonally adjusted annual rate, according to MarketWatch. Yet, during the boom times in 2005-2006 -- when prices and sales were at their peak -- people were buying homes like crazy and "flipping" them, according to the U.S. Census Bureau and Standard and Poor's.
Likewise, when it comes to stocks, history suggests that people tend to shun them when prices are down. For example, how many Americans were loading up the truck to buy more stocks as the market was declining to its recent low in March 2009? Not many. Yet, how many felt comfortable buying internet stocks in late 1999 as their prices were zooming?
These two examples suggest that housing and stocks are two major categories that defy traditional expectations. Knowing that, being a "contrarian" investor in these assets may be a smart long-term plan.

WHAT IS AN INVESTMENT? This is actually an important question to answer because the range of "investments" available today goes far beyond traditional stocks and bonds. Understanding the unique characteristics of these "alternative investments" may help you avoid a negative surprise sometime down the road.
According to Investopedia, an investment is defined as "An asset or item that is purchased with the hope that it will generate income or appreciate in the future." Sounds simple enough yet, ironically, investment professionals don’t necessarily agree on what constitutes an investment. For example, some disagree on whether gold and other commodities should be considered an investment.
On one side, some pros argue gold is an investment because it has been traded for thousands of years and has an established market where it can be bought and sold. On the other side, some say gold is not an investment because it does not generate cash flow, has no "earnings" that can be valued, and has little economic use.
Let’s contrast gold with stocks. Stocks represent a claim on a company’s assets and earnings. Using established norms of financial analysis, investment pros can place a value on those assets and earnings and come up with an estimated "fair value" for the stock (which may or may not be close to its actual trading price). However, with gold, there's no underlying productive asset to value or earnings to capitalize so determining "fair value" is really not even possible.
Where does this leave us?
Successful investors need to know the difference between a traditional investment that consists of underlying assets and potential earnings versus an alternative investment like gold that may look like an investment, but is difficult to value using traditional financial analysis.
This doesn't mean these non-traditional "investments" are a bad idea. It means they bear close monitoring… which we try to do.

Weekly Focus – Think About It
"Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well." --Warren Buffett
May 13, 2013 Weekly Commentary
The Markets


‘Sell in May and Go Away' is a trading maxim which, according to Investopedia, encourages an investor to "sells his or her stock holdings in May and get back into the equity market in November..." Traders who adhere to that adage may be pondering averages and exceptions right now. During the first two weeks of the month, the Dow Jones Industrials Average, the Standard & Poor's 500, and the Russell 2000 Indices all reached new highs. The Dow passed 15,000, the S&P reached 1,600, and the Russell 2000 hit 968.

Bulls are in the majority among investors, although there is some bearish sentiment, according to the Bull and Bear Wise Index. Investors' changing expectations are reflected in CNNMoney's Fear & Greed Index which showed investor sentiment has shifted from ‘fear' one year ago to ‘extreme greed' last week. The premise of the index, which measures seven indicators, is investors are driven by two emotions: fear and greed. When investors are fearful, stock markets may fall more than they should; when investors are greedy, markets may be pushed higher than they should be.

Investors' inclination toward stocks may be one of the reasons for declines in the value of gold and commodities last week.

Although there was little of it, economic news generally was positive last week. The U.S. Labor Department announced the number of Americans filing initial claims for jobless benefits dropped unexpectedly. Approximately 323,000 people filed for unemployment benefits which was about the same number that filed each week before the recession started in December 2007. According to Bloomberg, investors took the news as a sign the U.S. economy is improving which helped push yields on 10-year Treasuries higher.

Perceived economic strength in the U.S. caused the U.S. dollar to gain against many of the 16 major world currencies last week, as well as the 24 emerging countries' currencies tracked by Bloomberg.com.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


WHERE WILL YOU LIVE DURING RETIREMENT?

As with many of life's important questions, the answer depends on you and, possibly, your partner or spouse. Before you make a decision and decide to retire to wherever your grandchildren live (or in your favorite vacation spot) you might want to take a moment and consider the tax implications of your decision.

If your grandchildren live in Alaska, Nevada, Wyoming, Mississippi, or Georgia, you're probably okay. Each year, Kiplinger.com reviews the tax rules of each of the 50 states, giving special consideration to states which offer attractive tax incentives to retirees and then provides a list of those states it deems most tax-friendly for retirees. For 2012, Kiplinger reported the five states listed above were the most tax-friendly. According to the article,

"All of these tax havens exempt Social Security benefits from taxation (and some impose no state income tax at all). Many of them exclude government and military pensions from income taxes, and some exempt private pensions, too. A few offer blanket exclusions up to a specific dollar amount of retirement income from a wide variety of sources, which is important if you depend on distributions from IRAs and 401(k) plans rather than traditional pensions. Review all of your sources of income before you decide which state may be the best fit for your retirement home."

Kiplinger.com reported the least tax-friendly states included Connecticut, Vermont, Rhode Island, Montana, and Minnesota, which have one or more of the following:

- Estate or inheritance taxes
- High property taxes
- No tax breaks on Social Security benefits
- No special treatment for various types of retirement income
Source: Kiplinger.com

No matter where you decide to settle, it's important to evaluate all of the factors which may affect your income during retirement.


Weekly Focus - Think About It

"Every saint has a past and every sinner has a future."
--Oscar Wilde, Irish writer and poet

Sources:
http://www.investopedia.com/terms/s/sell-in-may-and-go-away.asp
http://finance.yahoo.com/news/wall-street-week-ahead-sell-224849895.html
http://online.barrons.com/article/SB50001424052748704253204578471390309717114.html
http://www.bullandbearwise.com/
http://money.cnn.com/data/fear-and-greed/
http://money.cnn.com/investing/about-fear-greed-tool/
http://www.forbes.com/sites/kitconews/2013/05/10/metals-outlook-us-dollar-strength-economic-data-may-influence-gold/
http://www.bloomberg.com/news/2013-05-10/treasuries-head-for-second-weekly-loss-as-stocks-rise-to-record.html
http://money.cnn.com/2013/05/09/news/economy/unemployment-benefits/
http://www.bloomberg.com/news/2013-05-11/canadian-currency-weakens-as-u-s-economy-overshadows-recovery.html
http://www.bloomberg.com/news/2013-05-10/emerging-stocks-fall-most-in-three-weeks-as-exporters-tumble.html
http://www.kiplinger.com/slideshow/retirement/T006-S001-10-most-tax-friendly-states-for-retirees/index.html
http://www.kiplinger.com/slideshow/retirement/T006-S001-10-least-tax-friendly-states-for-retirees/index.html
http://www.brainyquote.com/quotes/authors/o/oscar_wilde.html

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
May 12, 2008 Weekly Commentary
The Markets
Soaring crude oil prices helped put the kibosh on a three-week winning streak in the stock market, according to the Wall Street Journal.
The Journal reported that for the six trading days ending May 9, crude oil prices surged 11.8% and ended at a record price of just under $126 per barrel. Not helping matters was a May 6 Goldman Sachs report, which said, The possibility of $150-$200 per barrel seems increasingly likely over the next 6-24 months. Pundits frequently cite supply constraints, healthy demand, and good old-fashioned speculation as culprits of the rise.
Now, if theres any truth to basic economics, then worldwide demand for oil should start falling at some point because of the huge surge in price. Well see.
While oil hogged the spotlight last week, there were a few other bright spots worth noting. Barrons said, The service sector expanded in April for the first time this year, weekly unemployment claims stayed tame, and retail sales in April, boosted by an extra shopping day this year, were less dire than many had feared. These reports suggest that the economy, while soft, is not currently falling off a cliff.
And, of course, we have corporate earnings. So far, more than 400 companies in the S&P 500 have reported their quarterly earnings and their average earnings are down about 17% from a year ago, according to Thomson Financial. While thats a big drop, Most of the problems lie with the ailing financial sector, where results remain crushed by write-downs linked to bad home loans, according to MarketWatch.
Illustrating that some companies are still performing well in this economy, The Walt Disney Company reported last week a 32% increase in quarterly earnings per share, which handily beat analysts estimates, according to MarketWatch.
Looks like kids just cant enough of the Jonas Brothers and Hannah Montana!

HOW ARE INCOME AND INCOME TAXES DISTRIBUTED IN THE UNITED STATES?
The Internal Revenue Service recently released some data on the distribution of income and income taxes for tax years 1995 2005 and heres what the data shows:

Comparing 1995 to 2005, here are some conclusions we can draw:
First, the rich are increasing their share of the countrys total income. For example, from 1995 to 2005, the top 5% of taxpayers increased their share of the total income of all taxpayers from 28.8% to 35.8%.
Second, the rich are paying a growing share of the countrys total income taxes. For example, from 1995 to 2005, the top 5% of taxpayers increased their share of the countrys total income taxes paid from 48.9% to 59.7%.
Third, the rich pay a proportionately higher percentage of their income in taxes. For example, in 2005, the top 1% of taxpayers accounted for 21.2% of the total income and they paid 39.4% of the countrys total income taxes. By contrast, the bottom 50% of all taxpayers accounted for 12.8% of the total income and they paid 3.1% of the countrys total income taxes.
The data shows the progressive nature of our tax system in which wealthier people pay a proportionately higher percentage of their income in taxes. With this being an election year, the countrys tax policies will likely be a key debate item. As a result, dont be surprised to see some changes over the next four years.

Weekly Focus Whats Your Cookie?
During an old episode of Sesame Street, the Cookie Monster participated in a game show. As a prize winner, he got to choose among door #1, which contained $1 million, door #2, which contained a French chateau, and door #3, which contained a cookie.
He chose the cookie.
We all have a cookie in our life. Whats yours?
May 11, 2009 Weekly Commentary
The Markets Would you agree that the stock market has been volatile in the last six months?
As you may have guessed, that's a bit of a trick question. Most people would say that, yes, the stock market has been very volatile since early November 2008. For example, just from November 7, 2008 to November 20, 2008, the S&P 500 index dropped 19%. It then rallied 24% by January 6, 2009. But, that was just a tease. Between January 6 and March 9, the S&P 500 index dropped a frightful 28%. And, just when people thought the financial system was coming to an end, the index turned around and proceeded to rise a whopping 37% from the March 9 low to last Friday, according to Yahoo! Finance.
It's enough to make your head spin.
But, let's assume for a moment that you went into hibernation for the past six months and slept right through this volatility. Would you wake up happy or sad about your portfolio? Well, if your portfolio performed similar to the S&P 500 index, then you’d wake up essentially the same as you went to bed, meaning, there was no net change in your portfolio. Surprisingly, from November 7, 2008 to May 8, 2009, the S&P 500 index moved less than 1%. That’s right, after netting the 19% drop, the 24% gain, the 28% drop, and the 37% gain, the index is essentially flat.
One of the keys to being a successful investor is to get neither too depressed when the market is down nor too euphoric when the market is up. Checking your portfolio on a daily basis can lead to a daily dizzy spell while checking it on a less frequent basis may help keep you on an even keel.
Our job is to monitor your portfolio on a regular basis and do the worrying for you so you can “hibernate” from the market and take that extra time to enjoy life.

WHICH LETTER OF THE ALPHABET will our economic recovery most resemble? Will it look like a V, U, L, or W? Let’s look at each scenario.
A V-shaped recovery would suggest a sharp drop followed by a quick recovery. The July 1990 to March 1991 recession is an example of this.
A U-shaped recovery would suggest a drop followed by a slow but steady recovery. The July 1981 to November 1982 recession fits this description.
An L-shaped recovery would suggest a drop followed by a long period of subpar growth. Japan’s experience since its 1989 stock market high is the poster child for this unfortunate predicament.
And then there’s the W-shaped recovery. This occurs when you have back-to-back recessions. The U.S. experienced this in 1980 to 1982 when we had two recessions that were separated by just 12 months.
Veteran money manager Jeremy Grantham thinks we might be in for what he calls a “VL” recovery. He envisions a situation "in which the stimulus causes a fairly quick but superficial recovery, followed by a second decline, followed in turn by a long, drawn-out period of sub-normal growth as the basic underlying economic and financial problems are corrected."
The good news is that the collapse of the U.S. financial system, which seemed like a possibility (albeit a small one) a few months ago, now seems to be highly unlikely. The recent recovery of the banking stocks and the stock market as a whole suggests investors are no longer planning for a doomsday scenario. Now we have to wait and see which "letter of the alphabet" recovery unfolds and what that means for the financial markets.

Weekly Focus – Think About It
"Light tomorrow with today."
--Elizabeth Barrett Browning
May 10, 2010 Weekly Commentary
The Markets
Five little "PIIGS" went for a boat ride. The weather turned very stormy and "G" got tossed overboard without a life jacket. Shortly thereafter, "P" and "S" found themselves overboard and drowning in the water, too. Unable to mount an effective rescue, the other shipmates radioed for help. Fortunately, "EU" and "IMF" were available with a bigger boat and more rescue equipment. As the storm continued to rage, the "PIIGS" desperately waited for "EU" and "IMF" to arrive, hoping they would have the tools necessary to save them.
The above metaphorically describes what is happening in Europe. The "PIIGS" are Portugal, Italy, Ireland, Greece, and Spain. Water is code for government debt and largesse. "EU" is the European Union and "IMF" is the International Monetary Fund. The big question is, will the "EU" and the "IMF's" boat and tools be enough to complete the rescue, or will they be overwhelmed by the storm, too?
With the events of last week, world financial markets declared loud and clear that government debt levels in certain countries are unsustainable and have to be dealt with right now. Jolted into action by the gathering storm, the 16 euro nations and the IMF announced late Sunday evening a loan package worth nearly $1 trillion to help stem the budding crisis, according to Bloomberg. This huge show of force may be enough to convince investors that the euro nations are serious about saving the weaker members, i.e., the "PIIGS."
The good news is that the U.S. is not the epicenter of this latest problem. That, coupled with an improving economy, may help the U.S. avoid the brunt of the pain.

THE EVENTS OF LAST WEEK REMINDED INVESTORS that a significant drop in the markets can happen at any time. However, as described below, the U.S. has some positive momentum in place that may help it weather a new storm should one arise.

First quarter corporate earnings were strong as 76% of the S&P 500 companies beat the average analyst profit forecast, according to Bloomberg. Strong earnings growth may provide support for stock prices.
U.S. consumer spending hit an all-time high in March, finally surpassing the previous peak set in November 2007, according to the Commerce Department. Consumer spending accounts for 70% of gross domestic product so this could bode well for economic growth, according to Forbes.
Job growth is finally occurring as the Department of Labor said nonfarm payroll employment grew by 290,000 in April, which was well above forecast. Earlier months were revised upward, too. Employment growth is a key driver of economic growth.
Consumer borrowing posted an unexpected rise in March, which was only the second gain in 14 months, according to Associated Press. The rise may suggest consumers are feeling more confident and that could help the economy.
Today, the economy is on its way up from a devastating decline. With the layoffs in the past couple years, significant excess in the economy has been wrung out, which may set the stage for sustainable growth. As described above, many key economic indicators are pointing toward a strengthening economy. And, while it's true that the economy and the stock market can fall out of sync for periods of time, the fact that our economy seems to be heading in the right direction may help provide some underlying support for the stock market in the short term.

Weekly Focus – Think About It
"Worry gives a small thing a big shadow."
-- Swedish Proverb
May 09, 2011 Weekly Commentary
The Markets We know the law of gravity applies to the natural world and last week we were reminded that it also applies to the "artificial" world we call Wall Street.
While stock prices fell a bit on mixed economic data, gravity's biggest effect was reserved for commodities such as oil and silver. Consider these moves.
• The price of a barrel of U.S. light crude oil fell 14.7%—the largest one-week decline since it started trading in 1983, according to CNBC.
• Silver prices fell an eye-popping 27% last week and that comes after hitting a 31-year high the week before, according to Barron’s. Talk about fickle investors!
• Commodities in general fell as the Thomson Reuters/Jefferies CRB Index of raw materials sank 9 percent, the biggest weekly decline since December 2008, according to Bloomberg.
Note: Past performance is no guarantee of future results and the fast price swings of commodities will result in significant volatility in an investor's holdings.
These large, short-term price moves help illustrate the difference between investing and speculating. For example, it’s seems unlikely that the “fundamentals” of silver changed so drastically in one week that the price would hit a 31-year high one day and then plunge 27% over the next week. Blame that on the speculators who were trying to milk a profit from silver’s speedy rise this year but then exited en masse when “gravity” took over.
To modify a metaphor attributed to Wayne Gretzky, investors invest based on where they expect the opportunities to arise over time, while speculators speculate based on what is happening in the moment. In other words, investors are in for the long-haul while speculators are in for the quick pop.
Not surprisingly, we consider ourselves investors who invest over the long-haul on your behalf.

LIKE AM RADIO, SUCCESSFUL INVESTORS FIND A WAY TO ADAPT to the changing times. The world changes quickly and investors who stay stuck in their old paradigm get left behind. Here’s how AM radio stayed relevant for decades despite changing technology around them.
• The Golden Age of Radio from the 1920s through the 1950s gave way to the rise of TVs in the 1960s. Rather than die a slow death, AM radio reinvented itself by becoming the media of choice for the up-and-coming era of rock-n-roll. That extended AM radio’s shelf life for about another 10 – 20 years.
• By the mid 1970s, AM radio hit another technology inflection point as FM radio, with its clearer sound quality, became the frequency of choice for music aficionados. Undaunted, AM radio stations got a new lease on life by ditching music and embracing talk radio.
• Today, satellite radio, smart phones, the internet, and iPods all pose potential problems for the AM radio business. Rather than fold, AM stations are adapting again by streaming their sound over some of these new technologies and charging advertising or subscription fees.
Likewise, as financial advisors, we survey the landscape and realize, “we’re not in Kansas anymore.” Times have changed since we first entered the business and so has the way we serve our clients. Rather than rest on the past, we build on it.
Our commitment to you is we will continue to build on the best of the past and adapt to the new so we can serve you in ever improving ways.

Weekly Focus – Happy Mother's Day!
"Mother love is the fuel that enables a normal human being to do the impossible."
--Marion C. Garretty
May 08, 2012 Weekly Commentary
The Markets The most important news last week may have actually happened this past weekend.
On Sunday, voters went to the polls in France, Greece, and Germany and the results could have a major impact on world markets. French voters sent incumbent president Nicholas Sarkozy packing and, instead, elected Socialist Party candidate Francois Hollande. Hollande "has pledged to shift the burden of economic hardship onto the rich and to resolve the protracted euro sovereign-debt crisis by softening the current prescription of austerity," according to The Wall Street Journal. While his strategy is debatable, it will likely cause a rift with Germany and add uncertainty to recent eurozone agreements.
Greek voters also went to the polls and "delivered a stinging rejection of the two incumbent parties, with many people casting ballots for smaller, far-left and far-right parties," according to the The Wall Street Journal. This, too, will likely result in more political and economic uncertainty. And in Germany, incumbent Angela Merkel's party suffered some setbacks in state elections.
What's leading to all the angst in Europe? Here are three things:
1. Recession fears – 11 European countries have now experienced two consecutive quarters of economic contraction.
2. Unemployment fears – the unemployment rate across the eurozone is at a record high.
3. Business confidence fears – April's read on the manufacturing PMI for the eurozone – a measure of confidence among businesses – fell to the lowest since June 2009.
Sources: MarketWatch, The Guardian
The bottom line is citizens are voting for change, but "political realities will complicate even more what is an already delicate economic and financial outlook for Europe, the world’s largest economic area," according to Mohamed El-Arian, CEO and Co-CIO of PIMCO, as reported by CNBC.
These elections show that the economic crisis that began in 2008 is still rippling throughout the world.

WHAT DO DOTS HAVE TO DO WITH BEING A BETTER INVESTOR? In his fascinating new book, Imagine: How Creativity Works, author Jonah Lehrer describes the creative process and what steps we can all take to be a little more creative. One of those steps is to talk to more people and expose yourself to new situations. By "colliding" more often with people who are not like you and throwing yourself into new environments (like a foreign country), your mind will come up with more new ideas than you could have thought of on your own.
And, while business owners may not like this, Lehrer's research suggests, "The most important place in every office is not the boardroom, or the lab, or the library. It's the coffee machine." It’s those casual conversations with colleagues that generate new interactions and spark ideas.
This leads to an important point about investing.
Brian Uzzi, a professor at the Kellog School of Management, studied the instant messages (IM) sent by traders at a large hedge fund over an eighteen-month period. As reported in Lehrer’s book, these traders sent more than two million messages over that period and the average trader was involved in 16 different IM conversations simultaneously – talk about multitasking! Essentially, these traders were rapidly communicating with each other and trying to make sense of the latest news so they could profitably trade on it.
As summarized by Lehrer, Uzzi concluded, “The best traders were the most connected, and people who carried on more IM conversations and sent more messages also made more money.” Further, Uzzi said, “The act of investing is like solving a difficult puzzle. These traders are trying to connect the dots. Because the traders are listening to their network, they manage to accomplish what they could never have done by themselves.”
In essence, successful investing partly relies on “connecting the dots” of information that bombard us. While we’re not day traders like the people Uzzi studied at the hedge fund, the concept of connecting the dots still applies – albeit on a much longer timeframe. And, to connect the dots, we have a large network of colleagues who can help us separate the daily noise from what’s truly meaningful.

Weekly Focus – Think About It
“Everyone who's ever taken a shower has had an idea. It's the person who gets out of the shower, dries off, and does something about it who makes a difference.”
--Nolan Bushnell, founder of Atari, Inc. and Chuck E. Cheese’s Pizza-Time Theaters
May 06, 2013 Weekly Commentary
The Markets


Like athletes testing their limits, the Standard & Poor's 500 and the Dow Jones Industrials Indices both hit new highs last week. The S&P closed the week above the 1,600 level for the first time, while the Dow climbed above the 15,000 mark on Friday before closing lower. Strong corporate earnings, gains in the housing market, and good news from Europe helped support last week's strong performance.

Corporate earnings season - the period when companies' managements tell shareholders how well the companies have performed during the previous quarter - is almost over. Seventy-two percent of the companies in the S&P 500 have beaten analysts' expectations, according to information provided by FactSet and reported on MarketWatch. Since 1994, about 63 percent of companies have beaten expectations on average.

Housing market news was largely positive last week. The Standard & Poor's/Case-Shiller 20-city index of home prices was up 9.3 percent year-over-year through February which was the largest gain in almost 7 years. Generally, cities that had seen big price declines during the housing crisis realized the biggest gains, including Phoenix, Las Vegas, and Atlanta. Cities experiencing strong jobs growth, such as San Francisco, Seattle, and Dallas, also showed significant price gains.

In Europe, Italy's elected leaders finally resolved their political impasse and formed a government. The highly-diverse coalition includes a record number of women, as well as Italy's first non-white minister. The new cabinet was sworn in on Sunday, April 28. On Monday, Italy's FTSE MIB, an index which reflects the performance of the Italian stock market, the MSCI World Index, and several U.S. stock markets moved higher.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


DOES MONEY BUY HAPPINESS… OR DOESN'T IT? Many years ago, Richard Easterlin, a Professor of Economics at the University of Southern California, studied the relationship between happiness and money. He found that, over shorter periods of time, happiness and income tend to move in tandem. "Happiness tends to fall in economic contractions and rise in expansions."

Over longer periods of time, he found satisfaction with life (i.e., happiness) had little relationship to rates of economic growth (i.e., people having more money). The conclusion was once people have enough money to meet basic needs, they are as happy as they are going to be.

A recent paper from the National Bureau of Economic Research, written by economists Betsey Stevenson and Justin Wolfers of the University of Michigan, appears to cast doubt on Easterlin's happiness-income paradox. The authors relied on data from Gallup polls which asked people throughout the world how much they earned and on which rung of the happiness ladder they were perched. While people in some countries appeared to be happier than people in other countries, everyone - no matter how much money they had - was happier when they had more money.

So, does more money translate into more happiness or doesn't it?

It may all come down to your definition of happiness. After all, well-being is subjective as Princeton's Professor of Psychology and Public Affairs, Daniel Kahneman, and its Professor of Economics and International Affairs, Angus Deaton, pointed out in a 2012 paper. The pair evaluated two measures of happiness: life evaluation (satisfaction with your place in the world) and emotional well-being (day-to-day happiness). The researchers found that life evaluation increases steadily with income, while day-to-day happiness maxes out an annual income of $75,000. They concluded "high income buys life satisfaction but not happiness, and low income is associated both with low life evaluation and low emotional well-being."


Weekly Focus - Think About It

"All I ask is the chance to prove that money can't make me happy."
--Spike Milligan, British comedian

Sources:
http://www.marketwatch.com/story/stock-market-rally-takes-a-new-turn-as-tech-leads-2013-05-05
http://www.investopedia.com/terms/e/earningsseason.asp
http://finance.yahoo.com/news/wall-street-week-ahead-central-094959207.html
http://blogs.wsj.com/developments/2013/04/30/five-takeaways-from-the-latest-case-shiller-report/
http://www.nytimes.com/2013/04/28/world/europe/italy-forms-new-coalition-government-to-end-months-of-political-stalemate.html?pagewanted=all&_r=0
http://articles.marketwatch.com/2013-04-29/markets/38886563_1_tesoro-italian-debt-new-cabinet
http://www.bloomberg.com/quote/FTSEMIB:IND
http://www.reuters.com/article/2013/04/29/markets-global-idUSL2N0DG1D220130429
http://www.ncbi.nlm.nih.gov/pmc/articles/pmc3012515/
http://papers.nber.org/papers/w18992?utm_campaign=ntw&utm_medium=email&utm_source=ntw
http://www.economist.com/blogs/graphicdetail/2013/05/daily-chart-0?fsrc=scn/gp/wl/dc/moneybuyhappiness
http://www.pnas.org/content/107/38/16489.full
http://www.brainyquote.com/quotes/authors/s/spike_milligan.html

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
May 05, 2014 Weekly Commentary
The Markets

Sometime this year, you may have the opportunity to experience an event that's even more rare than a lunar or solar eclipse - an economic eclipse. The United States has had the world's largest economy since we surpassed Britain back in 1872, but our economy is about to be overshadowed by China's.
A lot of folks were anticipating an economic eclipse sometime around the end of this decade. As it turns out, the event horizon may be much, much shorter. Last week, The World Bank released its International Comparison Program (ICP) report. Every six years, in an effort to measure the real size of the world economy, the ICP surveys countries and measures their relative economic might. The ICP report was the final analysis of data collected during 2011. It found, at that time, the U.S. had the world's biggest economy. It also established that China's economy had grown much faster than ours between 2005 and 2011. China's economic growth has continued to exceed that of the United States. As a result, China's economy is expected to eclipse that of the United States during 2014. The U.S. economy will be the second largest and behind us will be India. The ICP also noted that:
- The six largest middle-income economies (China, India, Russia, Brazil, Indonesia, and Mexico) account for 32.3 percent of world Gross Domestic Product (GDP) - The six largest high-income economies (United States, Japan, Germany, France, United Kingdom, and Italy) account for 32.9 percent of world GDP - Asia and the Pacific, including China and India, account for 30 percent of world GDP - The European Union and countries in the Organization for Economic Cooperation and Development (OECD) account for 54 percent of world GDP - Latin America comprises 5.5 percent of world GDP (excluding Mexico, which is an OECD country, and Argentina which did not participate in the ICP survey)
Some people are unsettled by the news. Among them, apparently, are members of China's National Bureau of Statistics (NBS). According to The Washington Post, the NBS expressed reservations about the study's methodology and did not endorse the results as official statistics. As with solar and lunar eclipses, the event may be notable, but its effects are unclear.

Weekly Focus - Think About It

"I never considered a difference of opinion in politics, in religion, in philosophy, as cause for withdrawing from a friend."
--Thomas Jefferson, American President

Sources:
http://www.ft.com/intl/cms/s/0/d79ffff8-cfb7-11e3-9b2b-00144feabdc0.html#axzz30hMLV0y9 (or go to
http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/05-05-14_Financial_Times-China_Poised_to_Pass_US-Footnote_1.pdf)
http://go.worldbank.org/MP1FBPYUJ0
http://www.worldbank.org/en/news/press-release/2014/04/29/2011-international-comparison-program-results-compare-real-size-world-economies
http://www.washingtonpost.com/business/china-rejects-sign-it-may-soon-be-no-1-economy/2014/04/30/90fca9e2-d058-11e3-a714-be7e7f142085_story.html
https://www.moodys.com/research/Moodys-US-non-financial-corporates-cash-pile-grows-led-by--PR_296106?WT.mc_id=NLTITLE_YYYYMMDD_PR_296106
http://www.economist.com/news/finance-and-economics/21588901-american-corporate-profits-seem-have-defied-gravity-margin-error (or go to
http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/05-05-14_The_Economist-Margin_for_Error-Footnote_6.pdf)
http://blogs.wsj.com/moneybeat/2014/04/14/companies-piled-on-the-cash-in-2013/
http://www.brainyquote.com/quotes/quotes/t/thomasjeff389008.html
May 05, 2008 Weekly Commentary
The Markets
There is an old saying that 90% of what people worry about never actually happens. Investors seem to fall into that trap, too, as they fretted about all sorts of economic problems over the past few months and as a result, drove down stock prices. However, several key economic reports released last week suggest that the economy may not be in as bad of shape as many people thought.
The Federal Reserve kicked things off with another percent cut in the Fed funds rate last Wednesday. The Fed seemed to signal that it was going to stand pat for a while and investors viewed that as bullish news, according to Associated Press. Reading the tea leaves, some investors viewed the standing pat idea to mean that the Fed feels the economy has enough stimulus in place to rev up its engine without further government fuel. This fuel includes the $100 billion in rebate checks that are starting to fill our pockets.
Also on Wednesday, the Commerce Department said the GDP grew at an annualized rate of 0.6% in the first quarter, much higher than the 0.2% rate expected by economists surveyed by MarketWatch. While the headline number looked relatively positive, the devil is in the details. Upon closer inspection, some economists pointed out that much of the increase came from inventory growth and exports as opposed to things American households and businesses bought.
On Friday, the Labor Department said nonfarm payrolls dropped by a less than expected 20,000 in April. According to MarketWatch that suggests, The nation's economic downturn may be short and shallow rather than long and severe. The unemployment rate also dropped to 5.0% in April, down from 5.1% a month earlier.
On balance, last weeks news gave bulls reason to cheer and they responded by pushing stocks higher. Well need more time to determine if the markets rise over the past few weeks is the beginning of a new trend or just a head fake.

HAVE YOU EVER SEEN A BLACK SWAN? Most likely the answer is no, but theres a good chance that youve been affected by one.
For some 1500 years, western civilization believed that all swans were white. In fact, the idea of a black swan was a popular metaphor in Europe, which symbolized something that could not exist. That all changed in 1697 when a Dutch explorer sailed into New Holland and made the first recorded European sighting of this elusive bird.
What was once thought to be non-existent a black swan turned out to be not only existent, but rather common in a certain part of the world. This is a lesson that we should all take to heart as it relates to investing.
Many models used by sophisticated investors are predicated on the idea that by using statistics, we can come up with the odds of certain events occurring. Using a made up example, looking at historical stock market performance, a model might suggest that the odds of the Dow Jones Industrial Average dropping by 10% in one day, is 1 in 6,000. With that data, a sophisticated investor might create a complicated transaction that tries to eke out a predictable return using lots of leverage. What were finding is that in reality, the models some investors use may actually misprice the risk of certain events happening.
Nassim Taleb, in his 2007 bestselling book titled, The Black Swan: The Impact of the Highly Improbable, lucidly pointed out that on Wall Street, black swan events seem to occur more frequently than most investors expect. As a result, investors may be unprepared for negative events that were once thought to be highly improbable, but actually turn out to happen every few years.
In the past 25 years, Taleb pointed out a few black swans including the 1982 Latin American debt crisis, the October 1987 stock market crash, and the collapse of hedge fund firm Long-Term Capital Management in 1988. Perhaps the turmoil in the auction-rate securities market qualifies as another example.
The emotional nature of human beings makes us unpredictable. Talebs insights help us understand that while black swan events may be infrequent, they do happen and we would be wise to incorporate their possibility into our investment planning.

Weekly Focus Spend Some Time Thinking
You may find it helpful to pause for a moment and think about your life. When you are in the mood, take out a piece of paper and a pen, go to a quiet place, and do the following exercise.
Write a letter to yourself and reflect on your life's highs and lows, and joys and regrets.
After you finish, take some time to review it. What have you done well so far in your life? What have you done not so well? What do you need to improve? How can you eliminate the regrets before it's too late?
By doing this exercise, you'll learn a great deal about yourself and still have some time to improve upon the areas where you are currently falling short.
May 04, 2009 Weekly Commentary
The Markets Set the bar low and then step over it. That idea helps explain why the S&P 500 index has jumped 30% since its March 9 low, according to Barron's Magazine.
By early March, investors were quite pessimistic about the outlook for corporate earnings and the economy. In effect, the bar was quite low in terms of near-term expectations. Over the following few weeks, earnings and economic reports came in weak, but they were "less bad" than expected. Relieved investors took this "less bad" as a sign that perhaps the worst is over so they started dipping their toes back in the investing waters and stocks rose.
Here are a few of the recent "less bad" numbers that investors warmed up to:
• The purchasing managers' index contracted again in April, but showed a significant improvement over March's number, according to the Institute for Supply Management.
• The consumer sentiment index – although still at a depressed level – rose in April compared to March, according to MarketWatch.
• Initial claims for unemployment insurance for the week ending April 25 were 631,000 – a horrible number – but it was an improvement from 645,000 the previous week, according to the Department of Labor.
• The S&P/Case-Shiller Home Price Index for February, which was released last week, showed a slowing in the rate of decline in residential home prices.
• First quarter GDP plummeted a worse than expected 6.1%, but the consumer spending portion of GDP rose a pleasantly surprising 2.2%, according to The Wall Street Journal.
• Companies such as Caterpillar, Coca-Cola Enterprises, Wells Fargo & Co, Ford, American Express, and Marriott posted earnings that were historically low, but still above expectations, according to Bloomberg.
When the stock market can rally on news that is bad, but "less bad" than expected, that may suggest underlying strength. Only time will tell if this move is sustained or if it will falter and lead to a retest of the early March lows.

CYCLICAL OR SECULAR? Whether the current economic storm is a traditional cyclical adjustment within a long-term uptrend or a secular turning point into a "new normal" may help explain the course of the economy and the financial markets in the decades to come.
One could argue that since the end of World War II, the global economy has been on an upward march with only periodic interruptions by rather shallow localized recessions. The baby boom after the war coupled with business innovation, the growth of emerging countries, and the expansion of credit, helped usher in a six-decade long improvement in our standard of living. In recent years, this growth was turbo-charged by an expansion of credit that helped consumers finance a lifestyle that was not sustainable out of normal cash flow.
What we've witnessed over the past 18 months is an unwinding of the recent credit binge to a more sustainable level of consumption. The big question is whether this unwinding is just a temporary adjustment before we jump right back on the credit bandwagon or whether we are adjusting to a new lower level of consumption and a higher level of savings.
A recent Gallup poll found that nearly one-third of Americans have reduced their spending lately and intend to make this lower spending level their "new normal" in the years ahead. Twenty-seven percent said they are saving more and intend to make saving more their "new normal." If consumers follow through with what they told the pollsters, we may be witnessing the early stages of a secular change in American's spending and savings patterns.
Trends can only be identified after you've been in one for a while. While we definitely have seen consumers pull back and savings start to rise, it's too soon to say if this trend will continue and become a long-term secular change or reverse course after the recession ends and just be another cyclical speed bump along a decades-long growth curve.
Trends like this have important implications for the financial markets. If this is a secular change, then it's possible the financial markets will stay in a wide trading range for many years. If it's a traditional cyclical recession, then growth should return and the markets may resume their gallop toward new record highs.
Since no one can predict the future, we continue to look at the facts as they appear and make portfolio adjustments accordingly. Regardless of the secular or cyclical outcome, we continue to do our best on your behalf.

Weekly Focus – Think About It
"Opportunities to find deeper powers within ourselves come when life seems most challenging."
--Joseph Campbell
May 03, 2010 Weekly Commentary
The Markets Two tragedies, worlds apart, reached a boil last week and affected the financial markets in a not so pleasant way. Greece, which is an ocean away and no stranger to tragedy, (think Aeschylus, Sophocles, and Euripides), nearly imploded last week on fears that its government was bankrupt. With huge budget deficits and no credible way to pay them, Greece saw its short-term government bond yields soar past 20%, according to Barron's. By contrast, the comparable bond in the U.S. yielded about 1% last week, according to the Treasury Department. As a euro country, Greece has limited tools to deal with the crisis on its own (e.g., it cannot devalue its currency or adjust its interest rates) so it has to rely on the kindness of neighbors to bail it out. This past weekend, the European Union and the International Monetary Fund announced that they will support Greece with a $146 billion multi-year aid package, according to Bloomberg. Now comes the hard part for Greece--implementing the austerity measures that accompany the bailout. The concern that this debt problem could spread and undermine the euro countries helped undercut many world stock markets last week. Closer to home, the uncapped oil leak in the Gulf of Mexico has states bordering the Gulf bracing for an environmental and economic disaster. The Gulf is a major oil-producing region and this spill could deter new drilling, a thought which helped send oil prices up more than 1% last week. Unfortunately, fishermen, the tourism industry, and the environment itself all stand to lose, too, as the spill worsens. While the twin tragedies captured many of the headlines last week, much of the economic news was bullish. For example, first quarter gross domestic product grew at a respectable 3.2 percent annual rate, household spending increased at the fastest rate in three years, and The Institute for Supply Management-Chicago Inc. said its business barometer rose to 63.8 in April, the highest level in five years, according to Barron's. On top of that, The Economist magazine said, "global output is now back to where it was before the downturn…(and) there is growing optimism that the recovery is becoming self-sustaining." Although the twin tragedies are still developing, recent solid economic news has helped limit their financial market impact. "EVEN AFTER THE BIGGEST RALLY SINCE THE 1930s, U.S. stocks remain the cheapest in two decades as the economy improves," according to an April 26 Bloomberg story. How can that be? Well, digging into the numbers a bit, it appears the statement comes with some qualifiers. First, the "cheapness" is based on the price to earnings ratio (P/E) using forecasted earnings estimates. By that measure, the S&P 500 is trading at 14.1 times forecasted earnings. As you know, forecasts may or may not come true so, if earnings actually fall short of the projection, then today's P/E will be higher in retrospect. Second, while the Bloomberg headline said stocks were the cheapest since 1990 based on analyst estimates, the article qualified that and said, "except for the months after Lehman Brothers Holdings Inc. collapsed." So, yes, stocks may be cheap now, but they have been cheaper in the recent past. But wait, in the same article, Bloomberg points to another market valuation measure that says the market is significantly overvalued. Using the 10-year average corporate earnings model popularized by Yale economist Robert J. Shiller, the P/E on the S&P 500 is currently about 22, which is well above the historical average of 16. Bulls will point to the P/E using forecasted earnings estimates and say stocks are cheap. Bears will point to the Shiller calculation and say stocks are dear. Regardless of which view is ultimately correct, we stay focused on helping you reach your goals and your objectives for the future. Weekly Focus – A Riddle Two fathers and two sons went fishing one day. They were there the whole day and only caught three fish. One father said, that is enough for all of us, we will have one each. How can this be possible? (See below for the answer and send us an e-mail to let us know if you got it right. Good luck!) Answer to the Riddle: There was the father, his son, and his son's son. This equals two fathers and two sons. (Source: Riddles.com)
May 02, 2011 Weekly Commentary
The Markets When Fed Chairman Ben Bernanke speaks, people listen.
The normally secretive Federal Reserve held its first-ever news conference last week and what Bernanke said turned out to be music to the market’s ears. Here are some of his key comments:
• The Fed will end its current $600 billion bond-buying program (QE2) in June (no surprise).
• It will continue to reinvest the proceeds of maturing securities (a sign of continuing the easy money policy).
• It will maintain its exceptionally low target for federal funds for an extended period (another sign of continuing the easy money policy). Source: Barron’s
The markets seemed to like what they heard. Stocks, bonds, and commodities generally rose on the week. In fact, this latest round of bond-buying by the Fed -- the so-called QE2 -- has helped push the stock market up dramatically. According to an April 30 Barron’s article, the Wilshire 5000, the broadest measure of the U.S. equity market, has risen and increased the wealth of stockholders by about $4.1 trillion, or 32%, since last August 26, 2010, the day before Bernanke floated the idea of additional Treasury purchases (QE2) at a speech in Jackson Hole, WY.
There was other positive news last week, too.
• The Dow Jones Industrial Average and the S&P 500 closed at their highest level since mid-2008.
• The Russell 2000 Index of small cap stocks and the Dow Jones Transportation Index both hit all-time highs.
• Thomson Reuters reported that of the 323 companies in the S&P 500 that reported earnings as of last Thursday, 73% beat earnings estimates.
• Gold prices hit another all-time high and silver prices rose 28% in April -- a monthly record. Source: CNBC
But, all that good news aside, for some, the best news of the week was the spectacular wedding of William and Kate.

WHAT DO THE WEALTHY THINK ABOUT THEIR WEALTH? The U.S. Trust recently published a report based on a January-February 2011 nationwide survey of 457 high net worth adults with $3 million or more in investable assets. Here are a few of the interesting insights from the survey:
• The main ways the respondents accumulated their wealth were (respondents could choose more than one):
o 77% on their own through earned income
o 59% through investments
o 35% through employer equity/stock options
o 28% through real estate transactions
o 27% through inheritance
• The main factors that contributed to accumulating their wealth were (respondents could choose more than one):
o 84% cited focus and hard work
o 50% cited intelligence
o 45% cited personal values
o 35% cited luck
o 30% cited passion about their work
o 14% cited an overwhelming desire not to be poor
• Accumulating wealth did not come without cost as 47% said there were some sacrifices. Here are the main sacrifices in order:
o Haven’t taken enough time off
o Too busy to spend time with family
o Self-worth became defined by wealth
o Mishandled personal relationships
o Missed important milestones of family and friends
o Physical health suffered
This survey suggests that hard work, focus, earned income, and investments are a recipe for financial success. Some things never change.

Weekly Focus – Think About It
"Success usually comes to those who are too busy to be looking for it." --Henry David Thoreau
May 01, 2012 Weekly Commentary
The Markets What is the costliest fruit?
How about an apple, as in Apple, Inc.? With more than $500 billion in market capitalization, Apple is the world’s most valuable company, according to Reuters. Last week, the company reported quarterly earnings that easily trumped analyst forecasts and this helped propel the S&P 500 to a 1.8 percent weekly gain. But it’s not just Apple that’s doing well. According to FactSet, a robust 78 percent of the S&P 500 companies that have reported earnings so far this quarter have beaten analysts’ forecasts.
Last week’s gains came despite some disappointing economic news which included the following:
A weaker than expected reading on U.S. gross domestic product (GDP), the broadest measure of all goods and services produced in our country.
A downgrade of Spain’s government debt—perhaps not surprising since the country now has a debilitating unemployment rate of 24.4 percent.
A second consecutive quarter of negative economic growth in the U.K., indicating they have slid back into recession.
Sources: The Wall Street Journal, Yahoo! Finance, Bloomberg
Overall, the economy continues to chug along at a modest pace. Not quite fast enough to signal “all clear” and not quite slow enough to signal “recession ahead.”

THE HOUSING MARKET STILL HAS THE BLUES, according to a widely followed barometer of home prices in the U.S. The S&P/Case-Shiller Index is designed to show how home prices are performing in the twenty largest cities and last week’s report showed the index is at its lowest point since October 2002.
Since the peak of the index in 2007 through February of this year, home prices have lost one-third of their value—and that’s even with record low interest rates on mortgages. Unfortunately, tough employment conditions have kept many potential homeowners on the sidelines. Adding to that, obtaining a loan from a bank remains difficult without very good credit.
Even though home prices continue to decline, a silver lining might be emerging. According to the National Association of Realtors, an index that measures the number of agreements signed to buy previously owned homes rose in March to its highest level in two years.
The increase in interested home buyers is coming at a time when supply is declining. Inventory levels in many markets are at their lowest level in years. For example, according to The Wall Street Journal, at the current pace of sales, it would take only 1.5 months to sell all the homes in Sacramento, CA. Considering pickings are pretty slim, home builders have also benefitted. New home sales in the U.S. are up 16 percent so far this year.
Unfortunately, this recent decline in available homes for sale may prove to be temporary because Fannie Mae, Freddie Mac and other banks have been slow to list for sale hundreds of thousands of foreclosed homes. In fact, banks and other investors are believed to hold 450,000 foreclosed homes while an additional 2 million are currently in the process of being foreclosed.
Ultimately, the solution to the housing blues may be strong economic growth. And as last week’s GDP numbers show, that strong growth hasn’t started yet.

Weekly Focus – Think About It
“In order to get a loan you must first prove you don't need it.”
--Murphy's Law
Mar 31, 2014 Weekly Commentary
The Markets

Whether it's good news or bad news, it is often surprising how investors and markets react. Last week, Russia annexed Crimea and the Standard & Poor's 500 Index gained about 1.4 percent.
This week, U.S. investors had the chance to bask in the glow of some good news: jobs growth was healthy, consumer spending improved modestly, consumer confidence numbers were better than expected, and fourth quarter's U.S. gross domestic product (GDP) growth number was revised upward. How did U.S. markets respond? Only the Dow Jones Industrial Average finished the week in positive territory.
What offset the good domestic news?
First, there was some not-so-good domestic news. Several banks, including a leading global bank, failed the Federal Reserve's stress test causing share prices in the banking sector to fall.
Next, there was some global news that proved to be unsettling for American investors. According to Barron's, U.S. markets had a strong negative response to comments made by President Obama after a summit meeting with top European Union (EU) officials. Reuters quoted the President as saying, "If Russia continues on its current course, however, the isolation will deepen, sanctions will increase, and there will be more consequences for the Russian economy."
The President also said NATO would increase its presence in Eastern European member states that share borders with Russia and Ukraine. The upcoming Group of Eight summit meeting was cancelled and a G-7 meeting - excluding Russia - was scheduled for June in Brussels.
Investors and stock markets in other countries were far more sanguine about world events, and most finished the week higher. As reported by Econoday, "Investors were cheered by talk of Chinese stimulus and encouraging U.S. economic data… Equities advanced thanks to renewed chatter about monetary stimulus from the European Central Bank."

WHAT DOES THE FUTURE HOLD? If you're wondering about reality television, National Public Radio says it may be virtual reality goggles that let viewers feel as though they are part of a show or let them interact with shows. If you're asking about astronomy, it could be finding a planet that's ten times larger than earth orbiting our sun. Of course, if you're curious about global economic growth, it's almost as exciting - experts indicate we can expect relatively steady growth.
The Economist asked a group of economists to predict GDP growth for 2015. GDP is "the monetary value of all the finished goods and services produced within a country's borders in a specific time period." For the most part, they predicted 2015 will be better for developed nations than 2014.
"Only the economies of Britain and Japan are expected to expand at slower rates in 2015. But for those European countries that have suffered deep recessions, notably Italy and Spain, growth is likely to remain sluggish over the two year period."
The story in emerging countries is improving, too. According to Price Waterhouse Coopers, economic fundamentals (such as labor force growth and potential for capital investment and productivity improvement) in emerging countries look good over the longer term.
The International Monetary Fund, which has more robust projections for growth than The Economist's economists, expects to see improvement in emerging markets. Growth is projected to increase to 5.1 percent this year and 5.4 percent in 2015. Eastern Europe and Latin America aren't expected to grow much faster than the United States in 2015. However, growth in developing Asia is expected to reach 6.8 percent. One exception to the rule is China where growth is forecast to slow from 7.5 percent in 2014 to 7.3 percent in 2015. Even for an economy with slowing growth, those are some pretty good numbers.

Weekly Focus - Think About It
"The fact that an opinion has been widely held is no evidence whatever that it is not utterly absurd."
--Bertrand Russell, British philosopher

Sources:
http://online.wsj.com/public/resources/documents/b-econoday.htm (Click on Resource Center » U.S. & Intl Recaps, Simply Economics/"Spring thaw slow so far", Stocks section and the Economy section)
http://www.usatoday.com/story/money/business/2014/03/26/fed-stress-tests/6922129/
http://www.reuters.com/article/2014/03/26/us-ukraine-crisis-idUSBREA2P0VB20140326
http://online.wsj.com/public/resources/documents/b-econoday.htm (Click on Resource Center » U.S. & Intl Recaps, International Perspective/"Ukraine and China blur outlook", Global Markets and Europe and UK sections)
http://www.npr.org/2014/03/10/288712948/path-to-televisions-future-may-be-paved-in-virtual-reality
http://www.theguardian.com/science/2014/mar/26/dwarf-planet-super-earth-solar-system-2012-vp113
http://www.economist.com/news/economic-and-financial-indicators/21598659-economist-poll-forecasters-march-averages
(or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/03-31-14_The_Economist-Poll_of_Forecasters-March_Averages-Footnote_7.pdf)
http://www.economist.com/blogs/graphicdetail/2014/03/daily-chart-14
(or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/03-31-14_The_Economist-
Growing_and_Spreading-Footnote_8.pdf)
http://www.investopedia.com/terms/g/gdp.asp http://www.pwc.co.uk/economic-services/global-economy-watch/emerging-markets-will-they-be-stranded-at-low-tide-march14.jhtml
http://www.imf.org/external/pubs/ft/weo/2014/update/01/ (Scroll down to Table 1)
http://www.brainyquote.com/quotes/quotes/b/bertrandru108785.html
Mar 31, 2008 Weekly Commentary
The Markets
Sometimes a loss feels like a win.
Several economic indicators released last week suggest the economy is in a funk. Of course, you probably dont need us to tell you that, but now we have a few more data points to fill in the picture.

The Commerce Department said personal spending was flat in February. That does not bode well for the economy since consumer spending accounts for roughly two-thirds of economic activity.

The University of Michigan/Reuters U.S. Consumer Sentiment Index fell to 69.5 in March; its lowest level since 1992, according to a March 28 article from Marketwatch.com. Consumers are concerned about a slowing economy, unemployment, and rising prices in products as diverse as eggs and gas.

Orders for durable goods declined 1.7% in February, according to the Commerce Department. Thats on top of a 4.7% decline in January.

And, in the home department, sales of new homes fell to a 13-year low in February, according to the Commerce Department. Prices are down, too. The S&P/Case-Shiller Home Price Indices released on March 25 showed an annual decline of about 11% in the average sales price of homes in 20 metro areas in January. On the bright side, the average sales price in those 20 metro areas is still up about 80% from January 2000.

Its easy to get caught up in doom and gloom. All we have to do is turn on the TV or open the newspaper and we can get our fill. However, despite last weeks news, the S&P 500 Index was down just slightly more than 1% for the week. Not bad all things considered.
Ultimately, Americans seem to be an inherently optimistic bunch. Yes, were in a rough patch right now with the economy and the financial system, but well get through it. As the credit market excesses and financial de-leveraging work their way through the system, well likely continue to experience market volatility. At some point though, were apt to bottom out and start a new positive trend. While we cant predict when that will happen, were doing our best to be prepared to try to take advantage of it.

NO DOUBT ABOUT IT, theres a Whole lotta shakin going on in the stock market these days. Weve seen the headlines about big daily advances and declines in the markets and Standard & Poors has now confirmed that U.S. stock volatility has climbed to its highest level in 70 years. As reported in a March 20 article from Bloomberg, Standard & Poors said the benchmark S&P 500 Stock Index has advanced or declined 1% or more on 28 days in 2008 through mid-March. That came out to 52% of the trading days, which is the highest percentage since 1938. Back in 1938, the comparable number was 57%. Interestingly, despite the volatility in 1938, the S&P 500 actually rose 25% that year.
For a little historical perspective, going back to 2002, the S&P 500 had 1% moves 50% of the time. In 2006, that figure dropped to 12%. It rose slightly to 13% in the first half of 2007, then soared to 39% in the second half of the year.
While the overall market is experiencing volatility, the daily swings in certain individual stocks is also quite astonishing. For example, on March 17, Merrill Lynch had a high price of $42.42, a low of $37.25, and it closed the day at 41.18, according to data from Yahoo! Finance. Thats a drop of 12% from its high to low and a rise of 11% from its low to its close all in one day! However, that pales in comparison to the trip that Lehman Brothers stock took that same day. It had a high price of $34.91, a low of $20.25, and it closed at $31.75. Thats a drop of 42% from its high to low and a rise of 57% from its low to its close again all in one day!
Its very unlikely that the value of those companies changed by that much in one day. Instead, what we saw on March 17 was an extreme emotional reaction to unfolding events. Fear is a very potent emotion and it was on grand display that day. The significant movements may also suggest that investors (or speculators) still lack strong conviction about the future direction of the market.
As it relates to you, the market action on March 17 will likely just be an interesting footnote, if that. These large daily swings make great headlines and are fodder for the talking heads, but to long-term investors, they are just a blip.
Volatility can be scary and it tends to shake out the Nervous Nellies. For investors who have an historical perspective, and who have an understanding of how emotions can play out in the financial markets, volatility may be an ally. After all, if there was no risk to investing, thered also be no significant return. As your investment manager, we monitor these types of emotional market gyrations and do our best to help you take advantage of them.

Weekly Focus Brainteaser
A certain number consists of two digits. The number is equal to five times the sum of its digits. If you add 9 to the number, the order of its digits is reversed. What is the number? See below for the answer.
The answer to the brainteaser is 45.
Mar 30, 2009 Weekly Commentary
The Markets Sometimes, less bad is actually good.
Investors are clinging to any signs of hope that the economy, if not actually turning the corner, at least has the corner in view now. A slew of economic reports released last week hinted at some possible good news. Out of 12 reports, seven were better than expected and two were at expectations, while only three were worse than expected, according to Bespoke Investment Group. Wall Street has been anxious to see this type of (relatively) good news and investors responded by sending the stock market to a healthy gain last week.
In another sign of good news, the price of a pound of copper rose to $1.86 at one point last week, up from just $1.30 in December 2008. Copper has earned the nickname "Dr. Copper" due to its past ability to predict booms and busts, according to MarketWatch. The fact that copper is heavily used in building and manufacturing helps explain its supposed forecasting ability. Russell Napier, author of the book, Anatomy of the Bear, is also a big believer in copper's predictive powers. He wrote, "Of all the commodities, the change in the trend of the price of copper has been a particularly accurate signal of better equity prices."
These initial shards of good news helped underpin the market's recent rocket rise. Since reaching its cyclical closing low of 676 on March 9, the S&P 500 has risen just over 20%, according to data from Yahoo! Finance. That's a remarkable recovery in just 18 days. Technically, it means we're in a new bull market using the traditional definition of a 20% gain from a previous low. Technicalities aside, nobody is ready to uncork the bubbly.
We're not kidding ourselves by thinking that all is well on the road to recovery in the economy and the financial markets. It's just nice to see a few of the speed bumps flattening out.

RISK AND UNCERTAINTY are two different things and distinguishing between the two may help you be a better investor. We can think of risk as a random outcome that has a known probability distribution while uncertainty has a random outcome with an unknowable probability distribution, according to economist Frank Knight. For example, playing blackjack is risky because the outcome on any single hand is random, but it still has a known probability distribution. Conversely, dropping a bomb on North Korea would create uncertainty because we have no way of applying a probability distribution to the outcome of that action.
Investing appears to contain aspects of both risk and uncertainty. From a risk standpoint, we have many decades of historical performance and statisticians can easily develop all kinds of probability distributions for expected returns and standard deviations. From an uncertainty standpoint, we have days like October 19, 1987, when the Dow Jones Industrial Average dropped 22.6%. That record drop was effectively outside the practical bound of any probability distribution.
Okay, so what are you supposed to do with the knowledge that investing contains elements of risk and uncertainty? Here are two thoughts. First, don't be overconfident. While you may take some comfort that historical probability distributions can show you what to expect in the future, don't get too confident in that idea. Past performance is no indicator of future results because we have the uncertainty of unexpected events like the October 1987 crash or even the current bear market.
Second, like playing poker, use the odds to your advantage. The market is down about 50% from its all-time high. As long as you believe we're not at the end of the world, then one could argue that the market is a lot cheaper today than it was in October 2007. So, your odds of making a profit from today's market level may be greater than they were back then.
With the right understanding, we may be able to turn risk and uncertainty into allies instead of enemies.

Weekly Focus – Think About It
"And the trouble is, if you don't risk anything, you risk even more."
-- Erica Jong
Mar 29, 2010 Weekly Commentary
The Markets
The stock market seems to be climbing the proverbial "wall of worry."
Despite potential road hazards such as sovereign debt issues, rising interest rates, a weak job market, and a stalled housing recovery, investors bid up stock prices last week to an 18-month high, according to MarketWatch. Of course, these things could eventually affect stock prices, but, for now, stocks are riding the momentum of improving earnings and some underlying stability in the economy.
Lack of job growth has been a major problem for our economy the past couple years, but that could change this week. On April 2, the government will release the March employment report and, according to CNBC, economists expect it to show a rise of about 200,000 non-farm jobs. That would be a small down payment on the 8.4 million jobs lost since December 2007, according to Bloomberg. The fact that the S&P 500 has risen for four consecutive weeks may suggest that the market has been anticipating a good report. Ironically, on the day the employment report is released, the U.S. stock market will be closed for the Good Friday holiday, so we won't know the market's reaction until the following Monday.
Fear of a double-dip recession seems to be fading, too. In its final revision, the Commerce Department said fourth quarter 2009 GDP increased at a 5.6% annualized rate, which is the fastest rate in six years. For 2010, economists surveyed by MarketWatch expect GDP to expand at a non-recessionary 3% rate. On a regional note, the Great Lakes commercial shipping season has started early partly due to increased demand for iron ore and coal. "Things are moving quicker, sooner than a year ago. And it seems like more ships are involved," said Eric Reinelt, Port of Milwaukee executive director as quoted in the March 28 edition of the Milwaukee Journal Sentinel.
So, despite the worries, there is some good economic news supporting stock prices.

THE DAY OF RECKONING due to our country's ballooning deficits may be getting closer. Back in 2008, the Congressional Budget Office (CBO), projected the U.S. would run a budget surplus of $247 billion for the years 2009 through 2018. Now, just two years later, CNBC and the CBO have crunched the numbers again and project that we will incur a $7.4 trillion deficit during that 10-year period, according to a March 26 CNBC article.
How could the situation deteriorate so much in just two years?
The CBO said 57% of the projected deficit increase was due to lower government revenues--much of which is due to the decline in our economy and projected sluggish economic growth. The other 43% included expenses such as, "the stimulus bill, a change in accounting for the war, extended unemployment benefits, and additional interest on debt."
At the end of 2009, the U.S. national debt stood at $12.3 trillion, according to the Treasury Department. Tack on the projected deficit over the next 10 years and we could be close to $20 trillion in the hole 10 years hence.
Like chocolate chip cookie dough, a spoonful of annual deficit and national debt is fine, but gorging our country on borrowed money may eventually cause significant problems. Too much government debt could lead to rising interest rates and slower economic growth, according to Fortune Magazine. In a worst-case scenario, it could lead to economic collapse.
We have several options to solve the budding debt problem before it gets completely out of hand. First, we could grow our way out of it. This is the preferred method and the least painful. Second, we could raise taxes. Third, we could cut government spending. Most likely, we'll see a combination of the three.
Given the magnitude of our swelling deficits, we will likely have pain in our future. Whether that pain happens in our generation, our children's, or our grandchildren's, remains to be seen.

Weekly Focus – Think About It
"The way to wealth depends on just two words, industry and frugality."
--Benjamin Franklin
Mar 28, 2011 Weekly Commentary
The Markets After last week's rally, the U.S. stock market is now higher than it was before the triple tragedy in Japan, according to Bloomberg.
It's really quite remarkable how quickly the stock market shrugged off the problems in Japan, the unrest in the Middle East and North Africa, the rising price of oil and other commodities, and the continuing sovereign debt problems in Europe. What's helping the market stay firm? Once again, it looks like strength in corporate earnings.
Bloomberg noted that higher-than-estimated profit forecasts helped drive stock prices higher last week. Sean Kraus, the chief investment officer at Citizens Business Bank in Pasadena, California was quoted in Bloomberg as saying this (last) week’s earnings reports were “very, very positive, and a lot of the commentary coming out of the companies was also positive.”
In addition to the positive earnings, some of the fear in the market is going away. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 18 last week, according to CNBC. That’s a decline of 39.1% in just the past seven days.
So, there are a number of positives supporting the market right now. Will things turn soft once the Federal Reserve starts pulling the plug on its support programs like QE2? Possibly, but either way, we’ll do our best to help you profit.

WHAT ARE THE SECRET FEARS OF THE SUPER RICH? Since 1970, Boston College’s Center on Wealth and Philanthropy has been publishing various studies of the wealthy. The Center’s recent study titled, “The Joys and Dilemmas of Wealth,” asked the super rich to “write freely about how prosperity has shaped their lives and those of their children.” The average net worth of the roughly 165 households who responded to the survey was $78 million. Here are some highlights of the survey as published in an article by Graeme Wood in the April 2011 issue of The Atlantic.
• “The survey responses make a compelling case that being fantastically wealthy -- especially when the wealth is inherited rather than earned -- is not a great deal more fulfilling than being merely prosperous. Among other woes, the survey respondents report feeling that they have lost the right to complain about anything, for fear of sounding -- or being -- ungrateful. Those with children worry that their children will become trust-fund brats if their inheritances are too large -- or will be forever resentful if those inheritances (or parts of them) are instead bequeathed to charity. The respondents also confide that they feel their outside relationships have been altered by, and have in some cases become contingent on, their wealth.”
• According to Robert A. Kenny, one of the survey’s architects, “Sometimes I think that the only people in this country who worry more about money than the poor are the very wealthy. They worry about losing it, they worry about how it’s invested, they worry about the effect it’s going to have. And, as the zeroes increase, the dilemmas get bigger.”
• “But the overwhelming concern of the super-rich -- mentioned by nearly every parent who participated in the survey -- is their children. Many express relief that their kids’ education was assured, but are concerned that money might rob them of ambition.”
• The survey’s authors said that, “Eventually most wealthy people discover the satisfactions of philanthropy.”
• “If anything, the rich stare into the abyss a bit more starkly than the rest of us. We can always indulge in the thought that a little more money would make our lives happier -- and in many cases it’s true. But the truly wealthy know that appetites for material indulgence are rarely sated. No yacht is so super, nor any wine so expensive, that it can soothe the soul or guarantee one’s children won’t grow up to be creeps.”
The survey results support the idea that money (at least extreme money) can’t buy happiness. Apparently, while extreme wealth can solve some problems that many other people struggle with (like paying the bills), it trades them for a new set of problems that the less well off don’t have to worry about.

Weekly Focus – Think About It “Having only riches enough to be able to gratify reasonable desires, and yet make their gratifications always a novelty and a pleasure, the family occupied that just mean in life which is so rarely attained, and still more rarely enjoyed without discontent.”
--The Gilded Age, Mark Twain and Charles Dudley Warner
Mar 26, 2012 Weekly Commentary
The Markets A trillion here, a trillion there and, pretty soon, you have a nice market rally.
Through a program called quantitative easing, central banks around the world have flooded the world economy with the equivalent of trillions of U.S. dollars. Quantitative easing involves central banks making large-scale purchases of debt – usually government or mortgage debt – and paying for that debt by creating money out of thin air, according to The New York Times. The hope (and remember, hope is not an investment strategy) is that with more money sloshing around the global economy, interest rates will drop and that will stimulate demand and increase economic growth.
If all goes according to plan, the economy will recover and then the central banks will sell the bonds they purchased and “destroy” the money they received for selling the bonds. When the whole cycle is completed, the net effect is no new money is created, according to the BBC. Optimists say this is an appropriate activity for central banks when the economy faces major hurdles. Pessimists say the central banks are unlikely to turn off the spigot and we could end up with runaway inflation.
And, yes, it’s a big spigot. Just between the U.S. and the United Kingdom, more than 2.5 trillion dollars of new money has been created since 2008, according to Reuters and the BBC.
On top of that, the European Central Bank made more than 1 trillion euro available to banks in the form of cheap three-year loans in just the past few months. The hope (there’s that word again) is that banks will use this money to lend and invest, and, thereby, boost the economy, according to Bloomberg.
All this “easy money” has helped fuel a strong start to many of the world’s stock markets this year. The big question is, will this easy money be the bridge that gets the world economy back on a self-sustaining growth path or is it simply keeping the patient addicted to an unsustainable monetary policy?
Effectively answering questions like this keeps our job very interesting!

QUANTITATIVE EASING HAS LED TO A STEALTH “TAX” ON SAVERS in what’s been called “financial repression,” according to Bloomberg. As mentioned above, one goal of quantitative easing is to lower interest rates. On that score, it’s succeeded since interest rates are super low all along the yield curve. Unfortunately, there’s a problem with that – interest rates on many bonds and savings accounts are lower than the rate of inflation. This means savers are losing purchasing power (the stealth tax) while debtors are able to pay back their debts in inflated (i.e., “cheaper”) dollars. Savers are effectively being “financially repressed.”
The public debt of the U.S. is more than $15 trillion, according to the Treasury Department. The annual interest expense on that mountain of debt is more than $400 billion. Not surprisingly, the government wants to keep interest rates low because that will keep their interest payments low. Also, by tolerating some inflation, that debt pile can be paid back in inflated dollars. So, who loses in this deal? It’s the diligent American saver who lives below their means and has to endure very little interest on their savings.
Government policy makers are well aware that their actions are, to some extent, helping debtors at the expense of savers. They also know that in this complicated, global economy, there’s no easy way to make everybody happy and still get us out of the fiscal hole we’re in. Knowing that, we’ll keep doing our best to help you prosper.

Weekly Focus – Just for Fun
If you could spend one year traveling around the U.S. and Canada, how many different bird species do you think you could see? Well, there’s actually an informal competition that does just that and it’s called a Big Year. Last year, a movie starring Steve Martin, Jack Black, and Owen Wilson chronicled the Big Year exploits of three men who tried to set a new Big Year record in 1998. Sure enough, one of the men set a new record of seeing 748 bird species that year. Check out the movie and you’ll never look at birding quite the same.
Mar 25, 2013 Weekly Commentary

The hero of last week's drama might have been the United States which delivered a plethora of stronger economic data that included a steady decline in unemployment claims, an increase in factory activity, and a rise in existing home sales. The positive news suggested that the U.S. economy was gaining momentum. In addition, Federal Reserve Chairman Ben Bernanke reiterated the Fed's commitment to accommodative monetary policy. He set the expectation short-term interest rates will stay at exceptionally low levels until unemployment falls to 6.5 percent. Some believe that could happen in 2015.

Signs of strength in the U.S. economy were overwhelmed by another crisis in the Eurozone. This time the issue was Cyprus, an island nation that accounts for a tiny portion of the Eurozone's economic production. Cyprus has relatively robust growth and boasts a small budget deficit, so why did it ask for a bailout? According to The Economist, the issue is the country's banks are bigger than its domestic economy. Since a bank deposit guarantee is only as good as the country providing it, Cyprus needed assistance. Cyprus is a microcosm of the Eurozone which has about "€8 trillion of deposits and only €4.5 trillion of annual government revenues," according to BCA Research cited in The Economist.

Eurozone leaders responded to the Cypriot bailout request by suggesting the country impose a tax on bank deposits. The Cypriot parliament rejected the suggestion and the European Central Bank responded with an ultimatum: accept a bailout by Monday or else. The government's decision will affect Cyprus' largest banks and, possibly, the country's participation in the Euro.

All eyes will be on Cyprus on March 25.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


YOU MAY HATE FILING TAXES, BUT IDENTITY THIEVES DON'T. That's probably because they expect to get refunds. The Internal Revenue Service (IRS) reports tax refund identity fraud is a rapidly growing crime. During fiscal year (FY) 2011 (which started October 2010), 276 investigations were initiated. For FY2012, that number had increased to 898. During just the first three months of FY2013, 542 investigations have been opened.

How does it work? According to the IRS, identity thieves use stolen personal information to file fake tax returns and collect undeserved refunds. In one case, a criminal filed false returns in the names of deceased taxpayers. In another, criminals broke into a tax preparation office, stole files containing personal information, and filed tax returns claiming fraudulent refunds.

The IRS reports it is taking steps to protect taxpayers. They suggest taxpayers take basic steps to protect themselves, as well:

- Don't carry your Social Security card with you
- Don't give your Social Security number or Individual Taxpayer Identification Number to businesses (verbally or in writing) unless it is required
- Check your credit report at least once each year
- Protect your personal computers with firewalls, anti-virus software, and updated security patches
- Choose hard-to-break passwords and change them frequently
- Don't provide personal information to anyone unless you know them well and understand how they plan to use it

Source: Internal Revenue Service

If you have aging parents, it's important to discuss identity theft and encourage them to take necessary precautions. Developing good habits - such always keeping your personal identification numbers and financial documents in a secure place - can go a long way toward keeping personal information safe.


Weekly Focus - Think About It

"When you are courting a nice girl, an hour seems like a second. When you sit on a red-hot cinder, a second seems like an hour. That's relativity."
--Albert Einstein, theoretical physicist

Fisher Financial Partners, Inc. offers securities through Regal Securities, Inc., member FINRA/SIPC. Advisory Services offered through Regal Advisory Services, Inc. Fisher Financial Partners, Inc. is not affiliated with Regal Securities, Inc. or Regal Advisory Services, Inc.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.

Sources:
http://online.barrons.com/article/SB50001424052748704836204578362532521524880.html?mod=BOL_hpp_mag#articleTabs_article%3D1
http://online.wsj.com/article/BT-CO-20130322-712532.html
http://www.reuters.com/article/2013/03/21/us-markets-stocks-idUSBRE92A07T20130321
http://www.npr.org/2013/03/20/174867741/federal-reserve-to-hold-interest-rates-low-until-unemployment-improves
http://finance.yahoo.com/news/wall-street-week-ahead-cyprus-021518996.html
http://www.economist.com/blogs/schumpeter/2013/03/bail-out-cyprus-0?zid=307&ah=5e80419d1bc9821ebe173f4f0f060a07
http://www.economist.com/blogs/buttonwood/2013/03/euro-zone-crisis-2?zid=307&ah=5e80419d1bc9821ebe173f4f0f060a07
http://www.economist.com/news/finance-and-economics/21574041-there-more-one-way-savers-lose-out-financial-repression-levy?zid=307&ah=5e80419d1bc9821ebe173f4f0f060a07
http://www.irs.gov/uac/Newsroom/IRS-Criminal-Investigation-Targets-Identity-Theft-Refund-Fraud-2013
http://www.irs.gov/uac/Newsroom/Tips-for-Taxpayers,-Victims-about-Identity-Theft-and-Tax-Returns
http://www.brainyquote.com/quotes/authors/a/albert_einstein.html#81odFuJOYg0meFSF.99
' style='margin: 0px 5px;' cols='100' rows='15'>The Markets


Like a not-quite-dead villain in a horror film, the Eurozone crisis raised its ugly head again last week, scaring investors and causing many stock markets to close flat or slightly down for the week, according to Barron's. Investors' worries strengthened demand for Treasuries, pushing the yield on the benchmark 10-year bond lower.

The hero of last week's drama might have been the United States which delivered a plethora of stronger economic data that included a steady decline in unemployment claims, an increase in factory activity, and a rise in existing home sales. The positive news suggested that the U.S. economy was gaining momentum. In addition, Federal Reserve Chairman Ben Bernanke reiterated the Fed's commitment to accommodative monetary policy. He set the expectation short-term interest rates will stay at exceptionally low levels until unemployment falls to 6.5 percent. Some believe that could happen in 2015.

Signs of strength in the U.S. economy were overwhelmed by another crisis in the Eurozone. This time the issue was Cyprus, an island nation that accounts for a tiny portion of the Eurozone's economic production. Cyprus has relatively robust growth and boasts a small budget deficit, so why did it ask for a bailout? According to The Economist, the issue is the country's banks are bigger than its domestic economy. Since a bank deposit guarantee is only as good as the country providing it, Cyprus needed assistance. Cyprus is a microcosm of the Eurozone which has about "€8 trillion of deposits and only €4.5 trillion of annual government revenues," according to BCA Research cited in The Economist.

Eurozone leaders responded to the Cypriot bailout request by suggesting the country impose a tax on bank deposits. The Cypriot parliament rejected the suggestion and the European Central Bank responded with an ultimatum: accept a bailout by Monday or else. The government's decision will affect Cyprus' largest banks and, possibly, the country's participation in the Euro.

All eyes will be on Cyprus on March 25.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


YOU MAY HATE FILING TAXES, BUT IDENTITY THIEVES DON'T. That's probably because they expect to get refunds. The Internal Revenue Service (IRS) reports tax refund identity fraud is a rapidly growing crime. During fiscal year (FY) 2011 (which started October 2010), 276 investigations were initiated. For FY2012, that number had increased to 898. During just the first three months of FY2013, 542 investigations have been opened.

How does it work? According to the IRS, identity thieves use stolen personal information to file fake tax returns and collect undeserved refunds. In one case, a criminal filed false returns in the names of deceased taxpayers. In another, criminals broke into a tax preparation office, stole files containing personal information, and filed tax returns claiming fraudulent refunds.

The IRS reports it is taking steps to protect taxpayers. They suggest taxpayers take basic steps to protect themselves, as well:

• Don't carry your Social Security card with you
• Don't give your Social Security number or Individual Taxpayer Identification Number to businesses (verbally or in writing) unless it is required
• Check your credit report at least once each year
• Protect your personal computers with firewalls, anti-virus software, and updated security patches
• Choose hard-to-break passwords and change them frequently
• Don't provide personal information to anyone unless you know them well and understand how they plan to use it

Source: Internal Revenue Service

If you have aging parents, it's important to discuss identity theft and encourage them to take necessary precautions. Developing good habits - such always keeping your personal identification numbers and financial documents in a secure place - can go a long way toward keeping personal information safe.


Weekly Focus - Think About It

"When you are courting a nice girl, an hour seems like a second. When you sit on a red-hot cinder, a second seems like an hour. That's relativity."
--Albert Einstein, theoretical physicist

Fisher Financial Partners, Inc. offers securities through Regal Securities, Inc., member FINRA/SIPC. Advisory Services offered through Regal Advisory Services, Inc. Fisher Financial Partners, Inc. is not affiliated with Regal Securities, Inc. or Regal Advisory Services, Inc.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.

Sources:
http://online.barrons.com/article/SB50001424052748704836204578362532521524880.html?mod=BOL_hpp_mag#articleTabs_article%3D1
http://online.wsj.com/article/BT-CO-20130322-712532.html
http://www.reuters.com/article/2013/03/21/us-markets-stocks-idUSBRE92A07T20130321
http://www.npr.org/2013/03/20/174867741/federal-reserve-to-hold-interest-rates-low-until-unemployment-improves
http://finance.yahoo.com/news/wall-street-week-ahead-cyprus-021518996.html
http://www.economist.com/blogs/schumpeter/2013/03/bail-out-cyprus-0?zid=307&ah=5e80419d1bc9821ebe173f4f0f060a07
http://www.economist.com/blogs/buttonwood/2013/03/euro-zone-crisis-2?zid=307&ah=5e80419d1bc9821ebe173f4f0f060a07
http://www.economist.com/news/finance-and-economics/21574041-there-more-one-way-savers-lose-out-financial-repression-levy?zid=307&ah=5e80419d1bc9821ebe173f4f0f060a07
http://www.irs.gov/uac/Newsroom/IRS-Criminal-Investigation-Targets-Identity-Theft-Refund-Fraud-2013
http://www.irs.gov/uac/Newsroom/Tips-for-Taxpayers,-Victims-about-Identity-Theft-and-Tax-Returns
http://www.brainyquote.com/quotes/authors/a/albert_einstein.html#81odFuJOYg0meFSF.99
Mar 24, 2014 Weekly Commentary
The Markets

After a series of moves that proved far more effective, but were almost as complicated as the Acme Corporation strategies Wile E. Coyote employed in pursuit of the roadrunner, Russia dropped an anvil on Ukraine and annexed Crimea. In response, Ukraine's acting Prime Minister Arseniy Yatsenyuk signed a political association agreement with the European Union (EU), and the United States slapped sanctions on some of Russia's President Vladimir Putin's wealthy allies and Bank Rossiya.

The EU also took action although the BBC reported Russia's foreign ministry called the European Council's decision to impose sanctions "regrettable" and "detached from reality." European and Russian economies are interdependent. Twenty-five percent of the EU's gas comes from Russia, and more than one-half of Russia's budget is derived from oil and gas sold to the EU. In addition, experts cited by the BBC indicated sanctions on Bank Rossiya could tie up monetary transactions in EU banks and potentially affect individual European countries' business dealings with Russia if economic sanctions are implemented.

Economists cited by The New York Times said, "The uncertainty that now hangs over nearly every profitable enterprise in Russia is what poses the gravest threat to the country's long-term prosperity, rather than any immediate consequence of the specific sanctions." While many of Putin's allies seemed relatively unaffected by the sanctions, at least one has experienced consequences. Reuters reported Russian billionaire Gennady Timchenko was forced to sell his ownership stake of almost 50 percent in a global commodities trading firm after sanctions against him disrupted the company's operations.

Russian markets have been unsettled by recent events. Consumers and businesses already have been stung by interest rates which are very high by western standards and may move even higher. Rating agencies, like Fitch and Standard & Poor's, have warned they will downgrade Russia's credit rating. Russian consumers have been thwarted as both Visa and Mastercard have stopped doing business with Russian people or companies that have been targeted by sanctions.

U.S. stock markets remained relatively blase' about events overseas but were alarmed by Federal Reserve Chairman Janet Yellen's comments during her first quarterly press conference. She suggested the Fed might begin tightening interest rates in 2015, just a few months after tapering ends.


SOME WORRY THE U.S. STOCK MARKET, LIKE A FIRST TIME MARATHONER a few miles from the finish, may be getting a little wobbly. There is no denying the Standard & Poor's 500 Index has had a good run. It has gained about 172 percent since its low following the financial crisis, and its earnings have grown by 121 percent since 2008, according to Barron's. Of course, that growth has been supported by extraordinary measures including very low interest rates and multiple rounds of quantitative easing.

Low interest rates have meant businesses could borrow money relatively cheaply. Barron's pointed out lower borrowing costs were reflected in bond spreads - the difference between the current yield on one type of bonds (for example, high-yield bonds, investment-grade bonds, or government bonds) and that of other types of bonds with similar maturities. The differences in yield between higher risk and lower risk bonds are a lot smaller than they once were. According to Barron's, from late 2008 through early 2014, the yield on high-yield bonds and comparable Treasury bonds has narrowed from about 22 percent to about 4 percent.

As private borrowing costs have dropped, companies have been able to borrow billions of dollars and pay relatively little in interest. Some have returned the money to shareholders as dividends; some have used the cash to make acquisitions; and others have repurchased shares on the market or directly from investors. Typically, when companies repurchase stock, their earnings per share rises and so does the value of any outstanding stock. Regardless, low interest rates and cheap borrowing costs have helped fuel share price appreciation and the bull market in stocks.

Three rounds of quantitative easing (the Fed's bond buying programs) also helped push stocks higher. An expert cited in Barron's noted "there has been a more than 90 percent correlation between the growth of the central bank's assets and the S&P 500 since the bull market began five years ago."

Now, the Fed is tapering quantitative easing and has indicated tighter monetary policy may begin as soon as early next year. Should investors worry the bull market will go away as these exceptional support measures are taken away?

If an investor has long-term financial goals, the answer is no. The portfolio allocation may have been chosen to help pursue those goals through all kinds of market conditions. If the stock market is slowing down, an investor may experience slower growth but that doesn't mean the goals have changed or the holdings are unsound. We may want to stay focused on the finish line.


Weekly Focus - Think About It

"Humility is not thinking less of yourself, it's thinking of yourself less."
--C. S. Lewis, novelist, scholar, broadcaster

Sources:
http://finance.yahoo.com/news/stock-futures-edge-higher-wall-113701535.html
http://www.nytimes.com/2014/03/22/world/europe/russia-starts-to-feel-effect-of-sanctions.html?hpw&rref=world&_r=1
http://finance.yahoo.com/news/u-sanctions-hit-gunvor-co-founder-prompting-stake-012630577--sector.html
http://www.bbc.com/news/world-europe-26696189
http://www.bbc.com/news/business-26679452
http://blogs.marketwatch.com/capitolreport/2014/03/20/many-economists-see-yellens-six-month-comment-as-rookie-mistake/
http://online.barrons.com/article/SB50001424053111904628504579431230885220564.html
(or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/03-24-14_Barrons-Stocks_Perform_a_Balancing_Act-Footnote_7.pdf)
http://online.barrons.com/article/SB50001424053111904628504579417220757475770.html#articleTabs_article%3D1
(or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/03-24-14_Barrons-Happy_Birthday_Bull-Footnote_8.pdf)
http://www.investopedia.com/terms/h/high-yield-bond-spread.asp
http://www.investopedia.com/terms/s/sharerepurchase.asp
http://www.brainyquote.com/quotes/quotes/c/cslewis395865.html
Mar 24, 2008 Weekly Commentary
The Markets
They say truth is stranger than fiction and last week's mind-boggling activity in the financial markets underscored that point.
Investors awoke to the news last Monday morning that investment bank Bear Stearns, which just a few days earlier had been trading for more than $60 per share, was being sold to JP Morgan Chase in a Federal Reserve orchestrated bailout for a mere $2 per share in order to avert a possible meltdown in the financial system. Without the takeover, the Fed and Wall Street analysts figured Bear Stearns would have to file for bankruptcy, and the Fed decided they couldnt let that happen according to a March 18th, Wall Street Journal article. Despite a scary start, by the end of the day, the Dow Jones Industrial Average had managed a slight gain.
By Tuesday, euphoria gripped Wall Street and stocks soared to their fourth largest one-day point gain in history, according to MarketWatch.com. With the Federal Reserve cutting a key interest rate by three-quarters of a percentage point, many investors started to think that the worst was behind us.
On Wednesday, investors had a change of heart and the Dow promptly dropped nearly 300 points. As if in sympathy, oil prices, which had recently cracked $110 per barrel, suddenly reversed and took their biggest one-day hit in more than 16 years. And gold, the shiny yellow metal, lost some luster, too, as it dropped more than $60 an ounce its largest one-day decline in nearly two years, according to MarketWatch.
With our heads still spinning, the Dow closed the week on Thursday with a 261-point gain, as investors snatched up bargains and covered short positions at the end of a chaotic week, buoyed by economic data that wasn't quite as soft as expected, according to TheStreet.com.
So, whats the final tally? For the week, the Dow ended up with a much-welcomed 3.4%. Are we out of the woods now? Nobody knows for sure, but one thing we may take some comfort in is the willingness of the Federal Reserve and the government to step in and help support the markets. Some people suggest that the government is meddling too much and that its trying to circumvent the normal business cycle. Whether thats true remains to be seen, but for now, investors perceive the Fed and the governments intervention as comforting, not concerning.

AS THE FEDERAL RESERVE CONTINUES TO STIMULATE THE ECONOMY by lowering interest rates and easing lending requirements, we need to keep an eye on inflation. On March 14th, the Labor Department reported that the consumer price index was unchanged in February (thats good news) and rose 4.0% for the 12 months ending February 2008. The flat inflation reading for February was lower than expected by many economists, according to a survey by Bloomberg News. Surprisingly, the Labor Department said energy prices declined 0.5% in February and the cost of electricity declined by the most since December 2005. That may turn around in March since crude oil prices recently topped $100 per barrel and gas prices are well over $3 per gallon and approaching $4 in some places around the country.
When the supply of money increases in the economy (i.e., theres increased liquidity), Economics 101 says inflation may rise. If the growth of dollars in the economy outstrips the supply of goods and services, it may cause consumers to bid up the price of these goods and services, and hence, lead to inflation. A little inflation and by that we mean 1 to 2% per year is fine. When inflation starts creeping into the mid single digits area, problems can crop up such as high energy prices and a depreciating dollar.
The dramatic rise that weve seen over the past few months in energy prices, certain food commodities and precious metals can be partially attributed to the fear that inflation will rise out of the Feds comfort zone. The weak dollar is also partially attributable to the fear of U.S. inflation. As investment managers, we have to keep in mind that the Feds liquidity moves may keep the economy from falling into a deep recession (a good thing), but it may also keep energy prices in record territory and may make imports more expensive.
Due to the complexity of the global economy, it seems as if nothing is neutral. Making a change such as lowering interest rates may help certain parts of the economy, but it may be at the expense of a strong dollar and at the expense of consumers who have to pay more for energy and imports. The Fed is walking a tightrope right now. If they lower interest rates too much (i.e., the short-term rates that the Federal Reserve controls), it could backfire by causing inflation expectations to rise. If investors perceive inflation will be a problem, theyll push up long-term interest rates that are outside of the Feds influence and that could thwart the economic growth that the Fed is trying to engineer.
Nonetheless, a quick glance at the headlines shows that even though stocks are down this year, other asset classes are rising. Traditional asset classes like government bonds are up this year through March 20th, according to Morningstar, as are alternative investments such as energy, grains, and precious metals, according to Barrons. With all the investment options available today, we try our best to have exposure to those asset classes that are working while keeping in mind each of our clients goals, objectives, and risk tolerance.

Weekly Focus Customer Service Champs
If it seems like customer service is on the decline across the country, youre right. A new report from Business Week, using survey data from J. D. Power & Associates, indicates customer service declined in 2007. All is not lost though. Here are the 2007 customer service champions, according to the report:
1. USAA
2. L.L. Bean
3. Fairmont Hotels & Resorts
4. Lexus
5. Trader Joes
6. Starbucks
Do you have any great customer service stories that youd like to share?
Mar 23, 2009 Weekly Commentary
The Markets So now we know where money comes from.
The Federal Reserve elevated this financial crisis to an entirely new dimension last week by announcing several initiatives that would expand its balance sheet by more than $1 trillion. Effectively, they’ve decided to fire up the printing presses and create money where there once was none. We’ve been told that money doesn’t grow on trees; now we know where it really comes from – the stroke of the government’s pen.
With the federal funds rate already near zero, the Federal Reserve pulled out the big gun and said they would buy up to $300 billion of Treasury securities. This essentially means one arm of the government is issuing bonds and another arm of the government is buying them. By creating this additional demand for the bonds, the Fed hopes interest rates will drop. So far, it’s worked. The yield on 10-year treasuries dropped about one-half of a percent within minutes of the Fed’s announcement. Mortgage rates dropped as well, so if you’re looking to buy or refinance, now may be a good time.
The long-term effect of the government buying its own bonds is unknown. Some say it is the right medicine and will help foster an economic recovery by keeping interest rates low. Others say it will lead to a currency crisis and ruinous inflation. Investors reacted by sending hard assets like gold and oil higher, the U.S. dollar lower, and the stock market up for a short period then down the next two days.
The kind of money we’re talking about now to fix this mess is almost beyond comprehension. Based on its announced plans, MarketWatch says the Federal Reserve’s balance sheet may now grow to more than $4 trillion, up from less than $1 trillion last fall. And Goldman Sachs economist Jan Hatzious says the Fed may ultimately need to expand its balance sheet to a whopping $10 trillion to restore economic growth. Viewed from a different perspective, Morgan Stanley economists estimate that interest rates should be negative 5% in order to restore growth. Of course, you can’t have negative interest rates so the government is doing the next best thing – it’s using everything in its arsenal to bring them closer to zero all along the yield curve.
These are certainly interesting and challenging times, but together we will get through them and ultimately flourish.

PETER LYNCH, CONSIDERED BY MANY to be one of the greatest investors of all time, was quoted as follows in the 1997 book, Investment Gurus:
“There’s a 100% correlation between what happens to the company and what happens to the stock. The trick is that it doesn’t happen that way over one week, or even over six or nine months, and that’s terrific. Sometimes the fundamentals are getting better and the stock is going down. That’s what you’re looking for. The stock market and the stock price don’t always run in synch.”
A corollary to Lynch’s comment is that the stock market and the economy don’t always run in synch. Currently, they’re both in bad shape. However, there’s a reasonable probability that they will eventually decouple.
One possible scenario is that the stock market will sniff a whiff of economic recovery and it will start to rise before the economy does. Sometimes these rallies are premature and send a false signal that the economy is ready to roll. We call these occurrences “bear market rallies.” Eventually, one of these bear market rallies may turn into the start of a new bull market. At that point, the economy will need to “confirm” the new bull market by staging its own recovery.
This type of cycle has existed in the financial markets for many years and we don’t expect it to be repealed any time soon. Bottom line – expect the markets to continue vacillating between bullish and bearish swings.

Weekly Focus – Think About It
“Life is the sum of all your choices.”
--Albert Camus
Mar 22, 2010 Weekly Commentary
The Markets
Earnings drive stock prices, right?
It's easy to say that the stock market is nothing more than a "casino" that is driven by "speculators," but over the long term, earnings do drive stock prices. So, how do corporate earnings look these days? Actually, pretty good.
We've just wrapped up the fourth quarter 2009 earnings reporting period and 72% of the companies in the S&P 500 beat earnings estimates, according to Thomson Reuters, as reported by The Wall Street Journal. For all of 2009, S&P 500 earnings came in at about $57, up from $49.51 in 2008, but below the peak of $87.72 in 2006, according to Standard & Poor's.
For 2010, Wall Street strategists expect S&P 500 profits of about $75, according to Barron's. With the S&P 500 closing last week at 1160, this means the index is selling at a price-to-earnings ratio (P/E) of 15.5 based on expected 2010 profits. Historically, based on the trailing 12-months earnings, the long-term average P/E ratio of the S&P 500 was 18.3, according to data from Barclays Capital, as reported by The Wall Street Journal. Therefore, if 2010 profits do arrive as projected, then the current market may be undervalued based on the historical P/E ratio.
But, here's where it gets interesting.
In 1998, S&P 500 earnings were $44.27 while the index closed that year at 1229, according to Standard and Poor's and data from Yahoo! Finance. Yet, last week, the S&P 500 closed at 1160--about 6% below the level of year-end 1998--despite the fact that S&P 500 earnings in 2009 came in at about $57--more than 28% above the level in 1998, according to Standard and Poor's. Even more remarkable, S&P earnings in 1999 were $51.68 (still below 2009's earnings) and the S&P 500 closed that year at 1469, which leaves our current market 21% below 1999 even though last year's earnings were about 10% higher than 1999's.
Are you dizzy, yet?
In short, earnings are significantly higher today than they were in 1998 and 1999, yet stock prices are still lower. This seeming paradox occurred because investors are placing a lower P/E multiple on today's earnings than they did on 1998's or 1999's earnings. That's the good news.
The bad news is an alternative measure of the P/E ratio, which uses 10-year average corporate earnings instead of just the past year, shows the S&P 500 at a P/E ratio of 20.6. Yale economist Robert J. Shiller popularized this measure and the P/E of 20.6 is currently higher than the historical average of 16 using this methodology, according to The New York Times. So, by this calculation, the current market may be overvalued.
So which is it? Whether undervalued, overvalued, or just right, you can find data to support any opinion. Nonetheless, we remain focused on helping you navigate through this uncertainty.

THE YEAR 2012 has significance for some people as a year of either cataclysmic devastation or spiritual transformation. For the people on Wall Street, it means something entirely different--big bills are coming due.
During the heady days of the pre-2008 credit crisis, private equity firms and other companies racked up more than $700 billion of risky, high-yield corporate debt to finance buyouts and other transactions. Those loans start coming due beginning in 2012 and there is some concern about the debt market's ability to absorb them, according to a New York Times article.
On top of the corporate debt, the U.S. government is projected to borrow about $2 trillion in 2012 to fund its deficit. When you combine the financing needs of the private sector with the government's needs, 2012 may turn out to be a pivotal year. If the debt markets have trouble handling all this debt, one outcome might be a rise in interest rates. If interest rates were to rise precipitously, that could hurt corporate earnings, and, ultimately, stock prices. This debt overhang will likely need to be resolved before the stock market can reach a new all-time high.

Weekly Focus – Think About It
"Valuation matters. Over periods of decades, the average rarely happens; above-average returns occur when P/E ratios start low and rise; below-average returns occur when P/E ratios start high and decline." --Ed Easterling, author of Unexpected Returns: Understanding Secular Stock Market Cycles
Mar 21, 2011 Weekly Commentary
Update on World Events The enormity of the unfolding tragedy in Japan has saddened the world. We have never seen a triple tragedy like this with an earthquake, a tsunami, and a nuclear disaster all hitting one country at the same time. Like many others, we are hoping and praying for the Japanese people that their situation will improve soon.
As your advisor, we wanted to share with you a few thoughts about the current state of the world and how recent events in Japan, Libya, and elsewhere are affecting our thinking.
It seems like our world has been hit with an unusually large number of "black swan" events over the past few years. Black swan events are negative events that were once thought to be highly improbable, but actually turn out to happen every few years.
Here's a list of events in just the past 15 years that might qualify as "black swans:"
• The late 1990s internet bubble and resulting crash
• The 2001 terrorist attacks
• The early 2000s real estate bubble and resulting crash
• The 2004 Indian Ocean earthquake and resulting tsunami that killed over 200,000 people
• The 2007-2009 Great Recession, subprime crisis, and related economic problems
• The ongoing rebellion in the Middle East and North Africa
• The ongoing triple tragedy in Japan
With today's interconnected world and global communication system, we see these events unfold in near real-time and that amplifies their effect on our psyche. As a result, we have a tendency to think "this is the big one" that will takeout the world economy. However, unless the world is coming to an end -- which we don’t think is happening -- then the latest situation in Japan, which is very tragic on a human level, will probably not cause a worldwide recession.
Whenever these black swan events occur, it's important to remember that while we can't predict when they will occur or what the event will be, we do know that they will happen and we try to plan for that in how we manage your account.
It’s interesting to note that when you get to the core of what "the market" is, it's an assemblage of people. When disasters happen, such as in Japan, Haiti, Indonesia, or the terrorist attacks, "the market" tends to react almost in sympathy with the external tragedy. Over time, as the external tragedy heals, "the market" tends to heal as well. This symmetry adds an almost human element to what many consider to be a cold and calculating "market."
Today, we have our hands full with the evolving situations in Japan, Libya, and the Middle East. On top of that, we still have the simmering sovereign debt issues in Europe and the economic malaise in the U.S. The uncertainty and the day-to-day developments surrounding these situations are affecting the markets and causing volatility to spike.
Over time, though, as these situations move from crisis to closure, we expect the world will continue its march toward progress and that the markets will eventually resume their positive momentum. Japan's own history of recovering from World War II gives us an example of their resilience. For example, The Wall Street Journal stated that, "...from 1950 to 1960, in the heyday of the "economic miracle" that followed World War II, Japanese stocks returned an annual average of 27% after inflation." We're not predicting that type of return over the next 10 years; rather, it just shows that Japan has bounced back from severe devastation in the past.
As humans, we are keenly aware of the pain and suffering that these tragic world events inflict upon our collective community. As advisors, we try to ensure that this pain and suffering doesn’t spill over to your portfolio.

Weekly Focus – Think About It
"Perhaps they are not stars, but rather openings in heaven where the love of our lost ones pours through and shines down upon us to let us know they are happy." --Eskimo Proverb
Mar 18, 2013 Weekly Commentary
The Markets


Like winded runners, stock markets slowed at the end of last week.

Since the start of the year, the Dow Jones Industrials Index has risen by almost 11 percent, hurdling past new highs several times. The S&P 500 Index gained 9.4 percent over the same period. The index moved higher in 10 of the past 11 weeks and finished last week just shy of its all-time high. However, the Dow and the S&P's momentum - and that of some other U.S. stock markets - slowed on Friday as stronger economic data was offset by an unexpected slump in consumer sentiment.

Economists expected the Thomson Reuters/University of Michigan consumer sentiment index - which gauges Americans' feelings about their current financial health, the health of the economy over the shorter-term, and growth prospects for the economy over the longer-term - to move higher in March. Instead, the index fell from 77.6 to 71.8, reaching its lowest level since December 2011. Markets fell on the news even though the negative results contradicted those of other consumer confidence measures, such as Bloomberg's Consumer Comfort Index which has moved higher for six consecutive weeks.

The consumer sentiment surprise also pushed Treasury yields down. Yields on benchmark 10-year Treasury notes fell to 2 percent. The Treasury market remains concerned that stronger economic data could lead the Federal Reserve to change its policy on quantitative easing. The Federal Reserve's next Open Market Committee meeting is next week, and may provide further insight to the matter.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


THE MIDDLE CLASS IS GROWING. In the United States, households that earn between $35,600 a year and $94,600 a year are considered to be middle class. That's about 40 percent of U.S. households (another 40 percent earn less than the middle class and 20 percent earn more). Scholars and pundits have noted that job insecurity and stagnant income levels have weakened the middle class in the United States during the past few years, but that’s not what's happening in the rest of the world.

The global middle class has been growing and is expected to continue to grow over the next few decades. The Organization for Economic Development defines the global middle class as including people earning between $10 and $100 a day with purchasing power parity. (Purchasing power parity is the theory that currency exchange rates should adjust so the same goods cost the same in different countries. It's what the Big Mac Index measures.) By 2030, according to Ernst & Young, the global middle class is expected to more than double, adding three billion new members. These up-and-comers primarily will live and work in rapidly-growing countries.

As the global middle class grows so should its spending power. Between 2011 and 2030, middle class demand for goods and services is expected to increase from $21 trillion to $56 trillion. Forty percent of that spending will be done by the burgeoning middle class in Asia, including China and India. According to Forbes, these consumers are creating demand for all kinds of goods and services including cosmetics, automobiles, cell phone minutes, personal banking, and retirement planning.

For many decades, consumer spending has been an important driver behind economic growth in the United States. It's likely to play a significant role in the economic growth of emerging countries, too. As developing countries become developed countries, interesting opportunities for investment are likely to emerge.


Weekly Focus - Think About It

"A man who carries a cat by the tail learns something he can learn in no other way."
--Mark Twain, American author and humorist

Sources:
http://finance.yahoo.com/news/wall-st-week-ahead-big-010307323.html
http://www.bloomberg.com/news/2013-03-15/michigan-consumer-sentiment-decreased-to-71-8-in-march-from-77-6.html
http://www.investopedia.com/terms/c/consumer-sentiment.asp#ixzz2NoAVhyIC http://www.nasdaq.com/article/bond-report-treasurys-gain-after-consumer-sentiment-surprise-20130315-00494#ixzz2NoE2cuQH
http://consumerfed.org/news/594target=_blank
http://siteresources.worldbank.org/EXTABCDE/Resources/7455676-1292528456380/7626791-1303141641402/7878676-1306699356046/Parallel-Sesssion-6-Homi-Kharas.pdf (Page 2)
http://www.oecd.org/dev/44457738.pdf (Page 6, Abstract section and Page 27)
http://www.economist.com/blogs/freeexchange/2012/06/purchasing-power-parity
http://www.ey.com/GL/en/Newsroom/News-releases/Press-Release_Middle-class-purchasing-power-set-to-triple-by-2030-world-wide-due-to-rapid-growth-in-emerging-markets
http://www.forbes.com/sites/investopedia/2012/12/06/the-finances-of-the-global-middle-class/ (Last paragraph)
http://www.stlouisfed.org/publications/re/articles/?id=2201
http://www.brainyquote.com/quotes/authors/m/mark_twain.html#TvIMjBVkLGIr23fr.99

Fisher Financial Partners, Inc. offers securities through Regal Securities, Inc., member FINRA/SIPC. Advisory Services offered through Regal Advisory Services, Inc. Fisher Financial Partners, Inc. is not affiliated with Regal Securities, Inc. or Regal Advisory Services, Inc.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
Mar 17, 2008 Weekly Commentary
The Markets
The Wall Street roller coaster continues...
On Monday, we heard the sad news about the fall from grace of former New York Governor Eliot Spitzer. That kept many Wall Streeters (and much of the country) riveted until his resignation announcement on Wednesday, March 12th. Sandwiched in there on Tuesday, the Federal Reserve pleased investors with an unorthodox move that could add up to $200 billion in new liquidity to the banking system, according to a March 11th article at MarketWatch.com. That news helped send stocks into orbit on Tuesday as the Dow Jones Industrial Average soared more than 400 points its fourth largest point jump in history. With that gain, some market participants dared to whisper that perhaps the market had hit bottom and was ready to start a new bull market.
On Wednesday, the market ended slightly lower as crude oil prices broke the $110 per barrel mark and the dollar continued its descent. Thursday began on a grim note as news of a potential hedge collapse left traders in a sour mood, gold topped $1,000 per ounce for the first time and the Dow Jones dropped more than 200 points at one point, according to The New York Times. However, that was replaced by euphoria later in the day as Standard & Poors released a report suggesting that the end of subprime write-downs is in sight for financial firms. By the end of the day, the Dow had closed slightly higher.
Fridays stunning announcement from investment bank Bear Stearns that its liquidity position in the last 24 hours had significantly deteriorated" shocked Wall Street and helped send the Dow Jones Industrial Average to a loss of nearly 200 points for the day, according to The Wall Street Journal. Just four days earlier, Bear Stearns CEO Alan Schwartz proclaimed, Ridiculous, absolutely ridiculous, in response to rumors of a liquidity crunch at the firm. Decades ago, Franklin Roosevelt said, The only thing we have to fear is fear itself. Unfortunately, that seems to be true for Bear Stearns. The rumors of liquidity problems caused fear among Bears clients and lenders and it turned into a self-fulfilling prophecy.
Despite all the ups and downs, by the end of the week, the Dow Jones Industrial Average finished in positive territory. Whew! While we cannot predict when the market will turn around and start a new bull market, we have every confidence that it will and we continue to monitor developments very closely.

AS THE CREDIT CRUNCH CONTINUES, the Fed keeps adding liquidity to the financial system. However, as quoted in The Wall Street Journal, Bob Eisenbeis, chief monetary economist for Cumberland Advisers, said its no longer an issue of liquidity thats plaguing the markets, Rather, there is uncertainty about the underlying quality of assets which is a solvency issue, driven by a breakdown in highly leveraged positions.
This breakdown in highly leveraged positions initially stemmed from rising defaults in subprime mortgages. That cascaded into other areas of the financial system and is now reaching into areas that, heretofore, were considered safe. The meltdown of Bear Stearns also suggests that were moving from a financial crisis to a crisis of confidence. When clients and lenders lose confidence in a firms abilities to meet its financial obligations, they can pull the plug quickly.
While that may sound rather dire, we need to keep in mind that for the prepared investor, fear may breed opportunity. As nervous investors throw in the towel, seasoned investors with a broad perspective and intestinal fortitude may profit from the tumult. Sir John Templeton, considered by many to be one of the greatest investors of the 20th century, said, The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell." That contrarian thinking enabled him to build a highly successful investment management company that he eventually sold in 1992 for nearly $1 billion.
Of course, nobody rings a bell and says, Hear ye, hear ye, now is the time of maximum pessimism so back up the truck and start buying. The chances of identifying the bottom of the market and jumping in at that exact moment are slim to none. However, being a successful investor does not require perfect timing. It requires a strategy of buying low and selling high.
Interestingly, when it comes to the financial markets, many investors do just the opposite. They want to sell their securities when prices are relatively low (e.g., 2002 and 2003) and then, buy securities when times are euphoric and prices are historically high (e.g., 1999 and early 2000). Thats a recipe for whiplash and poor returns.
The current confidence breakdown may eventually lead to a great buying opportunity. As your advisor, we continue to monitor the markets and do what we think is best for our clients based on our experience and based on our clients goals, objectives, and risk tolerance.

Weekly Focus Bragging Rights
If you had a few hundred million dollars of spare cash, how would you spend it? Well, some of the worlds most well-heeled billionaires are spending their spare change on owning the worlds largest yachts. A few years ago, Paul Allen, co-founder of Microsoft, built Octopus, his 417-foot floating palace. Not to be outdone, a short time later, Larry Ellison, co-founder of Oracle, christened Rising Sun, his 454-foot behemoth. But, those pale in comparison to Dubai, the new 525-foot mega-yacht owned by, who else, the ruler of Dubai. Of course, records were meant to be broken. The New York Times reported a German shipbuilder is putting the finishing touches on Eclipse, the 531-foot home away from home that is reportedly being built for a Russian billionaire.
So, how much does a 500-foot yacht cost? Well, if you have to ask, thats right, you probably cant afford it! But, heres the numberabout $650 million, according to an estimate by Burgess, a company that helps owners build and charter yachts.
Mar 16, 2009 Weekly Commentary
The Markets It's about time.
Last week, the stock market, as measured by the S&P 500 index, staged its third-largest weekly gain since World War II, according to Reuters. The gain was partially attributed to the following good news:
• Banking behemoths Citigroup, Bank of America Corp., and JPMorgan Chase & Co., all announced that they were profitable in the first two months of 2009, excluding one-time charges. Shares of Citigroup and Bank of America Corp. responded by rising 73% and 83% respectively for the week, according to Associated Press.
• General Motors said it wouldn't need the latest $2 billion installment of bailout money because its cost-cutting plan was taking hold, according to Associated Press.
• The widely watched Reuters/University of Michigan consumer sentiment poll ticked up slightly in early March, according to MarketWatch.
• The Commerce Department reported that February retail sales were not as bad as economists feared and the January numbers were revised substantially upward.
• General Electric received a credit rating cut last Thursday, but it was not as deep as some expected and the stock rose 13% that day, according to The Wall Street Journal.
• A number of well-known market analysts, who had previously been stock market bears, adopted a more bullish posture last week. This list included Doug Kass, Marc Faber, Steve Leuthold, and Barry Ritholtz, according to Yahoo! Finance.
• Prices for copper and scrap steel have risen recently, which suggests there's demand from manufacturers, according to The Wall Street Journal.
• Oil prices are up 23% in the last four weeks on signs that demand may be firming, according to The Wall Street Journal.
So, if you look hard enough, you can find reasons for optimism even amidst the despair. Well be watching for more clues this week to see if this is just a blip or the start of something big. Let's hope for the latter.

HOW DO YOU DETERMINE THE DIFFERENCE BETWEEN a bear market rally and the start of a new bull market? Last week's huge 10% rally still left the S&P 500 index slightly more than 50% below its October 2007 all-time high. Can we confidently say that we're now off to the races and we'll start reeling in that 50% decline?
Reasonable people can certainly disagree on whether last week's move is a head fake or the real deal. Let's look at some history to see if it will help us reach a conclusion. Comparisons to the Great Depression seem to abound these days so let's start there and see if there were any head fakes. All data comes from Bespoke Investment Group.
The Dow Jones Industrial Average reached a peak of 381 on September 3, 1929. Few people had any idea what was to unfold next. Just 71 days later, the Dow had plummeted 48% and the stock market crash was in full swing. However, the Dow then turned around and by April 17, 1930, it had soared 48%. Case closed – we're now in a new bull market – right? Not quite.
By December 16, 1930, the Dow turned around again and dropped 46%. But wait, just 70 days later, the Dow was up 23%. Hold on, 98 days later, it was down 37%. But don't despair, 31 days later it was up 28%. Dizzy yet? Ninety-four days later, it was down 44%. We're far from done, though. Just 35 days later, the Dow was up 35%. And 57 days after that, it was down 39%. No need to worry, though, because 63 days later, it was up 25%. Oops, 122 days later, it was down a whopping 54%. Then we received a huge turnaround. Just 61 days later, the Dow was up 94%. At this point, it's now September 7, 1932, and after all these pops and drops, the Dow is down 79% from its September 3, 1929, all-time high. To prevent boring you with more numbers, over the next two years, the Dow experienced five more swings of 20% or more. Whew!
As you may have concluded from just looking at the large number of 20% moves up and down during the Great Depression, there were many head fakes interspersed with substantial rallies.
So, back to the question at hand, how do you determine the difference between a bear market rally and the start of a new bull market? Answer: you can't in real-time; instead, you have to wait until substantial time has passed and you can place the market’s moves in historical context.

Weekly Focus – Think About It
"As your faith is strengthened you will find that there is no longer the need to have a sense of control, that things will flow as they will, and that you will flow with them, to your great delight and benefit."
-- Emmanuel Teney
Mar 15, 2010 Weekly Commentary
The Markets
The American consumer is not dead.
Last week, a report from the Commerce Department showed a surprising increase of 0.3% in February U.S. retail sales compared to the month before. That may not seem like much of an increase, but it was much better than the drop of 0.2% expected by economists surveyed by Bloomberg. Importantly, it's also the fourth rise in the past five months and represents an increase of 3.9% over the year-ago period.
So, how can consumers ramp up spending when unemployment is so high? Barron's magazine pointed out a few reasons why this is occurring.
First, it is not unusual at this stage of the recovery. "The last time the unemployment rate broke double digits, during the deep recession of 1981-82, consumer spending also was increasing," according to Barron's.
Second, the government's February 2010 index of aggregate weekly payrolls was less than 1% below the number in February 2009. So, even though unemployment is high, total payroll income hasn't dropped dramatically in the last 12 months.
Third, the stock market has rallied substantially since a year ago. As a result, the "wealth effect" from a rising stock market helped consumers feel a bit wealthier and loosened their purse strings.
And, let's face it, Americans love to shop!
When you combine rising consumer spending with government stimulus and loose monetary policy, you have a recipe for rising stock prices. And, as if on cue, last week, the S&P 500 hit a new 17-month high, according to CNBC.

THE HARDER THEY FALL, the higher they rise. Would it surprise you to know that the worst stocks during the bear market that ran from October 9, 2007 to March 9, 2009 turned out to be--by far--the best performing stocks over the next 12 months?
Bespoke Investment Group did an interesting study where they took the S&P 500 stocks and ranked them from 1 to 500 with 1 being the worst performer and 500 being the best performer during the October 9, 2007 to March 9, 2009 bear market. Then, they sliced this ranking into deciles, with decile 1 being the 50 worst performers, decile 2 the next 50 worst performers all the way to decile 10, which were the 50 best performers.
They discovered that decile 1 (the 50 worst performing stocks during the bear market) turned around and rose, on average, 371% during the next 12 months that ended March 9, 2010. Decile 2, the next 50 worst performers, rose 184% over the ensuing 12 months. By contrast, decile 10, the 50 best performing stocks during the bear market, only rose 30% over the following 12 months. Essentially, the worst stocks during the bear market performed the best during the bull market and vice versa.
The study also showed that the average change of all stocks in the S&P 500 was 122% over the 12 months following the March 9, 2009 low.
This study points out one reason why understanding human emotion is an important factor in successful investing. Think of it this way: on March 9, 2009, at the bear market low, would you have been enthusiastic about buying stocks that had declined 80-90% over the previous 17 months? Probably not because your emotions would have been so rattled, yet, those were the types of stocks that turned out to be the best performers over the next 12 months, according to Bespoke Investment Group.
As the last few years have shown, successful investing sometimes requires that you gather your courage and do what seems most frightening because the point of maximum "frightening" may also be the point of maximum profit potential.

Weekly Focus – Think About It
"I learned that courage was not the absence of fear, but the triumph over it. The brave man is not he who does not feel afraid, but he who conquers that fear."
--Nelson Mandela
Mar 14, 2011 Weekly Commentary
The Markets "It takes a licking and keeps on ticking" was a memorable jingle for Timex watches and it seems like an apt description of the U.S. financial markets, too.
Despite absorbing numerous "licks" over the past couple years, the financial markets have been remarkably resilient. Here are a few of the blows they’ve been able to withstand:
• Rebellion in the Middle East and North Africa
• Oil prices above $100 per barrel
• Woeful housing market
• Banks sitting on billions in underperforming loans
• European sovereign debt mess
• Projected U.S. budget deficit of $1.5 trillion
• Unemployment rate at 8.9%
On top of all those concerns, the devastating Japanese earthquake will reverberate emotionally and economically for a long time. And, just like an earthquake, you never quite know what will trigger a selloff in the financial markets. The headwinds mentioned above have not prevented the S&P 500 index from nearly doubling off its March 9, 2009 closing low, according to Reuters. However, at some point, it’s possible that investors will decide that these headwinds do matter and that could trigger a correction in the markets.
For now, the financial markets keep on ticking and we keep on monitoring and managing your investments as best we can.

HUMANS ARE NOT RATIONAL DECISION MAKERS and that’s one reason why financial markets don’t always behave the way we’d expect them to. For example, you could put together a well-researched, well-reasoned analysis of why “xyz” should happen in the financial markets. Yet, frequently, “xyz” doesn’t happen as expected. Why? One reason is that the financial markets are full of “uncertainty” and, as Jonah Lehrer wrote in a recent Wall Street Journal piece, “the mere whiff of uncertainty can dramatically skew our decision-making,” and turn us into non-rational decision makers.
Lehrer points to a 2006 study by economists Uri Gneezy, John List, and George Wu that asked people how much they would pay for various items. In the first test, people were asked how much they would pay for a $50 and $100 Barnes & Noble gift certificate. The study showed people would pay, on average, $26.10 for the $50 certificate and $45 for the $100 one.
Things got interesting, though, when the economists changed the offer and injected some “uncertainty” into it. Here’s how Lehrer described it:
Everything changed, however, when the economists introduced a little uncertainty into the marketplace. Instead of bidding on guaranteed gift certificates, the subjects were offered lotteries in which they were sure to win one of the options, but didn't know which one. A sample lottery, for instance, gave the subjects a 50% chance of winning the $100 Barnes & Noble gift certificate and a 50% chance of winning the $50 one. If people were rational agents, they should have offered to pay between $26.10 and $45 for a chance to win. Instead, the subjects were willing to pay only $16. This is the curse of uncertainty. It makes every possibility seem less appealing.
The example above shows how even a little uncertainty in a simple gift certificate situation can cause humans to make non-optimal decisions. Carry that same behavior over to the complex and uncertain nature of the financial markets and you can understand why the markets don’t always perform as one may expect.
Unless human behavior changes, we won’t suddenly turn into rational human beings. Consequently, we should expect financial markets to occasionally confound the best laid plans.

Weekly Focus – Thinking About Our Friends in Japan
"Frightening beyond belief. I have no words." --Japanese earthquake survivor
Mar 12, 2012 Weekly Commentary
The Markets An important key to support the stock market is starting to fall into place.
You may have guessed that key is JOBS. Last week, the Labor Department reported an increase of 227,000 new jobs in February. Over the past six months, 1.2 million new jobs have been created – the highest six-month total since 2006. More jobs could lead to more spending which could boost corporate sales, earnings, and, possibly, stock prices.
While the recent employment numbers look pretty good, leave it to Fed Chairman Ben Bernanke to rain on the parade. In testimony to Congress on February 29, he said, “Notwithstanding the better recent data, the job market remains far from normal: The unemployment rate remains elevated, long-term unemployment is still near record levels, and the number of persons working part-time for economic reasons is very high.”
On a different note, last week marked the three-year anniversary of the March 9, 2009 stock market low. Since the low:
- The S&P 500 index has risen just over 100 percent
- Corporate operating earnings per share have risen just under 100 percent
- Corporate revenue per share has risen a meager 1 percent
Source: Barron’s
So, how can corporate earnings nearly double while corporate revenue barely budges? The answer… cost cutting – and a big chunk of the cost cutting came from whacking jobs. Even though we’ve added over a million jobs in the past six months, we’re still down about six million jobs from the peak, according to Barron’s.
The good news is the recent spurt in job growth may suggest that corporations have about reached the limit of cutting jobs and now have to add staff to support even small gains in revenue growth.

THE AGGREGATE NET WORTH OF U.S. HOUSEHOLDS WAS $58.5 TRILLION at the end of last year, according to data from the Federal Reserve Flow of Funds report. To put that number in context, household net worth peaked at $66.8 trillion in the third quarter of 2007. It hit a five-year low of $50.5 trillion in the first quarter of 2009 – the same quarter as the bear market low, according to Bloomberg.
The aggregate net worth of U.S. households is still $8.3 trillion below the all-time high set back in 2007.
Net worth is the difference between total assets and total liabilities. Investment holdings and real estate typically account for the bulk of households’ assets so any change in the financial or real estate markets can cause big swings in net worth.
Parsing the data a bit further shows these two interesting numbers:
1. Household debt as a percent of disposable income fell to 113 percent at the end of last year. This ratio peaked at 130 percent in 2007 and has been steadily declining. It’s good to see this number drop because it means households are deleveraging and have more income to support their debt level, according to The Wall Street Journal.
2. Debt payments as a percent of households' after-tax income (the debt-service ratio), fell to a 17-year low of 11.1 percent. Again, a lower number is better because this means consumers are allocating less of their monthly income to pay off debts. With more money left over, they can spend it on things that could propel the economy.
Some of the decline in these debt ratios may be due to the debts being written off as opposed to consumers actually having the money to pay them off. Either way, household balance sheets seem to be improving.
We don’t want to get too caught up in numbers here because that can distract from the key point which is this – consumers are deleveraging, they’re spending less of their income paying off debts, and that may bode well for the economy.

Weekly Focus – How to Innovate
Some of the most innovative new ideas are developed by simply connecting an existing idea to something new says author Jonah Lehrer. For example, the Wright Brothers were bicycle manufacturers whose first plane was akin to a bicycle with wings. Johannes Gutenberg used his knowledge of wine presses to create the printing press. And, more recently, the founders of Google took the existing idea of ranking the importance of academic articles by the number of citations and applied it to their search engine algorithm. The result – web pages that have lots of other web pages linking to it tend to score high in a Google search.
The next time you need to come up with a creative solution to a problem, try taking an idea from an unrelated field and apply it to your situation. Who knows, it might become the next billion-dollar idea!
Mar 11, 2013 Weekly Commentary
The Markets


During periods of strong market performance, like the one we’ve experienced since the end of last year, it’s important to remember that markets ebb and flow over time. Since December 31, 2012, the Dow Jones Industrial Index has gained 9.9 percent and the Standard & Poor’s 500 added 8.8 percent. Last week, the Dow reached highs last seen during 2007, and the S&P 500 ended the week less than one percent from its record high, which was also realized during 2007.

While the strong performance of U.S. stock markets has given investors reason to smile, significant economic challenges remain. The effect of sequester spending cuts on the American public and economic growth remains relatively unknown. Also, U.S. earnings growth appears to be slowing and that could affect stock prices. (Earnings are a measure of a company’s profitability and influence its share price.)

Global markets were largely up last week, too, as investors seemed to celebrate stronger U.S. and Chinese economic data, as well as the fact that Central banks in Europe, the United Kingdom, Australia, Japan, and Canada met and left their monetary policies unchanged.

In the Eurozone, economic growth remained relatively weak and inconsistent. While the European Central Bank has stepped up to help countries affected by poor demand for bonds, insufficient bank-to-business lending has negatively affected economic growth, especially in southern Europe, leaving some countries mired in recession.

In the United States, yields on 10-year Treasuries rose higher last week despite Federal Reserve assurances that it will continue to pursue its current monetary policy for some time.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


IS A WEDDING IN YOUR FUTURE? IF SO, PREPARE YOURSELF. Between the planner, venue, food, flowers, cake, dress, drinks, photographer, videographer, invitations, programs, and all the rest, you’re likely to be hearing a lot of this: Ka-ching! Ka-ching!

More than $50 billion is spent on weddings in the United States each year. According to the 2012 Wedding Report, the average wedding has about 133 to 143 guests and costs more than $25,000, not including the honeymoon. The good news is the average cost of a wedding in 2011 was less than the average cost in 2007. The bad news is that, according to CostofWedding.com, the cost of any wedding could increase by 50 to 100 percent if the planners choose designer labels, popular event locations, custom products and services, or if they invite significantly more guests.

Here are a few tips that may help ensure wedding costs don’t spiral out of control:

 Establish a budget. Set a budget for the wedding, but make sure you build in a cushion of 10 to 15 percent for cost overruns, just as you would if you were putting an addition on your house or remodeling.

 Understand venue and reception costs. When negotiating the cost of your reception, it’s important to ask for the per person cost, all-inclusive. If you’re given an allinclusive price and you find the words ‘additional costs may be incurred’ or ‘plus the cost of setup and delivery’ in your final contract, ask what those costs are, specifically, and be prepared to negotiate.

 Make smart liquor choices. The drinks served at the reception often are a significant expense. Many venues charge for every bottle opened. To save on the cost, you could opt to serve beer, wine, and champagne for toasts. Alternatively, you could offer signature cocktails that require a single type of liquor, which can help limit the number of bottles opened.

After evaluating costs, you may decide that the best option is for the happy couple to elope, marry in an exotic locale, and celebrate with a big party when they return. If that’s not an option, make sure to take advantage of the plentiful online resources available.


Weekly Focus – Think About It

“The greatest happiness of life is the conviction that we are loved; loved for ourselves, or rather, loved in spite of ourselves.”
--Victor Hugo, French poet and novelist

Sources:
http://finance.yahoo.com/news/dow-record-not-necessarily-buy-021621887.html
http://www.npr.org/2013/03/10/173837176/double-take-toons-sequester-effects
http://www.investopedia.com/terms/e/earnings.asp#axzz2N9Euzxvx
http://online.barrons.com/mdc/public/page/9_3063-economicCalendar.html (click on U.S. & Intl Recaps and then click on “Keeping the status quo for now” under “International Perspective”)
http://www.economist.com/news/finance-and-economics/21573125-dearth-lending-blights-prospectsrecovery- southern-europe-still
http://online.barrons.com/mdc/public/page/9_3063-economicCalendar.html (click on U.S. & Intl Recaps and then click on “Punch Bowl and Employment” under “Simply Economics”)
http://www.theweddingreport.com/wmdb/index.cfm?action=db.viewdetail&t=s&lc=00&setloc=y&brand=c w http://www.costofwedding.com/
http://www.costofwedding.com/index.cfm/action/search.weddingcost/zipcode/00000?sg_sessionid=13 62961992_513d2648918947.23893396&__sgtarget=- 1&__sgbrwsrid=b994e000041383b6c931e14f9e79d51d#sgbody-1179037 (you may have to Refresh the page to view the information)
http://www.dummies.com/how-to/content/tips-for-sticking-to-a-wedding-budget.html
http://www.bridalguide.com/planning/wedding-budget/hidden-wedding-costs
http://www.realsimple.com/weddings/budget/save-money-wedding-00000000006530/page3.html
http://www.brainyquote.com/quotes/authors/v/victor_hugo.html

Fisher Financial Partners, Inc. offers securities through Regal Securities, Inc., member FINRA/SIPC. Advisory Services offered through Regal Advisory Services, Inc. Fisher Financial Partners, Inc. is not affiliated with Regal Securities, Inc. or Regal Advisory Services, Inc.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
Mar 10, 2014 Weekly Commentary
The Markets

Okay, so Russia sending troops into Ukraine's Crimean Peninsula did unsettle world markets. At least it did on Monday.

Like a diver plummeting off a cliff, markets in various parts of the world lost value last Monday as investors responded to the possibility of war between Ukraine and Russia. The New York Times said it like this:

"The escalating crisis in Ukraine created turmoil in global markets on Monday, hitting stocks from Wall Street to Ukraine and causing a spike in oil and natural gas prices that could reach into consumers' wallets. But despite fears that the conflict between Russia and the West over Ukraine could shift into a military confrontation, analysts said there was little risk of global financial contagion or of major blowback to Western economies.

Perhaps that was the reason markets generally did so well during the rest of the week. That and the fact Russian President Vladimir Putin seemed to pause for a breath and, possibly, a reconsideration of strategy after the Russian stock market lost about $58 billion on Monday. (That's more than the cost of the Sochi winter games.) There were other economic consequences, too. A rapid decline in the value of the ruble led to a sharp rise in short-term Russian interest rates, and the Russian central bank was compelled to spend about $12 billion defending the country's currency.

Meanwhile, back in the United States, the bull market celebrated its fifth birthday. During the last five years, the value of investors' holdings in U.S. stocks has increased by about $16 trillion, according to Wilshire Associates as reported in Barron's. As if that weren't remarkable enough, last week the Federal Reserve reported the net worth of U.S. households rose by nearly $3 trillion during the last quarter of 2013. It's enough to make you wonder whether the cost of quantitative easing, which expanded the Federal Reserve's by more than $3 trillion, was worth it.


WHERE ARE THEY NOW? Remember that island in the Mediterranean that was in turmoil about a year ago and turned to the European Union (EU) for a bailout? The situation in Cyprus was a bit confounding because the country was growing relatively robustly and had a small budget deficit. The issue was the country's banks which were bigger than its domestic economy. Cyprus had about 8 trillion euros in deposits and only 4.5 trillion euros of annual government revenues, according to BCA Research cited in The Economist. Since bank deposit guarantees are only as good as the country providing them, Cyprus needed some help.

Eurozone leaders responded to the Cypriot bailout request with demands for austerity and reforms - pretty much the same thing they'd been requesting from other bailout recipients - but a 'bail-in' also was part of the package. What is a bail-in? The EU required debt holders and uninsured depositors help absorb bank losses and fork up new capital. Although the idea was initially rejected by the Cypriot parliament, the government capitulated relatively quickly. The Economist described it like this:

"At first, a raid on insured [bank] deposits was envisaged, though ultimately they were spared and the main victims were uninsured depositors - a decision made easier by the fact that many of them were Russians. But getting creditors both to absorb losses and to recapitalize the country's biggest bank (which also had to absorb the second-biggest and even more comprehensively bust bank) is not proving to be a great success."

How unsuccessful has it been? The Cypriot economy contracted by about 5 percent in 2013 and is expected to continue to wither this year. Unemployment in the country is at 17 percent.

There are several lessons that can be learned from events in Cyprus, according to The Economist: 1) It's important to have a state-backed 'bad' bank where bad loans can be held and dealt with over the long term; 2) Forcing uninsured depositors to take a hit helped protect taxpayers, but it also damaged public confidence in banks; and 3) Fiscal policy makers need pragmatic and flexible solutions because every banking crisis is different.

Weekly Focus - Think About It

"If your actions inspire others to dream more, learn more, do more, and become more, you are a leader."
--John Quincy Adams, Sixth President of the United States

Sources:
http://www.nytimes.com/2014/03/04/business/international/global-stock-market-activity.html?_r=0
http://online.barrons.com/article/SB50001424053111904628504579417220757475770.html?mod=BOL_hp_we_columns#articleTabs_article%3D1 (or go to
http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/03-10-14_Barrons-Happy_Birthday_Bull-Footnote_2.pdf)
http://www.economist.com/blogs/schumpeter/2013/03/bail-out-cyprus-0?zid=307&ah=5e80419d1bc9821ebe173f4f0f060a07
http://www.economist.com/blogs/buttonwood/2013/03/euro-zone-crisis-2?zid=307&ah=5e80419d1bc9821ebe173f4f0f060a07
http://www.economist.com/news/finance-and-economics/21574041-there-more-one-way-savers-lose-out-financial-repression-levy?zid=307&ah=5e80419d1bc9821ebe173f4f0f060a07
http://www.economist.com/news/finance-and-economics/21598649-bail-out-working-bail-isnt-injured-island
http://www.economist.com/news/leaders/21598645-getting-creditors-not-taxpayers-rescue-banks-seemed-good-idea-it-has-not-worked
http://www.brainyquote.com/quotes/quotes/j/johnquincy386752.html
Mar 10, 2008 Weekly Commentary
The Markets
The American dream of home ownership is causing some people a lot of nightmares.
Stocks took it on the chin again last week as weak housing and credit data helped keep investors in the doldrums. According to data from the Mortgage Bankers Association (MBA) as reported on March 6th by MarketWatch.com, The rate of mortgages entering foreclosure was at its highest level in the history of the MBA's quarterly national delinquency survey and the percent of loans somewhere in the foreclosure process also hit its highest level. While homeowners are having trouble making payments, so are the mortgage lenders. Various mortgage companies made headlines last week when they were unable to meet margin calls and that spooked Wall Street.
Declining home prices also helped contribute to the fact that, Last year marked the first time American homeowners, in the aggregate, owned less than half the value of their houses. Their share of home equity -- the market value of a home minus the size of its mortgage -- dropped to 47.9% in the final three months of 2007, according to data from the Federal Reserve, as reported by The Wall Street Journal on March 7th. By contrast, home equity was more than 80% in 1945.
The weak housing market is proving painful to the stock market. And while the Federal Reserve is using its various levers to try to pull the industry out of its slump and add liquidity to the credit markets, it may be a long and winding road before we can take a victory lap.

DATELINE MARCH 10, 2000. DO YOU REMEMBER THAT DAY? It was a giddy time in the stock market as that was the day the NASDAQ Composite Index closed at an all-time record high of 5,048.62, according to Yahoo! Finance. To show you just how euphoric that time was, the NASDAQ Composite Index rose at a phenomenal average annualized rate of 44.5% for the preceding five years ending March 10, 2000, according to data from Yahoo! Finance. But, then the bubble burst and the NASDAQ Composite Index began a severe decline. Now lets fast forward to last Friday, which is eight years later, and we see that the NASDAQ Composite Index is still 56% below its all-time high, according to Yahoo! Finance. Ouch!
Arent stocks supposed to go up in the long term? Isnt eight years long enough to recover from a bear market? Those are two good questions and well try to answer them.
Yes, historically, stocks have risen in the long term in the United States. According to AIM Investments, the S&P 500 Index (generally considered a broad measure of the U.S. stock market) rose at an average annualized rate of 10.4% between 1926 and 2007. While thats the average annual total return over a long period, the actual return in any given year could be much different. Stock market returns are generally quite lumpy. For example, the S&P 500 rose 37% in 1995 and declined 26% in 1974, according to AIM Investments.
While the NASDAQ Composite Index is still down 56% from its March 10, 2000, close, the S&P 500 is actually down only 7% from its March 10, 2000, close, according to Yahoo! Finance (although the S&P 500 did hit a new all-time high back on October 9, 2007). Why the big gap? Part of the reason is diversification. Even though the NASDAQ Composite Index contains more than 3,000 securities, many of them are technology related, dont pay dividends and, on average, they are smaller companies compared to the S&P 500 Index.
You see, diversification is not simply achieved by the number of stocks you own, its achieved by owning an array of securities with different risk and return profiles that respond differently to economic circumstances. So to answer the first question, yes, stocks have historically gone up, but we need to make sure that we own well diversified portfolios.
Concerning the second question, under normal circumstances, we would expect eight years to be long enough to get back to even from a bear market. For example, according to a March 7th article by Mark Hulbert at MarketWatch.com, it took about four years for the DJ Wilshire 5000 Index (the broadest index for the U.S. stock market) to reach an all-time high after touching its 2000-2002 bear market low set on October 9, 2002. Hulbert also pointed out that it took only 17 months for the DJ Wilshire 5000 Index to regain its all-time high after the October 1987 stock market crash. So, whats the problem with the NASDAQ Composite Index? Why is it still so far off its all-time high? In a word diversification (or more accurately lack thereof).
Generally speaking, the NASDAQ Composite Index is not a well-diversified, broad-based index. Its heavily weighted toward technology stocks and many of those stocks are still struggling to regain their former, late 1990s glory days.
The bottom line is diversification is critical to successful investing. But, not just any old diversification; it has to be intelligent diversification with a variety of asset classes that are carefully constructed. The good news about investing today is that we have a broader range of investment vehicles and asset classes to choose from compared to a few years ago. While no guarantee against loss, we try to build intelligent diversification into our clients portfolios to help minimize the pain when financial markets are in disarray .. as they seem to be now.

Weekly Focus Reach Out and Call Someone
Okay, do you remember what you were doing on March 7, 1876? Not likely! Well, that was the day 29-year old Alexander Graham Bell received a patent for the telephone. Can you imagine going a day without using the phone? As a random act of kindness, why dont you pick up the phone today and call someone and let them know how much you appreciate them.
Mar 09, 2009 Weekly Commentary
The Markets As it relates to the financial markets, essentially the only positive thing we can say about last week is that it ended.
The relentless decline in the stock market continued as investors focused on declining earnings, declining jobs, and lingering unhappiness with some of the administration's proposed economic plans. Talk of limiting some deductions for wealthy taxpayers and a cap-and-trade system on greenhouse gas emissions, in particular, seemed to spook investors. Of course, this year's projected $1.75 trillion deficit doesn't help matters, either.
The Dow Jones Industrial Average touched a 12-year low last week, and that's only the third time it's ever happened, according to a MarketWatch article, which cited a J.P. Morgan Chase analyst report. The first time a 12-year low occurred was on April 8, 1932 and the second time was December 6, 1974. MarketWatch pointed out that, "In 1932, the April 8 crossing of a 12-year-old low came three months before the market hit its bottom, while, 42 years later, the December 6 breach marked the exact 1974 low." The good news is, one year after the December 6, 1974 low, the Dow was 42 % higher, according to data from Yahoo! Finance. We would certainly welcome a repeat of that performance!
The Dow has now dropped more than 50 % since its all-time high of 14,164 in October 2007, according to Bloomberg. Clearly, this is not your typical bear market. Please be assured that we are monitoring the situation very closely and we are doing our best to opportunistically take advantage of whatever this market throws at us.

AS AN ADVISOR, one of the earliest lessons you learn is that historically, over a long period of time, stocks have outperformed bonds. For example, from 1926 – 2007, stocks had an average annual total return of 10.4 %, while bonds had an average annual total return of 5.5 %, according to The Vanguard Group. As you can see, stocks significantly outperformed bonds during this long period.
However, over the last 30 years, the situation reversed.
According to a March 6, Bloomberg story, the cumulative total return of bonds over the past 30 years was 1,479 %, while the total return for stocks was a bit lower at 1,265 %. This switch of bonds outperforming stocks over the past 30 years occurred because of the tremendous drop in stocks since October 2007. To confuse things, if we took this measurement at the stock market peak in October 2007, it shows stocks returning 2,845 % and bonds returning 1,156 % since 1979. A bear market sure makes a big difference.
The point we want to make is that diversification, while not guaranteeing a profit or protecting against loss, is a prudent strategy. Stocks may outperform bonds in the very long term, but in the short term—which in this case is 30 years—bonds may outperform stocks. It makes sense to own both because you never know when one will outperform the other.
It's also worth pointing out that there are very few "absolutes" in the investing business. When we have big declines like we've witnessed over the past year, it causes investors to reexamine long-held beliefs about how markets work. This is actually healthy because it forces you to continually upgrade your belief system based on new information. Investors who don't adapt may face major problems.

Weekly Focus – Daylight Saving Time
While it's debatable how much energy is saved by implementing daylight saving time (DST), it's not debatable that DST has an effect on health. A Finnish study last year concluded that DST can disturb people's sleeping patterns and make them more restless at night. Another study published last year found a spike in heart attacks during the first week of DST. The study also concluded that there's a brief, slight dip in heart attacks when DST ends in the fall.
Apparently, the human body does not like a disruption in its sleep pattern.
Mar 08, 2010 Weekly Commentary
The Markets It was one year ago this week that the Standard & Poor's 500 closed at its bear market nadir of 676 on March 9, 2009. Last week, it closed at 1138, which represents a gain of 68% from the year ago low. What insights can we learn from the painful decline to 676 and the rapid rise to 1138?

HIGHLY VOLATILE MARKETS can be great teachers and the last few years offered a great learning environment for those willing to pay attention. Here are a few thoughts to ponder:
 Cracks tend to appear in the dike before the dike breaks. The first cracks that led to the 2007-2009 bear market formed in mid-2005 as the housing market began to cool off and defaults among subprime mortgages began to rise, according to The Federal Reserve and Vanguard. However, early on, the cracks were largely dismissed as Fed Chairman Ben Bernanke told Congress on March 28, 2007 that subprime defaults were “likely to be contained,'' and former Treasury Secretary Hank Paulson said on August 1, 2007, "I see the underlying economy as being very healthy," according to Reuters. Reassured, the stock market continued rising until early October 2007.
 Not all cracks in the dike lead to a major break. This is a really tricky part about investing--how to discern the difference between a cyclical issue and a secular issue. Cyclical issues are short-term blips that don't cause major long-term damage. Secular issues are multi-year problems that left untreated may cause real trouble. Overcompen-sating for the former and under-compensating for the latter is a bad combination.
 When a major break does occur, it can lead to massive flooding. Almost all traditional asset classes declined during the 2007-2009 bear market, so it was hard to find shelter from the storm. Even many of the so called "smart investors," such as hedge funds, discovered that they too were vulnerable to the market's vicissitudes, according to Bloomberg.
 Hundred-year floods seem to happen much more frequently than theory suggests. Just since 1950, the U.S. has experienced 10 bear markets, defined as a drop of 20% or more from the market's previous high, according to Standard & Poor's. Excluding the most recent bear market, the average decline during these bear markets was 31.7%. And, don't forget, on October 19, 1987 the market dropped more than 20%--effectively a bear market in a day! This frequency of large declines makes it difficult to rely on modern portfolio theory as a panacea.
 Dikes can be repaired and the flooding cleaned up. After each of the first nine bear markets since 1950, the stock market went on to reach a new all-time high. We are currently in the 10th bear market so the jury is still out on whether we'll hit a new one again. However, unless you think the world is coming to an end soon, chances are the stock market will regain its previous high. When that new high will happen is subject to fierce debate.
 Bad floods may leave lasting damage--both physical and psychological. After particularly bad investment experiences, some investors yank their money from the market and seek safer pastures. It's akin to people who grew up during the depression and developed a lifelong habit of frugality; they were never quite able to shake the trauma of their early lean years. Financial wounds may heal, but scars persist.
 People continue to build homes in flood-prone areas. The reverse from above is also true. Some people have short investment memories and quickly bounce back into their aggressive investment ways. Rather than learn from the past, they continue to repeat it and hope that they will somehow manage to dodge the next bullet.
With the large rally we've seen since the March 2009 low, we seem to be in the "Dikes can be repaired and the flooding cleaned up" stage. However, given the size of the flood (bear market) we experienced, the clean-up stage could continue for some time and the chance of further flooding still remains.

Weekly Focus – Think About It
"Experience fails to teach where there is no desire to learn."
--George Bernard Shaw
Mar 07, 2011 Weekly Commentary
The Markets It's a heavyweight battle between high oil prices in one corner and strong economic numbers in the other. Which one will win?
Oil still lubricates a significant part of the world economic machine and, at more than $100 a barrel, it could cause the machine to seize up and inflation to rise. Unrest in the Middle East, speculative fervor, and the economic recovery are contributing to oil’s recent strength, according to MarketWatch.
While high oil prices could hurt the economy, we're seeing some strong economic numbers that may suggest the economy is finally getting some traction. Here are a few examples from last week:
• U.S. factory orders in January grew 3.1%, the biggest gain since September 2006, according to MarketWatch.
• Nonfarm payroll employment increased by 192,000 in February and the unemployment rate dropped to 8.9% -- the lowest rate in nearly two years, according to Bloomberg.
• Indexes of manufacturing output hit their highest levels in seven years in the U.S. and more than ten years in Europe, according to The Wall Street Journal.
• Signaling "percolating demand for business aircraft," Berkshire Hathaway's NetJets subsidiary placed a firm order for 50 business jets, plus options for an additional 70 aircraft, according to The Wall Street Journal.
The interesting thing about rising oil prices is that the more they rise, the more they sow the seeds of their ultimate destruction. If prices rose out of control, it would likely cause the economy to slow down, the government to release inventory from the Strategic Petroleum Reserve, oil producers to ramp up exploration efforts, and other companies to speed up the development of alternative energy sources. All of these things would conspire to help lower oil prices.
For now, don't be surprised to see volatile swings in the market as the momentum switches between high oil prices and strong economic numbers.

WHAT ARE THE KEY CHARACTER TRAITS AND BEHAVIORS that lead to accumulating financial wealth? Here are a few of them according to various studies reported in a January 2011 article from Yahoo! Finance:
• A propensity to plan. People who answered yes to the question, "Before going on a vacation, I spend a great deal of time examining where I would most like to go and what I would like to do," tended to accumulate more wealth than people who didn't answer yes.
• No fear of numbers. People who answered yes to the question, "I am highly confident in my mathematical skills," also tended to accumulate more wealth.
• Have some level of financial literacy. The article pointed to a 2007 study that said, "People who cannot correctly calculate interest rates given a stream of payments tend to borrow more and accumulate less wealth." It's not math skills that are important here, rather, it's "making the connection between math and setting up retirement savings plans."
• Non-smokers. This was an eye-opener. One study discovered that, "A typical non-smoker's net worth is roughly 50% higher than that of light smokers and about twice the level of that of heavy smokers."
• Feel a sense of power. A study showed that, "People who feel a sense of powerlessness tend to splurge on high-status luxuries, a sure-fire detour from long-term wealth." So, feeling powerful may enable you to keep your money invested instead of using it to splurge on high-status luxury items.
• Are conscientious and emotionally stable. Out of the five families of personality traits, those two were most closely linked with economic success, according to research by Angela Lee Duckworth of the University of Pennsylvania and David Weir of the University of Michigan.
How many of these character traits and behaviors describe you?

Weekly Focus – Today's Oil Got Its Start Before the Dinosaurs
"Oil was formed from the remains of animals and plants (diatoms) that lived millions of years ago in a marine (water) environment before the dinosaurs. Over millions of years, the remains of these animals and plants were covered by layers of sand and silt. Heat and pressure from these layers helped the remains turn into what we today call crude oil. The word 'petroleum' means 'rock oil' or 'oil from the earth.'" --U.S. Energy Information Administration
Mar 05, 2012 Weekly Commentary
The Markets It may not feel like it, but the U.S. stock market is off to its best start to the year since 1991, according to CNBC.
With a rise of 8.9 percent for the year, the S&P 500 index has now risen eight of the last nine weeks. Some analysts cite improving economic data, solid corporate earnings, and a stronger job picture for the bubbling stock market, according to Reuters.
But, before we get too carried away, the S&P 500 index would still need to rise about 15 percent to match its all-time record high of 1,565 hit back on October 9, 2007, according to The Wall Street Journal. The gap is not as wide if you reinvested dividends since October 2007. On that score, the S&P would be just 3.5 percent below its all-time high.
If you look at the broad stock market as measured by the Wilshire 5000 index, which tracks more than 3,700 U.S. stocks, we’re at a record high. That index eked out an all-time record high last week assuming reinvested dividends, according to The Wall Street Journal. So, from the market’s peak in October 2007 to the trough in March 2009 and back to the peak in March 2012, it was a long and winding road of about 4½ years.
We talk about the importance of thinking long-term and this market cycle round-trip is a great example of what we mean. Things looked bleak near the bottom in early 2009, but here we are three years later and the market has surged and the economy seems to be healing. Patience is indeed a virtue.
CAN WE LEARN FROM OTHER PEOPLE’S WISDOM? The answer to that question is yes since no one of us is as smart as all of us. With that in mind, here are eight tidbits of investment advice from Jeremy Grantham, the co-founder and chief investment strategist of GMO, a $97 billion global investment management firm.
1. Believe in history. While past performance is no guarantee of future results, we should pay heed to history and avoid using the words “this time is different.” As the old Wall Street saw goes, “history doesn’t repeat itself, but it rhymes.”
2. “Neither a lender nor a borrower be.” Don’t borrow money to invest. If you do, “it will interfere with your survivability.”
3. Don’t put all of your treasure in one boat. This is investing 101 and it’s a basic tenet of sound investment practices.
4. Be patient and focus on the long term. Another piece of sound advice that is easier said than done – but it is well worth striving toward.
5. Try to contain natural optimism. While optimism may be a good survival characteristic, it can get in the way of good investment results. How? If you’re too optimistic, you may dismiss bearish news and go down with a sinking ship while those who had their eyes and ears open reached out for the lifeboat.
6. But on rare occasions, try hard to be brave. There may be times when it makes sense to be bolder than normal. If the odds look stacked in your favor, Grantham says it might make sense to be brave.
7. Resist the crowd: cherish numbers only. It’s easy to get caught up in the euphoria of a crowd – that’s how manias get rolling. But, as an investor, you have to put your analytical hat on, ignore the crowd, and sharpen your pencil (or calculator or computer!).
8. “This above all: to thine own self be true.” In order to succeed as an investor Grantham says, “It is utterly imperative that you know your limitations as well as your strengths and weaknesses. If you can be patient and ignore the crowd, you will likely win. But to imagine you can, and to then adopt a flawed approach that allows you to be seduced or intimidated by the crowd into jumping in late or getting out early is to guarantee a pure disaster. You must know your pain and patience thresholds accurately and not play over your head.”
While there are many top 10 lists of how to be a better investor, these eight from Grantham are a nice place to start.

Weekly Focus – Think About It
"Risks must be taken because the greatest hazard in life is to risk nothing."
--Leo Buscaglia, Ph.D., professor, New York Times bestselling author
Mar 04, 2013 Weekly Commentary

Despite great political hullaballoo, no action was taken to prevent or modify the spending cuts and they took effect on Friday, March 1. Over the next decade, sequestration is expected to cut government spending by about $1.5 trillion. The cuts will reduce defense discretionary spending, including weapons purchases, base operations, construction work, and more. Cuts also will shrink mandatory and discretionary domestic spending. Two of the domestic programs affected are the unemployment trust fund and Medicare (specifically, Medicare's provider payments).

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.

Data as of 3/1/131-WeekY-T-D1-Year3-Year5-Year10-Year
Standard & Poor's 500 (Domestic Stocks)0.2%6.5%10.5%10.8%2.7%6.2%
10-year Treasury Note (Yield Only)1.9N/A2.03.63.53.7
Gold (per ounce)0.4-6.6-7.712.49.916.4
DJ-UBS Commodity Index-0.7-2.4-8.60.7-9.01.1
DJ Equity All REIT TR Index0.25.318.819.87.512.5
Notes: S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

The National Retirement Risk Index (NRRI) measures whether Americans will be able to maintain the same standard of living they enjoy today after they retire. When it was updated for 2012, the index showed the number of "at risk" households had increased by nine percentage points - from 44 percent to 53 percent - between 2007 and 2010. In its explanatory comments the Center for Retirement Research at Boston College (the group that compiles the index) attributed the change to the combined effects of the financial crisis, poor investment returns, low interest rates, and the continuing rise in Social Security's full retirement age.

Americans are not unaware of the situation. The 2012 Retirement Confidence Survey found almost one-half of working Americans are 'not too' or 'not at all' confident they'll have enough money to live comfortably throughout retirement. If you fall into either of these categories - and even if you don't - it's important to evaluate your current retirement plan in light of key risks that may influence its effectiveness. These include:

Longevity risk. A recent headline suggested that 72 is the new 30. The scientists who made the determination meant that modern man, at age 72, has the same chance of dying as primitive man did at age 30. That makes longevity risk - the chance you'll outlive your savings - an essential consideration when planning for retirement. One way to address longevity risk is by developing a retirement income plan that will allow you to generate income for as many years as you may need it.

Inflation risk is the chance your savings and investment will grow more slowly than inflation, reducing your purchasing power. For example, a gallon of milk that cost about $2.00 in 1990 would have set you back $3.50 in 2012 - and that was after a period of relatively low inflation. One way to address inflation risk is to consider investing in a well-allocated and well-diversified portfolio that may have the potential to outperform inflation over time.

Weekly Focus - Think About It

When planning for a year, plant corn. When planning for a decade, plant trees. When planning for life, train and educate people.
--Chinese proverb

Katie Gillman
Associate Wealth Advisor
Fisher Financial Partners, Inc.
(847) 582-9190
www.fisherfinancialpartners.com
kgillman@fisherfinancialpartners.com

Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.


Sources:
http://online.barrons.com/mdc/public/page/9_3063-economicCalendar.html (click on U.S. & Intl Recaps and then click on "Fed tops sequestration" under "Simply Economics")
http://www.bbc.co.uk/news/business-21583576
http://online.barrons.com/mdc/public/page/9_3063-economicCalendar.html (click on U.S. & Intl Recaps and then click on "Information overload" under "International Perspective")
http://www.telegraph.co.uk/news/worldnews/northamerica/usa/9904403/American-Way-Why-85bn-sequestration-spending-cuts-are-not-really-the-end-of-the-world.html
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/02/20/the-sequester-absolutely-everything-you-could-possibly-need-to-know-in-one-faq/
http://crr.bc.edu/wp-content/uploads/2012/11/IB_12-20.pdf
http://www.ebri.org/pdf/surveys/rcs/2012/PR962_13Mar12_RCS.pdf
http://www.cnbc.com/id/100493887
http://www.investorwords.com/6856/longevity_risk.html
http://www.investorwords.com/2457/inflation_risk.html
http://www.minneapolisfed.org/index.cfm? (in the gray box on the upper right-hand side of the webpage, enter in 1990, $2.00, 2012 to get the answer)
http://www.marketwatch.com/story/since-87-is-the-new-65-invest-to-beat-inflation-2013-02-28
http://en.proverbia.net/citastema.asp?tematica=903

Fisher Financial Partners, Inc. offers securities through Regal Securities, Inc., member FINRA/SIPC. Advisory Services offered through Regal Advisory Services, Inc. Fisher Financial Partners, Inc. is not affiliated with Regal Securities, Inc. or Regal Advisory Services, Inc.


This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Past performance does not guarantee future results.
* You cannot invest directly in an index.
* Consult your financial professional before making any investment decision.

Confidential, proprietary or time-sensitive communications should not be transmitted via the Internet, as there can be no assurance of actual or timely delivery, receipt and/or confidentiality. This is not an offer, or solicitation of any offer to buy or sell any security, investment or other product.
' style='margin: 0px 5px;' cols='100' rows='15'>The Markets It was a bumpy week for stock markets. Early on, markets in many countries were negatively affected by the outcome of Italian elections. Italy's anti-establishment Five-Star Movement, led by comedian Beppe Grillo, won about one-fourth of the votes in both the country's upper and lower houses. Markets lost value as investors anticipated political gridlock could delay Italian economic reforms. Since Italy is the third largest economy in Eurozone and its public debt is significantly higher than its Gross Domestic Product, political stalemate in Italy could negatively affect the Eurozone. As the week progressed, events in Italy were eclipsed. Ben Bernanke reiterated the U.S. Federal Reserve's intention to keep monetary policy loose until unemployment levels drop. This helped stock markets recover some lost ground. Positive economic news, including higher pending home sales and a rise in consumer sentiment helped push the Dow Jones Industrials, NASDAQ, and Standard & Poor's 500 Indices even higher, and they finished the week in positive territory. Concerns about Italian election results affected bond markets, too, pushing yields on 10-year Treasuries lower during the week. Lower yields were also driven by uncertainty about the potential impact of sequestration - $85 billion in automatic spending cuts - on America's economic growth.

Despite great political hullaballoo, no action was taken to prevent or modify the spending cuts and they took effect on Friday, March 1. Over the next decade, sequestration is expected to cut government spending by about $1.5 trillion. The cuts will reduce defense discretionary spending, including weapons purchases, base operations, construction work, and more. Cuts also will shrink mandatory and discretionary domestic spending. Two of the domestic programs affected are the unemployment trust fund and Medicare (specifically, Medicare's provider payments).

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.

Data as of 3/1/131-WeekY-T-D1-Year3-Year5-Year10-Year
Standard & Poor's 500 (Domestic Stocks)0.2%6.5%10.5%10.8%2.7%6.2%
10-year Treasury Note (Yield Only)1.9N/A2.03.63.53.7
Gold (per ounce)0.4-6.6-7.712.49.916.4
DJ-UBS Commodity Index-0.7-2.4-8.60.7-9.01.1
DJ Equity All REIT TR Index0.25.318.819.87.512.5
Notes: S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

The National Retirement Risk Index (NRRI) measures whether Americans will be able to maintain the same standard of living they enjoy today after they retire. When it was updated for 2012, the index showed the number of "at risk" households had increased by nine percentage points - from 44 percent to 53 percent - between 2007 and 2010. In its explanatory comments the Center for Retirement Research at Boston College (the group that compiles the index) attributed the change to the combined effects of the financial crisis, poor investment returns, low interest rates, and the continuing rise in Social Security's full retirement age.

Americans are not unaware of the situation. The 2012 Retirement Confidence Survey found almost one-half of working Americans are 'not too' or 'not at all' confident they'll have enough money to live comfortably throughout retirement. If you fall into either of these categories - and even if you don't - it's important to evaluate your current retirement plan in light of key risks that may influence its effectiveness. These include:

Longevity risk. A recent headline suggested that 72 is the new 30. The scientists who made the determination meant that modern man, at age 72, has the same chance of dying as primitive man did at age 30. That makes longevity risk - the chance you'll outlive your savings - an essential consideration when planning for retirement. One way to address longevity risk is by developing a retirement income plan that will allow you to generate income for as many years as you may need it.

Inflation risk is the chance your savings and investment will grow more slowly than inflation, reducing your purchasing power. For example, a gallon of milk that cost about $2.00 in 1990 would have set you back $3.50 in 2012 - and that was after a period of relatively low inflation. One way to address inflation risk is to consider investing in a well-allocated and well-diversified portfolio that may have the potential to outperform inflation over time.

Weekly Focus - Think About It

When planning for a year, plant corn. When planning for a decade, plant trees. When planning for life, train and educate people.
--Chinese proverb

Katie Gillman
Associate Wealth Advisor
Fisher Financial Partners, Inc.
(847) 582-9190
www.fisherfinancialpartners.com
kgillman@fisherfinancialpartners.com

Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.


Sources:
http://online.barrons.com/mdc/public/page/9_3063-economicCalendar.html (click on U.S. & Intl Recaps and then click on "Fed tops sequestration" under "Simply Economics")
http://www.bbc.co.uk/news/business-21583576
http://online.barrons.com/mdc/public/page/9_3063-economicCalendar.html (click on U.S. & Intl Recaps and then click on "Information overload" under "International Perspective")
http://www.telegraph.co.uk/news/worldnews/northamerica/usa/9904403/American-Way-Why-85bn-sequestration-spending-cuts-are-not-really-the-end-of-the-world.html
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/02/20/the-sequester-absolutely-everything-you-could-possibly-need-to-know-in-one-faq/
http://crr.bc.edu/wp-content/uploads/2012/11/IB_12-20.pdf
http://www.ebri.org/pdf/surveys/rcs/2012/PR962_13Mar12_RCS.pdf
http://www.cnbc.com/id/100493887
http://www.investorwords.com/6856/longevity_risk.html
http://www.investorwords.com/2457/inflation_risk.html
http://www.minneapolisfed.org/index.cfm? (in the gray box on the upper right-hand side of the webpage, enter in 1990, $2.00, 2012 to get the answer)
http://www.marketwatch.com/story/since-87-is-the-new-65-invest-to-beat-inflation-2013-02-28
http://en.proverbia.net/citastema.asp?tematica=903

Fisher Financial Partners, Inc. offers securities through Regal Securities, Inc., member FINRA/SIPC. Advisory Services offered through Regal Advisory Services, Inc. Fisher Financial Partners, Inc. is not affiliated with Regal Securities, Inc. or Regal Advisory Services, Inc.


This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
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* Past performance does not guarantee future results.
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Mar 03, 2014 Weekly Commentary
The Market

If you think Russia could have found a colder place to hold the winter Olympics than Sochi, where the average January 2014 temperature was 51 degrees Fahrenheit, you're right. In some Siberian towns, negative double-digit temperatures are considered the norm during winter months. If you thought Russia sending troops into Ukraine's Crimean Peninsula would unsettle world markets, you would have been wrong.

While the world was watching the winter Olympics, the Ukrainian people were staging a revolution. They ousted President Viktor Yanukovych and, according to The Economist, Ukraine's new leaders began forming pro-European government. Russia's president Vladimir Putin asked the Russian parliament for permission to deploy troops in Ukraine. America warned there would be consequences for such an action.

Regardless, Mr. Putin persisted, perhaps believing the West will be more "worried about keeping Russian oil and gas exports flowing than about standing up for the idea of a Europe whole and free." It's probably fair to say neither the winter Olympics nor reality TV about housewives in any county or city has ratcheted up the drama in the way Mr. Putin did last week.

So, how did markets respond? Six world indices lost value last week (in Australia, Japan, China, Indonesia, United Kingdom, and Mexico), 17 showed gains, and one remained unchanged.

Why were markets so bullish? According to Barron's, markets in the United States focused on strong consumer confidence data, evidence of sales growth for durable goods, and new Federal Reserve Chair Janet Yellen remarking the last six weeks of economic data have been surprisingly weak (which some hoped could signal a pause in tapering).

THERE ARE ONLY 10 TYPES OF PEOPLE IN THE WORLD: those who understand binary numbers and those who don't. The joke is funnier when you understand that 10 in the binary system is the same as the decimal number two.

There are two distinct ways of thinking, too, and both appear to be essential to companies that are trying to turn a profit through innovation. In an article about the World's most innovative companies, FastCompany.com had this to say about innovation:

"...But there's another kind of faith in business: The belief that a product or service can radically remake an industry, change consumer habits, challenge economic assumptions. Proof for such innovative leaps is thin, payoffs are long in coming (if they come at all), and doubting Thomases abound. Today, pundits fret about an innovation bubble. Some overvalued companies and overhyped inventions will eventually tumble and money will be lost. Yet breakthrough progress often requires wide-eyed hope."

Perhaps it's less of a hope and more of a commitment to fostering both divergent and convergent thinking within a company, which probably is not an easy thing to do. Divergent thinking is the process of generating many ideas related to a single subject or many solutions for a specific problem. For instance, strong divergent thinkers can come up with dozens of answers for questions like: How many uses can you think of for a knife and a brick? As it turns out, young children are terrific divergent thinkers. A longitudinal study of kindergarten children found that 98 percent of them were genius level divergent thinkers. By fifth grade, that percentage had dwindled to 50 percent or so. After another five years, even fewer were strong divergent thinkers.

Convergent thinking, on the other hand, is the process of applying rules to arrive at a single correct solution to a problem or a limited number of ways to address a specific issue. Convergent thinking occurs in a more systematic and linear manner. Strong convergent thinkers rely on analysis, criticism, logic, argument, and reasoning to narrow down options and choose a path forward.

According to Psychology Today, "The highest levels of creativity require both convergent thinking and divergent thinking. This idea has long been known in creativity research... creativity involves a cyclical process of generating ideas and then systematically working out which ideas are most fruitful and implementing them. The generation stage is thought to involve divergent thinking whereas the exploration stage is thought to involve convergent thinking."

Weekly Focus - Think About It

"Everybody gets so much information all day long that they lose their common sense."
--Gertrude Stein, American writer

Sources: http://www.slate.com/blogs/future_tense/2014/02/24/sochi_s_average_temperature_it_was_the_warmest_winter_olympics_ever.html
http://www.weather.com/travel/earths-coldest-town-siberia-20130123
http://www.economist.com/blogs/easternapproaches/2014/02/ukraines-crisis?spc=scode&spv=xm&ah=9d7f7ab945510a56fa6d37c30b6f1709
http://www.economist.com/blogs/easternapproaches/2014/03/russia-ukraine-and-west
http://online.barrons.com/mdc/public/page/9_3063-economicCalendar.html (go to U.S. and Intl Recaps, and under International Perspectives, click on "Equities rebound in February")
http://online.barrons.com/article/SB50001424053111903506304579381133185307454.html?mod=BOL_hp_we_columns#articleTabs_article%3D1 (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/03-03-14_Barrons-Yellen_Comments_Help_Lift_Dow_1.4_Percent_on_Week-Footnote_6.pdf)
http://www.fastcompany.com/3026098/most-innovative-companies-2014/the-worlds-most-innovative-companies-2014
http://www.creativitypost.com/psychology/creativity_and_iq._what_is_divergent_thinking_how_is_it_helped_by_slee#sthash.Czah92bN.dpuf
http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3184540/
http://www.innovationexcellence.com/blog/2012/10/24/divergent-and-convergent-thinking/#sthash.gsHrqwer.dpuf
http://www.psychologytoday.com/blog/beautiful-minds/201202/both-convergent-and-divergent-thinking-are-necessary-creativity
http://www.brainyquote.com/quotes/quotes/g/gertrudest107878.html
Mar 03, 2008 Weekly Commentary
The Markets
"It is not what is in the news today, it is what is already in the price that matters." Unfortunately, that insightful comment from the March 3rd issue of Barrons magazine leaves unanswered just how much of the current bad news is already priced in the market.
Last week's news was not pretty, yet the markets, while down, did not reach panic mode. For the most part, investors seem to realize that the economy has issues and corporate earnings growth is likely to slow down. The fact that stock prices are down this year seems to reflect that understanding. However, going forward, for stock prices to move dramatically to the upside or downside, there would likely need to be a mass shift from the current expectations built into the markets. The only problem is, nobody can predict a) how much bad news is already built into the market, and b) whether the next market moving news will be positive or negative.
The Federal Reserve seems intent on keeping interest rates low at the possible expense of inflation, according to Fed Chairman Ben Bernanke in testimony to Congress last week. That stance has potential positive and negative ramifications. If he overshoots and rates go too low, that may cause inflation to ramp up and the dollar to keep declining. On the positive side, if he strikes the right balance, it may prevent a deep recession. Investors are not shy in voicing their opinions. Some say Bernanke is nuts and is dropping rates too much while others say hes on the right track.
As long as investors hold opposing opinions, thats a good thing because it may prevent markets from spinning out of control. If everybody decided at the same time that the markets were under pricing the economic slowdown, then we may have a problem as everybody rushes for the exits. However, we dont anticipate that happening as there always seems to be investors who are willing to step in and buy when they smell bargains.

WHEN IT COMES TO FINANCIAL MATTERS, the adult children of baby boomers defy the traditional Gen-X slacker stereotype. According to the Ameriprise Financial Money Across Generations study, adult children of boomers are fixated on finances. In fact, 87% of the adult children of boomers said it is very important to them to assure a financially secure life. Other goals: Seventy-two percent of adult children of boomers said it is very important to them to substantially help their children or grandchildren pay for education (compared to 50% of boomers and 38% of boomers parents). Also, compared to their parents, twice as many adult children of boomers (60%) said that it is very important to them to preserve wealth to leave to their children.
In other insights, the study disproved Gen-Xs spendthrift reputation. For example, illustrating frugality in a difficult market, the adult children of boomers expressed the lowest level of confidence that now is a good time to make major purchases. More than one third (36%) said now is a good time to wait before buying, compared to 28% of both boomers and parents of boomers. Whats more, the adult children of boomers were the most likely to strongly agree with the statement, I don't like to be in debt at any time (80% compared to 68% of baby boomers).
However, the survey also found Gen-Xers were not confident in their own money management skills. When asked, Do you think your generation, your parents generation, or your grandparents generation has the best money management skills?, only 15% of the adult children of boomers said their own generation.
Almost a third (31%) of Gen-Xers said their parents generation had the best money management skills, and 53% said the boomers parents generation is the best at handling money.
In spite of their perceived lack of money skills, the adult children of boomers are the most optimistic generation about their financial futures. Forty-six percent of the adult children of boomers said they are very optimistic about their personal financial future, compared to 39% of boomers and 28% of the boomers parents generation. Additionally, 48% of the adult children of boomers said they are very confident in their ability to reach all of their financial goals over time, while only 36% of boomers and 34% of boomers parents indicated they feel the same way.
This may be an interesting launching pad to talk to your adult children about money.

Weekly Focus Favorite Movies
What is your favorite movie of all time? Heres how American adults responded to a February 21, 2008, Harris survey:
1. Gone with the Wind
2. Star Wars
3. Casablanca
4. Lord of the Rings
5. The Sound of Music
6. Wizard of Oz
7. The Notebook
8. Forrest Gump
9. The Princess Bride*
10. The Godfather*

*Indicates a tie.
Mar 02, 2009 Weekly Commentary
The Markets "History does not repeat itself exactly, but behavior does," according to legendary Wall Street veteran Bob Farrell. Institutional Investor magazine ranked Farrell the number one market analyst for 16 years.
Elaborating on Farrell's quote, the economy is going through another one of its periodic recessions, but this recession is not exactly the same as the last few. Some economists are likening it to The Great Depression, not so much in magnitude, but rather, in terms of its structural characteristics.
While it's always dangerous to use the phrase, "this time is different," to justify an investment stance or economic view that is wildly out of kilter with historical perspective (e.g., buying tech stocks in late 1999), there is usually something different every time we have an unusual market event or an economic crunch. Being able to discern what's truly different from what's merely an excuse for inappropriate decision-making takes skill and helps separate good investors from great investors.
So, while we can't count on history repeating itself exactly, Farrell says we can at least count on human behavior remaining the same. And, that makes sense. For example, how easy would it be to change your emotions such as fear, anxiety, greed, desire, hope, or regret? By knowing that behavior doesn't really change, it's understandable that we see investors make the same emotion-based mistakes during this bear market as they did in previous bear markets.
How do we overcome this tendency?
For starters, be aware that your emotions can block your ability to make reasoned, rationale decisions. With this new awareness, you can process your emotions, separate the "good" information they're telling you from the "bad," and, then, make a more informed investment decision.
As your advisor, we do our best to keep our emotions in check and not let them cloud the decisions we make on your behalf.

IT'S IRONIC that the information and wisdom that’s necessary to help one be a successful investor is so freely available, yet so few people actually use it. One reason why is that during difficult times, those pesky emotions cloud our judgment. As an example of some great investment wisdom that's freely available, a June 2008 MarketWatch article published the following 10 investment rules developed by Bob Farrell over his many decades in the investment business:
1. Markets tend to return to the mean over time.
2. Excesses in one direction will lead to an opposite excess in the other direction.
3. There are no new eras – excesses are never permanent.
4. Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.
5. The public buys the most at the top and the least at the bottom.
6. Fear and greed are stronger than long-term resolve.
7. Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names.
8. Bear markets have three stages: sharp down, reflexive rebound, and a drawn-out fundamental downtrend.
9. When all the experts and forecasts agree, something else is going to happen.
10. Bull markets are more fun than bear markets.
These are good rules to remember especially during these tumultuous times.

Weekly Focus – Think About It
"When dealing with people, remember you are not dealing with creatures of logic, but creatures of emotion."
-- Dale Carnegie
Mar 01, 2010 Weekly Commentary
The Markets Three months ago, on December 1, 2009, the S&P 500 closed at 1,108. Last week it closed at 1,104. After three months, the net movement in the stock market was just 4 points. Hmm. What does that tell us about investing? Here are a few thoughts that come to mind.
First, there is a lot of noise out there. What may seem like big news on the day it comes out (e.g., new U.S. home sales plunged in January 2010 to the lowest level on record dating back to 1963, according to the Department of Commerce), may actually just be one piece of information that briefly affects the markets and then is quickly forgotten.
Second, investing is a game of patience. As the past three-month stretch shows, the stock market can stay flat for a long period. Okay, three months is not exactly "a long period," but there are historical precedents for the stock market staying flat for many years. For example, the closing price of the S&P 500 was only 1 point different on November 29, 1968 and August 17, 1982, according to MSN. That required nearly 14 years of patience!
Third, your patience may be rewarded. Between August 17, 1982 and March 24, 2000, the S&P 500 rose approximately 1,300%, according to data from Yahoo! Finance. That was nearly an 18-year payoff.
As you may already know, our current three-month flat period in the stock market is just the tip of the iceberg. Turning back the calendar, the S&P 500 closed at 1,105 on March 24, 1998, which is only 1 point higher than it closed at last Friday. This means the U.S. stock market has essentially gone nowhere in nearly 12 years. Ouch.
That may sound ugly but there is an upside. Many stocks pay dividends so, on a reinvested dividends basis, the return may look better over those 12 years. And, of course, there's this thing called diversification. Other asset classes such as foreign stocks, bonds, real estate, and others may have provided a positive boost to an investor's portfolio over that period. In summary, tune out the noise, be patient, and diversify.

IS DEFLATION on the horizon? With all the money being pumped into the worldwide economy and our large state and federal deficits, many investors are preparing for a surge of inflation sometime down the road. Logically, that makes sense--but is that what will really happen?
Yes, the U.S. government has tried to pump, prime, and print its way to economic growth, but that has its limits. This money has to find a productive use or else it won't "stimulate." Here are a few things that are blocking our stimulus money from stimulating the economy.
First, banks have excess cash. Bank lending plays an important role in transforming easy money into economic growth. Unfortunately, banks are sitting on nearly $1 trillion of excess reserves at the Federal Reserve, up from essentially zero in the fall of 2008, according to data from the St. Louis Federal Reserve Bank. This is $1 trillion above and beyond reserve requirements, which means banks could use that money to lend to businesses and consumers instead of keeping it safe and secure with the Fed.
Second, the unemployment rate is near 10% and jobless claims are remaining stubbornly high. It's hard for consumers to spend when they are out of a job or worried about losing one.
Third, consumers are de-leveraging and paying down debt. By paying off their bills, consumers have less money to spend on goods and services. Less spending may lead to less economic growth.
Fourth, because of the deep recession, the U.S. has substantial excess capacity in its industrial sector. According to the Federal Reserve, capacity utilization was only 72.6% in January, which is well below the 1972-2009 average of 80.6%. With all this slack, there may be little upward pressure on prices because factories have room to add production.
Fifth, a little followed economic indicator from the Dallas Federal Reserve Bank called the Trimmed Mean Inflation Index (TMII) is declining. This is an alternative measure of inflation, which adjusts for the month-to-month noise found in more popular inflation measures like CPI. For the 12 months ending December 2009, the TMII (inflation rate) was 1.3%--the lowest rate on record dating back to 1978.
So, while many people are talking about inflation, we also have to consider the possibility that deflation could happen first and then be followed by inflation down the road. It may not be a high probability, but it is on our radar and could impact the markets if it comes to fruition.

Weekly Focus – Think About It
"Success is simple. First, you decide what you want specifically; and second, you decide you’re willing to pay the price to make it happen, and then pay that price."
--Nelson Bunker Hunt
Jun 30, 2008 Weekly Commentary
We are excited to announce that our office has relocated to 580 N. Western Avenue in downtown Lake Forest. Please make a note of our new location for your future mailings. For your convenience, all of our other contact information (phone, email and fax) will remain unchanged.
We are excited about our move to Lake Forest's Business District. Our new office will provide us with additional space to support our continued growth while maintaining our warm, intimate atmosphere.
Thank you for your continued confidence, trust and support.
We look forward to seeing you at our new office in the near future.

The Markets
The stock market and life seem to have at least one thing in common. Both go through transitions over time.
As we age, we move from one stage of life to another such as from infancy, to childhood, to adolescence, to young adulthood, to middle age, and then to senior adulthood. How well we manage these life transitions goes a long way toward our success and fulfillment in life. The stock market is no different as it is in the midst of a wrenching transition. How we deal with this transitionboth proactively and reactivelywill help determine your ultimate financial results.
Its always dangerous to say this time is different, but, the reality is, each time the market experiences difficulty, theres a unique set of circumstances that leads to the difficulties. In our present situation, unusually low interest rates and easy credit terms in the early to mid-2000s led to an unsustainable speculative housing boom that is now painfully unwinding. The low interest rates also drove down the value of the dollar and that helped cause commodity prices to soar and inflation to rise. The net result is consumers are hurting, corporate earnings growth is slowing, and the stock market is correcting.
To deal with this transition, heres the process were following:
First, were analyzing the root causes of the problem.
Second, based on our understanding of the causes, were developing a working thesis for who we believe will be the winners and losers in this environment.
Third, were adjusting our clients portfolios to try to take advantage of asset classes that may benefit from the current environment and to avoid the asset classes that may be hurt.
Fourth, we remain ever vigilant in incorporating new data into our working thesis and making adjustments that we deem appropriate.
Despite our best efforts, there will likely be bumps along the way. As of last week, the decline in the Dow Jones Industrial Average brought it within a whisker of the traditional definition of a bear market, according to Barrons. In markets like this, there are few places to hide.
Over time, we expect the economy and the financial markets to find some stability. Once that happens, the stock market may turn up again and well do our best to take full advantage of it.

SINCE WERE NEARING BEAR MARKET TERRITORY, it makes sense to review what a bear market is and to discuss what has been done from an historical perspective. While theres no standard definition of a bear market, The Vanguard Group says one common definition is a decline of 20% or more over at least a two-month period. Using that definition, Vanguard says weve had 10 bear markets in the U.S. over the past 50 years.
Here are some statistics on what the last 10 looked like (all data is based on the S&P 500 Index):
Shortest duration 2.9 months from July 1990 to October 1990
Longest duration 30.5 months from March 2000 to October 2002
Average duration 14.1 months
Smallest decline 19.9% from July 1990 to October 1990 (while this is less than 20%, Vanguard included it in the list)
Largest decline 49.1% from March 2000 to October 2002
Average decline 30.4%
If the current correction should turn into an official bear market, the above figures may help us keep perspective on the decline. Since the S&P 500 hit its all-time record high back in October 2007, we would already be eight months into the new bear market should the S&P 500 cross that 20% threshold in the next few days. Of course, we have to let you know that past performance is no guarantee of future results. Markets will do what they want and they dont necessarily have to follow a script from the past.
With that said, its important to understand the past. From the above data, here are several key points wed like you to keep in mind:
First, bear markets are normal. Over the past 50 years, weve had 10 of them thats an average of one every five years.
Second, the last bear market ended in October 2002, which is more than five years ago. If we enter a new bear market now, that would be in line with the historical average.
Third, every bear market in the past eventually gave way to new record highs in the S&P 500, according to data from Vanguard and Yahoo! Finance. We have no reason to think this time will be different.
Fourth, bear markets can be ugly. As equity investors, we may have to endure the pain of the occasional bear market in order to reap the potential long-term attractive returns offered by equity investing.
As always, were available if you have any questions.

Weekly Focus Think About It
I can't change the direction of the wind, but I can adjust my sails to always reach my destination. -- Jimmy Dean
Jun 29, 2009 Weekly Commentary
The Markets Faith that the economy will get significantly better in the near future will soon need to be replaced by the proof that it is getting better or else we may end up with more market volatility.
Back on March 9, the S&P 500 index hit a bear market low and investors were very nervous. But, then the stock market turned on a dime and proceeded to rise about 38% as of last Friday. Analysts began to identify "green shoots" in the economy that suggested the recession was ebbing and that helped justify the swift market rise.
However, the green shoots are starting to lose their ability to propel the market higher as the S&P 500 is now back to where it traded in early May, according to data from Yahoo! Finance. To jumpstart the market, we may need to see additional evidence that the economy is on the mend.
Second quarter earnings announcements will start arriving over the next few weeks and they may provide a catalyst to shake us out of the current trading range. Companies can boost their short-term earnings by cutting costs – which many of them have already done – but, eventually, they have to start growing revenue to maintain momentum. The upcoming earnings might be our first sign of corporate America's ability to show decent revenue growth after the depths of the recession. If the numbers fall short, then investors' recent faith may have been premature and that could cause some market heartburn. If the numbers look good, then the faith may have been justified and that could be good news for stock prices.
So, let's just say it's show and tell time for the economy and corporate America!

THE WILD SWING IN THE PRICE OF OIL OVER THE PAST YEAR is one example of how the financial markets tend to move from one extreme to another. Back in July 2008, oil soared to $145 per barrel on the idea that the world was running out of oil and that emerging markets like China, Brazil, and India would keep demand high. Then the reality of the recession hit hard and oil prices promptly nose dived. Prices bottomed-out near $33 in December 2008 which represented a decline of more than 75%.
But, the low prices did not last long. As of last Friday, oil prices closed at just over $69 per barrel. That's a rise of more than 100% since last December's low.
So, here's the recap. Prices soared to $145 per barrel last July, then plunged to $33 per barrel in December, then more than doubled to $69 per barrel last week. And guess what? During that time, there was no major supply disruption or geopolitical event.
This is a great example of how the complex interplay of speculation, fear, and greed combine to generate dramatic volatility in the financial markets. Sometimes huge moves like this can be explained by outside events. Other times, they seem to make no sense whatsoever. Yet whether they make sense or not, we do our best to try to be on the "right"” side of the move.

Weekly Focus – Think About It
"In a world filled with hate, we must still dare to hope. In a world filled with anger, we must still dare to comfort. In a world filled with despair, we must still dare to dream. And, in a world filled with distrust, we must still dare to believe."
-- Michael Jackson
Jun 28, 2010 Weekly Commentary
The Markets
Can world governments "cut" their way to prosperity?
It's no secret that many countries are incurring large--and unsustainable--budget deficits. What's interesting is the approach each country is taking to try to lower their deficits to a manageable level. Britain, Japan, Germany, and Greece, for example, are focused on cutting government spending, according to Bloomberg, June 22. Conversely, the U.S., while concerned about government spending, seems more focused on keeping the stimulus spending alive and raising taxes until (hopefully) the economy can catch fire and grow on its own.
Who's right?
According to Harvard University professor Alberto Alesina, “There have been mountains of evidence in which cutting government spending has been associated with increases in growth, but people still don’t quite get it.” In addition, a study by Ben Broadbent and Kevin Daly of Goldman Sachs Group, Inc. as reported by Bloomberg on June 22, "discovered that reducing expenditures by 1 percentage point a year boosted average annual growth by 0.6 percentage point. Raising the ratio of taxes to GDP by the same margin cut growth by an average 0.9 percentage point." And, from a stock market perspective, the same report said, "The equity markets of the countries that sliced spending beat those of other advanced nations by 64% during a three-year period."
Like many things related to finance and economics, we won't know "who's right" until time passes and the market delivers its verdict. Between now and then, expect the vigorous debate on spending cuts versus stimulus spending to continue among academics, investors, and world leaders.

ARE THE FINANCIAL MARKETS "NORMALLY DISTRIBUTED" and should you even care? Consider this. The average height of an American male is 69.4 inches, according to the National Center for Health Statistics, October 22, 2008. If we randomly chose 1,000 American males and calculated their average height, we would likely come up with a number close to 69.4 inches. Now, in an un-random fashion, let's assume we found an 8-foot tall man--who is clearly an extreme outlier--and we have him join the previous group of 1,000. By recalculating the data, we now find the average height of this group of 1,001 men jumps by a very underwhelming 0.03 inches. In other words, adding an extremely tall outlier to this group of average height men had very little effect on the overall average height of the group. Without getting too technical and assuming "tall outliers" are just as likely to be found as "short outliers," we can say the height of men follows a "bell curve" or a normal distribution.
By contrast, let's consider the average net worth of American households. According to the Federal Reserve, February 2009, the average American family had a net worth of $556,300 in 2007. Like above, if we randomly chose 1,000 families, this group would probably have an average net worth near $556,300. However, for fun, let's add Warren Buffett--and his $40 billion net worth--to the group. Recalculating the data, we find the average net worth of this group of 1,001 Americans jumps to $40.5 million! Clearly, adding an extreme outlier to this sample dramatically changed the average of the sample.
As it relates to the financial markets, do you think their distribution of returns looks more like the average height of American men (where an extreme outlier doesn't really affect the average) or the average net worth of American households (where an extreme outlier could have an extreme impact)? If you think the returns in financial markets look like the average height of American men, but it turns out they behave more like the average net worth of American households, you could lose a lot of money. In fact, much of modern portfolio theory is based on the assumption that financial markets follow a normal distribution, i.e., they look like the average height of American men. Unfortunately, experience suggests otherwise.
Warren Buffett-type outliers such as the October 1987 stock market crash, the 2000-2002 bursting of the internet bubble, the 2007-2009 bear market, the 2008 credit crisis, and last month's "flash crash," suggest that the financial markets are subject to large outliers that can significantly affect your financial well-being. Knowing that, we do our best to try to limit the damage to your portfolio if one of these outliers occurs during your investing lifetime.

Weekly Focus – Think About It
"In the business world, the rearview mirror is always clearer than the windshield."
--Warren Buffett
Jun 27, 2011 Weekly Commentary
The Markets There was good news and there was bad news but, by the end of the week, a wave of pessimism had swept gains away, causing markets to finish lower.
In the good news department, Greece adopted an austerity program that made it eligible to receive financial support from the European Union and International Monetary Fund, according to The New York Times. Relief that a Greek default had been avoided was soon offset by concern about the health of Italian banks. On Friday, extreme share price volatility caused trading in shares of specific banks to be suspended, according to The Wall Street Journal. Although the reason for the volatility was unclear, it raised new concerns about Europe’s financial condition.
In the United States, the Commerce Department reported that durable goods orders were more robust than expected, according to Reuters. The Commerce Department also raised its estimate of gross domestic product (GDP) growth during first quarter from 1.8% to 1.9%. This was positive news; however, it did little to soothe worries that the U.S. economy might be slowing. GDP growth during the previous quarter was 3.1%.
Even Federal Reserve officials appeared to be riding the wave of pessimism. On Wednesday, at the conclusion of a two-day policy meeting, the Fed announced that recovery was continuing at a moderate pace; however, economic growth was slower than expected, according to CNNMoney. The U.S. central bank reduced its forecasts for GDP growth during the current year and for 2012.
This week, the Federal Reserve's second round of quantitative easing (QE2) ends. According to a recent survey by Reuters, investors expect the end of the stimulus program to affect stocks, bonds, gold, and currencies. This may create uncertainty and choppiness in markets over the near term.

TRAVELING TO CHINA OR EUROPE SOON? Make sure your credit card has cutting-edge security or you may find yourself short of funds. That’s because high levels of credit card fraud have caused financial institutions in other countries to improve card security.
Credit card fraud is on the rise around the world, according to a 2010 survey by ACI Worldwide that was reported in InformationWeek. The survey canvassed 4,200 people in North America, Europe, Asia, Brazil, and the Middle East. When the results were tallied, the survey showed that almost one-third of credit and debit card users around the world had experienced credit fraud during the past five years. The percentage varies significantly by region. In China, 43% of consumers have experienced card fraud; in the United States, 33%; and in the Netherlands, just 11%.
According to ConsumerReports, the percentage of Americans experiencing card fraud is expected to grow because the credit and debit cards we use rely on old technology -- storing unencrypted data on a magnetic stripe on the back of the card. This makes the cards more vulnerable to being skimmed and counterfeited. ConsumerReports also stated that only the United States and a few African countries continue to rely on this technology.
One of the new standards for security, in many countries, is the smart card, which combines an embedded microprocessor with a PIN to make point-of-sale transactions more secure, according to The New York Times. Cards that have radio frequency chips, which allow "contactless transactions," also provide improved security, according to the article. All the user has to do is wave the card at a payment terminal to make a purchase.
If you are planning to travel abroad, it is a good idea to contact your financial institution and request a smart card. Your magnetic stripe cards may not be accepted by some retailers, and simply won't work at automated ticket kiosks like those found in train stations, on gas pumps, and at parking garages, according to ABCNews.

Weekly Focus – Think About It
"The charity that is a trifle to us can be precious to others." --Homer
Jun 26, 2012 Weekly Commentary
The Markets While nobody knows what the future holds, one powerful person came pretty close to accurately predicting the problems Europe is having with the euro – a full 17 years before the current crisis began in 2010.
Former British Prime Minister Margaret Thatcher strongly resisted having Britain join the single currency and, instead, pushed the country to keep the pound sterling. Her view prevailed.
Today, the controversial Lady Thatcher is retired from public view, but her take on the common currency of Europe has proved uncannily accurate.
Paraphrasing her 1993 autobiography, a November 18, 2010 article in the Daily Telegraph said Thatcher argued, "The single currency could not accommodate both industrial powerhouses such as Germany and smaller countries such as Greece. Germany, forecast Thatcher, would be phobic about inflation, while the euro would prove fatal to the poorer countries because it would 'devastate their inefficient economies.'"
True to Thatcher's prediction, the euro zone is suffering from the imbalances caused by a currency shared by countries with dramatically different economic, political, and cultural norms.
We monitor the euro zone problems because, in our global society, a breakdown in Europe could spread to the rest of the world. And, once again, euro zone leaders are meeting this week to try and solve their structural problems. But, consider this. In the U.S. we have one country and two major parties. In Europe, 17 countries share the euro and each of those countries have multiple major parties. Knowing how hard it is for Democrats and Republicans to agree, imagine how hard it is to get 17 countries and their respective parties to agree on anything!
Given this difficulty, it's not surprising that the euro crisis has dragged on and on and on. Eventually, though, Europe will have to make some tough decisions – or the market may do it for them.

VOLATILE MARKETS HAVE EXPOSED ONE FLAW in the traditional thinking about how to determine an investor's "risk tolerance." Traditionally, risk tolerance was thought of in terms of a spectrum moving from very conservative at one end to very aggressive at the other. And, risk was defined as how much of a loss an investor could stomach. That makes sense, but it’s only one part of the risk tolerance story.
Investors essentially have two types of risk tolerance:
1. Financial risk tolerance – which is an investor’s financial ability to withstand a decline in their portfolio.
2. Emotional risk tolerance – which is an investor’s emotional ability to withstand a decline in their portfolio.
Source: The Charles Schwab Corporation
Now, here's the key – there could be a very large gap between these two levels. For example, some investors may be able to financially withstand a 30 percent decline in their portfolio without it negatively impacting their ability to meet their long-term goals and objectives. However, some of those same investors may be able to withstand only a 20 percent decline in their portfolio from an emotional standpoint.
The emotional risk tolerance level is effectively your "sleep" level. It's the level where if your portfolio went down any further, it would affect your ability to sleep soundly at night.
But, there's more...
We also have one other factor to consider here and that's your time horizon. If you are 10 years away from needing to tap your investment portfolio, then a decline in your portfolio today should not be a cause for alarm. Why? Because you have 10 years to recoup the decline. Remember, today’s stock market prices are only relevant to those who are selling today.
As your advisor, it's important for us to know your financial risk tolerance level and your emotional risk tolerance level. With this knowledge, we do our best to manage your portfolio in such a way that we won’t breech either of those levels. After all, we appreciate a good night’s sleep, too!

Weekly Focus – How to Sleep Better
Are you one of the lucky 42 percent of Americans who consider themselves "great sleepers?" If not, try these tips from the National Sleep Foundation:
-Set and stick to a sleep schedule by going to bed and waking up at the same times each day.
-Exercise regularly, but do it in the morning or afternoon.
-Establish a relaxing bedtime routine such as reading a book or listening to soothing music.
-When you go to sleep, make sure your room is dark, quiet, and cool.
-Avoid caffeinated beverages, chocolate, tobacco, or large meals right before bedtime.
Jun 24, 2013 Weekly Commentary
The Markets


It was like watching a game of telephone where one child speaks into another child's ear and that child speaks into another child's ear and, by the time the last child repeats the original statement, it has transformed into something completely different.

Chairman Ben Bernanke stepped up to the microphone at the press conference after the Federal Open Market Committee's policy meeting and said:

"As I mentioned, the current level of the federal funds rate target is likely to remain appropriate for a considerable period after asset purchases are concluded. To return to the driving analogy, if the incoming data support the view that the economy is able to sustain a reasonable cruising speed, we will ease the pressure on the accelerator by gradually reducing the pace of (bond) purchases. However, any need to consider applying the brakes by raising short-term rates is still far in the future. In any case, no matter how conditions may evolve, the Federal Reserve remains committed to fostering substantial improvement in the outlook for the labor market in a context of price stability."

His statements filtered through analysts and managers, through blogs and media outlets and, by the time it reached investors, they heard this: SELL. The message rippled through stock, bond, and other markets around the world. As markets fell, interest rates rose, particularly in countries like Indonesia, Brazil, Mexico, Turkey, Russia, and Poland. A Bloomberg report cited in the Washington Post stated the People's Bank of China injected about $8.2 billion into China's financial system in an effort to keep interest rates low.

Investors' fears were reflected in the CBOE Volatility Index (VIX), which is also known as the investor fear gauge. It measures the market's expectations for volatility during the next 30-day period. It started the week at 10.2 percent and finished the week at 19. According to a Citigroup equity strategist who was quoted in The Wall Street Journal, "...there are much higher probabilities for market gains when the VIX is sitting between 10 and 15 than when it is in the 20-25 range..." Will markets settle? Or, will volatility continue? Time will tell.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


THERE'S ANOTHER HOUSING BUBBLE? REALLY? The housing market in the United States isn't just recovering - it's RECOVERING. Tight inventories, fewer foreclosures, low mortgage rates, and rising demand have helped push home prices significantly higher. Year-over-year sales data shows home prices increased by about 15 percent through the end of May, according to the National Association of Realtors (NAR). That's the strongest year-over-year improvement since October 2005, and it marks the 15th month of gains in a row. In many cases, cities that had experienced the biggest declines in prices during the housing crisis realized some of the biggest gains.

Double digit price gains have some believing the housing market is getting frothy and a new housing bubble may be forming. Fitch, a ratings service, recently said home price gains in some markets are outpacing improvements in underlying fundamentals, which could cause prices to stagnate or fall again.

So, is it a bubble? It depends on who you ask, but credible sources suggest otherwise. According to an article in an early June issue of The Economist:

"To qualify as a bubble, an asset must not simply appreciate; it must decouple from its intrinsic value. For houses, The Economist each quarter compares the ratio of prices to household income and rents against their long-run average in 20 countries. We have now done the same for the 20 metropolitan areas in the Case-Shiller index. The verdict: in most markets, houses are at or near their long-run values, but none looks bubbly."

One thing that's keeping home prices high is limited supply. The Chief Economist for the NAR recently said one way to moderate future price growth is to create additional supply by building more new homes.

It seems clear from the markets' response to the Fed Chairman's comments during last week's press conference and speculation about bubbles - investors are feeling a lot of fear and uncertainty.


Weekly Focus - Think About It

"It is evident that skepticism, while it makes no actual change in man, always makes him feel better."
--Ambrose Bierce, American Journalist

Sources:
http://www.federalreserve.gov/mediacenter/files/FOMCpresconf20130619.pdf (Page 6)
http://www.reuters.com/article/2013/06/22/us-usa-fed-volatility-idUSBRE95L06720130622
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/06/20/this-is-why-global-markets-are-freaking-out/
http://www.investopedia.com/terms/v/vix.asp
http://finance.yahoo.com/news/wall-st-week-ahead-stocks-000902889.html
http://blogs.wsj.com/moneybeat/2013/06/21/time-to-start-fearing-the-vix/
http://www.reuters.com/article/2013/05/28/us-usa-economy-homes-index-idUSBRE94R0HA20130528
http://money.cnn.com/2013/06/20/news/economy/home-prices-sales-bubble/
http://www.cnbc.com/id/100834061
http://www.economist.com/news/united-states/21579030-recovering-prices-have-yet-inflate-any-big-cities-bubble-hunting%20
http://www.peakadvisoralliance.com/app/webroot/custom/editor/06-24-13_US_House_Prices_Surge_as_Recovery_Gains_Momentum.pdf
http://www.brainyquote.com/quotes/keywords/skepticism.html

* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.
* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Past performance does not guarantee future results.
* You cannot invest directly in an index.
* Consult your financial professional before making any investment decision.
Jun 23, 2008 Weekly Commentary
The Markets The three Cs - credit, crude, and consumers - are still impacting the direction of the financial markets.
Just when you think the credit markets have reached bottom, another multi-billion dollar write-down seems to pop up. Last week, Citigroup warned that it may take additional markdowns on its subprime portfolio when it announces second quarter earnings in July, according to TheStreet.com. In the first quarter, Citigroup took about $12 billion in pretax write-downs and investors had hoped that would be the end of it. In addition to Citigroups problems, two bond insurers lost their Moodys AAA rating and regional bank Fifth Third Bancorp said it needs to raise $2 billion in capital to help stabilize its financial position, according to Associated Press. Until the financial sector stabilizes, it may be difficult for the stock market to find its footing.
Crude oil prices continued to grab headlines last week as the price of a barrel of crude closed near $135 per barrel, according to MarketWatch. News of supply disruptions in Nigeria and tough talk between Israel and Iran helped keep prices high. Gas prices are also uncomfortably high as they averaged $4.13 per gallon as of June 16. A year ago, the average nationwide gas price was $3.06 per gallon. No doubt many Americans are reevaluating their travel plans for the summer.
Consumers are a wildcard and in this tough environment, the question is, how much will they pullback their spending? If they cutback significantly, that may ripple through the economy and send us into a significant recession. So far, that does not appear to be happening. Consumers may not be as flush as they were a year or two ago, but their spending hasnt fallen off a cliff.
We will continue to monitor the three Cs and make opportunistic portfolio adjustments as appropriate. In the meantime, as the old saying goes, Patience is a virtue. We believe that is true when it comes to investing and we believe that our patience will be rewarded.

WE ALL KNOW THAT OIL PRICES HAVE RISEN DRAMATICALLY over the past few years, but a recent June 12 research piece from Bespoke Investment Group put it in perspective. The article pointed out that the price of a barrel of oil has risen by 730% from November 19, 2001, to its recent record close on June 6 of about $139 per barrel. By comparison, that looks eerily similar to the NASDAQ Composite Indexs rise of 640% between June 24, 1994, and its record high of 5048 on March 10, 2000.
So what happened to the NASDAQ in the years following its 640% rise? It plunged by 78% in less than three years, according to Bespoke.
In fact, the NASDAQ still has not surpassed its 2000 high. The big question is, will oil prices follow a similar pattern and drop precipitously? There are heated opinions on both sides of that question.
Some people believe that weve entered a new era in which strong demand from countries such as China and India will outstrip the supply of oil and thus, create a long-term energy problem that will result in high oil prices. Others believe oil prices are in bubble territory and that theyll eventually pop when demand slows and alternative energy sources are developed.
One thing we can say with some confidence is that asset prices sometimes reflect human emotions. There seems to be a little bit of fear and greed in all of us and occasionally, it manifests itself in asset prices that go from one extreme to another. Weve seen it in the NASDAQ. Weve seen it in the housing market. And, now were seeing it in the oil market.
Just how high energy prices will rise and how far theyll fall is anybodys guess. Fortunately, were not in the business of guessing. Instead, were in the business of helping grow and protect our clients assets. To that end, were doing everything we can to help you benefit regardless of what happens to the cost of energy.

Weekly Focus Do You Agree With This List?
What are the technologies that have changed our life the most? Heres LiveScience.coms list of the top 10 disruptive technologies:
10. Magnetic strip card
9. Gun powder
8. Iron smelting
7. Rubber
6. X-rays
5. Microprocessor
4. Electricity
3. Nuclear fission
2. Flight
1. Internet

Would your list be any different?
Jun 22, 2010 Weekly Commentary
The Markets
A hypothetical Doctor of Investments might say we are in an "EKG market."
We've experienced a series of headlines that have sent the market on a yo-yo ride since we dropped the New Year's ball in Times Square six months ago. Here are a few of the eye-raising events that have kept investors on an emotional rollercoaster:
*The S&P 500 index rose 15.2% between February 8 and April 23, according to data from Yahoo! Finance. Unfortunately, investor sentiment quickly turned and the index declined 13.7% between April 23 and June 7, according to data from Yahoo! Finance.
*On May 6, the "flash crash" sent the Dow Jones Industrial Average to an intra-day loss of nearly 1,000 points before making a massive recovery to end the day down "only" 348 points, according to Portfolio.com. At one point during the day, the Dow dropped 481 points in 6 minutes and then jumped 502 points just 10 minutes later.
*An April 20 explosion on a drilling rig sent as much as 60,000 barrels of oil a day flowing into the Gulf of Mexico making it the worst oil spill in American history, according to The New York Times on June 18.
*A sovereign debt crisis in Europe sent shivers through world markets and led the European Union to unveil a nearly $1 trillion loan package designed to backstop weak countries from defaulting, according to The Wall Street Journal on May 10.
*Gold prices hit an all-time high of $1,258 per ounce on June 18, "fueled by sovereign risk in the euro zone, historically low interest rates, and concern over the stability of paper currencies," according to CNBC on June 18.
Pop quiz time. After all these headline-grabbing events, in percentage terms, how much do you think the S&P 500 index has gone up or down since the end of last year? Brace yourself. The index has risen a whopping 0.2% between December 31, 2009 and last Friday.
The up-down EKG between the bulls and the bears has, like the U.S. versus Slovenia in the World Cup, ended in a draw. However, unlike the U.S. versus Slovenia, we still have six months left in this year to see who wins the yearly "Investment Cup."

HELEN REDDY PROCLAIMED, "I am woman, hear me roar. In numbers too big to ignore," back in the early 1970s. Today, those words are coming true in education, the workplace, and on Wall Street.
In an article titled, "The End of Men" in the July/August 2010 issue of Atlantic Magazine, author Hanna Rosin reported some little known statistics about how far women have come in today's society. How many of these were you aware of?
*As of earlier this year, women now outnumber men in the U.S. workforce for the first time ever.
*Even though women outnumber men in the workforce, three-quarters of the jobs lost in this recession were lost by men.
*Thirteen of the 15 job categories projected to grow the fastest over the next decade are staffed primarily by women.
*Women now hold more than 50% of managerial and professional jobs, according to the Bureau of Labor Statistics.
*According to Rosin, women now earn 60% of master’s degrees, about 60% of all bachelor's degrees, about half of all law and medical degrees, and 42% of all MBAs.
*A 2008 study by researchers at Columbia Business School and the University of Maryland looked at the top 1,500 U.S. companies from 1992 to 2006 and discovered that firms that had women in top positions performed better.
The rising level of women's educational attainment and workplace prominence will have a profound impact on the business and investment spheres in the years to come. As part of our "find a trend and throw yourself in front of it" philosophy, we will continue to monitor this long-term trend and the ensuing investment implications.

Weekly Focus – Think About It
“I shut my eyes in order to see.”
--Paul Gauguin
Jun 22, 2009 Weekly Commentary
The Markets Popular wisdom about life says, "It's the journey, not the destination." In successful long-term investing, it's just the opposite.
The financial markets contain short-term traders and long-term investors. Short-term traders focus on the day-to-day journey, not the destination. To them, it's all about making money in a quick trade.
Long-term investors keep their sights firmly fixed on the destination. They understand that month-to-month fluctuations are normal and expected. Rather than selling during a brief period of turbulence, long-term investors tend to ride out the storm and wait for better weather to return.
Interestingly, traders and investors work synergistically in order to create opportunities for the other to make profits. Here’s how.
Since traders are short-term focused, they tend to buy and sell frequently. If a large group of traders decides to sell at about the same time, we may end up with a bear market low similar to what we just experienced leading up to March 9, 2009. That type of selling could create an opportunity for longer-term investors to swoop in and buy the potential “bargains.” As the longer-term investors step in to buy, that may lift prices and pull the traders back into the game.
Conversely, if traders end up pushing prices to the stratosphere, that may persuade longer-term investors to take some profits, which could push prices down and give the traders an opportunity to profit again by shorting the market. The cycle then starts all over again.
Of course, neither traders nor long-term investors can perfectly time their buys and sells. The point is simply that the markets can accommodate both. And the fact that the various market participants have different time horizons helps create profit opportunities for each of them.

WILLIAM SHAKESPEARE WROTE, “Neither a borrower nor a lender be.” Money manager Doug Kass took some liberty and used Shakespeare’s cadence to state a new phrase, “Neither a bull nor a bear be.”
As a financial advisor, we spend time doing research so we can be as prepared as possible to do a good job managing your financial situation. As part of this research, it’s easy to start forming an opinion about whether we are in a bull market or a bear market. However, having a stubbornly strong bullish or bearish opinion may actually be detrimental to successful investment management.
There are two potential problems with taking a strong bullish or bearish stance. First, when you take a strong stand like that, you tend to seek out evidence that corroborates your bias and then discount contrary evidence until it’s too late. For example, if we were really bearish, it’s human nature that the headlines that scream, “S&P 500 Heading to 600” would draw our attention. By reading those stories, it would make us feel good and help “convince” us that our position was “correct.” Bullish stories would get scant attention since they didn’t fit with our pre-existing bias.
A second problem with taking a strong stance is your bias could turn out to be wrong. By taking a strong stand, you are effectively trying to predict the future, which is no easy task. If your bias is wrong, stubbornly sticking to an incorrect viewpoint could be very costly as the market runs in the other direction and you are left behind.
Is there a better way? Try being a realist.
Realists keep an open mind. They may have an opinion about the future but they are not wedded to it if new information suggests something is changing. Instead of trying to predict the future, realists analyze new information as it arrives based on its merits. Instead of just reading stories that support their bias, realists read various viewpoints and get a more balanced view. Ultimately, realists are willing to embrace change as appropriate rather than waste precious time and energy defending a “known” that may no longer be relevant.
To summarize, “Let’s be real!”

Weekly Focus – Think About It
“The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.” -- William Arthur Ward
Jun 21, 2011 Weekly Commentary
The Markets Like a computer owner who successfully reboots after experiencing a blue screen, investors heaved a sigh of relief on Friday as the Dow Jones Industrials and Standard & Poor’s 500 Indices eked out gains for the week ending six straight weeks of losses. According to Reuters, markets gained after leaders in Germany and France suggested they would provide additional support to prevent Greece from defaulting on its debt. While the announcement soothed investors somewhat, the deal has yet to be accepted by opposition parties in the Greek government. As a result, concerns remain that a Greek default could destabilize the Eurozone and create a global domino effect, according to The Wall Street Journal. These worries may be overblown, the news source said, as Greece accounts for just 2% of the Eurozone's gross domestic product (GDP).
The International Monetary Fund (IMF) reduced its outlook for GDP growth in the United States from 2.8% to 2.5% on Friday, according to Reuters. While many interpreted this news negatively, the IMF’s news release stated that its global growth forecast remained largely unchanged as developing countries continue to show robust growth. Olivier Blanchard, the Fund’s Economic Counselor, said he believed the U.S. slowdown was "a bump in the road rather than something more worrisome."
Regardless, investors' optimism remained tepid. The majority of U.S. stocks that performed well last week were in defensive sectors, such as utilities and consumer staples, according to The Wall Street Journal. Reuters said that risk aversion helped drive the value of gold and the Swiss Franc, which is thought to be a safe-haven currency, higher during the week while the value of commodities fell. Bloomberg attributed some of the decline in commodities prices to expectations that slower global growth would reduce demand for raw materials.
Oil prices also declined during the week in response to worries about slower economic growth, according to Barron’s. This may make Americans happy, who are planning driving vacations, if it translates into lower gas prices. However, their enjoyment may be short-lived as Barron’s also said that some forecasters predict a rebound in America’s growth by year end. That could increase demand for crude oil and push prices higher once again.

HOW CONFIDENT ARE YOU ABOUT RETIREMENT? The market volatility of the past few years has negatively affected many Americans earnings, savings, and investments. It has also diminished their confidence about being able to retire comfortably. According to the Employee Benefits Research Institute's 2011 Retirement Confidence Survey, American workers are more pessimistic about their ability to retire comfortably than at any time since the survey began about 20 years ago.
The lack of confidence may actually be good news, according to EBRI, because it means Americans may be waking up to the realities of retirement including the need to save more than they are currently. According to the survey about one-third of workers tapped their retirement savings to pay for day-to-day expenses during 2010 and many of them didn't have much saved in the first place. Just 59% of workers are currently saving for retirement and one-half of them have less than $25,000 tucked away, according to the survey.
Work is the new retirement. This new awareness of the cost of retirement may be one reason that many people -- of all ages and income levels -- are planning to work after they retire. A recent Gallup Poll found that about 80% of Americans plan to work during retirement. Most plan to work part-time, although some say they may need to work full-time just to make ends meet.
The silver lining, for those who were looking forward to a retirement of full-time leisure, is that people who continue to work during retirement often experience better health than those who don’t work, according to studies cited on LiveScience.com. As long as the work remains low stress, retirees who labor are less likely to suffer from major diseases such as cancer, high blood pressure, and cardiovascular disease. They are also less likely to become depressed.
If you've been rethinking your retirement, you're not alone. If you would like a sounding board or want to discuss options, please give us a call.

Weekly Focus – Think About It
After the Constitutional Convention of 1787, Dr. James McHenry, one of Maryland's delegates, reported that Ben Franklin was asked, "Well, Doctor, what have we got: a republic or a monarchy?" Ben answered, "A republic, if you can keep it."
Jun 18, 2012 Weekly Commentary
The Markets When central bankers talk, investors listen.
World stock markets rallied last week on a Reuters report which said major central banks were prepared to take coordinated action if the results of the Greek elections led to market turmoil.
On top of that, later reports said the European Central Bank was hinting at an interest-rate cut and Britain jumped in with a pledge to flood its banks with cash if needed, according to Reuters. This global show of force suggests the world’s political leaders will do whatever they can to keep the financial markets stable. Interestingly, last week’s economic news in the U.S. and Europe pointed to continued sluggish growth, according to MarketWatch. Normally, you might expect the stock market to drop on weak economic news as it could lead to lower corporate profits. However, investors seemed to interpret the “bad” news as “good” news for the market because the worse things get, the more likely government may step in with more stimulus.
There’s an old Wall Street adage that says, “Don’t fight the Fed.” This means when the Federal Reserve starts firing its bullets to stimulate the economy, it tends to spark a rally in the stock market – even if the economic news continues to look weak, according to MarketWatch. The Federal Reserve, along with other central banks, have already fired $6 trillion worth of bullets in the form of money printing since 2008 and, as a result, many of the world’s financial markets have risen sharply since the early 2009 lows, according to CNBC.
While further stimulus might support the financial markets in the short term, there are two things to consider:
1. Additional stimulus is subject to the law of diminishing returns. Just like one chocolate chip cookie tastes great, but 10 may make you sick, too much stimulus may eventually backfire.
2. Additional stimulus improves liquidity, but does not address the solvency issue. Europe and the U.S. still have a solvency problem of too much debt and this debt needs to either be written off or paid off. Solvency is the harder issue to solve.
Source: Hussman Funds, June 18, 2012
We’ll know the financial markets are “back to normal” when they can stand on their own without any hint of support from central banks.

IS THERE A BUBBLE IN THE BOND MARKET? As you know, interest rates are near record lows and that hurts savers who were used to receiving relatively high and mostly risk-free income on their savings. For example, back in 2007, 10-year Treasuries yielded about 5 percent, according to the U.S. Department of the Treasury. Last week, the yield was down to about 1.6 percent. Since bond prices move inversely to yield, this means as yields moved to near record lows, bond prices moved to near record highs. And, now, some analysts are asking if bond prices have reached bubble territory, according to Bloomberg.
One of the most recent clear-cut cases of a bubble was the technology boom of the late 1990s. Unfortunately, that was followed by the technology stock bust of the early 2000s. You may recall that bubble was based on greed as investors clamored to get in on the internet frenzy and make some “easy” money.
But, today’s peak in the bond market is just the opposite. It’s based on fear, not greed. Due to economic uncertainty, investors have jumped into bonds to preserve their money and this fear-based demand for bonds has pushed prices up and yields down, according to Bloomberg.
So, can a bubble be based on fear or are bubbles just reserved for greed-driven extremes? In reality, we’re not as concerned about the definition of the bubble as we are about the possible unwinding of the bubble.
The technology bubble of the late 1990s and the strong bond market of today are great examples of two things that can drive markets to extremes – greed and fear. In the end, whether driven by greed or fear, extreme movements in the financial market tend to eventually reverse themselves and revert back to the mean. Our job as your financial advisor is to acknowledge these emotions, but not get caught up in them. We do our best to remain rationale and analytical in the face of greed and fear so we can do the best job possible in securing your financial future.

Weekly Focus – Think About It
"Individuals who cannot master their emotions are ill-suited to profit from the investment process." --Benjamin Graham, investment manager, author, Warren Buffett mentor
Jun 17, 2013 Weekly Commentary

The next Federal Open Market Committee Meeting is on June 18 and 19. While few people expect the Fed to announce it will reduce the pace of bond buying immediately, the majority of economists surveyed by USA TODAY predict the Federal Reserve will begin to reduce bond purchases by early fall.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


ARE EMERGING COUNTRIES LEADING THE WAY IN RENEWABLE ENERGY? It seems that way sometimes. According to UNEP's report, Global Trends in Renewable Energy Investment 2013, "Renewables are picking up speed across Asia, Latin America, the Middle East, and Africa, with new investment in all technologies... Markets, manufacturing, and investment shifted increasingly towards developing countries during 2012." For instance, after running even with the United States during 2011, China became the dominant country for renewable energy investment in 2012, according to the report.

This doesn't mean the United States isn't in the race. According to The Economist, an analysis by Bloomberg New Energy Finance found the U.S. and China traded about $6.5 billion in solar, wind, and smart-grid technology and services during 2011. America sold about $1.5 billion more to China than it imported. The Economist concluded, "American ingenuity is required to supply Chinese factories with such things as polysilicon and wafers for photovoltaic cells, and the fiberglass and control systems used in wind turbines."

So, what does the future hold? Kiplinger's Letters said solar power production will double in 2013 and move ahead of geothermal power as a source of clean energy. They believe wind energy will soon rival hydroelectric power, as well. The United States added more wind power capacity last year than any other type of power generation. Currently, wind comprises about 5 percent of power generated in the United States.

Global investment in renewable energy may have fallen during 2012, but that doesn't mean the industry has lost momentum. Renewable energy is gaining share in a growing number of countries and regions, including the European Union where renewable energy - primarily solar and wind power - accounted for about 21 percent of electricity consumption in 2011, and almost 70 percent of new electric capacity in 2012.

Renewables just may prove to be the tortoise in the energy race.


Weekly Focus - Think About It

"It is not in the stars to hold our destiny, but in ourselves."
--William Shakespeare, English poet and playwright

Sources:
http://uk.reuters.com/article/2013/06/14/uk-imf-usa-idUKBRE95D0LJ20130614
http://www.imf.org/external/pubs/ft/survey/so/2013/car061413a.htm
http://online.wsj.com/article/BT-CO-20130614-707207.html
http://finance.yahoo.com/blogs/the-exchange/finance-week-ahead-focus-fed-234959581.html;_ylt=Akb29zb_aSPtjMcmdEEbXHCiuYdG;_ylu=X3oDMTNycWVwNWh0BG1pdANGUCBUb3AgU3RvcnkgTGVmdARwa2cDZmJjYjQ2NjUtNDM1MC0zZTAzLThhZTEtOTMyYmVjNmVlM2E2BHBvcwMxBHNlYwN0b3Bfc3RvcnkEdmVyA2JkMjExNjMyLWQ2MGMtMTFlMi1iZmZmLTlhNmEyMzEwZDkyNQ--;_ylg=X3oDMTFkcW51ZGliBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3BtaA--;_ylv=3
http://finance.yahoo.com/news/wall-st-week-ahead-investors-230802196.html
http://www.federalreserve.gov/whatsnext.htm
http://www.ibtimes.com/economic-events-june-fomc-meeting-minutes-bernanke-press-conference-fed-qe-tapering-1308475
http://www.usatoday.com/story/money/business/2013/06/16/fed-june-meeting-advance/2423363/
http://www.ren21.net/Portals/0/documents/Resources/GSR/2013/GSR2013_lowres.pdf
http://fs-unep-centre.org/publications/global-trends-renewable-energy-investment-2013
http://www.economist.com/blogs/analects/2013/03/renewable-energy
http://www.kiplinger.com/article/business/T008-C024-S005-torn-from-the-kiplinger-letters.html
http://www.brainyquote.com/quotes/quotes/w/williamsha101458.html

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
' style='margin: 0px 5px;' cols='100' rows='15'>The Markets


Like a host at a dinner party, the International Monetary Fund (IMF) put the performance of the U.S. economy on the table last week to be gnawed over by world markets. When the IMF presented its annual review of the world's largest economy, it stated that:

"Despite some improvements in economic indicators, particularly in the housing market, the very rapid pace of deficit reduction... is slowing growth significantly... U.S. growth is expected to slow to 1.9 percent in 2013, from 2.2 percent in 2012. This projection reflects the impact of the sequester ($85 billion of automatic U.S. government spending cuts), and the expiration of the payroll tax cut and the increase in tax rates for high-income taxpayers...Growth could pick up to 2.7 percent next year with a more moderate fiscal adjustment and a further strengthening of the housing market."

The IMF also said the Federal Reserve should continue quantitative easing through 2013.

It was not the only one pondering the Fed's quantitative easing program. The major U.S. stock market indices finished the week lower. The Dow Jones Industrials Average fell 1.2 percent last week, the Standard & Poor's 500 Index was off by 1 percent, and the NASDAQ dropped 1.3 percent. Remarkably, the Dow experienced four straight days of triple-digit swings.

The next Federal Open Market Committee Meeting is on June 18 and 19. While few people expect the Fed to announce it will reduce the pace of bond buying immediately, the majority of economists surveyed by USA TODAY predict the Federal Reserve will begin to reduce bond purchases by early fall.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


ARE EMERGING COUNTRIES LEADING THE WAY IN RENEWABLE ENERGY? It seems that way sometimes. According to UNEP's report, Global Trends in Renewable Energy Investment 2013, "Renewables are picking up speed across Asia, Latin America, the Middle East, and Africa, with new investment in all technologies... Markets, manufacturing, and investment shifted increasingly towards developing countries during 2012." For instance, after running even with the United States during 2011, China became the dominant country for renewable energy investment in 2012, according to the report.

This doesn't mean the United States isn't in the race. According to The Economist, an analysis by Bloomberg New Energy Finance found the U.S. and China traded about $6.5 billion in solar, wind, and smart-grid technology and services during 2011. America sold about $1.5 billion more to China than it imported. The Economist concluded, "American ingenuity is required to supply Chinese factories with such things as polysilicon and wafers for photovoltaic cells, and the fiberglass and control systems used in wind turbines."

So, what does the future hold? Kiplinger's Letters said solar power production will double in 2013 and move ahead of geothermal power as a source of clean energy. They believe wind energy will soon rival hydroelectric power, as well. The United States added more wind power capacity last year than any other type of power generation. Currently, wind comprises about 5 percent of power generated in the United States.

Global investment in renewable energy may have fallen during 2012, but that doesn't mean the industry has lost momentum. Renewable energy is gaining share in a growing number of countries and regions, including the European Union where renewable energy – primarily solar and wind power – accounted for about 21 percent of electricity consumption in 2011, and almost 70 percent of new electric capacity in 2012.

Renewables just may prove to be the tortoise in the energy race.


Weekly Focus – Think About It

"It is not in the stars to hold our destiny, but in ourselves."
--William Shakespeare, English poet and playwright

Sources:
http://uk.reuters.com/article/2013/06/14/uk-imf-usa-idUKBRE95D0LJ20130614
http://www.imf.org/external/pubs/ft/survey/so/2013/car061413a.htm
http://online.wsj.com/article/BT-CO-20130614-707207.html
http://finance.yahoo.com/blogs/the-exchange/finance-week-ahead-focus-fed-234959581.html;_ylt=Akb29zb_aSPtjMcmdEEbXHCiuYdG;_ylu=X3oDMTNycWVwNWh0BG1pdANGUCBUb3AgU3RvcnkgTGVmdARwa2cDZmJjYjQ2NjUtNDM1MC0zZTAzLThhZTEtOTMyYmVjNmVlM2E2BHBvcwMxBHNlYwN0b3Bfc3RvcnkEdmVyA2JkMjExNjMyLWQ2MGMtMTFlMi1iZmZmLTlhNmEyMzEwZDkyNQ--;_ylg=X3oDMTFkcW51ZGliBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3BtaA--;_ylv=3
http://finance.yahoo.com/news/wall-st-week-ahead-investors-230802196.html
http://www.federalreserve.gov/whatsnext.htm
http://www.ibtimes.com/economic-events-june-fomc-meeting-minutes-bernanke-press-conference-fed-qe-tapering-1308475
http://www.usatoday.com/story/money/business/2013/06/16/fed-june-meeting-advance/2423363/
http://www.ren21.net/Portals/0/documents/Resources/GSR/2013/GSR2013_lowres.pdf
http://fs-unep-centre.org/publications/global-trends-renewable-energy-investment-2013
http://www.economist.com/blogs/analects/2013/03/renewable-energy
http://www.kiplinger.com/article/business/T008-C024-S005-torn-from-the-kiplinger-letters.html
http://www.brainyquote.com/quotes/quotes/w/williamsha101458.html

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
' style='margin: 0px 5px;' cols='100' rows='15'>
"Despite some improvements in economic indicators, particularly in the housing market, the very rapid pace of deficit reduction... is slowing growth significantly... U.S. growth is expected to slow to 1.9 percent in 2013, from 2.2 percent in 2012. This projection reflects the impact of the sequester ($85 billion of automatic U.S. government spending cuts), and the expiration of the payroll tax cut and the increase in tax rates for high-income taxpayers...Growth could pick up to 2.7 percent next year with a more moderate fiscal adjustment and a further strengthening of the housing market."

The IMF also said the Federal Reserve should continue quantitative easing through 2013.

It was not the only one pondering the Fed's quantitative easing program. The major U.S. stock market indices finished the week lower. The Dow Jones Industrials Average fell 1.2 percent last week, the Standard & Poor's 500 Index was off by 1 percent, and the NASDAQ dropped 1.3 percent. Remarkably, the Dow experienced four straight days of triple-digit swings.

The next Federal Open Market Committee Meeting is on June 18 and 19. While few people expect the Fed to announce it will reduce the pace of bond buying immediately, the majority of economists surveyed by USA TODAY predict the Federal Reserve will begin to reduce bond purchases by early fall.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


ARE EMERGING COUNTRIES LEADING THE WAY IN RENEWABLE ENERGY? It seems that way sometimes. According to UNEP's report, Global Trends in Renewable Energy Investment 2013, "Renewables are picking up speed across Asia, Latin America, the Middle East, and Africa, with new investment in all technologies... Markets, manufacturing, and investment shifted increasingly towards developing countries during 2012." For instance, after running even with the United States during 2011, China became the dominant country for renewable energy investment in 2012, according to the report.

This doesn't mean the United States isn't in the race. According to The Economist, an analysis by Bloomberg New Energy Finance found the U.S. and China traded about $6.5 billion in solar, wind, and smart-grid technology and services during 2011. America sold about $1.5 billion more to China than it imported. The Economist concluded, "American ingenuity is required to supply Chinese factories with such things as polysilicon and wafers for photovoltaic cells, and the fiberglass and control systems used in wind turbines."

So, what does the future hold? Kiplinger's Letters said solar power production will double in 2013 and move ahead of geothermal power as a source of clean energy. They believe wind energy will soon rival hydroelectric power, as well. The United States added more wind power capacity last year than any other type of power generation. Currently, wind comprises about 5 percent of power generated in the United States.

Global investment in renewable energy may have fallen during 2012, but that doesn't mean the industry has lost momentum. Renewable energy is gaining share in a growing number of countries and regions, including the European Union where renewable energy – primarily solar and wind power – accounted for about 21 percent of electricity consumption in 2011, and almost 70 percent of new electric capacity in 2012.

Renewables just may prove to be the tortoise in the energy race.


Weekly Focus - Think About It

"It is not in the stars to hold our destiny, but in ourselves."
--William Shakespeare, English poet and playwright

Sources:
http://uk.reuters.com/article/2013/06/14/uk-imf-usa-idUKBRE95D0LJ20130614
http://www.imf.org/external/pubs/ft/survey/so/2013/car061413a.htm
http://online.wsj.com/article/BT-CO-20130614-707207.html
http://finance.yahoo.com/blogs/the-exchange/finance-week-ahead-focus-fed-234959581.html;_ylt=Akb29zb_aSPtjMcmdEEbXHCiuYdG;_ylu=X3oDMTNycWVwNWh0BG1pdANGUCBUb3AgU3RvcnkgTGVmdARwa2cDZmJjYjQ2NjUtNDM1MC0zZTAzLThhZTEtOTMyYmVjNmVlM2E2BHBvcwMxBHNlYwN0b3Bfc3RvcnkEdmVyA2JkMjExNjMyLWQ2MGMtMTFlMi1iZmZmLTlhNmEyMzEwZDkyNQ--;_ylg=X3oDMTFkcW51ZGliBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3BtaA--;_ylv=3
http://finance.yahoo.com/news/wall-st-week-ahead-investors-230802196.html
http://www.federalreserve.gov/whatsnext.htm
http://www.ibtimes.com/economic-events-june-fomc-meeting-minutes-bernanke-press-conference-fed-qe-tapering-1308475
http://www.usatoday.com/story/money/business/2013/06/16/fed-june-meeting-advance/2423363/
http://www.ren21.net/Portals/0/documents/Resources/GSR/2013/GSR2013_lowres.pdf
http://fs-unep-centre.org/publications/global-trends-renewable-energy-investment-2013
http://www.economist.com/blogs/analects/2013/03/renewable-energy
http://www.kiplinger.com/article/business/T008-C024-S005-torn-from-the-kiplinger-letters.html
http://www.brainyquote.com/quotes/quotes/w/williamsha101458.html

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
' style='margin: 0px 5px;' cols='100' rows='15'>The Markets


Like a host at a dinner party, the International Monetary Fund (IMF) put the performance of the U.S. economy on the table last week to be gnawed over by world markets. When the IMF presented its annual review of the world's largest economy, it stated that:

"Despite some improvements in economic indicators, particularly in the housing market, the very rapid pace of deficit reduction... is slowing growth significantly... U.S. growth is expected to slow to 1.9 percent in 2013, from 2.2 percent in 2012. This projection reflects the impact of the sequester ($85 billion of automatic U.S. government spending cuts), and the expiration of the payroll tax cut and the increase in tax rates for high-income taxpayers...Growth could pick up to 2.7 percent next year with a more moderate fiscal adjustment and a further strengthening of the housing market."

The IMF also said the Federal Reserve should continue quantitative easing through 2013.

It was not the only one pondering the Fed's quantitative easing program. The major U.S. stock market indices finished the week lower. The Dow Jones Industrials Average fell 1.2 percent last week, the Standard & Poor's 500 Index was off by 1 percent, and the NASDAQ dropped 1.3 percent. Remarkably, the Dow experienced four straight days of triple-digit swings.

The next Federal Open Market Committee Meeting is on June 18 and 19. While few people expect the Fed to announce it will reduce the pace of bond buying immediately, the majority of economists surveyed by USA TODAY predict the Federal Reserve will begin to reduce bond purchases by early fall.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


ARE EMERGING COUNTRIES LEADING THE WAY IN RENEWABLE ENERGY? It seems that way sometimes. According to UNEP's report, Global Trends in Renewable Energy Investment 2013, "Renewables are picking up speed across Asia, Latin America, the Middle East, and Africa, with new investment in all technologies... Markets, manufacturing, and investment shifted increasingly towards developing countries during 2012." For instance, after running even with the United States during 2011, China became the dominant country for renewable energy investment in 2012, according to the report.

This doesn't mean the United States isn't in the race. According to The Economist, an analysis by Bloomberg New Energy Finance found the U.S. and China traded about $6.5 billion in solar, wind, and smart-grid technology and services during 2011. America sold about $1.5 billion more to China than it imported. The Economist concluded, "American ingenuity is required to supply Chinese factories with such things as polysilicon and wafers for photovoltaic cells, and the fiberglass and control systems used in wind turbines."

So, what does the future hold? Kiplinger's Letters said solar power production will double in 2013 and move ahead of geothermal power as a source of clean energy. They believe wind energy will soon rival hydroelectric power, as well. The United States added more wind power capacity last year than any other type of power generation. Currently, wind comprises about 5 percent of power generated in the United States.

Global investment in renewable energy may have fallen during 2012, but that doesn't mean the industry has lost momentum. Renewable energy is gaining share in a growing number of countries and regions, including the European Union where renewable energy – primarily solar and wind power – accounted for about 21 percent of electricity consumption in 2011, and almost 70 percent of new electric capacity in 2012.

Renewables just may prove to be the tortoise in the energy race.


Weekly Focus – Think About It

"It is not in the stars to hold our destiny, but in ourselves."
--William Shakespeare, English poet and playwright

Sources:
http://uk.reuters.com/article/2013/06/14/uk-imf-usa-idUKBRE95D0LJ20130614
http://www.imf.org/external/pubs/ft/survey/so/2013/car061413a.htm
http://online.wsj.com/article/BT-CO-20130614-707207.html
http://finance.yahoo.com/blogs/the-exchange/finance-week-ahead-focus-fed-234959581.html;_ylt=Akb29zb_aSPtjMcmdEEbXHCiuYdG;_ylu=X3oDMTNycWVwNWh0BG1pdANGUCBUb3AgU3RvcnkgTGVmdARwa2cDZmJjYjQ2NjUtNDM1MC0zZTAzLThhZTEtOTMyYmVjNmVlM2E2BHBvcwMxBHNlYwN0b3Bfc3RvcnkEdmVyA2JkMjExNjMyLWQ2MGMtMTFlMi1iZmZmLTlhNmEyMzEwZDkyNQ--;_ylg=X3oDMTFkcW51ZGliBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3BtaA--;_ylv=3
http://finance.yahoo.com/news/wall-st-week-ahead-investors-230802196.html
http://www.federalreserve.gov/whatsnext.htm
http://www.ibtimes.com/economic-events-june-fomc-meeting-minutes-bernanke-press-conference-fed-qe-tapering-1308475
http://www.usatoday.com/story/money/business/2013/06/16/fed-june-meeting-advance/2423363/
http://www.ren21.net/Portals/0/documents/Resources/GSR/2013/GSR2013_lowres.pdf
http://fs-unep-centre.org/publications/global-trends-renewable-energy-investment-2013
http://www.economist.com/blogs/analects/2013/03/renewable-energy
http://www.kiplinger.com/article/business/T008-C024-S005-torn-from-the-kiplinger-letters.html
http://www.brainyquote.com/quotes/quotes/w/williamsha101458.html

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
Jun 16, 2008 Weekly Commentary
The Markets There was lots of gurgling beneath the surface, but by the end of last week, the Dow Jones Industrial Average eked out a welcome gain.
Helping the cause was a report from the Commerce Department, which showed a 1% increase in retail spending in May. It was the fastest increase in six months and due, in part, to consumers trading their stimulus checks for tangible goods. Ironically, in a June 13 article, Reuters reported that the Reuters/University of Michigan survey of consumer confidence dropped to 56.7 in early June, which was a 28-year low. Apparently, consumers tried to shake off their gloom by engaging in one of their favorite activitiesshopping.
Inflation concerns plagued the bond market last week as the yield on the 2-year Treasury note climbed 60 basis points. That was the largest weekly gain in nearly seven years, according to MarketWatch. Also, according to MarketWatch, yields rose as investors became more convinced that the Federal Reserve may raise interest rates later this year to help combat rising inflation. On the positive side, higher interest rates may cool inflation and help strengthen the dollar, but it could put a damper on a housing recovery. Like just about everything the Federal Reserve does, theres a tradeoff.
A barrel of oil closed last week at about $135, down from a record high of about $139 per barrel on June 6, according to Bloomberg. Airlines, of course, have been hard hit by this rise in energy prices and now some people are calling for the industry to be re-regulated. Bob Crandall, the former CEO of American Airlines, said in a June 10 speech, Our airlines, once world leaders, are now laggards in every category, including fleet age, service quality, and international reputation. He said, a dollop of regulation, along with new government policies and appropriate investment, would help the carriers get back on the right track.
The airline industry was deregulated back in 1978 and according Portfolio.com on June 12, the industry has a net loss of more than $13 billion since that time. The stock prices of some of the major airlines also reflect the dire state of the industry. United, Northwest, Delta, and American all closed at less than $7 per share as of the end of last week, according to Yahoo! Finance.
The high cost of energy is creating winners and losers in the stock market. Airlines have been one of the losers. We continue to work hard on your behalf to try to find the winners.

IF ATTENDEES of the Federal Reserve Bank of Boston's 52nd Annual Economic Conference held last week in Chatham, Massachusetts, were looking for an inflation sound bite in Federal Reserve Chairman Ben Bernankes speech, its likely they settled on: The Federal Open Market Committee will strongly resist an erosion of longer-term inflation expectations, as an un-anchoring of those expectations would be destabilizing for growth, as well as for inflation. What the heck does that mean?
The Chairman may be setting the stage for an increase in interest rates. Some Fed observers believe weve reached the end of the rate-cutting cycle. Yet, Bernanke finds himself in the quintessential Catch 22. Drop rates lower and he delivers another blow to the plummeting global value of the U.S. dollar and opens the door for inflation here at home. Yet, can the weakened U.S. economy grow if he decides to let rates stay put?
Bernankes speech may signal that inflation worries have begun to offset concerns on how to fuel economic growth. For the consumer, however, the Chairmans take away message was: Inflation has remained high largely due to sharp increases in the prices of globally-traded commodities, and likely will be accelerated by the latest round of increases in energy prices. Yet, according to Bernanke, the Fed is paying close attention to the extent to which consumers believe prices will rise in the future. That is, if consumers, investors, and business owners become overly concerned about inflation, they might change their purchasing decisions in ways that aggravate inflation, turning their worries into a self-fulfilling prophecy.
What does all the attention on inflation mean for the future of interest rates? Economic pros and cons aside, its a political factor that may impact the Chairmans thinking most strongly. Americans head to the polls in November and, historically, Fed chairmen do not like to be seen as influencing the presidential elections. Accordingly, while interest rate increases could be on the horizon, they may not happen until after the new president takes office.

Weekly Focus Financial Capital of the World
No, its not New York. According to the 2008 MasterCard Worldwide Centers of Commerce Index, London takes the top spot followed by New York, Tokyo, Singapore, and Chicago. Los Angeles slipped to #17 from #10 in 2007. Western Europe led the list regionally by claiming 10 of the top 25 cities. The cities were rated on the following seven key dimensions: legal and political framework, economic stability, ease of doing business, financial flow, business center, knowledge creation, and information flow.
Jun 15, 2009 Weekly Commentary
The Markets The stock market has been on a very nice run over the past three months and there's a divergence of opinion on what's behind it.
Most analysts seem to agree on one point – we're out of the "end of the financial system" doomsday scenario. That alone could be a major reason for the big jump in equity prices since the March 9 low. From there, opinions vary.
One camp says the "green shoots" are a clear sign that the economy has bottomed and that it's just a matter of time before we are back to steady growth. Supporting this view is the fact that copper, which is traditionally viewed as an early indicator of economic strength, has risen 82% from its December 2008 low of $1.30 per pound, according to data from Seeking Alpha and The Wall Street Journal. Analysts in this camp think, "Happy days are here again."
Another camp thinks we're simply passing through the eye of the hurricane. They think this rally is a reprieve from the front end of the storm and that we'll get slapped hard again when we hit the other side of the eye wall. Folks in this group typically coalesce around the idea that government actions to stem the crisis will eventually make the situation worse, not better.
A third camp is more middle-of-the-road. They think the rally we've seen is a normal reaction to panic selling in the first quarter and to the massive liquidity added to the financial system. Neither bullish nor bearish, they think we're in a broad trading range and don't expect new all-time highs or new cyclical lows anytime soon.
Only time will tell which scenario comes to fruition. In the mean time, we continue to do our best to benefit from whatever the market has to offer us.

IS IT NEWS OR NOISE? Theoretically, just about everything that happens in the world has the ability to move markets. For example, the discovery of a large oil field off the coast of Brazil could cause oil prices to drop due to an increase in supply. A late freeze in the Midwest could cause agricultural commodity prices to rise due to crop destruction. The announcement of a $587 billion fiscal stimulus package in China could send stocks soaring as investors speculate it will lead to worldwide growth. A flu epidemic could cause stock prices to drop as it may lead to fewer people traveling and shopping, which could cut corporate profits. The list is endless.
But, here's one more potential market moving event that many investors have never heard of. It’s called the "200-day moving average." This is the average closing price of a security or index over the last 200 trading days. When updated daily and graphed, it creates a line that gives you a visual representation of the price trend. When the most current price breaks above this trend line, technical analysts view that as a bullish sign. When it breaks below, it's considered bearish.
So, here's the news – or noise – as it relates to the 200-day moving average. On June 1, the S&P 500 index closed above its 200-day moving average for the first time in 523 days, according to Bloomberg. That was the longest stretch of trading below its 200-day moving average since, you guessed it, the Great Depression. Does this mean the market will continue to move up from here?
The track record of the 200-day moving average is mixed. According to data from Bespoke Investment Group and Bloomberg, "The gauge rallied an average 21% over 12 months the last five times it crossed the 200-day mean after falling below it for a year or more." That sounds bullish until you realize that investors using the indicator were misled in January 2002. Back then, "when the S&P 500 rose past the 200-day average, ending a 463-day stretch below it, the index slumped 23% in the following year as investors speculated interest-rate cuts by the Fed wouldn't be enough to revive profit growth," according to Bloomberg.
One of the fascinating things about investing is, what's noise to one person might be news to another and vice versa. Some investors put great weight on a breakout of the 200-day moving average, while other investors simply shrug their shoulders. This 200-day moving average tug-of-war between opposing viewpoints is a microscopic example of the nearly infinite number of opposing views that buffet the market everyday. This interplay of opinions makes a market between buyers and sellers – and it's healthy.
Just like "Beauty is in the eye of the beholder," we can say, "News is in the eye of the investor." So, whether we’re talking news or noise, they each have the ability to move the markets.

Weekly Focus – Think About It
"The feeling of being hurried is not usually the result of living a full life and having no time. It is on the contrary born of a vague fear that we are wasting our life. When we do not do the one thing we ought to do, we have no time for anything else – we are the busiest people in the world."
-- Eric Hoffer
Jun 14, 2010 Weekly Commentary
The Markets
Which country is the most attractive market for investors?
Perhaps Brazil? Russia? India? China? Collectively, those four are known as the "BRIC" countries and for a number of years, many investors have pointed to them as economic stars. However, in a global quarterly poll of investors and analysts who are Bloomberg subscribers released on June 8, "Almost four of 10 respondents picked the U.S. as the market presenting the best opportunities in the year ahead." That placed the U.S. #1 on the list followed by Brazil, China, and India.
Of course, this is simply the opinion of a group of investors and analysts and it does not mean that the U.S. will turn out to be the best market. But, it does raise an interesting observation, which is… there are countries with good economics and countries with good investment opportunities--and they are not always the same.
Here's what we mean. In the first quarter of 2010, Brazil, India, and China's economies expanded at an annual rate of 9.0%, 8.6%, and 11.9%, respectively, as measured by gross domestic product, according to Bloomberg. That's huge. By contrast, the U.S. economy expanded at a relatively modest 3.0% in the first quarter, according to the Bureau of Economic Analysis. On the surface, you might think that the three countries with the highest economic growth rates would also present the most attractive investment opportunities. Possibly yes, but the latest survey from Bloomberg put the good ol' USA in the #1 spot.
Why would these investors and analysts put a slower-growing U.S. ahead of fast-growing Brazil, India, and China? There could be numerous reasons, but a simple takeaway is this--in the short-term, good economics does not always translate into good investment opportunities. For example, if the fast economic growth in Brazil, India, and China was already "priced into" their financial markets, then the near-term outlook for stock prices might be muted. Conversely, if the modest growth in the U.S. helped drive our stock prices down to a relatively low level, then we might be in the best position to experience a bounce from this "oversold" condition.
This is a long-winded way of saying short-term market movements might not reflect current economic realities.

DID YOU FEEL WEALTHIER in the first 3 months of this year? Well, believe it or not, the net worth of U.S. households rose by $1.1 trillion in the first quarter, according to the Federal Reserve. Most of this increase came from rising stock prices. And, if you believe economists, each extra dollar of wealth should generate about 5 cents of spending over time, according to MarketWatch. Dubbed "The Wealth Effect," it suggests that rising stock prices could lead to a virtuous cycle of higher spending, higher corporate earnings, and higher stock prices. That's the good news.
Here's the bad news. The theory also works in reverse.
Yes, household net worth was up in the first quarter, but it is still down about $11.4 trillion from its early 2007 peak, according to MarketWatch. And, with the roughly 7% slide we've seen in S&P 500 so far in the second quarter, we may see the net worth number drop when the second quarter data is released in a few months.
This net worth data and the stretched balance sheets of many Americans leaves us with a conundrum. On one hand, consumer spending accounts for about 70% of U.S. economic activity, according to Associated Press. So, if we want robust economic growth, we need consumers to open their wallets and start buying stuff. On the other hand, the pragmatic observer says consumers are already too much in debt and need to curb their spending and build up their savings. This could lead to slower growth.
Essentially, we can keep spending by going deeper in debt and hope we can "leverage" our way to prosperity. Or, we can cut our spending, increase our savings, and gradually build our way back to a sustainable growth rate. Both scenarios would likely cause some pain. The former scenario would likely delay the pain. The latter scenario would likely speed it up.
Sooner or later, don't be surprised if we enter an "Age of Austerity" that enables (forces?) consumers to reduce their debts, and, after a painful adjustment, puts our country back on a path to prosperity.

Weekly Focus – Think About It
"I have learned, as a rule of thumb, never to ask whether you can do something. Say, instead, that you are doing it. Then fasten your seat belt. The most remarkable things follow."
--Julia Cameron
Jun 13, 2011 Weekly Commentary
The Markets To rework one of the Beatles most famous songs, our economy is traveling "The Long, Winding and Bumpy Road."
After doubling in value by the end of April from the March 2009 low, the Standard & Poor's 500 index has now declined for six straight weeks, according to Minyanville and The Wall Street Journal. While the doubling in stock prices is quite impressive, the economy hasn’t kept up. Currently, we’re experiencing "bumps" along the economic road including a double-dip in housing prices, weak first quarter economic growth, a high unemployment rate, and ballooning government debt, according to The Wall Street Journal.
Our modest economic recovery is in line with what PIMCO dubbed "The New Normal" in 2009. Back then, PIMCO suggested we would experience 3-5 years of a bifurcated world economy. Specifically, they expected advanced countries to endure a period of sluggish growth, persistently high unemployment, public debt and deficit issues, increased regulation, and continuous pressures for private sector deleveraging. By contrast, they expected emerging economies to prosper with high growth rates and a closing of the income and wealth gap relative to advanced economies.
So far, their New Normal scenario is generally playing out across the world.
The latest bumps have kept our policy makers up at night trying to figure out how to drive our economy forward and create more jobs. This month's ending of the Federal Reserve's $600 billion bond-buying program known as QE2 will remove one form of monetary stimulus and possibly expose the economy to more volatility, according to MarketWatch. Rather than pick up the slack, Congress is having difficulty coming to terms on fiscal policy that might rev up the economy.
Like Nero fiddling while Rome burns, our economy is drifting out to sea and in need of strong leadership across the political spectrum to get it back to port.
WHAT IF YOU HAD A MAGIC NEWSPAPER and were able to read tomorrow's economic news today? Do you think you could successfully invest with that information?
It would make investing a lot easier, right? Well, maybe not.
Super investor Warren Buffett famously said, "If (Federal Reserve Chairman) Ben Bernanke whispered in my ear exactly what he's going to do tomorrow, it wouldn't change anything I'm going to do today," according to CNBC. The problem is it's difficult to know how the market will interpret any given piece of information.
Take oil prices as an example. If we whispered in your ear that oil prices would fall $2 per barrel tomorrow, do you think that would be bullish or bearish for the stock market? In reality, it probably depends on the reason for the fall.
Generally speaking, falling oil prices are good for the economy because it lowers the cost of gas and may allow consumers to spend more money, which could lead to higher corporate profits. With that backdrop, if oil prices fell due to oversupply, it might be bullish for the stock market because consumers would have more money to spend. However, if oil prices fell due to a slowing economy, the stock market might sell-off because some consumers would lose their jobs and reduce spending, according to CNBC.
So, even if you knew what was going to happen to oil prices tomorrow, you'd still need to know the "why" behind the price change to predict its impact on the stock market. And oil is just one example. Think about the myriad of economic indicators, corporate announcements, political wrangling, regulatory actions, and other things that happen each week that could affect the stock market. Trying to track all these factors and accurately discern their impact on the market would be futile.
Call us old-fashioned, but we'd rather stick to our investment process than spend time trying to guess the Federal Reserve’s next move or the impact of a $2 change in oil prices. It’s process rather than prognostication.
Weekly Focus – Think About It
"All of the great leaders have had one characteristic in common: it was the willingness to confront unequivocally the major anxiety of their people in their time. This, and not much else, is the essence of leadership." --John Kenneth Galbraith
Jun 10, 2013 Weekly Commentary
The Markets


Like a funhouse mirror, investors' concerns about whether and when the Federal Reserve will begin to end its quantitative easing program contorted market responses to economic news last week. Unexceptional economic reports were treated as good news and pushed stock markets higher; strong economic reports were treated as bad news and pushed stock markets lower.

Markets headed south mid-week, but responded positively to the U.S. May jobs report. It was a Goldilocks report - neither too weak nor too strong - which showed the Labor Department added slightly more jobs than expected in May. Apparently, investors thought the increase was not large enough to spur the Federal Reserve to early action on quantitative easing, and U.S. stock markets finished the week higher. The Dow Jones Industrial Average was up 0.9 percent, the Standard & Poor's 500 Index gained 0.8 percent, and the NASDAQ rose 0.4 percent.

Uncertainty about the future of quantitative easing has created volatility in U.S. bond markets during the past few weeks. Concerns the Fed could begin tapering sooner rather than later, triggered a sharp increase in bond yields during that period. In addition, several new offerings in the municipal bond market - issued by cities and states, municipal bonds typically are exempt from federal tax - have been scaled back or postponed because of market uncertainty.

If concerns about the end of quantitative easing continue to dominate, it's possible markets may continue to respond to economic news in unexpected ways. So, what's on deck for next week? Economic news should include the May retail sales report, initial June consumer sentiment reading, and inflation data.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


Is Investing in the Stock Market More Like Golf or Tennis? Every sport has a certain way to measure performance. For example:

- Running is based on time.
- The high jump is based on feet and inches.
- Football and basketball are based on points.
- Baseball is based on runs.
- The decathlon is based on the cumulative score from 10 different events.

So, how do we measure success as an investor?

A recent report from Invesco used golf and tennis as an analogy for how to win as an investor. The report pointed out tennis is scored using match play, meaning your performance is measured at intervals along the way.(1) You can win games, which leads to winning sets, which leads to winning the match. In effect, tennis players have to win along the way in order to win at the end of the match.

By contrast, golf is scored using stroke play, meaning it doesn't matter who wins any particular hole. Rather, the winner is determined by who has the lowest cumulative score at the end of the round or match.

Despite their different scoring systems, people who win at golf and tennis still need to perform somewhat consistently throughout their performance. Tennis players can't play great for 3 games and then poorly in 4 games and still win the set. Likewise, golfers who triple bogey 12 holes and birdie 6 holes probably won't win the club championship.

Now, before we can determine whether winning as an investor is more like golf or tennis, we have to define what "winning as an investor" means. Simply put, we can define winning as an investor to mean you've achieved your financial goals within the timeframe you've identified and at a risk level that was acceptable to you.

Using that definition, winning as an investor is more like winning at golf than tennis.

In golf, the winner is determined at the end of the round or match and who won each individual hole does not matter. Likewise, a winning investor "wins" when they've achieved their goals by the end of the specified period.

Of course, real life investing is not so neat and tidy. Just like golfers sometimes take a triple bogey, the stock market sometimes takes a big drop. And, while nobody likes to see these declines, it's important to understand they will happen.

In addition, golfers are sometimes tied at the end of a tournament so they have to play extra holes. Similarly, the financial markets occasionally experience extended declines which may mean it will take investors longer to reach their goals than originally planned.

Consider this, too: golfers have numerous clubs in their bag they can use depending on how far they are from the hole, their lie, and any obstacles that may be in their way (e.g., a tree). On the tee at a par 5 hole, for example, a golfer might take out a driver because they have a long way to go. Likewise, for clients who are a long way from retirement, we might more heavily weigh equities in an effort to pursue a greater return. Conversely, a golfer on the green facing a 3-foot putt would pull out a putter instead of a driver while accepting more risk. Likewise, if you're in retirement, there are certain asset classes with risk and return characteristics that may be more suited to your portfolio than a heavy allocation to equities.

Golf, tennis, and investing have a lot in common. They can all be played competitively and competitive people like to keep score and win. As a "competitive" advisor, we do our best to "win" the investment game on your behalf so you can spend more of your time doing what you enjoy the most… which might include golf or tennis!

(Investing in securities is subject to market fluctuation and possible loss of principal. No strategy assures success or protects against loss.)


Weekly Focus - Think About It

"I've learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel."
--Maya Angelou, American author and poet

Sources:
http://online.barrons.com/mdc/public/page/9_3063-economicCalendar.html (Click on link, then Simply Economics)
http://finance.yahoo.com/news/just-jobs-data-could-help-003913615.html
http://www.reuters.com/article/2013/06/07/markets-municipals-deals-idUSL1N0EH0W120130607
http://www.marketwatch.com/column/bond%20report
http://www.investorwords.com/3162/municipal_bond.html
http://www.invesco.com/pdf/PPRRGLF-FLY-1.pdf?contentGuid=f34ec06792c0b210VgnVCM1000000a67bf0aRCRD
http://www.brainyquote.com/quotes/authors/m/maya_angelou.html

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
Jun 09, 2008 Weekly Commentary
The Markets Big Brown laid a big goose egg on Saturday at the Belmont Stakes as did the stock market the day before.
As the heavy favorite to win the Triple Crown, Big Brown proved once again that there are no sure things in racing. The stock market is no different. In recent weeks, as the stock market rallied from its mid-March lows, many pundits suggested the worst was over. While that may still be true, last Fridays nearly 400-point drop in the Dow Jones Industrial Average reminded investors that things can change in a hurry.
A weak employment report, another record surge in oil prices, and a weaker dollar all combined to send the domestic stock market last Friday to its worst daily loss in more than a year, according to Barrons. The Labor Department said May payrolls fell by 49,000a smaller decline than expected, according to a Bloomberg News surveywhile the unemployment rate rose by 0.5% to 5.5%. The rise in the unemployment rate is worrisome, however, as reported by MarketWatch.com, and the Labor Department said the big jump may partially reflect statistical distortion caused by the difficulty of seasonally adjusting the numbers to reflect the big influx of students entering the job market this time of year. In other words, reality may not be as bad as the report suggests.
While the stock market was down last week, the bond market was up. The yield on the 10-year Treasury declined from 4.05% on Friday, May 30, to 3.94% on Friday, June 6. Bond prices move inversely to a bonds yield so that means the value of bonds went up last week, according to data from Yahoo! Finance. This is an example of how diversification may help temper volatile movements in the stock market.
Thomas J. Lee, chief U.S. equity strategist at JPMorgan, took an optimistic view on the jump in unemployment. He said, The Dow Industrials posted a 30% average gain in the 12 months following a jump in the unemployment rate by half a point or more since 1950, according to Bloomberg. Lets hope the current jump continues that positive 30% average gain.

WHILE OVERALL DOMESTIC STOCK PRICES ARE DOWN OVER THE PAST YEAR, other various asset classes have performed well. With the low returns in the U.S., some investors have pulled money out of domestic stocks and put it to work elsewhere. This money in motion has helped prop up other asset classes.
With so many investment choices these days, were not limited to just whats happening in the domestic market. Frequently, even if the U.S. equity market is down, one or more other asset classes somewhere in the world is performing well. Because of globalization and innovation, its relatively easy for investors to move money from one asset class to another. Consequently, we can see big moves in the financial markets in short time periods as investors readjust their portfolios to try to take advantage of changing market conditions.
As always, we remain on alert for the best investment opportunities and, as we deem appropriate, well try to take advantage of them on your behalf.

Weekly Focus Do You Want to Live Longer and Healthier?
If you answered Yes then, play more golf. Playing golf may reduce your death rate by 40%.
A new study published in the Scandinavian Journal of Medicine & Science in Sports made that startling conclusion even after controlling for sex, age, and socioeconomic status. In more understandable terms, golf may add five years to your life expectancy, according to the study as reported by Bloomberg. And, if youre a low handicap golfer, youre even better protected, according to the study.
So, if your loved one is complaining about you spending too much time on the links, just say, Honey, Im doing it for you so I can live longer and spend more time with you. Yeah, right!
Jun 08, 2009 Weekly Commentary
The Markets This week marks the two-year anniversary of the financial meltdown. What lessons have we learned?
On June 12, 2007, news broke that a 10-month old Bear Stearns hedge fund that speculated in mortgage-backed securities was melting down. The fund used leverage and bet heavily on bonds tied to subprime mortgages. As the market for subprime mortgages began to implode in early 2007, so did the Bear Stearns fund. This was the first major piece of information that all was not well in the land of finance, and, of course, you know what happened over the next two years.
Interestingly, this news made major headlines at the time, yet the stock market continued to rise for four more months until the S&P 500 index hit its all-time high on October 9, 2007.
Though the history books are still in process, here are a few meltdown lessons worth contemplating:
• Market meltdowns don't happen all of a sudden – they leave clues. But, being able to accurately decipher those clues is very difficult.
• Stock prices can rise much further and much longer than you ever expect.
• Stock prices can fall much further and much longer than you ever expect.
• When investors panic, fundamentals go out the window and securities may drop to levels that, in hindsight, appear to be ridiculously low.
• When prices get ridiculously low, they can soar very quickly on a snapback rebound. For example, witness the nearly 40% rise in the S&P 500 index in the past three months.
• The unimaginable can happen. For example, GM and Chrysler are in bankruptcy, Lehman Brothers and Bear Stearns are gone, the government owns AIG, Fannie and Freddie, and the government has spent trillions of dollars propping up the economy and the financial system.
• No matter how dark and desperate it seems in the financial markets, the sun will still rise in the east, children will play in the park, and life will go on.
As George Santayana wrote, "Those who do not learn from history are doomed to repeat it." We realize that history does not repeat itself exactly, but it is close enough that we do all we can to learn from it.

SINCE WE ARE TALKING ABOUT HISTORY, let's go back to January 2008. If you recall, the economy was doing fine, the stock market was just coming off all-time record highs, and consumers were still spending freely. Few people had any inkling of what would transpire over the next 18 months... except for Gary Shilling, a longtime Wall Street economist and part-time beekeeper. In January 2008, Shilling recommended the following 13 "investment strategies" in his subscription-based newsletter Insights as reported on May 31, 2009, in New York Magazine:
1. Sell or sell short homebuilder stocks and bonds.
2. If you plan to sell your home, second home, or investment houses anytime soon, do so yesterday.
3. Sell short subprime mortgages.
4. Sell or sell short housing-related stocks.
5. Sell or sell short consumer discretionary-spending companies.
6. Sell low-grade fixed-income securities.
7. Sell or avoid most commercial real estate.
8. Short commodities.
9. Sell or sell short emerging-market equities.
10. Sell emerging country bonds.
11. Buy the dollar before long.
12. Sell or sell short U.S. stocks in general.
13. Buy long Treasury bonds.
Amazingly, Shilling was 13 for 13. So what is he thinking now? Here are a few of his current thoughts according to the New York Magazine article, a recent interview with Bloomberg and an article in The Globe and Mail.
• Consumers will start saving more and spending less, which will slow economic growth over the next 5-10 years.
• Government involvement will slow us down further because of inefficiencies and protectionism.
• The recession will last another year.
• Housing prices will continue to drop.
• Loan demand will be weak and lenders will be tight.
• The biggest risk is deflation, not inflation.
Shilling was right back in January 2008 and it's possible he could be right again this year. However, while it's worth listening to various points of view, we don't blindly follow any market forecaster because you never know ahead of time which of them will be accurate or when their forecasting skill will expire. Instead, we research, we monitor, and we make adjustments along the way. Ultimately, we use multiple sources, including our own experience, to do the best job we possibly can for you.

Weekly Focus – Think About It
"Fear not for the future, weep not for the past."
--Percy Bysshe Shelley
Jun 07, 2010 Weekly Commentary
The Markets
Despite the blaring headlines of late, the U.S. stock market has been stuck in a broad trading range since last September.
It's easy to get caught up in the daily gyrations of the stock market's ups and downs, but when viewed through a longer-term lens, the S&P 500 index has been pin-balling between a range of about 1,040 and 1,217. The low end of the range was established in mid-September of last year and the high end of the range was reached in late April of this year, according to data from Yahoo! Finance. Last Friday, the index closed at 1,065, which is near the low end of the range.
Range-bound markets are not unusual and with the big rise we've had since March 2009, some consolidation of those gains is par for the course. Going forward, the market can do one of three things. It can continue to bounce around the range, it can breakout of the range to the upside, or it can breakdown. Of course, nobody knows until after the fact which scenario will occur, but regardless of the next direction, we continue to do all we can to help you reach your goals and objectives.

HOW OFTEN SHOULD WE EXPECT THE STOCK MARKET to experience declines of at least 5%? When training for athletic events coaches are fond of saying, "No pain, no gain." Likewise, investors should expect to endure the "pain" of market declines in order to benefit from the "gain" of bull markets. But, in order to withstand these market declines, it's helpful to know how much pain is "normal."
As of last week, the Dow was in the "-10% or more" category, according to CNNMoney.com. This was the first decline of 10% or more since March 2009, according to Barron's. Looking at the chart above, the current decline puts us right in line with the historical frequency of such declines.
We realize that market declines are not enjoyable even if they are in line with historical frequency. However, knowing where we stand within the context of history can help us make clearer and less emotional decisions as it relates to investment strategy.

Weekly Focus – Think About It
"The trend is your friend except at the end where it bends."
--Ed Seykota
Jun 06, 2011 Weekly Commentary
The Markets Well, it wasn't exactly the best week for the U.S. economy and financial markets. Here are a few "bumps on the road to recovery" we learned last week:
• Nationwide housing prices declined again in March and are now at the lowest level since mid-2002, according to the S&P/Case-Shiller Home Price Indices.
• The Institute for Supply Management's manufacturing gauge posted its third straight monthly decline in May and its biggest one-month drop since 1984, which suggests the manufacturing sector is slowing, according to MarketWatch.
• The Conference Board's index of consumer confidence fell to 60.8 in May from 66.0 in April, which was well below the consensus of economists and suggests consumers are turning gloomier, according to The Wall Street Journal.
• The jobs picture turned sour in May as the unemployment rate rose to 9.1% and only 54,000 new jobs were created -- both figures were worse than expected, according to MarketWatch.
The stock market didn’t like the news, either, as both the S&P 500 and the Dow Jones Industrial Average declined last week. Those two indices have now declined for five straight weeks, according to Bloomberg.
Still, some prominent market analysts think the bad news is just temporary. Byron Wien, the vice chairman of Blackstone Advisory Partners, was quoted last week in Bloomberg as saying, "Investors should be looking for buying opportunities. The economy is not as bad as it looks right now. Corporate profits will be good, very good." A June 5 Wall Street Journal article also pointed out some positives including "super-low interest rates, hefty corporate profit margins, and attractive prices for shares of many stable, global companies."
Regarding last week's market news, Reuters said fund managers "displayed caution, rather than distress" and "most see the recent data confirming a soft patch, or slowdown" rather than a double-dip recession.
Confused? No doubt this is a tricky time in the markets as investors can make a good argument for being either bullish or bearish. Ultimately, we don't control the markets so our focus is on helping you reach your goals through bull and bear markets.

AS WE CLAW OUR WAY OUT OF THE GREAT RECESSION, Americans are concerned about the future of our country. Times are difficult as we deal with budget deficits, high unemployment, weak consumer confidence, low housing prices, and high energy prices.
But, despite our challenges, there’s one reason to be optimistic... the U.S. is an innovator.
Innovation holds one key to a resurgent United States. Let's look at the evolution of computers as an example of America's ingenuity:
• In the 1960s, the mainframe computer introduced distributed computing and dumb terminals into the workplace.
• In the 1970s, minicomputers essentially made mainframe capabilities available to smaller businesses.
• In the 1980s, PCs extended the reach of computing power into the home.
• In the 1990s, the internet took off and connected the world.
• In the 2000s, smartphones allowed us to take computing with us wherever we go.
• In the 2010s, the “cloud” is poised to take computing to the next level.
Source: Scientific American Magazine
With Silicon Valley as the nexus, the U.S. has been a leader in many of these technology innovations. And, our innovation extends beyond computer technology, too. Just consider the standard of living you have compared to your grandparents. It’s like night and day. Despite many bumps and bruises along the way, the U.S. progresses.
The point is, don’t count America out of the race to reclaim its "glory days." Yes, there will be more economic hardships, more partisan politics, more bear markets, and more wars. But, somehow, we will find a way to regroup and march on. The future of the U.S. may not look like its past… it could be even better!

Weekly Focus – Think About It
"Success requires enough optimism to provide hope and enough pessimism to prevent complacency." --David G. Myers, Social Psychologist
Jun 04, 2012 Weekly Commentary
The Markets It was a weak week in the world's financial markets and these headlines from The Wall Street Journal, Saturday, June 2, and Sunday, June 3 editions, leave no doubt of that.
-Grim Job Report Sinks Markets
-Euro-Zone Reports Deepen Gloom
-Asia Weakness Heightens Fears of Contagion
-Brazil Loses Steam as World Slows
-Dow Tumbles Into Red for the Year
-Raw Materials in a Free Fall
-Government-Bond Yields Sink to Record Lows
But, let's keep something in mind. Headlines like these are designed to do one thing – get you to keep reading. By doing so, the publisher can sell more papers and charge higher rates for advertising. Fair enough.
Unfortunately, there's an unintended consequence to this type of hyped headline. It has the potential to scare the public into doing the wrong thing at the wrong time for the wrong reason.
The fact is, scary things happen every day, however, that should not derail a well-thought out plan that has checks and balances in place to try and distinguish between short-term noise and long-term secular change.
Our job as a financial advisor is to dig beneath the screaming headlines and get to the crux of what's happening. With a clearer understanding of the real issues, we can do a better job of discerning how changes in the economy impact the markets, and, ultimately, your goals and objectives. And, with that information in hand, we can make course corrections as needed to help keep you on track.

IN THE CLASSIC MOVIE THE SOUND OF MUSIC, the nuns asked (or rather sang), "How do you solve a problem like Maria?" For the past couple years, the leaders of Europe have been asking, "How do you solve a problem like over-indebtedness?" So far, the debate has been framed as a choice between growth or austerity, according to the BBC. As the biggest member of the euro zone, Germany has been aggressive in acting as the enforcer of the austerity route for its weaker sister countries. Greece, for example, had to agree to major austerity measures in return for bailout money. The result? The economy hasn't improved and the people are revolting.
Countries in favor of austerity believe spending cuts and general belt tightening are the ticket to lower budget deficits. The growth camp favors more government spending on things like infrastructure and energy technology as a way to create more jobs and help a country grow its way out of its debt problem.
Recently, with the election of Francois Hollande in France, and the popular support of Alexis Tsipras in Greece ahead of the upcoming Greek election, the support for austerity is starting to fade and is being replaced by a growth agenda, according to BusinessWeek. Germany, however, remains firmly in the austerity camp.
But, here's a question, "Can we have austerity and growth?"
As complicated as our world is, the debate between austerity and growth might be a false choice so says Christine Lagarde, head of the International Monetary Fund, according to the BBC. She and others argue that given the precarious state of some countries, a two-pronged approach might be needed. First, spend more in the short-term to stabilize the economy, then gradually tighten the belt down the road when the economy is better able to handle it.
In theory, that sounds like a less painful way to solve the deficit conundrum. In reality, it may not be that easy.
For years, countries such as Greece and, yes, even the U.S., have lived on borrowed money and borrowed time. It appears the bill for this "living beyond your means" spending is coming due sooner rather than later as evidenced by the continuing economic stagnation in many countries.
While one can hope the politicians and economists will come up with a plan to steady the ship, we can't bank on it. We have a responsibility to you, as our client, to help you meet your objectives regardless of what happens in Washington or Athens or Berlin. And, we take the responsibility very seriously.

Weekly Focus – Think About It...
"When asked in surveys, most Americans believe that spending money on personal desires brings greater satisfaction than giving it away. But, when participants actually were given the chance to do that, to spend $20 on themselves or give it away, it was the act of generosity that led to greater happiness. To care is good." --Dacher Keltner, professor of psychology at the University of California-Berkeley, commencement address at UC-Berkeley on May 14, 2012
Jun 03, 2013 Weekly Commentary
The Markets


The Fed will taper... the Fed will not... the Fed will taper... the Fed will not...

Last week, investors and traders obsessed about the Federal Reserve and the possibility it might begin to end its quantitative easing program. The Fed began its first round of quantitative easing during the financial crisis in an effort to prop up the American economy. In general, quantitative easing helps increase money supply and promote lending and liquidity. Investors' fears about what may happen when the program ends were apparent when, despite abundant positive economic news, major U.S. stock markets lost value last week.

On Tuesday, after the Memorial Day holiday, the Standard & Poor's Case-Shiller home price index posted its biggest gain in seven years. Housing prices increased in every one of the 20 cities it tracks. U.S. stock markets initially responded positively to the news. However, it wasn't long before investors began to worry that stronger housing prices might speed up the Fed's timetable for quantitative easing, and U.S. stock markets moved lower on Wednesday.

On Thursday, weaker-than-expected economic data - first quarter gross domestic product (GDP) growth for the United States was revised downward from 2.5 percent to 2.4 percent - pushed markets higher.

On Friday, positive news - the Thomson Reuters/University of Michigan index of sentiment showed consumer confidence had reached its highest level in six years - caused markets to move lower.

U.S. stocks generally finished higher for the month of May despite last week's performance. The Dow Jones Industrial Index gained 1.9 percent, the Standard & Poor's 500 Index rose by 2.1 percent, and the NASDAQ was up 3.8 percent.

Treasuries, however, delivered their worst monthly performance since 2010. During the last four weeks, yields on 10-year Treasury notes rose from 1.6 percent to 2.1 percent - an increase of 50 basis points.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


SOME SAY THE CONSUMER FINANCIAL PROTECTION BUREAU (CFPB) unnecessarily limits consumers' choices and is not subject to sufficient oversight; others say it protects consumers from unethical business practices and unnecessary financial hardship. Regardless of the hoopla surrounding it, consumers have begun turning to the CFPB for help.

The CFPB is funded by the Federal Reserve and operates independently of Congress which is one reason some believe it does not have sufficient oversight. According to the CFPB's web site, its purpose is:

"Above all... ensuring that consumers get the information they need to make the financial decisions they believe are best for themselves and their families - that prices are clear up front, that risks are visible, and that nothing is buried in fine print. In a market that works, consumers should be able to make direct comparisons among products and no provider should be able to use unfair, deceptive, or abusive practices."

From July 2011 (the date the CFPB became effective) through February 2013, the CFPB had received and worked to address more than 131,000 consumer complaints, including 5,000 issues raised by members of the military, veterans, and their families. The complaints typically are related to mortgages, credit cards, bank accounts and services, private student loans, consumer loans, and credit reporting. According to a recent article in Barron's, the CFPB is:

"...Progressing in its original mission of reducing predatory lending by mortgage and auto lenders, credit-card issuers, and other consumer-finance outfits... So far, the agency has forced financial institutions to repay $425 million to consumers, and tackled bias in auto loans made by finance companies via car dealers. The CFPB has formulated tighter mortgage-lending rules that are being challenged in Congress. The bureau is about to begin regulating an estimated 22,000 payday offices."

For banks and financial firms, complying with CFPB rules may require operational makeovers and the not-insignificant expenses which may accompany them, according to American Banker.com. One financial institution spent 900 hours analyzing how its mortgage operations, servicing, collections, and legal compliance measured up to CFPB rules. Then it modified its systems, processes, and training programs (or created new ones) to ensure it would remain in compliance. One outcome was the firm's compliance team grew from four to 17 employees.

So, what is the CFPB? Is it an overreaching compliance nightmare or an effective consumer watchdog? Only time will tell.


Weekly Focus - Think About It

"The optimist thinks this is the best of all possible worlds. The pessimist fears it is true."
--J. Robert Oppenheimer, American theoretical physicist

Sources:
http://www.bdlive.co.za/businesstimes/2013/06/02/financial-markets-jumpy-despite-good-news
http://www.forbes.com/pictures/efjl45ejmk/fed-chairman-ben-bernanke-the-brains-behind-qe-2/
http://www.forbes.com/pictures/efjl45ejmk/evolution-of-real-gdp-in-the-u-s-2/
http://www.investopedia.com/terms/q/quantitative-easing.asp
http://www.nytimes.com/2013/05/29/business/house-prices-show-largest-gain-in-years.html?pagewanted=all&_r=0
http://www.sfgate.com/business/bloomberg/article/U-S-Stocks-Rise-on-Fed-Stimulus-Bets-After-GDP-4562236.php#ixzz2V4mD0znS
http://www.bloomberg.com/news/2013-05-31/michigan-consumer-sentiment-index-climbed-to-84-5-in-may.html
http://www.reuters.com/article/2013/05/31/markets-global-idUSL2N0EC1X920130531
http://finance.yahoo.com/blogs/the-exchange/finance-week-ahead-june-swoon-come-221449595.html
http://finance.yahoo.com/blogs/breakout/bond-market-outsmarting-stocks-113004999.html
http://www.thefiscaltimes.com/Articles/2013/05/30/Critics-Say-Consumer-Bureau-is-an-Overreaching-Monster.aspx#page1
http://www.consumerfinance.gov/the-bureau/
http://files.consumerfinance.gov/f/201303_cfpb_Snapshot-March-2013.pdf (Page 6)
http://www.consumerfinance.gov/blog/2013/04/
http://online.barrons.com/article/SB50001424052748704895304578495514250700462.html#articleTabs_article%3D1
http://www.americanbanker.com/magazine/123_6/new-cfpb-rules-will-impact-all-mortgage-servicers-1059171-1.html?pg=2
http://www.brainyquote.com/quotes/authors/j/j_robert_oppenheimer.html

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
Jun 02, 2008 Weekly Commentary
The Markets How do you succeed as an investor? According to legendary bond manager Bill Gross of PIMCO, "Investment success depends on an ability to anticipate the herd, ride with it for a substantial period of time, and then begin to reorient portfolios for a changing world."
Essentially, Gross is saying, "find a trend and throw yourself in front of it." The trick is to spot the trend early then move out of it before it fades away or, worse yet, crashes. Over the past 10 years, weve seen a few trends. For example, we had the tech stock boom of the late 1990s, the real estate boom of the early 2000s, and, now, the commodities boom over the past couple years. The first two trends ended badly, while the jury is still out on how the commodities boom will end.
As a financial advisor, were constantly scanning the horizon to try to identify trends and turning points in trends. When we identify a trend, we try to position your portfolio to take advantage of it. When we suspect a trend is starting to end, we try to adjust accordingly. Of course, no financial advisor will ever be 100% accurate, but, the good news is, we dont have to be. You can still have a very successful financial result even with the occasional bad investment.
The key is to construct a portfolio that is diversified and that offers a chance of at least several components going up in value at any given time. Innovation in the financial sector now allows us to invest in areas that previously were difficult to access. Thats good news because we now have more asset classes from which to choose. With greater choice, we have more opportunities to find an asset class that may be starting an upward trend.
While the innovation is great, it does carry a price. Wall Street financial engineers got fancy and created sophisticated derivative products, such as collateralized debt obligations (CDOs), that are now coming back to haunt them. As a result, they discovered the hard way that if you dont know what youre doing, Wall Street can be an expensive place to learn.
It may not feel like it, but the trend in the stock market is up. Since reaching a recent low of 1273 on March 10, the S&P 500 has risen to 1400 as of last Friday, according to data from Yahoo! Finance. Thats a gain of about 10% in less than three months. While impressive, were not getting complacent. Like an airplane flying at 35,000 feet, we could hit unexpected turbulence at any time so were trying to stay vigilant on your behalf.

AS YOU WELL KNOW, GAS PRICES HAVE RISEN DRAMATICALLY LATELY. Wheres the cost increase coming from? In mid-May, crude oil, which accounts for 55% of the price of gasoline, surged to an all-time trading high of $135 a barrel. Accordingly, gasoline prices, which for months lagged the big run-up in oil, accelerated upward, fueled by the summer travel season.
High gas prices are just the tip of the iceberg. The rising price of oil, up 25% in the first quarter of 2008, negatively impacts macroeconomic variables from real GDP growth, inflation, and employment to exports/imports and interest rates. In fact, the Energy Information Administration (EIA) estimates that every $10 per barrel increase in the price of oil will reduce U.S. GDP by approximately $6.9 to $13.8 billion in current dollars.
Whats causing high oil prices? According to, High Oil Prices Have Significant Effects on Consumers and the U.S. Economy, published by Congress Joint Economic Committee, rising oil prices are the result of decisions made by OPEC and other oil-producing countries, stagnant production in Iraq, and ongoing concerns about political and supply stability in a number of oil-producing countries. Whats more, since oil is denominated in U.S. dollars, the dollars 40% decline in the last six years has put additional upward pressure on oil prices. And, because oil prices are affected by oil futures which are traded on the commodities futures exchange, prices also have been driven up by the increased speculative buying by institutional investors from pension funds to university endowments that own the largest share of outstanding commodities futures contracts. Yet, the most significant, long-term factor driving oil prices higher may be the greatly increased demand for oil in developing countries such as China and India.
While experts believe the combination of our nations increased energy efficiency and the changing composition of output means that the U.S. economy is less vulnerable to high oil prices than it was during the oil crisis of the 1970s, high prices still can have a negative impact on economic growth because of their effects on producer costs. For example, as the price of oil drives the cost of gasoline higher, transportation costs rise, increasing the prices of goods and services. If those costs cant be passed along to the consumer, unemployment and subsequent decreases in production may result.
As Raymond L. Orbach, Under Secretary for Science at the U.S. Department of Energy, noted in a recent keynote address, that because global energy consumption is expected to double, perhaps triple, by the end of the century, we should find ways to supply new energy. To adequately meet the energy demands of the future, Orbach says transformational breakthroughs are needed to provide a foundation for novel, alternative technologies. He believes major advances could be on the horizon because of the emergence of nanotechnology, which could lead to revolutionizing the way energy is used, stored, and transmitted.
Just as the rise in oil prices in the 1970s led to significant breakthroughs in energy efficiency and alternative fuel production, so, too, will todays oil spikes foster scientific exploration and innovation. In fact, because the supply and demand curve may drive prices higher throughout the 21st century, we likely will see significant developments in the field of alternative energy sources, many of them driven by the cyclical nature of the oil industry.

Weekly Focus Staycation Anyone?
With high energy prices and people strapped for time, some folks are now opting for staycations. Instead of traveling to a far away destination, theyre opting to stay close to home. It could be as simple as spending a few days at home in the hammock or going to a local resort for a romantic escape.
If you have any exciting staycation ideas, let us know!
Jun 01, 2010 Weekly Commentary
The Markets "Sell in May and go away" is a popular Wall Street adage. After the May we just experienced, investors are saying, "True that!"
According to a May 1, 2008 CNNMoney.com article, "The old 'sell in May' strategy says that if you invest in the S&P 500 or the Dow industrials during the 'best six months' (November through April) and then switch into bonds during the 'worst six months' (May through October), you'll end up with better returns than if you did the reverse." In fact, a study by Plexus Asset Management as reported by InvestmentPostcards.com, showed that between January 1950 and March 2009, the S&P 500 index returned 7.9% per annum during the "best six months" and only 2.5% per annum during the "worst six months."
The S&P 500 performed better during the "best six months" due to seasonal factors such as end-of-the-year bonuses, the "Santa Claus" rally, and the timing of tax refunds and quarterly earnings results, according to the CNNMoney.com article. Of course, past performance is no guarantee of future results and this "Sell in May and go away" strategy does not work every year.
But, back to the May just passed. It wasn't pretty. The S&P 500 index dropped 8.2% for the month making it the worst May performance since May 1962, according to CNBC. Rising tensions in the Korean peninsula, European debt worries, China's property bubble bursting, and the winding down of America's "stimulated" economy conspired to send investors to the sidelines, according to The Economist.
Not too surprisingly, as equity prices declined in May, government bond prices rose, according to Associated Press. This "flight to safety" suggested that diversification between equity and government bonds worked in May.
While you may "go away" this summer for some rest and relaxation, be assured that we will remain hard at work on your behalf.

OVER THE PAST FEW MONTHS, we've endured an uncontrollable oil spill in the Gulf, a volcano in Iceland that disrupted air travel in Europe, and an earthquake in Haiti that caused immeasurable suffering. These human disasters have parallels in the financial world that are worth noting.
The ongoing gusher in the Gulf is a manmade disaster that, in the financial world, looks like our country's ongoing manmade gusher of deficit spending. With the fragile Gulf ecosystem drowning in oil, our country is drowning in bills that will eventually come due. Efforts to stop the oil spill have so far failed as have our efforts at reducing our deficits. BP says drilling a relief well is the "end game" to stop the leak. What is our country's endgame to stop the ballooning fiscal mess?
The volcano in Iceland disrupted air travel for millions of travelers causing birthdays and weddings to be missed, business meetings to be cancelled, and a few extra days of unexpected expenses. But, eventually, the ash cleared and travelers went on their way. Likewise, the financial markets experience disruptions from time to time that are disappointing to investors. We call these "corrections" and they are usually temporary and not "retirement threatening." They're no fun, but we get through them.
The earthquake in Haiti came without warning and was devastating. More than 200,000 people likely died and many more will feel its effects for years to come. Poor infrastructure and lack of planning exacerbated the devastation of the quake. Likewise, the economic crisis of 2008-2009 is the financial market equivalent of the Haiti earthquake. Our country's inability to live within its means (poor infrastructure) and prepare for contingencies (poor planning) led us to a market debacle. Like Haiti surviving its calamitous quake, we can survive a market meltdown, and, ideally, learn from it so we are better prepared to withstand the next financial earthquake.
This comparison of nature's disasters to a financial counterpart is not meant to trivialize the pain from the Gulf, the volcano, and the earthquake. Rather, it suggests that we can become better investors by learning the lessons that nature teaches us. The question is, will we take nature's lessons to heart?

Weekly Focus – Think About It As we took time this past Monday to remember those who gave their lives for our freedom, these words from singer Lee Greenwood express a sentiment that we all feel:
And I'm proud to be an American, Where at least I know I'm free. And I won't forget the men who died, Who gave that right to me.
And I gladly stand up, Next to you and defend her still today. ‘Cause there ain't no doubt I love this land, God bless the USA.
Jun 01, 2009 Weekly Commentary
The Markets How do you spell higher stock market prices? J-O-B-S!
We all know that stock prices generally reflect the underlying growth of earnings, but companies cannot grow much unless consumers have jobs that allow them to spend money on stuff created and delivered by companies. So, how do we stand on the metric of job creation? Unfortunately, it's ugly.
Since the recession started in December 2007, our country has lost 5.7 million jobs, according to the Department of Labor. Economists surveyed by MarketWatch predict another 500,000 were lost in May 2009. If May comes in as projected, that would mean the number of employed Americans would be the same as it was in August 2000. In other words, we would have a net change of zero new jobs created in roughly the past nine years, according to MarketWatch.
Is it any surprise that the major U.S. stock market indexes are lower now than they were nine years ago?
When you put it in that perspective, the government's urgency to turbo-charge the economy and generate jobs makes more sense. The presently unanswerable question is, will the medicine to fix the economy in the short-term (e.g., massive budget deficits), stunt its growth in the long-term?
Reasonable people can argue both sides of that presently unanswerable question, but based on the recent surge in the stock market, those who think we can handle the debt seem to have the upper hand.

Sunk costs and mental accounting can be hazardous to your wealth. Let's pretend that you just arrived at a theater and as you reach into your pocket to pull out the $10 ticket that you purchased in advance, you discover that it's missing. Would you fork over another $10 to see the movie? Compare that to a second scenario in which you did not buy the ticket in advance, but when you arrive at the theater, you discover you lost a $10 bill. Would you still buy a movie ticket?
In these two scenarios, you effectively lost $10, but here's where it gets interesting. Psychologists Amos Tversky and Daniel Kahneman of Princeton University conducted the above study in 1984. They discovered that only 46% of the study participants in scenario one said they would spend another $10 to buy another movie ticket. However, a whopping 88% of the subjects in scenario two said they would still spend $10 to buy a theater ticket.
Here's what happened. More than half of the subjects in scenario one created a "mental account" for the theater ticket. They equated the $10 they spent on buying the ticket in advance with the additional $10 they would have to spend to replace that ticket and concluded that the theater ticket actually would cost them $20. Paying $20 for a $10 ticket was a non-starter for 54% of the study participants.
Conversely, in scenario two, 88% of the study participants did not create a "mental account" that equated the $10 theater ticket with the $10 bill they lost on the way to the theater. But, as you can see, in both scenarios, the study participants still lost $10.
So, are humans completely irrational? Sort of. The participants who lost the theater ticket succumbed to the "sunk cost" trap. They let the price they paid for the lost ticket affect their decision to buy a new ticket even though the two are technically unrelated.
Investors frequently do the same thing. They buy a security, watch it go down, and then tell themselves, "as soon as it gets back to breakeven, I'll sell it." But, the fact is, a losing security is a sunk cost and there should be no commingled "mental accounting." Instead, each investment decision should stand on its own and be made based on the most current information.
Remember, you don't have to recoup a loss in the same way that you generated it. Sometimes it's best to take a loss and move on to a more promising investment.

Weekly Focus – Think About It
"When you let go of trying to get more of what you don't really need, it frees up oceans of energy to make a difference with what you have. When you make a difference with what you have, it expands."
--Lynne Twist
Jul 30, 2012 Weekly Commentary
The Markets
"Within our mandate, the ECB is willing to do whatever it takes to preserve the euro and, believe me, it will be enough."
--Mario Draghi, European Central Bank (ECB) President
It's quite amazing how one sentence from one man can help spark a major rally in stocks, bonds, and the euro currency. Draghi's comments last Thursday in London represent a significant ramping up of the ECB’s willingness to use its resources to hold the euro together and investors responded enthusiastically. On the day of Draghi's comments:

• The euro and the British pound each gained more than 1 percent against the U.S. dollar.
• Stocks were positive in nearly all European markets.
• Italian and Spanish indexes each jumped more than 5 percent.
• The Spanish 10-year bond yield dropped nearly half a percentage point from the day before and the 10-year Italian bond yield was down a similar amount.
• The S&P 500 index rallied 1.6 percent.
Sources: The Wall Street Journal; CNBC

Between Draghi in Europe and Fed Chairman Ben Bernanke in the U.S., central bankers seem to be exerting an outsized influence on the markets. Normally, you expect markets to roughly trend with corporate earnings.
Speaking of earnings, several high-profile companies including Amazon, Facebook, and Starbucks, fell short on their second quarter earnings numbers released last week, according to CNBC. Overall, earnings for the companies reporting so far this quarter have been a bit on the light side, according to CNBC.
While earnings ultimately matter in the long run, today's markets seem focused on the support provided by central banks. And, yes, an up market is an up market regardless of what’s propelling it. However, for long-term sustainability, we need the markets to go up based on their earnings growth – not artificial stimulus.

THE BEST AND THE WORST DAYS IN THE STOCK MARKET tend to occur rather close to each other and that has major implications for how to be a successful investor.
While it's tempting to try to aggressively "time" the stock market and be in on the best days and sitting in cash on the worst days, that’s not a viable strategy.
For example, during the 1980s, the S&P 500 had an average annualized return of 12.6 percent. However, if you excluded the return of the 40 best days during that decade, then the return would have fallen to a negative 0.4 percent. In other words, just 40 days out of that 10-year period accounted for all of the return for the decade. Wow!
Now, you also have to know that missing the 40 worst days during the decade would have a profound positive impact on your performance. But, here's the rub – it would take perfect foresight to know in advance when these 40 best and worst days would occur. And, of course, none of us have that.
What makes aggressive timing even more difficult is that these best and worst days often happen pretty close to each other. BMO Capital Markets discovered that since 1970, more than 50 percent of the 40 best days occurred within two weeks of one of the 40 worst days! So, imagine this… the stock market has one of its worst 40 days for the decade and you are lucky enough to be sitting 100 percent in cash that day. Now, realistically, after a big drop like that, are you going to have the nerve to jump 100 percent right back in? If you didn't, you'd miss more than half of the 40 biggest up days since those big up days often occur within two weeks of a big down day.
The lesson here is simple. Markets are volatile and the price of long-term return is enduring the pain of periodic declines.

Weekly Focus – Think About It...

"The most important thing in the Olympic Games is not winning, but taking part; the essential thing in life is not conquering, but fighting well."
--Pierre de Coubertin, founder of the modern Olympic Games
Jul 30, 2007 Market Commentary 7/30/07
The Markets

Ping-pong anyone?

The topsy-turvy market last week ended with major declines in the broad market averages. While the headlines looked scary, we have to keep in mind that the Dow Jones Industrial Average was coming off its all-time high set just the week before. Wall Street investors can be fickle! On the bright side, for the month of July, the Dow is only down 1.1% and for the year, its still up a respectable 6.4%, according to Yahoo! Finance.

Its no surprise that tightening credit conditions, housing worries and inconsistent corporate earnings from some blue chip companies were touted as last weeks scapegoats, according to MarketWatch. Of the three, tightening credit might be the most worrisome.

The bull market that weve experienced the past few years was partially fed by low interest rates and easy access to credit, according to some analysts. As lending institutions become more stringent in loaning money, it could reduce liquidity and stifle the volume of corporate buyouts. Up to this point, corporate buyouts have been one source of support for the stock market and if that dries up, we may need to find another catalyst to pick up the slack.

As in ping-pong, knowing the score during the game is important. However, what matters the most is the score at the end of the game and as long as youre investing for the long term, then your game is still being played. And as your advisor, we continue to do our best to try to make sure the final score shows a W in your column.

POTTERMANIA
As the magic of Harry Potter reached its frenzied climax on Friday, July 20th, stock market investors were digesting another run in record territory. Since both the stock market and Pottermania reached new peaks in the last weeks, we thought itd be fun to see how closely the Harry Potter books and the stock market performed over the course of those seven books.

According to Amazon.com, the first Harry Potter book published in the United States was Harry Potter and the Sorcerers Stone, and it dates to September, 1998. Lets just assume the book was released on September 1 so we can use the Dow Jones Industrial Averages closing price of 7,539 on August 31 of that year as our starting point. Fast forward to Friday, July 20, and we see that the Dow closed at 13,851, according to Yahoo! Finance. Using our handy dandy HP 12c calculator, the Dow has compounded at an annual rate of approximately 7.1% over that nearly nine-year period, excluding reinvested dividends.

So what can we say about a 7.1% average annual return before dividends? By comparison, for the 30 years ending August 31, 1998, the Dow rose at an annualized average rate of about 7.4% before dividends, according to data from Yahoo! Finance. The conclusion? The Dow had an average return while Harry Potters 9-year run, with 325 million books sold and billions in box office receipts, was extraordinary and unlikely to be repeated in our lifetime.

Yes, the Potter saga is over but the stock market continues and as always, we will do our best to master it, while it does its best to beguile us.

BOLSTERED BY A FEW MEGA-GIFTS FROM MAJOR FOUNDATIONS, U.S. charitable giving reached a record $295.02 billion in 2006, according to Giving USA 2007, the yearbook of philanthropy published by Giving USA Foundation. Specifically, Americans gave an estimated $11.97 billion more than in 2005, a 4.2 percent increase (or 1.0 percent adjusted for inflation) over 2005s $283.05 billion. This was the third straight year with an increase in giving.

Richard T. Jolly, chair of Giving USA Foundation, notes that the increase in giving in 2006 is especially impressive given 2005s previous record included nearly $7.4 billion in what he calls extraordinary disaster relief giving.

Now, if you guessed the Oracle of Omaha was one of the mega-donors, youre correct. According to Giving USA, Warren Buffett gave away $1.9 billion in 2006, the first installment on his 20-year pledge of more than $30 billion to four foundations. While gifts of Buffetts magnitude garner a lot of attention in the press, according to George C. Ruotolo, Jr., CFRE, chair of Giving Institute: Leading Consultants to Non-Profits, parent organization of the Foundation, Buffett-sized gifts accounted for just 1.3 percent of total giving nationwide.

In fact, according to Ruotolo, about 65% of families with incomes lower than $100,000 give to charity, a greater percentage, he says, than Americans who vote or read a Sunday newspaper. Collectively, these large and small gifts fund what Giving USA estimates to be Americas 1.4 million charitable and religious organizations. To ensure your own gifts have the maximum impact on causes you care about, wed be happy to talk to you about planned giving.

YOUVE PROBABLY HEARD OF THE INVESTMENT MAXIM, Invest in what you know. You may even be able to attribute it correctly to Peter Lynch, the legendary investment manager at Fidelity Investments. While Lynchs assertion that its important to understand what you invest in is true, a recent study published by the University of California, Berkeleys Haas School of Business calls into question whether local knowledge benefits individual investors. That is, researchers set out to discover whether what investors believe to be superior information on local companies translates into superior investment performance.

Analyzing almost 1 million transactions from more than 43,000 households, Haas Assistant Professor Mark Seasholes found that local stocks bought by individuals fail to outperform the stock market, suggesting that these investors had no superior information about the companies. Interestingly, the working paper Individual Investors and Information Diffusion that Seasholes co-authored with Ning Zhu of the University of California, Davis, also reveals that the typical individuals portfolio holds roughly 30 percent in stocks of companies located within a 250-mile radius of his home. According to Seasholes, that represents a significant over-weighting of local holdings given that, on average, only 12 percent of companies on the stock market are headquartered within the same radius.

Yet, local knowledge is a myth that may be difficult to debunk. Just think about how many corporate executives are overly invested in their companys stock. Minimally, however, thinking about this behavioral aspect to investing can help encourage you to adopt a potentially beneficial broader worldview.

Weekly Focus Dont Touch That BirdOr Egg
As a child, you likely heard someone tell you that if you touch a baby bird or a bird egg, its parents will abandon them. Thats an old myth, according to Frank B. Gill, former president of the American Ornithologists' Union as reported by Scientific American. So how did this myth get started? According to the article, The myth derives from the belief that birds can detect human scent. The fact is they cant detect human scent. Like humans, birds are protective of their young so it takes much more than a simple touch by a human for them to give up. However, petting the youngsters or playing egg toss is still not advised!

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* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Consult your financial professional before making any investment decision.
* Past performance does not guarantee future results.

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Jul 29, 2013 Weekly Commentary
The Markets


If it's not stocks, it's bonds!

In a turnaround worthy of Bruce Willis in a 'Die Hard' movie, expectations for second quarter's corporate earnings growth soared from below expectations, on average, in the previous week to beating expectations last week. Earnings growth estimates shot up to 4.1 percent which was a significant change from last week's 2.8 percent. Of the companies that have reported so far, more than one-half have performed better than expected - an improvement on the last four quarters' performance.

Whether it is earnings performance or other factors, consumers have become more confident than they've been in years - six years to be specific. The Thomson Reuters/University of Michigan's consumer sentiment index beat expectations for June even though consumers expect growth to slow next year.

Things were not so rosy for bond markets which have been selling off since early May on speculation the Fed will temper quantitative easing before the end of the year. Yields on 10-year Treasuries have ascended from about 1.5 percent in early May to more than 2.5 percent last week.

Ben Bernanke's impending retirement also has bond markets roiled. Speculation about who will become the next chairman of the Federal Reserve, and how his or her policies will differ from Bernanke's, is unsettling investors and creating potential for bond market volatility, according to MarketWatch.

On the public finance side of the market, municipal bond investors are reeling after Detroit's bankruptcy declaration. The city's dire circumstances have caused some pundits to look more closely at municipal credits. According to Barron's, 83 percent of Moody's Investors Service's second quarter municipal bond rating changes were downgrades.

The drama and suspense is likely to continue next week. The Fed begins a two-day policy meeting on Tuesday, and an abundance of economic indicators - including the S&P Case Shiller Home Price Index, PMI Manufacturing Index, and employment situation reports - will be released.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


IF AESOP WAS RIGHT, EUROPE MAY EVENTUALLY REACH THE END OF RECESSION. You've heard about the tortoise and the hare. It's a fable that has much to say about unequal partners, overconfidence, and perseverance - topics that leaders of the European Union (EU) may ponder when they're not poking and prodding member states in efforts to provoke structural reform and growth.

Last year, the head of the European Central Bank (ECB) announced that ECB would do whatever it took to save the euro. Nine months later, Europe still is plodding through recession. During the first three months of this year, gross domestic product in the region declined slightly year-to-year. The European Commission projects the decline will be a bit bigger over the full year (down 0.4 percent). That, however, will be an improvement over 2012's 0.6 percent contraction.

The good news, according to The Economist, is current account deficits (the difference between a country's total imports and its total exports) and primary budget balances (budgets without interest payments included) have improved in many EU countries. In fact, this year it appears the biggest primary budget deficit (about 3.9 percent) belongs to the United Kingdom. The bad news is government debt levels remain very high in many EU nations. In May, Peter Praet, a member of the ECB's executive board, said:

"...the euro area needs to persevere in fiscal consolidation efforts and reduce steadily the government debt ratio. Despite the important progress on fiscal consolidation, debt ratios have yet failed to stabilize in most euro area countries...The euro area government debt ratio is projected to rise further to above 95% of GDP in 2013 - far above the 60% Maastricht reference value - with debt ratios displaying large differences across countries."

Research from the National Bureau of Economic Research has found growth typically slows - by about 1 percent - when a nation's debt level reaches 90 percent of gross domestic product. If they're right, growth in the EU probably will be slow overall. Let's hope it's steady, too.


Weekly Focus - Think About It

"Health is the greatest gift, contentment the greatest wealth, faithfulness the best relationship."
--Siddhartha Gautama, also known as Buddha

Sources:
http://www.reuters.com/article/2013/07/26/usa-stocks-weekahead-idUSL1N0FW1WN20130726
http://www.dailyfinance.com/2013/07/26/consumer-confidence-rises-july-six-year-high/
http://www.cnbc.com/id/100914877
http://blogs.marketwatch.com/thetell/2013/07/26/why-the-bond-market-hates-larry-summers/
http://blogs.barrons.com/incomeinvesting/2013/07/26/of-all-q2-muni-rating-actions-83-were-downgrades-moodys/?mod=BOL_hpp_blog_ii
http://online.barrons.com/mdc/public/page/9_3063-economicCalendar.html (Click on "S&P Case Shiller Home Price Index" under Tuesday column; "PMI Manufacturing Index" under Thursday column; and "Employment Situation" under Friday column)
http://www.economist.com/blogs/graphicdetail/2013/07/european-economy-guide
http://www.investopedia.com/terms/c/currentaccountdeficit.asp
http://www.ecb.europa.eu/press/key/date/2013/html/sp130516.en.html
http://www.nber.org/digest/apr10/w15639.html
http://thinkexist.com/quotation/health_is_the_greatest_gift-contentment_the/147326.html

* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.
* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Past performance does not guarantee future results.
* You cannot invest directly in an index.
* Consult your financial professional before making any investment decision.
Jul 28, 2008 Weekly Commentary
The Markets Despite a 15.2% drop in the price of a barrel of oil last week, the stock market finished mixed as weak jobs and housing data took center stage, according to MSN Money.
The Labor Department helped sour the market last Thursday by reporting another rise in first-time claims for state unemployment benefits. That kept fears of a slowing economy top of mind with investors. Shortly after that release, the National Association of Realtors delivered the dour news that sales of existing homes in the United States fell to a 10-year low in June. By the end of the day, the Dow Jones Industrial Average had lost 283 points.
In order for this market to begin a sustained rally, we may need to see some stability in the housing market. Currently, falling home sales combined with decreasing home prices (a 15.3% decline for the 12 months ending April 2008, according to the S&P/Case-Shiller Home Price Index), is a not a good recipe for a bull market. When prices drop, that’s bad news for financial institutions because it may cause them to take write-offs and raise additional capital that may dilute existing shareholders.
On top of the declining home sales and falling prices, mortgage rates hit their highest level in nearly a year last week, according to data from Freddie Mac. Thirty-year mortgage rates averaged 6.63% last week, which is a sharp increase of more than a third of a percentage point from the week before. Freddie Mac’s chief economist said rising inflation concerns and a greater probability that the Federal Reserve will start raising short-term interest rates later this year were factors in last week’s mortgage rate increase.
The good news is the housing sector should eventually turn around. At some point, we expect the current glut of homes on the market to be chipped away and prices to firm. That will likely occur when the economy strengthens and jobs become plentiful again.
While we don’t take any pleasure in weak financial markets, we try to make the best of the situation by acting on any opportunities that they may present.

BRETT FAVRE’S ON AGAIN, OFF AGAIN RETIREMENT SAGA is causing heartbreak for many Green Bay Packers fans, but in his struggle, we can all learn an important lesson. As you may know, for several years, legendary quarterback Brett Favre wrestled with the issue of retiring. After last season, he finally decided to pull the plug and retire… or so we thought.
Favre recently told the Packers he wants to play football again and, if it’s not with the Packers, then he’d like to be traded to a team of his choice. Ouch! Seeing Brett Favre suiting up in a non-Packers uniform would be just too much to bear for some fanatical cheeseheads. The Packers organization has said Favre can come back, but he would not begin the season as the number one quarterback.
Here’s the key point in this drama that most of the media is missing – Brett Favre was totally unprepared for life after football. As the quintessential quarterback, Favre gave his heart and soul to the gridiron. Unfortunately, he didn’t prepare himself emotionally for the day when he’d have to hang up the cleats.
Having enough money to retire with dignity is one thing, but having the emotional wherewithal to handle stepping out of the job, career, or calling that you’ve worked so hard at could be a completely different thing. If you’re nearing retirement, it’s time to ask yourself some tough questions. Here are a few to consider:
How will you and your spouse interact now that you may be spending a lot more time together?
Do you have a hobby to keep you busy in retirement?
Do you want to find a part-time job in an area that you are passionate about?
Do you want to volunteer and give back to your community?
Do you want to travel more and, if so, where do you want to go?
Will you relocate and, if so, where will you move to?
How will you replace the intellectual stimulation and satisfaction you received from paid work?
Some people are able to quit working and never look back. But, many people struggle with how to redefine their lives after their main working period ends. While athletes such as Brett Favre, Michael Jordan, and Joe Montana all publicly struggled with letting go of their athletic careers, the change can be just as tough for the unsung average American who worked hard for many years to be a good family provider.
The key is to understand that with some thoughtful advance planning, retirement can be one of the happiest periods of your life. We’re here to help make that happen in any way we can.

Weekly Focus – Retirement Thoughts
Here are a few quotes about retirement that are worth pondering:
“Retire from work, but not from life.” – M.K. Soni
“Don't simply retire from something; have something to retire to.” – Harry Emerson Fosdick
“A retired husband is often a wife's full-time job.” – Ella Harris
“Retirement is like a long vacation in Las Vegas. The goal is to enjoy it to the fullest, but not so fully that you run out of money.” – Jonathan Clements
Jul 27, 2009 Weekly Commentary
The Markets Whether you are bullish or bearish, there's plenty of ammo in each camp to support your view.
Here are three keys supporting the bullish case:
1. The unfolding earnings season is generally positive. As of last week, a whopping 77% of the 184 S&P 500 companies that have reported earnings so far this quarter have exceeded expectations, according to Thomson Reuters data.
2. One of Warren Buffett's favorite economic indicators is now showing signs of life. Buffett tracks the average weekly U.S. rail carloads and that rose in June compared to May for the first monthly increase this year, according to the Association of America Railroads.
3. The domestic economy is poised for growth this quarter. Believe it or not, GDP may actually grow this quarter (albeit at a low rate) with an assist from a very accommodative Federal Reserve, according to Barron's.
For the bears, there's plenty of food to chew on, too:
1. The economy, while showing signs of improvement, is still a mess with unemployment at 9.5% and likely to rise further.
2. The housing industry is in a depression-like state.
3. Government spending is way up while revenue is way down, which is resulting in massive budget deficits at both the state and federal levels.
4. Consumers are in hunker-down mode, which may limit spending and keep economic growth at a low level for a long time.
Despite the gloom, the S&P 500 index has risen about 45% in the last 4½ months. It is now up more than 8% for the year and at its highest level since last November, according to CNBC.
As of last week, the bulls were stampeding over the bears. An old Wall Street saw says, "Don't fight the tape." Well, the old ticker tape is long gone, but its replacement – electronic quotes – has been flashing plenty of green lately. Of course, that could change in an instant. A batch of poor earnings reports or some surprisingly negative economic indicator might trip the market. It could also be something a little more unassuming such as investors deciding en masse that it's time to book some profits and head to the beach for one last refreshing summer dip.

WHEN DO YOU MAKE THE MOST MONEY in the financial markets? According to a Barron's magazine quote from Arjun Divecha, a portfolio manager at GMO (a Berkeley, California-based emerging-markets equities group), "You make more money when things go from truly awful to merely bad than when they go from good to great." That insight may help explain why the U.S. stock market has rallied so sharply over the past few months.
Do you remember how bad the news was between October 2008 and early March of this year? Just when things seemed nearly hopeless in early March, the market all of a sudden turned around and, as described above, shot up nearly 45%. Once the turn started, we heard the phrase "green shoots" and little by little, "less bad" economic and corporate news began to trickle out.
Like Divecha's quote, once we made the shift from "the world may be coming to an end" to "we're going to survive this after all," the stock market rallied. Ideally, we'd all love to be omniscient and magically pick that point when the market makes the shift, but we can't. However, that misses the real point we want to make.
The point is not to confuse what's going on in the economy with what's going on in the stock market. As we are witnessing right now, the economy and the stock market can decouple. This decoupling, though, is likely only a temporary phenomenon. If the economy does not follow through and improve like the stock market is foreshadowing, then the market could be in for a nasty fall down the road.
To succeed as an investor, it's important to understand that the economy and the financial markets can decouple in the short-term. However, in the long run, the two should more closely resemble each other's trajectory since corporate profits (and hence, stock prices) are so closely intertwined with the economy.

Weekly Focus – Think About It
"Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well."
-- Warren Buffett
Jul 26, 2010 Weekly Commentary
The Markets
"The economy is still struggling; too many Americans are still out of work; and the Nation's long-term fiscal trajectory is unsustainable, threatening future prosperity," according to the Mid-Session Review submitted by the White House last week.
This supplemental update of the annual budget contained a number of projections that are of interest to us. Here are a few:
* A projected federal deficit of $2.9 trillion over the next two fiscal years.
* Gross Domestic Product projected to grow 3.2% this year, 3.6% in 2011, and 4.2% in 2012.
* Unemployment projected to average 9.7% this year, 9.0% in 2011, and 8.1% in 2012. It is projected to stay above 6% until 2015.
* The consumer price index projected to rise 1.6% this year, 1.3% next year, and 1.8% in 2012.
* The 10-year Treasury projected to yield on average 3.5% in 2010, 4.0% in 2011, and 4.6% in 2012.
Projections like this are, of course, notoriously difficult to get right. So much can happen in a short period and throw off the best laid plans. But, looking at the projections at least gives us a place to start. Overall, the projections are a mixed bag. The deficit numbers are problematic. The GDP growth projection is good if we can hit it. The unemployment numbers are painful. The inflation outlook is stable and the Treasury yield is favorable for business growth.
If, by the end of 2012, the above numbers come to fruition, then we would likely avoid a double-dip recession and the economy would probably "muddle along." So far, corporate America is doing its part by showing really solid earnings for the second quarter. Companies such as Caterpillar, 3M, AT&T, and UPS notched solid quarters and suggest there is underlying strength in the economy, according to MarketWatch. In fact, of the 175 companies in the S&P 500 that have already reported their second quarter earnings, a whopping 78% have beaten analysts’ estimates while only 12% missed, according to data from Thomson Reuters as reported by MarketWatch. Buoyed by good earnings and relief over the European bank stress tests, the S&P 500 rose a solid 3.6% last week.
Given all the volatility we've had over the past 2½ years, "muddle along" might not be so bad!

WHETHER AN INVESTOR LEANS BULLISH OR BEARISH, there is ample data to support either view. This situation may explain why Fed Chairman Ben Bernanke told Congress last week that the economic outlook was "unusually uncertain." For those investors who lean bullish, here are several supporting points courtesy of economist David Rosenberg as reported by Financial Times:
* Congress extended jobless benefits, which is one form of stimulus.
* Some Democrats are now in favor of delaying tax hikes.
* China is having some success slowing its property bubble without bursting it.
* Confidence is growing that the emerging markets may keep world growth positive even if more mature countries slow down.
* Eurozone debt and money markets have settled down after the problems with Greece sparked default fears.
* The European bank stress tests contained no major surprises and added clarity to the soundness of the banking system.
* Consumer credit delinquency rates in the U.S. are improving.
* Mortgage delinquencies in California, one of the hardest hit real estate markets, are at a three-year low.
* The BP oil spill is coming under control and is no longer each day's top headline.
* The passage of the financial regulation bill removed one more cloud of uncertainty.
* Corporate America is reporting solid earnings for the second quarter and their future outlook has been, on balance, positive.
* Fed Chairman Ben Bernanke indicated he'll keep using monetary policy to stimulate the economy and he'll get even more aggressive if need be.
So, yes, there are reasons why the markets and the economy could do okay in the months to come. But, in this "unusually uncertain" time, it still makes sense to be "on guard."

Weekly Focus – Think About It
"Even if I knew that tomorrow the world would go to pieces, I would still plant my apple tree."
--Martin Luther King, Jr.
Jul 25, 2011 Weekly Commentary
The Markets How did our federal budget deficit become so large that we find ourselves in this political quagmire over raising the debt ceiling?
In testimony before Congress last month, Congressional Budget Office Director Douglas Elmendorf laid out a few key points that we should all keep in mind:
*In recent years, the federal government has been recording budget deficits that are the largest as a share of the economy since 1945.
*At the end of 2008, federal debt equaled 40 percent of the nation’s annual economic output (a little above the 40-year average of 37 percent).
*By the end of this year, CBO projects the federal debt will reach roughly 70 percent of gross domestic product (GDP) -- the highest percentage since shortly after World War II.
*Looking forward, the CBO projects the federal debt will exceed its historical peak of 109 percent of GDP by 2023 and would approach 190 percent in 2035, based on its most realistic estimate.
*The sharp rise in debt stems partly from lower tax revenues and higher federal spending related to the recent severe recession. However, the growing debt also reflects an imbalance between spending and revenues that predated the recession.
Elmendorf went on to say, “The budget outlook, for both the coming decade and beyond, is daunting.”
Other factors that play into our growing budget deficit include the increase in entitlement benefits related to the retirement of the baby-boom generation and a likely increase in per capita spending for health care as our population ages.
Without boring you with more numbers, any way you slice it, our country has to get a handle on its budget. We can do that by cutting spending, raising revenue (that’s code for raising taxes), or a combination of both.
Democrats and Republicans are arguing over the right split between cutting spending and raising revenue. The bottom line is, they better get something done very soon or we will all pay a very heavy price for their failure!

SPECIAL REPORT ON CHINA
Before China, there was Japan.
From the 1960s to the 1980s, Japan was on a roll. They had one of the highest economic growth rates in the world, according to PBS. Their manufacturing prowess grew to be the envy of the world. Their stock market soared 373 percent between 1980 and its peak in 1989, according to Knowledge@Emory. And, like China today, there were predictions that Japan would overtake the United States as the largest economy in the world.
Oh, but times change.
Japan’s economic miracle came crashing down in the 1990s along with its stock market. By the end of 2010, the Japanese stock market, as measured by the Nikkei 225 index, was down an astounding 73 percent from its 21-year old 1989 high, according to data from Yahoo! Finance.
As happened in Japan, extrapolating past performance could be hazardous to your wealth. Will China suffer a similar fate? If it does, what will that do to the financial markets?
Managing the Economy
China has deftly managed its economy over the past three decades to produce spectacular growth and improved living standards for its people. In fact, economic growth has contributed to more than 500 million Chinese people rising out of poverty since 1981, according to The World Bank. But, growth has its price.
Strong economic growth can lead to problems such as inflation, social and economic inequality, and a growing pile of foreign exchange reserves.
Inflation
Inflation is a major threat to China’s future success because if it gets out of control, the population may revolt. In June, inflation rose by 6.4 percent from a year earlier, the highest rate in three years. Worse yet, food prices rose 14.4 percent while pork prices, a Chinese staple, rose 57 percent in June from a year earlier, according to The New York Times.
Rising food prices is particularly difficult for China to stomach (pardon the pun) because the average Chinese household spends about a third of its disposable income on basic food, according to the Financial Times.
If you want to know why inflation is a threat, go back to 1989. The Financial Times said, “Inflation of nearly 20 percent is considered a key contributing factor to the 1989 student protests that culminated in the bloody military crackdown in and around Beijing’s Tiananmen Square.”
Social and Economic Inequality
While China’s economy has grown more than 90-fold in the past 30 years, the gains have left a widening gap between the “Haves” and “Have-Nots.” Chinese Premier Wen Jiabao said back in February that rising inequality is threatening social stability, according to a Bloomberg article.
Can you imagine what would happen if even a small percentage of China’s 1.3 billion people turned against the government?
Well, unrest has been on the rise in recent years. As Bloomberg reported in citing data from Sun Liping, a professor of sociology at Beijing’s Tsinghua University, “‘Mass incidents,’ everything from strikes to riots and demonstrations, doubled from 2006, rising to at least 180,000 cases in 2010.”
So, how do you keep 1.3 billion people “in check?” According to Nicholas Bequelin, a China researcher for Human Rights Watch in Hong Kong, China’s been doing it “through a combination of economic growth, social reforms, and political repression.” Time will tell how long that lasts.
Foreign Exchange Reserves
At $3.2 trillion, China has -- by far -- the largest foreign exchange reserves in the world, according to The Wall Street Journal.
These trillions were built over the years through China’s trade surplus, foreign direct investment, and capital inflows betting on yuan appreciation (The yuan is China’s currency.) On the surface, large foreign exchange reserves sound like a good thing, and in some ways it is. The downside is that it exacerbates inflationary pressure, according to Bloomberg.
In an ironic twist, the U.S. has been a beneficiary of this massive reserves buildup. China had to park their cash somewhere, so, where did they turn? To the U.S. treasury market! At the end of May, China was the largest foreign holder of U.S. Treasuries with more than $1.1 trillion filling their balance sheet, according to Bloomberg.
Viewed another way, China has been a big reason why the U.S. has been able to run up trillion dollar budget deficits while keeping interest rates low -- we have China as a willing buyer of our paper.
With China needing a large liquid market to park its reserves and the U.S. needing a big buyer of its paper, these countries have the ultimate “too big to fail” global relationship, said Andy Rothman, an analyst in Shanghai for the investment bank CLSA as quoted in The New York Times.
Conclusion
China is so large and growing so fast, that it will impact the world in major ways for the foreseeable future. Its success or failure, its twists and turns will reverberate throughout the financial markets and affect everything from the level of interest rates to the price of soybeans to the volatility of the S&P 500 index.
Will it stumble at some point? Probably. Yet, no matter what happens, we will continue doing our research. We will continue monitoring your investments. We will continue doing what is in your best interests.
We truly live in a globally interconnected world that is getting smaller and smaller by the day. One thing that does not get smaller is our commitment to you.

Weekly Focus – Think About It
"When it is obvious that the goals cannot be reached, don't adjust the goals, adjust the action steps." --Confucius, Chinese Philosopher
Jul 23, 2012 Weekly Commentary
The Markets The man with his finger on the pulse says the U.S. economy faces two main risks. We have no control over one of those risks and the other, well, we do have some control, but whether our politicians will appropriately exercise that control is a big question.
Federal Reserve Chairman Ben Bernanke faced Congress last week and he delivered a rather subdued outlook in his semi-annual monetary policy report. He said our economy faces two major headwinds:
1. The Euro-area fiscal and banking crisis and its potential spillover effects on our economy.
2. The unsustainable path of the U.S. fiscal situation (e.g., the "fiscal cliff").
Source: Federal Reserve
The U.S. has little control over the euro-area situation so we're at the mercy of European leaders to make bold and tough decisions to get their houses in order. The second item, though, is clearly within our control.
The so-called fiscal cliff, in which a series of tax hikes and spending cuts will take effect in 2013 if Congress takes no further action, could throw the economy back into a recession. The Congressional Budget Office estimates if no policy changes are made, then our 2013 federal budget deficit will decline by about $600 billion. On the surface, that sounds great. However, such a huge shock to our system in a short period of time could be problematic.
So, will Congress agree to adjust the legislation for the benefit of the economy? We'll see.
For his part, Bernanke said the Federal Reserve "is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability." It’s good to know that the Fed is ready to help if needed.

IT’S BEEN ALMOST A YEAR since August 5, 2011, the day the U.S. lost its coveted AAA credit rating from Standard and Poor's. So, how have the financial markets responded in the year since? Quite well, actually.
It may not feel like it, but the broad U.S. stock market, as measured by the S&P 500 index, rose 13.6 percent between August 5, 2011 and last Friday, according to data from Yahoo! Finance. Despite all the angst from the credit downgrade, the threat of a double-dip recession and the turmoil in Europe, the stock market has hung in there.
The returns in the bond market are perhaps even more startling. The 10-year Treasury yielded 2.56 percent on August 5, 2011 and by last Friday, the yield had dropped to 1.46 percent, according to Yahoo! Finance. Normally, you might expect interest rates to rise after a credit downgrade since the ratings agency is essentially saying your bonds are riskier than previously thought.
The U.S., though, is perhaps a "special" case. The day after the credit downgrade, none other than Warren Buffett went on Bloomberg television and said he thought the U.S. should be a "quadruple A" rating. And, to this day, the U.S. dollar remains the world's leading reserve currency as more than 60 percent of the world’s foreign currency reserves are held in U.S. dollars, according to BusinessWeek.
We shouldn't get overconfident, though. While the U.S. has tremendous assets, it might only take a few bad decisions from our leaders to undo what took decades to build.

Weekly Focus – Think About It...
"There is nothing wrong with America that the faith, love of freedom, intelligence, and energy of her citizens cannot cure." --Dwight D. Eisenhower, 34th president of the United States
Jul 22, 2013 Weekly Commentary
The Markets


Singing the earnings song...

Each year, in January, April, July, and October, most publicly-traded companies announce their corporate earnings results. These announcements can have a dramatic effect on companies' share prices - and markets - especially when companies don't meet analysts' expectations.

The way a company's share price moves after an earnings announcement can strike a discordant note. For instance, a company can have a great quarter, but if it earns a few pennies per share less than expected, its share price may tumble. Likewise, a company can be in dire straits, but if it produces a few cents more than expected, its share price may climb.

Last week's earnings song was a bit melancholy. By the end of the week, about one-fifth of the companies in the Standard & Poor's 500 Index had submitted their reports and earnings were on track to grow by about 1.5 percent year-to-year. That's a bit lower than the 4.1 percent earnings growth analysts had expected, but it was in positive territory.

Unfortunately, as The Wall Street Journal pointed out, financial companies have exceptionally easy year-to-year comparisons. When they were pulled out of the mix, earnings hit a low note: down by almost 3 percent from last year, according to FactSet. That's worse than analysts expected at the start of the quarter. Earnings were weak relative to expectations, but the S&P 500 still finished higher for the week. That may be because of the soothing refrain offered by Ben Bernanke (monetary policy will remain accommodative... monetary policy will remain accommodative). The important thing to remember is the Fed's definition of accommodative monetary policy doesn't necessarily mean maintaining its quantitative easing program.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


THERE'S BEEN AN INNOVATION IN MEASURING INNOVATION. Innovation is one of those things. It's hard to fully describe, but it can be awfully important to countries and economies. In recent years, there have been some remarkable innovations, such as car sharing and the Oakland A's use of sabermetrics; and some less remarkable ones, such as airline baggage fees and the detachable dog sack (which allowed Fido to ride in a cloth carrier attached to the outside of the car). In March, panelists at the Wharton Economic Summit 2013 discussed the concept of innovation. Although they didn't all define it in the same way, they suggested innovation is using something new or known in a different way, different time, or a different place; essential for companies to grow; useful; transformative; an approach that addresses a major want or need; not always easy to spot. It's clear innovation means different things to different people. Cornell University, INSEAD, and the World Intellectual Property Organization, which collaborate on the Global Innovation Index, said their benchmark, "recognizes the key role of innovation as a driver of economic growth and prosperity, and adopts an inclusive, horizontal vision of innovation applicable to both developed and emerging economies."

They refined the index for 2013. According to The Economist:

"Instead of objectively counting the inputs and outputs, it relies on nuance. For example, rather than ranking overall education, it looks at the top three universities, since elite institutions may be more important than the average. Instead of counting each patent, it tracks only those filed in at least three countries, which suggests it is a more valuable technology. And, rather than look at scientific journal articles en masse, the index includes how often they are actually cited."

So, using these innovative metrics, which countries rank the highest in innovation? Among rich countries, the United States, Britain, and Germany are one, two, and three. In middle income countries, China, Brazil, and Russia take top honors.


Weekly Focus - Think About It "Health is the greatest gift, contentment the greatest wealth, faithfulness the best relationship." --Siddhartha Gautama, also known as Buddha

Sources:
http://www.investopedia.com/terms/e/earningsseason.asp
http://www.investopedia.com/financial-edge/1010/4-things-to-know-about-earnings-season.aspx
http://blogs.wsj.com/moneybeat/2013/07/19/morning-moneybeat-whats-that-you-said-about-a-strong-earnings-season/
http://money.cnn.com/2013/07/17/investing/premarkets/
http://www.federalreserve.gov/mediacenter/files/FOMCpresconf20130619.pdf (Page 6)
http://knowledge.wharton.upenn.edu/article.cfm?articleid=3242
http://www.foxnews.com/story/2009/03/19/century-disasters-top-10-worst-inventions-in-history/ http://www.globalinnovationindex.org/content.aspx?page=GII-Home (Click on the Quick Link "GII 2013 Report," then "Download the GII 2013 Report here" and go to page V)
http://www.economist.com/blogs/graphicdetail/2013/07/daily-chart-14
http://www.brainyquote.com/quotes/authors/b/buddha.html#FspDAtGzW65EdVdm.99
* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
Jul 21, 2008 Weekly Commentary
The Markets
It was a market of extremes last week.

First, the extreme bad news. On Tuesday, the Dow Jones Industrial Average closed below 10,000 for the first time in two years, according to Bloomberg. That same day, Fannie Mae and Freddie Mac, the largest U.S. mortgage-finance companies, lost more than a quarter of their market value, according to Bloomberg. Also, the S&P 500 Financials Index dropped 3%, closing at a level not seen since 1998 and capping its steepest-ever five-day retreat. And, to add insult to injury, Bloomberg reported that the global stock market decline has erased more than $13 trillion in market value since last October.
Now, the good news—investors’ memories can be short! Starting on Wednesday of last week, the Dow rose a total of 4.9% over three days, which was its biggest three-day gain since March 2003, according to Barron’s. Better than expected earnings from Wells Fargo, JP Morgan, and Citigroup helped fuel the rally, according to MarketWatch. And, speaking of fuel, oil prices declined more than $16 per barrel last week and that helped give support to the markets, according to MarketWatch.
The midweek rally was also boosted by news from the Securities and Exchange Commission on Tuesday that it was placing new temporary restrictions on short-selling the stock of 19 financial companies. This new rule is designed to relieve some of the downward pressure on companies such as Fannie Mae, Freddie Mac, Bank of America, Merrill Lynch, Citigroup, and Lehman Brothers, according to MarketWatch. This is not a recommendation to buy or sell any of these stocks, but it is worth noting that all 19 of the stocks on this list rose in value from Tuesday through the close of trading last Friday, according to the Wall Street Journal.
When the dust settled last week, the Dow was up a much welcome 3.6%. With all the extreme action last week, it will be interesting to look back six months to a year from now and see if last week was a turning point or just another crazy week in this unpredictable market.

SO WHAT ARE YOUR THOUGHTS on the concept of retirement? A recent study by Charles Schwab and AgeWave titled, “Rethinking Retirement: Four American Generations Share Their Views on Life’s Third Act,” reached the following conclusions:

Fifty-two percent of respondents see retirement as an opportunity for a new, exciting chapter in life.
Seventy-one percent of pre-retirees said they want to work in retirement and the most popular reason for working in retirement was to stay mentally active.
Three in five said they would like to move to a completely different line of work when they retire.
Slightly more than half of the respondents said they want to focus on their own needs and interests in retirement while 45% said they want to focus on giving back to family and community.
Forty percent said they anticipate providing financial support to their parents at some point in the future and 25% think they’ll have to support a sibling.

It appears that the very concept of retirement is changing. With people’s lifespan increasing, the idea of working for 40 years then retiring to golf and a rocking chair is pretty much gone. Today, many retirees are relatively young and in good health. Rather than relaxing, they want to pursue dormant passions and engage in more meaningful work—even if it means receiving little pay.

Whether you’re approaching retirement or in retirement, we’re happy to talk to you about how to make your golden years truly “golden.”

Weekly Focus – The Pursuit of Happiness
The Declaration of Independence says the pursuit of happiness is an inalienable right. Well, the writers of that document are on to something. Science is now telling us that instead of our happiness being stuck at some inborn level, we can actually take actions that will positively affect our happiness level and keep it at a high level for a long time. In her new book, The How of Happiness: A Scientific Approach to Getting the Life You Want, professor Sonja Lyubomirsky says about 50% of our happiness is genetically set and 10% is based on our life circumstances. That means a significant 40% is up for grabs. All we have to do is adopt the behaviors of happy people. And, without further suspense, here are some of those behaviors:

Practice gratitude
Be optimistic
Nurture relationships
Commit to goals
Develop coping strategies
Learn to forgive
Be physically active

Happiness may take work, but the results will outweigh the effort.
Jul 20, 2009 Weekly Commentary
The Markets
The second quarter earnings season started just like the Fourth of July – with a bang!
The hard-hit financial sector delivered some good news last week as companies such as Goldman Sachs and JP Morgan Chase announced earnings that pleased the market. In the tech sector, Intel and IBM provided support, too. On the other hand, widely watched General Electric came out with earnings and guidance last Friday that was disappointing and the stock dropped 6% by the end of the day. The good news was that the big drop in GE stock did not take the rest of the market with it – perhaps a sign that investors don’t view GE as the bellwether stock it once was.
By the end of the week, after all the news and noise, the S&P 500 index had surged 7% and had almost recaptured its recent June 12 high.
Going forward, investors will keep a close eye on the rest of the earnings reports looking for any sign that profits are being generated by revenue growth instead of relying on cost cutting. As you know, you can't cost cut your way to 15% profit growth each year, so, eventually, we'll need to see solid revenue growth before investors will feel confident that we're out of the woods.

AMERICANS SOCKED AWAY MONEY AT THE HIGHEST MONTHLY RATE IN 15 YEARS last month, according to the Department of Commerce, and that's good news – mostly. The personal savings rate rose to 6.9% in June, which is well above the average savings rate over the past decade. The personal savings rate is the percentage of personal disposable income that is saved each month.
A higher savings rate may reduce our dependence on foreign countries financing our deficits – a good thing – but, paradoxically, it might lengthen our recession. If we collectively save "too much" it could stunt economic growth as consumption slows down and fewer goods and services are produced and delivered. This "paradox of thrift" may hurt the economy in the short-term, but could be very beneficial in the long run. A higher savings rate also helps cushion families against unforeseen financial setbacks like the loss of a job, so that’s good, too.
To put the 6.9% in context, here's how the number looks over roughly the past 50 years:
Notice that from the 1960s through the 1980s, the personal savings rate averaged a healthy 8.3% to 9.6%. During the 1990s, there was a noticeable decline in the savings rate as consumers started a nearly 20-year spending binge. As we started the new millennium and all the way up to September of last year, consumers were on a spending rampage as they not only burned through their income each month, but, in some cases, borrowed money to support their habits.
In August 2005, near the peak of the housing bubble, the personal savings rate was actually a negative 2.7%. This amazing financial alchemy was aided and abetted by consumers pulling out billions of dollars in home equity loans and using that money to finance an unsustainable lifestyle. Of course, this spending above our means also meant that the level of economic growth was unsustainable, too. This all abruptly shifted in August 2008 as the personal savings rate went from 0.8% that month to last month's 6.9%.
Yes, it is generally a good thing that consumers are saving again. The big question is, have we learned our lesson? Is this new frugalness just temporary or is it the new normal? The answer to that question has major implications for the worldwide economy over the coming years.

Weekly Focus – Think About It
"Money often costs too much."
-- Ralph Waldo Emerson
Jul 19, 2011 Weekly Commentary
The Markets Will they or won't they?
Republicans and Democrats are squabbling over raising the federal debt ceiling and jeopardizing a projected August 2 "drop-dead" date for avoiding a default on part of our outstanding debt obligations. Both parties agree that default has to be avoided, but, so far, they’ve been unable to meet in the middle on an agreement. Meanwhile, the economy suffers.
Nobody knows for sure what would happen if our politicians cannot reach an agreement by August 2, but former Treasury Secretary Larry Summers took a stab at it on CNN last week. As reported by Bloomberg, Summers said a U.S. debt default would cause panic throughout the financial system and long-term uncertainty. He went even further and said a U.S. default would make, "Lehman Brothers look like a very small event." You may recall that the bankruptcy of Lehman Brothers in September 2008 helped trigger a collapse of the credit markets and contributed to a 28% decline in the S&P 500 index over the next 30 days, according to Yahoo! News.
There's no doubt that politicians on both sides of the aisle know they are playing with fire right now. That's why very few people believe the U.S. will actually default. Instead, we may see a last-minute deal that raises the debt ceiling and sets us up for another bruising battle down the road.
Ultimately, tough decisions have to be made. Our country is deeply in debt and there are no easy ways to solve it. Whether it gets resolved now or later remains to be seen.

SPECIAL REPORT ON CHINA
"If you build it, they will come."
That seems to be an appropriate description of China's economic growth model. Just one look at Shanghai’s waterfront or train station is enough to leave visitors believing China’s infrastructure can rival anything in the world.
FIXED INVESTMENT VERSUS CONSUMPTION SPENDING A significant amount of China’s growth over the past 20 years has come from what's called "fixed investment" as opposed to consumption spending. Fixed investment includes tangible things like roads, bridges, trains, buildings, and machinery and accounted for 46% of China’s GDP in 2010, according to the Financial Times. The June 30 launch of the Beijing to Shanghai high-speed train is a good example of fixed investment. It cost $33 billion to build, reaches a top speed of about 200 mph, and connects the two major cities in less than five hours, according to The Vancouver Sun.
Fixed investment is good from the standpoint that it equips a country with the tools and resources needed to grow and be productive. However, too much fixed investment can lead to overcapacity and strained budgets.
Rather than continuing to rely on building and infrastructure for its growth, the Chinese government has developed a plan to rebalance its economy from investment and manufacturing towards consumer consumption and services, according to the Financial Times. Ironically, this would put China more in line with the U.S., where consumer spending accounts for about 70% of demand in our economy, according to The Wall Street Journal. In China, the comparable private consumption number is 34%, according to the Financial Times.
One of the knocks on China is that the growth in fixed investment has risen faster than GDP and this could cause problems with too much capacity and too much debt to fund those investments. Should China falter in its effort to rebalance its economy, it could lead to domestic problems that ripple out to the rest of the world.
There's an old saying that when the U.S. sneezes, the rest of the world catches a cold. Given China's strong growth and massive size, we should be concerned about China sneezing, too. How they manage the rebalancing of their economy over the next few years bears close attention.

Weekly Focus – Think About It
"Nature does not hurry, yet everything is accomplished." --Lao Tzu, Chinese Taoist Philosopher
Jul 19, 2010 Weekly Commentary
The Markets
What is the most actively traded security on the planet?
The answer is the two-year Treasury note and its current yield is sending us a signal, according to Bloomberg, July 17. Last week, the yield on the two-year note fell for the seventh straight week and touched its lowest level ever. At just under 0.6%, it is now lower than during the peak of the financial crisis in the fall of 2008.
What does this signal?
In short, it suggests the economy is slowing down, inflation is not a threat, deflation is a possibility, and money-market rates will remain historically low, according to BusinessWeek, July 15, Barron’s, July17, and Bloomberg, July 17. Here’s a list of several economic reports released last week that help support this view:
* U.S. consumer sentiment tanked in early July, according to a survey by Reuters and the University of Michigan (MarketWatch, July 16).
* The consumer price index dropped for the third straight month in June, according to data from the Labor Department (Market Watch, July 16).
* Industrial production rose a modest 0.1% in June after having risen 1.2% in May, according to the Federal Reserve, July 15.
* Another report released by the Federal Reserve, June 22, said, “The economic outlook had softened somewhat and a number of members saw the risks to the outlook as having shifted to the downside.”
* The dollar has posted significant declines recently against the euro and yen as traders position themselves for a potential slowdown in the U.S., according to Bloomberg, July 17.
While the data above points toward economic softness, second quarter corporate profits are coming in strong. Of the 48 companies in the S&P 500 index that have reported their earnings, 75% have topped analysts’ estimates, including a blow-out quarter from Intel, according to Reuters, July 16.
The tug-of-war between soft economic data and strong corporate profits is helping keep the market stuck in a bouncy trading range.

HOW DO YOU SOLVE A PROBLEM LIKE JOBS? This question has a double meaning--jobs as in employment and Jobs as in Steve Jobs of Apple.
Chronically high unemployment in the U.S. is having a debilitating effect on our economy. We can point to many causes for this, but one that receives lots of press is the outsourcing of jobs overseas--and that’s where Steve Jobs comes in.
Without getting into a political debate about the pros and cons of free trade, it turns out that in a little recognized fact, Apple is one of the biggest beneficiaries of outsourcing jobs overseas. We can’t get enough iPods, iPhones, iPads, and Macs, but relatively few of the jobs created by our insatiable demand are sprouting on our shores.
According to Apple and BusinessWeek, as of September 26, 2009, Apple had about 37,000 full-time equivalent employees of which about 25,000 were based in the U.S. By contrast, Apple has subcontracted with a Chinese company called Foxconn that employs roughly 250,000 people who are devoted to building Apple products. Doing the math, for every one Apple employee working in the U.S., there are 10 Foxconn employees building Apple products in China. Knowing that costs are much lower in China (and that Apple products are in high demand), is it any surprise that Apple earned $3 billion in profit with a 42% gross margin in the first three months of this year?
Again, this is not meant to start a political debate about free trade or protectionism as there are many facets to this issue. It simply points out the intractable nature of high unemployment in the U.S., particularly in the manufacturing sector. Some people argue that free trade and capitalism are the best ways to grow jobs and profits. Others, notably former Intel chairman and chief executive officer Andrew Grove (Bloomberg, July 1), argue for protectionist measures to rebuild our domestic manufacturing base.
Ultimately, America needs to get its people back to work. The Apple example shows just how difficult that may be.

Weekly Focus – Think About It
“I want to put a ding in the universe.”
--Steve Jobs
Jul 16, 2012 Weekly Commentary
The Markets Should the Federal Reserve raise interest rates to fire up the economy?
For the past few years, the Fed has been on a mission to lower rates as much as possible. The thinking is lower rates will spur economic growth by making it less costly for businesses and consumers to borrow money.
Unfortunately, it hasn't quite worked as planned.
Short-term interest rates are near zero and 30-year mortgages are at a record low, yet the economy is still just muddling along, according to Barron's. Now, some investment managers are saying the Fed should reverse course and raise interest rates.
Last week, prominent money manager David Einhorn went on CNBC and said, "I think having very low zero rates is depressing to people. I think it deprives savers of reasonable incomes, the ability to forecast a reasonable income, and it cuts down on consumption." He went on to say low rates drive up food and oil prices and lower standards of living.
Folks relying on a stream of income from their fixed investments can probably relate very well to what Einhorn is talking about. As recently as July 2007, $100,000 worth of 1-year Treasuries would have generated about $5,000 of annual income (a 5 percent yield), according to data from the Federal Reserve. Now, it would generate only about $200 (a 0.2 percent yield).
The Fed may be in a classic Catch-22, according to CNBC. With sluggish economic growth, it's certainly hard to justify a rate hike, yet, low rates are increasingly ineffective. CNBC says a growing number of analysts suggest the best course of action is to allow "the cash-rich private sector to sort out its own problems without the government's interference." However, they acknowledge it "likely would be painful, but could be the only sustainable path to recovery."
With the Fed on the record as saying they plan "to keep interest rates at their historically low range of 0 to 0.25 percent through late 2014," investors shouldn't expect the Fed to raise rates any time soon, according to Fox Business. Only time will tell if this low rate strategy is the right medicine for the economy.

HOW DO YOU TURN A PENNY INTO 1.25 BILLION DOLLARS? Sounds like a magic trick, right? Well, there's really no magic other than the law of large numbers.
Here's how it works and how it may benefit our economy.
A report from the Federal Highway Administration shows Americans traveled approximately 2.94 trillion miles in motor vehicles for the 12 months ending April 2012. Now, when you figure how many gallons of gas that burns up, you get a really big number! Moody's Economy.com chief economist Mark Zandi has done the math and, by his reckoning, each penny change in the price of a gallon of gas equates to, you guessed it, about $1.25 billion over the course of a year, as reported by CNBC.
With the wild swings we've seen in the price of gas, the savings – or cost – can add up quickly. A recent check with AAA showed the average price for a gallon of regular gas dropped by about $.25 over the past year. So, multiply $1.25 billion by 25 and you get, to quote Carl Sagan, "billions upon billions" of additional coin in consumer’s pockets. And, that coin could fuel further growth in consumer spending.
You've heard the old saying, "A penny saved is a penny earned." Today, a few pennies saved on gas can add up to billions!

Weekly Focus – Did You Know...
There’s about $1.1 trillion of US dollars in circulation today – an all-time record high. However, most of it is not "floating" around in everyday transactions. About 75 percent of the $1.1 trillion is in $100 bills which don’t circulate much. On top of that, about 50 to 66 percent of U.S. cash is held abroad. Despite the proliferation of credit cards and debit cards, we still seem a long way away from a cashless society. Source: CNNMoney
Jul 15, 2013 Weekly Commentary
The Markets


One of these things is not like the other... If you find yourself humming that old Sesame Street standard when you think about financial markets and world economies, you're probably not alone.

To the consternation of many, the Dow Jones Industrials Average and the Standard & Poor's 500 Index rocketed to new highs last week just as the International Monetary Fund (IMF) cut its global economic growth forecast for 2013 and 2014.

Many in the media pointed fingers and announced, "That's the problem right there!" Of course, the fingers were pointing at Ben Bernanke and the Federal Reserve which continued to dither about Quantitative Easing (QE) last week. While it may feel good to lay blame, the Fed is just one tree in the forest of market volatility and economic growth.

Let's take a look at another section of the forest: emerging markets. They are expected to power 60 percent of the world's economic activity by 2030. Yet, just last week, China's exports slumped, and Brazilian and Indonesian central banks raised interest rates (which generally slows growth). Turkey's central bank may do the same next week. Is slowing growth in emerging markets the Fed's fault?

While higher rates in the U.S. may hurt emerging markets, many of those countries have problems of their own, including infrastructure bottlenecks and excessive credit expansion. Last March, the Financial Times quoted Deutsche Bank strategist John-Paul Smith who wrote:

"We believe that 2013 will mark the year when economists and investors focus on the underlying imbalances within the Chinese economy and, accordingly, reduce their expectations of sustainable growth over the medium term. The deterioration in the perception of China is likely to have a very disruptive effect on (global emerging market) equities..."

Smith's forecast proved out. Early last week, the International Monetary Fund (IMF) lowered expectations for China's growth to the high-seven percent range.

Of course, it's not easy to predict the future. Irrefutable evidence of that arrived a few days after the IMF's report when Lou Jiwei, China's Minister of Finance, said his country's growth rate could fall to 7.0 percent or even lower. Economists gasped.

China's official growth target (set by the National People's Congress) is 7.5 percent, not 7.0 percent or lower. According to The Wall Street Journal, "Such a sharp downshift in China's growth would send ripples around the world economy, hitting everything from iron-ore demand in Australia to sales of luxury handbags in Hong Kong stores." This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


IN AMERICA, PEOPLE ARE STILL PULLING THEMSELVES UP BY THEIR BOOT STRAPS. Three-fourths of the folks who participated in the 2013 U.S. Trust Insights on Wealth and Worth (all of whom have $3 million or more in investable assets) made their money the old fashioned way. They worked, owned businesses, and/or invested.

Most believe they're financially secure and feel confident about the future. While that proved true for many aspects of financial planning, the study uncovered some unrecognized risks, many of which have been created by a volatile investment environment and changing tax laws. They include:

- Incomplete retirement planning. Although the vast majority of those surveyed are very confident about having the income they need during retirement, many have overlooked factors which affect income and assets such as lifestyle expectations, out-of-pocket healthcare expenses, long-term care costs, and others.

- Financial support for extended family. Almost one-half of those surveyed provide significant support to members of their extended families (including parents, in-laws, siblings, and grown children). However, the majority have not included that fact in their financial plans.

- Conflicted emotions about investing. The majority of survey participants said growing assets is more important than preserving them today; however, they also said lowering risk is a higher priority than pursuing higher returns.

- Tax law changes. A majority of wealthy people do not understand the ways in which tax law changes may affect their income, investments, or estates. Few understand the tax strategies which may be available to them.


Weekly Focus - Think About It

"Tell me and I forget. Teach me and I remember. Involve me and I learn."
--Benjamin Franklin, inventor and statesman


* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.
* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Past performance does not guarantee future results.
* You cannot invest directly in an index.
* Consult your financial professional before making any investment decision.

Sources:
http://finance.yahoo.com/news/bulls-crosshairs-bernanke-earnings-020139063.html
http://www.imf.org/external/pubs/ft/survey/so/2013/NEW070913A.htm
http://blogs.barrons.com/emergingmarketsdaily/2013/07/12/the-emerging-market-power-rankings-thank-heavens-for-ben-bernanke/?mod=BOL_hpp_blog_stw
http://www.theglobeandmail.com/report-on-business/international-business/asian-pacific-business/indonesia-hikes-interest-rates-as-nations-scramble-over-market-rout/article12508211/
http://blogs.ft.com/beyond-brics/2013/03/01/deutsche-bear-em-stocks-to-drop-10-15/#axzz2YvzcWUrQ
http://online.wsj.com/article/SB10001424127887324425204578600890536037594.html
http://blogs.barrons.com/emergingmarketsdaily/2013/07/12/china-slower-growth-lower-stock-prices/?mod=BOLBlog
http://www.ustrust.com/publish/content/application/pdf/GWMOL/UST-Key-Findings-Report-Insights-on-Wealth-and-Worth-2013.pdf
http://www.ustrust.com/publish/content/application/pdf/GWMOL/UST-Fact-Sheet-Insights-on-Wealth-and-Worth-2013.pdf
http://www.ustrust.com/ust/Pages/Insights-on-Wealth-and-Worth-2013.aspx
http://www.brainyquote.com/quotes/quotes/b/benjaminfr383997.html
* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
Jul 14, 2008 Weekly Commentary
The Markets
Investing can be a bit like the weather on Mount Rainier in June - very unpredictable. You could have a horrendous blizzard one day and then a glorious, warm sunny day the next. That just about sums up the recent action on Wall Street.
The daily mood swings on Wall Street were evident last week as the Dow Jones Industrial Average closed down on Monday, then was up, down, up, down for the remaining four days of the week, according to Barron’s. In fact, for the 50 trading days ending July 8, the S&P 500 had 15 days when it went up only to be followed the next day by an even greater decline. That’s the highest number of times over a 50-day period that we’ve had “up one day and down even more the next day” since 1940, according to Bespoke Investment Group. It looks as though the blizzard is prevailing right now.
No matter how you slice it, the overall performance of the broad market averages is weak. As of last Friday, all three of the domestic stock market indices listed in the chart below, were at least 20% below their all-time highs, according to Bloomberg. That’s the conventional definition of a bear market.
Financial stocks once again took center stage last week as continued concerns about the health of banks, brokers, and Fannie Mae and Freddie Mac weighed on investors, according to Bloomberg. Of course, it didn’t help that crude oil and gasoline futures hit record highs last week and the dollar continued to drop in value against many major currencies.
While the financial markets may look bleak at the present moment, we have to put emotion aside and look at this as an opportunity in the making. At the Berkshire Hathaway annual shareholder meeting this past May, Warren Buffet made a comment that bears repeating. As published in a July 12, Wall Street Journal article, he said, “If a stock [I own] goes down 50%, I'd look forward to it. In fact, I would offer you a significant sum of money if you could give me the opportunity for all of my stocks to go down 50% over the next month.” Hmm. Maybe declining stock prices is not such a bad thing after all?
Okay, so how is the current bear market an opportunity for us? Well, we have to carefully analyze the investment opportunities and then selectively make investments that we believe are poised for a turnaround. Eventually, this market should reverse course and start a new bull market and we’ll try to take advantage of that.

SIR JOHN TEMPLETON, ONE OF THE GREATEST INVESTORS OF ALL TIME, and later in his life, a generous philanthropist, passed away last week at the age of 95. In honor of his passing, here are a few of his investing insights that we’ll remember long after he’s gone:
• Be a contrarian. In a 1995 Forbes interview, Templeton said, “People are always asking me where the outlook is good, but that's the wrong question. The right question is: ‘Where is the outlook most miserable?’” He was a firm believer in investing at the point of “maximum pessimism.” An avowed value investor, Templeton liked to buy when everybody else was selling and sell when everybody else was buying. It was his way of “buying low and selling high.”
• Don’t be afraid of big bets. When he felt confident, Templeton was not afraid to put a significant amount of his money in one area. For example, back in the 1960s, he was highly concentrated in Japanese companies because he felt they were extremely cheap. Of course, big bets can turn into big risks if you make a bad decision. Fortunately, for Templeton, his bad bets were few and far between. By buying stocks that were low priced and out of favor, he had a built-in “margin of safety.”
• Don’t worry about the direction of the markets. According to a 1978 Forbes cover story, Templeton said, “I never ask if the market is going to go up or down because I don't know, and besides it doesn't matter. I search nation after nation for stocks, asking: ‘Where is the one that is lowest-priced in relation to what I believe it is worth?’ Forty years of experience have taught me you can make money without ever knowing which way the market is going.” For Templeton, it all boiled down to finding stocks that had value and could go up regardless of what is happening to the broad market.
• Remain humble. From humble roots, Templeton never let success go to his head. He said, “An investor who has all the answers doesn't even understand all the questions. The wise investor recognizes that success is a process of continually seeking answers to new questions.” We’ll never bat 1,000%—nor do we have to. We do our best and then try to learn from our mistakes.
• Don’t panic or be too negative. Templeton’s advice here is quite timely. He said, “There will, of course, be corrections, perhaps even crashes. But over time our studies indicate, stocks do go up and up. In this century or the next, it’s ‘buy low, sell high.’”
Like wise grandparents, we can learn from our elders. Templeton is certainly one of the all-time greats and his words are worth listening to.

Weekly Focus – Whom Do You Trust?
Here’s a simple test to determine if you can trust someone. Ask them if they drink coffee. It turns out that the five countries whose citizens trust each other the most are also the five countries with the highest per capita coffee consumption, according to NationMaster.com. Is this a simple case of data mining or is there something special about coffee drinkers?
Jul 13, 2011 Weekly Commentary
The Markets "This is a big bucket of very cold water."
That was how Ian Shepherdson, chief U.S. economist at High Frequency Economics, described last week's ugly U.S. employment report.
We know that one month does not make a trend. But, two months in a row, now that starts to raise an eyebrow. Last week's employment report was stunningly weak, well below market expectations and the second month in a row that employment numbers were distressingly low, according to The Wall Street Journal. It's hard to have sustained economic growth when employment growth is in the doldrums.
To put the employment situation in perspective, private payrolls, which account for about 70% of the work force, are still 6.7 million below where they were in late 2007 when the recession began, according to The Wall Street Journal. That hurts.
Paradoxically, even though employment growth has been decidedly weak, the U.S. stock market has performed remarkably well. According to a July 9 Wall Street Journal article, “Factoring in dividends, the Dow on Thursday (of last week) was only 0.1% below its all-time high, while the S&P 500 was off just 6% from its own highest level ever, according to Morningstar.” On top of that, the Dow Jones Transportation Average hit an all-time high last week, according to Reuters.
With unemployment high, economic growth weak, and the budget out of control, how can stocks hang in there? The short answer is corporate earnings. Companies have slashed expenses, cut staff, and become lean, mean earnings machines. CNBC says second quarter earnings are expected to be strong and, for the year, S&P 500 earnings could hit an all-time high.
At the end of the day, corporate earnings are what matters. This week marks the beginning of second quarter earnings reports and we’ll be watching them very carefully for signs of either growth or weakness.

SPECIAL REPORT ON CHINA
Is the "Age of America" about to end? Will China become the world’s largest economy? What does the rise of China mean for investors?
For much of recorded history, China was the world's largest economy. Even into the early 1800s, it accounted for 30% of the world’s GDP, according to The Economist. But, like many empires before it, China spectacularly flamed out over the next century. By the mid-1970s, the disastrous reign of Mao Zedong was coming to an end and China was near rock bottom.
In 1978, new leader Deng Xiaoping laid out a vision of economic reform that has propelled China to unprecedented growth. Since then, China has been massively reshaping the world order as its growth and demand for resources affects everything from auto production, to corn prices, to funding the U.S. budget deficit. Earlier this year, China overtook Japan as the world’s second largest economy behind the U.S.
Given the importance of China in shaping world events, we thought it would be helpful to review some of the facets of China’s phenomenal rise and what that may mean for our clients like you. Today, in the first of a series, we’ll look at demographics.

DEMOGRAPHICS Incredibly, China's GDP has grown at an average annual rate of 9.3% since 1989, according to Trading Economics. Yet, for all its might, there are some glaring holes that might trip it up over the coming years -- with demographics being one of them.
You may be surprised to know that between 2000 and 2010, the U.S. population grew faster than China’s (9.7% in U.S. vs. 5.8% in China, according to Financial Times). For the past 20 years, China’s economic boom has been partly fueled by urbanization -- rural folks moving to the cities in search of higher paying jobs, plus a supposedly endless supply of cheap young workers. Turns out that supply may be coming to an end.
China has had a one-child policy since 1979 and it resulted in the “non-birth” of about 250 million babies, according to Time Magazine. As a result, China’s population is aging rapidly. Today, 12.5% of China’s population is over 60. By 2020, it will hit 20% and by 2030, it will hit 25%, according to The Economist.
Worse yet, the working age population will start to decline in about 2015, according to the United Nations. Fewer workers supporting a growing elderly population is not a recipe for economic growth.
Of course, China could reverse its one child policy and rev up population growth, but that would likely cause other problems such as food shortages or environmental issues.
As the demographic shift causes the labor market to tighten, wages have already started to rise, according to The Economist. That puts pressure on inflation and makes the country less competitive.
While it’s easy to look at China’s growth over the past 30 years and extend it for another 30, changing demographics are one of several hurdles that could put the brakes on growth. Next week, we’ll look at the challenge of moving China’s economy from one led by exports and investments to one led by consumption.

Weekly Focus – Think About It
“Do the difficult things while they are easy and do the great things while they are small. A journey of a thousand miles must begin with a single step.” --Lao Tzu, Chinese Taoist Philosopher
Jul 13, 2009 Weekly Commentary
The Markets Are the green shoots getting nipped by a late frost?
When Fed Chairman Ben Bernanke uttered the phrase "green shoots" back on March 15, 2009, in a 60 Minutes interview to describe improvements he saw in the functioning of the financial markets, investors and pundits alike started to feel better about the future of the economy. This confidence may have partially accounted for the 40% jump in the S&P 500 index between the March 9 low and the recent June 12 high.
Since that June high, the S&P 500 has dropped 7%, perhaps on concerns that the initial signs of spring are dissipating.
One of the most discouraging pieces of economic news was the July 2 release of the June payroll report. It showed a decline of 467,000 jobs in June versus an expectation for a loss of 325,000, according to MarketWatch. This was a significant increase from the 322,000 jobs lost in May and suggested that a consumer-led recovery may be further in the future than previously thought. In addition, last week's release of the University of Michigan/Reuters consumer sentiment report showed consumers were much gloomier in early July compared to June which does not bode well for consumer spending.
Of course, a couple random economic statistics cannot tell you whether the stock market will go up or down and it's possible that the recent decline in the market is simply due to a normal pullback and consolidation from a steep rise. What we can say with some confidence is that the economic recovery will likely be inconsistent. One day we may receive data that says the economy looks great, the next day another report might show just the opposite.
This tug-of-war between conflicting data will test the patience of investors and we will do our best to pass that test with an A+.

HOW WILL WE KNOW when the market hits rock bottom and starts a new secular bull market? This is one of those questions where if we knew the exact answer we could probably make a fortune. Unfortunately, we cannot pinpoint the bottom of a bear market in real time, but according to money manager John Hussman (www.hussmanfunds.com), there's an anecdotal measure that might help us narrow the timeframe.
In his June 29 commentary, Hussman discussed the concept of "assumed permanence of unusual conditions" to help describe both major market peaks and major market lows. He referenced the 2000 technology peak, the recent housing peak, the 2007 stock market peak and the 2008 oil peak as examples of investors believing in the "assumed permanence of unusual conditions" to justify such high prices. We now know that those "unusual conditions" were anything but permanent.
Conversely, he said the same sentiment applied back in early 1982 to help justify why the stock market was dead and would continue to be dead for years. Of course, in August 1982, the stock market took off on an 18-year bull run.
What we're really talking about here is that at certain times, investors might become so euphoric or so despondent that they believe the current trend will last for many years. Today, investors are understandably concerned about the financial markets. We've been in a down cycle since October 2007 and there's plenty of anxiety about how much longer it will last. But, have we reached the point where many investors take it as a given that these unusual economic and market conditions will be permanent?
Hussman suggests that when or if we reach this point of "assumed permanence of unusual conditions," then that might be the time when we create a floor from which a new long-term bull can begin. It's a great theory, but we have no empirical way of measuring when we hit this point. Despite the inability to measure it, we will keep our eyes open to try to spot it and profit from it.

Weekly Focus – Think About It
"You are on the road to success if you realize that failure is only a detour."
-- Corrie ten Boom
Jul 12, 2010 Weekly Commentary
The Markets
Wall Street investors are sure a fickle crowd these days.
After dropping 16% between April 23 and July 2, the S&P 500 recouped one-third of that loss last week and rose 5.4%, according to Bloomberg, July 10. Stocks rose on news that U.S. retail sales grew at the fastest pace in four years in June and a bullish report from the IMF projected an upwardly revised global economic growth rate of 4.6% in 2010, according to CNBC, July 8. Rising optimism that second quarter earnings reports might be better than expected also supported stock prices last week, according to MarketWatch, July 7.
Although the market jumped dramatically, has much changed in the past week? Maybe, maybe not.
Wall Street observers have a tidy tendency to explain every movement in the market with an explanation that seems, on the surface, to be reasonable. Last week’s bullish reports on retail sales, world economic growth, and some earnings pre-announcements all seem like logical explanations for the big rise in the market. However, between April 23 and July 2, when the market dropped 16%, we were reading reports that retail sales were weak, economic growth was slowing, and we might be heading for a double-dip recession. Now, a week later, the economy seems to have turned a corner, right?
In reality, the truth is probably somewhere in between. The economy may not have been as bad as the 16% market swoon suggested and it may not be as good as last week’s 5.4% pop suggests, either.
It’s good to know what market observers are ascribing to the market’s weekly moves, but as financial advisors, we have to filter their tidy explanations with a dose of skepticism.

DOES THE LARGE U.S. BUDGET DEFICIT MATTER?
Notice how our budget deficit has soared over the past three years as the recession took its toll. Surprisingly, it was just nine years ago that we ran a budget surplus of $128 billion. On a cumulative basis, the national debt is $13.2 trillion, according to the Treasury Department. So, should we be concerned that our annual deficit and national debt are rising dramatically?
Without meaning to be glib, deficits don’t matter until they do. Just ask Greece.
Currently, financial markets are relatively unconcerned about our debt level. Investors’ lack of concern shows up in the fact that interest rates on government bonds are near historic lows and the spread between interest rates on inflation-protected Treasury bonds and regular bonds is a mild 2.3%, according to MSN, July 9. If investors were concerned about our debt level, they’d send interest rates skyrocketing (as happened in Greece) and inflation might rear its head if the government cranked up the printing press to monetize our debt.
Investors are not alarmed at our large debt level because they still have confidence that our country will weather the storm. However, investors could lose confidence if, for example, we experience some new shock or a “failed” Treasury auction. If that happens, confidence could dissipate rather quickly and throw our economy into disarray.
Nobody knows if this will happen or not, but we continue to monitor interest rates and inflation expectations as early indicators to help determine if confidence is slipping.
Jul 08, 2013 Weekly Commentary
The Markets


The second quarter offered a level of drama often found in homes with teenagers.

When investors realized their good friend, quantitative easing, might have an earlier-than-expected curfew, they threw a hissy fit that resounded through global markets. The outburst interrupted the trajectory of Standard & Poor's 500 Index, which finished June lower after hitting record highs in May. As stocks fell, yields on the benchmark 10-year Treasury bond hit a 22-month high.

Higher treasury yields and a strengthening greenback proved attractive to investors and capital flowed out of emerging markets during the quarter. As interest rates moved higher, the cost of borrowing rose sharply in many emerging countries. That may impede economic growth, which has slowed already, in many developing countries. Economies in emerging Asia, Latin America, and Europe grew by about 4 percent on average year-on-year during the first quarter as compared to 6.4 percent on average during the past decade.

When compared to growth rates in developed countries, such as the European Union (EU), that's still a pretty attractive growth rate. The EU has suffered seven consecutive quarters of recession. It's hard to say the recovery is going well, but experts are hopeful because the Spanish economy is contracting at a slower rate, Italian business activity isn't declining as fast as it once did, the French downturn is moderating, and the German economic growth is in positive numbers.

It's a different story in the United States. By the end of second quarter, economists were predicting 2014 could prove to be the best year for U.S. economic growth since 2005. The Wall Street Journal's monthly survey found that, "Economists... expect gross domestic product to expand at a 2.3 percent annual pace this year and 2.8 percent next year. The Federal Reserve edged up 2014 growth forecasts to between 3 and 3.5 percent, from a March estimate of 2.9 to 3.4 percent." Encouraging economic signs include:

- Housing market vigor: Experts say housing market strength will be critical to economic performance in the second half of the year.
- Employment gains: Unemployment has dropped from double-digits to 7.6 percent, although there are still about 2.4 million fewer jobs than there were before the recession.
- Confident consumers: After years of paring spending and paying down debt, Americans are feeling optimistic. Consumer confidence now stands at a five-year high.

While optimism about the American economy is good news, it's important to remember world economies are like members of a family. What happens to one country or region often has a significant influence on what happens in the others.

This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Regal Securities, Inc.


SHE CAN BRING HOME THE BACON AND FRY IT UP IN A PAN... From 1960 through 2011, the percentage of households with children under the age of 18 and mom as the primary or sole breadwinner increased from 11 to 40 percent. According to the Pew Research Center report, ‘Breadwinner Moms' fall into two distinct groups: married moms who earn more than their husbands (37 percent) and single mothers (63 percent). The earnings gap between the two groups tends to be very large:

"The median total family income of married mothers who earn more than their husbands was nearly $80,000 in 2011, well above the national median of $57,100 for all families with children, and nearly four times the $23,000 median for families led by a single mother."

It's interesting to note an educational gap has been developing between husbands and wives, as well. A growing proportion of married women are better educated than their husbands. According to Pew Research, "the share of couples in which the mother has attained a higher education than her spouse has gone up from 7 percent in 1960 to 23 percent in 2011." This probably shouldn't be a surprise since more women than men have been receiving college degrees of all types - associates, bachelors, masters, and doctorates - every year since 1982.

Perceptions about women's roles in both the workplace and the family appear to be changing, too. According to another Pew report, almost three-fourths of American adults say having more women in the workforce has been a change for the better. About 60 percent say family life is more satisfying when both spouses work and they share responsibility for housework and child care.


Weekly Focus - Think About It

"If we become increasingly humble about how little we know, we may be more eager to search."
--Sir John Templeton, Global investing pioneer

Sources:
http://www.reuters.com/article/2013/06/28/us-markets-stocks-idUSBRE95N0HT20130628
http://www.bloomberg.com/news/2013-06-28/fed-s-lacker-says-he-doubts-more-monetary-stimulus-effective.html
http://online.wsj.com/article/SB10001424127887324904004578539263826544252.html
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/06/20/this-is-why-global-markets-are-freaking-out/
http://www.cnbc.com/id/100849151
http://www.businessspectator.com.au/news/2013/7/3/european-crisis/eurozone-recession-eases
http://online.wsj.com/article/SB10001424127887323300004578559263197557362.html
http://www.pewsocialtrends.org/2013/05/29/breadwinner-moms/
http://www.aei-ideas.org/2013/01/staggering-college-degree-gap-favoring-women-who-have-earned-9-million-more-college-degrees-than-men-since-1982/
http://www.pewsocialtrends.org/2012/04/13/women-work-and-motherhood/
http://www.brainyquote.com/quotes/authors/j/john_templeton.html

* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Past performance does not guarantee future results.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

Jul 07, 2008 Weekly Commentary
The Markets With the second quarter in the history books, we'll take a brief look back at what affected the markets over the first half of this year.
COMMODITY PRICES CONTINUED TO MAKE HEADLINES
The unrelenting rise in oil prices continued in the second quarter as a barrel of crude rose 37.8% in the second quarter and nearly 46% so far this year, according to MarketWatch. Gas prices rose in tandem as the average U.S. retail price for a gallon of regular gasoline climbed to a record $4.086 on June 30, according to MarketWatch. The AAA Daily Fuel Gauge Report says that's a 40% increase from a year ago. Ouch! Precious metals were on a tear, too. Gold prices rose about 1% for the quarter and are up about 11% this year. Silver prices are up more than 17% this year while platinum is up more than 35%. Even copper prices are up more than 27% this year, according to MarketWatch. These steep increases have kept pressure on stock prices.

INFLATION REMAINED TOP OF MIND WITH INVESTORS
The consumer price index rose 4.2% for the 12 months ending May 2008, according to the Labor Department. Thats uncomfortably above the Federal Reserves presumed comfort zone of 1-2%, according to Pacific Investment Management Company (PIMCO). Of course, rising commodity prices are a big factor in the inflation number. The Federal Reserve is in a tight spot because under normal circumstances, they might raise interest rates to help squash inflation. Unfortunately, were in the midst of an economic slowdown with tight credit conditions, so raising interest rates would run the risk of throwing the economy into even greater turmoil. The Fed seems to be trying to walk a fine line between keeping rates low to help the economy, but not too low that it fosters out of control inflation and a plunging dollar. The way the markets have reacted so far this year, it appears that the Fed has some fine-tuning to do.

THE CREDIT MARKETS ARE STILL HAVING PROBLEMS
By now, everyones familiar with the subprime problems and the havoc theyve caused. The new concern is that the subprime problems may migrate into problems with home equity lines of credit and other forms of credit, according to Barrons. With the value of homes dropping, homeowners have less equity and lenders are starting to get stingy with credit. This could ripple through the economy and create additional strain. Surprisingly, even though the Federal Reserve has cut the Fed Funds rate from 4.25% at the end of 2007 to 2.0% by the end of April 2008, the average rate on a 30-year mortgage has hardly budged. During that time, it went from about 6.2% to about 6.0%, according to Freddie Mac. However, by early July 2008, the average rate on a 30-year mortgage had risen to more than 6.3%. Stubborn mortgage rates coupled with tight credit conditions are not helping the housing recovery.

HOUSING WOES CONTINUE
The 20-City Composite index published by S&P/Case-Shiller showed a 15.3% year-over-year decline in housing prices as of April 2008. All 20 cities in the index showed a decline, ten of which are in double-digits. Las Vegas, NV, Miami, FL, and Phoenix, AZ, took the top three spots with declines of 25% or greater, while Charlotte, NC, showed the most resilience with just a miniscule decline of 0.1%. One key to the economy is to get housing prices to stabilize. As it stands now, many would-be homebuyers are sitting on their thumbs rather than buying a home that may depreciate further. If prices level off, it might encourage them to jump into the market which would be a good thing!

THE JOB MARKET IS WEAKENING
The U.S. economy has shed jobs each month t