Monthly Archives: June 2012

Weekly Commentary, June 26th

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.

 

Data as of 6/22/12

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

-0.6%

6.2%

5.3%

14.3%

-2.3%

3.0%

DJ Global ex US (Foreign Stocks)

0.0

-1.5

-17.6

4.6

-7.4

4.8

10-year Treasury Note (Yield Only)

1.7

N/A

3.0

3.7

5.1

4.8

Gold (per ounce)

-3.8

-0.6

0.8

19.4

19.1

17.0

DJ-UBS Commodity Index

-0.4

-8.8

-19.6

2.0

-5.6

2.6

DJ Equity All REIT TR Index

-0.5

10.3

8.7

32.9

1.6

10.0

Notes: S&P 500, DJ Global ex US, 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.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly.  N/A means not applicable.

 

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 tofinancially 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.

 

 

Best regards,

 

John Raudat

Canoga Wealth Management, LLC

 

 

 

Securities offered through  LPL Financial, Member FINRA/SIPC.

 

* 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 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.

 

Sources:

http://blogs.telegraph.co.uk/news/peteroborne/100064330/margaret-thatcher-knew-the-single-currency-would-devastate-europe/

http://www.schwab.com/public/schwab/resource_center/expert_insight/todays_market/sonders/sonders_081211.html

http://www.sleepfoundation.org/article/press-release/americans-bedrooms-are-key-better-sleep-according-new-national-sleep-foundatio

 

1-078765

 

 

John Raudat is a Registered Representative with, and securities offered through, LPL Financial. Member FINRA/SIPC.

Please remember to contact Private Advisor Group, LLC, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you want to impose, add, to modify any reasonable restrictions to our investment advisory services, or if you wish to direct that Private Advisor Group, LLC effect any specific transactions for your account. Please be advised that there can be no assurance that any email request will be reviewed and/or acted upon on the day it is received-please be guided accordingly. A copy of our current written Disclosure statement discussing our advisory services and fees continues to remain available for your review upon request. Copyright 2011 – LPL Financial. All Rights Reserved. 

Advertisements

Leave a comment

Filed under Uncategorized

Weekly Commentary, June 19th

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. 

 

Data as of 6/15/12

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

1.3%

6.8%

5.6%

13.3%

-2.6%

2.6%

DJ Global ex US (Foreign Stocks)

2.0

-1.5

-17.4

3.5

-7.4

4.5

10-year Treasury Note (Yield Only)

1.6

N/A

3.0

3.7

5.2

4.9

Gold (per ounce)

3.2

3.4

6.4

20.4

20.0

17.7

DJ-UBS Commodity Index

0.0

-8.5

-20.2

0.7

-6.1

2.8

DJ Equity All REIT TR Index

0.4

10.9

13.1

30.1

0.9

10.1

Notes: S&P 500, DJ Global ex US, 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.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly.  N/A means not applicable.

 

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

 

Best regards,

 

John Raudat

Canoga Wealth Management, LLC

 

 

Securities offered through LPL Financial, Member FINRA/SIPC.

 

* 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 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.

 

 

http://www.reuters.com/article/2012/06/14/us-markets-stocks-idUSBRE84S0BG20120614

http://www.reuters.com/article/2012/06/15/us-markets-stocks-idUSBRE84S0BG20120615

http://articles.marketwatch.com/2012-06-13/commentary/32196927_1_stock-market-debt-crisis-crises

http://www.cnbc.com/id/47792734/

http://www.hussmanfunds.com/wmc/wmc120618.htm

http://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/TextView.aspx?data=yieldYear&year=2007

http://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/TextView.aspx?data=yieldYear&year=2012

http://www.bloomberg.com/news/2012-06-11/bond-bubble-dismissed-as-low-yields-echo-pimco-s-new-normal-1-.html

https://guidance.fidelity.com/viewpoints-workplace/dont-let-fear-2

 

1-076936

 

John Raudat is a Registered Representative with, and securities offered through, LPL Financial. Member FINRA/SIPC.
 

Please remember to contact Private Advisor Group, LLC, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you want to impose, add, to modify any reasonable restrictions to our investment advisory services, or if you wish to direct that Private Advisor Group, LLC effect any specific transactions for your account. Please be advised that there can be no assurance that any email request will be reviewed and/or acted upon on the day it is received-please be guided accordingly. A copy of our current written Disclosure statement discussing our advisory services and fees continues to remain available for your review upon request. Copyright 2011 – LPL Financial. All Rights Reserved. 

Leave a comment

Filed under Uncategorized

Changes in 401(k) Plans

For years, employer-sponsored 401(k) plan participants have received statements that include account balances and changes in values since the prior period. In most cases, fees paid from their account were not mentioned.

Plan sponsors, service providers, and participants face big changes in 2012, starting July 1. That’s when the Labor Department will require mutual funds and plan administrators to disclose details about the fees they are charging employees with 401(k) plans. The long-awaited disclosures cover both direct and indirect compensation that administrators receive – the latter of which often slides under the radar.

A second change involves plan participants directly. Plans must furnish their first set of fee disclosures to participants by August 30, 2012 – 60 days after the July 1st effective date. In addition, fees and expenses paid by participants must appear on the quarterly statement (for fees incurred in July through September) to be furnished no later than November 14, 2012.

A recent AARP survey found that 71 percent of 401(k) participants think they don’t pay any 401(k) fees at all. Seeing these fees for the first time might come as a big surprise to those who had no idea how much they’ve been paying over the years.

Employers need to plan and think about how employees will react to these changes, and how to inform them responsibly to minimize the surprise. Plan sponsors have a duty to evaluate the fees to determine whether they are reasonable and in the best interest of the employees. If uncertain whether the fees are reasonable, your organization might need to benchmark them against what other providers charge.

“In the 401(k) world, benchmarking measures a plan against other plans with the same characteristics in terms of assets, cash flow, number of participants, number of non-participants, average account balance, fees (both stated and unstated), and much more,” says Steven E. Parmelee, President of Westport Benefits Group.

By 1990, 401(k) plans held about $900 billion in assets; by 2011, the figure had swelled to $4.3 trillion.

“The Department of Labor believes that fee disclosure will help reduce the costs of running a retirement plan in the long run,” says Jeff Zobell, Vice President of Alliance Benefit Group – Rocky Mountain. “Not only are the fee disclosure regulations requiring more active oversight by both participants and plan sponsors, they are changing the focus of the conversation to that of retirement preparedness. Participants and plan sponsors will have access to better programs and products because of these lower costs, and a higher account balance at retirement,” he adds.

Transparency is good for employers, participants, and the 401(k) industry.

* Securities offered through LPL Financial, Member FINRA/SIPC.

* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.

* 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.

LPL 1-055224

John Raudat is a Registered Representative with, and securities offered through, LPL Financial. Member FINRA/SIPC.

Please remember to contact Private Advisor Group, LLC, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you want to impose, add, to modify any reasonable restrictions to our investment advisory services, or if you wish to direct that Private Advisor Group, LLC effect any specific transactions for your account. Please be advised that there can be no assurance that any email request will be reviewed and/or acted upon on the day it is received-please be guided accordingly. A copy of our current written Disclosure statement discussing our advisory services and fees continues to remain available for your review upon request. Copyright 2011 – LPL Financial. All Rights Reserved.

Leave a comment

Filed under Uncategorized

Weekly Commentary, June 11th

The Markets

Add another country to the European bailout list.

Over the weekend, Spain requested up to $125 billion in bailout money to shore up its ailing banks, according to Bloomberg. Spain’s banks and the country’s economy are reeling from the bursting of a massive property bubble. Things are so bad in Spain that the country is back in recession and nearly 25 percent of the country’s workers are unemployed, according to The Wall Street Journal.

Spain matters because it’s the fourth largest economy in the euro zone and if it goes bust, it may create chaos in euro land.

Fortunately, if all goes according to plan, the new bailout money may be enough to reassure investors that Spain won’t go the way of Greece. Speaking of Greece, the next big event in the ongoing euro zone debt crisis takes place this coming Sunday when Greece holds a new election. Depending on who wins, it could lead to “Grexit”—which means Greece leaving the euro. There is no precedent for a country leaving the euro so if it happens with Greece, we’re in unchartered territory.

Back in the states, Fed Chairman Ben Bernanke spoke last week and said, “The situation in Europe poses significant risks to the U.S. financial system and economy and must be monitored closely.” He went on to say, “The Federal Reserve remains prepared to take action as needed to protect the U.S. financial system and economy in the event that financial stresses escalate.” While he didn’t announce another round of quantitative easing, the markets were somewhat reassured that he might pull the trigger if the economy gets much worse.

And let’s not forget China. They just announced a surprise interest rate cut which “raised concerns over the state of the economy,” according to MarketWatch.

So here we are again, monitoring the situation in Europe, worrying about a hard landing in China, and analyzing whether the Federal Reserve will ride to the rescue and print more dollars. It keeps our job very interesting!

Data as of 6/8/12

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

3.7%

5.4%

4.3%

12.2%

-2.5%

2.6%

DJ Global ex US (Foreign Stocks)

2.0

-3.4

-20.2

2.9

-7.3

4.0

10-year Treasury Note (Yield Only)

1.6

N/A

3.0

3.9

5.1

5.0

Gold (per ounce)

-1.8

0.1

2.5

18.7

19.2

17.2

DJ-UBS Commodity Index

1.6

-8.5

-22.5

0.8

-5.4

3.0

DJ Equity All REIT TR Index

4.5

10.4

8.9

26.9

0.6

10.2

Notes: S&P 500, DJ Global ex US, 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.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly.  N/A means not applicable.

 

SOMETHING HAPPENED ON NOVEMBER 18, 2008 THAT HADN’T HAPPENED IN 50 YEARS—what was it and what are the implications for your portfolio?

Before we get to the answer, we need a brief review of history. Up until 1958, the dividend yield on common stocks was higher than the yield on bonds. This seemed to make sense because stocks were generally riskier than bonds and in order to entice investors to buy stocks, they had to be incented with a higher yield. But in 1958, that flipped. Stock prices rose, the dividend yield fell and the yield on bonds became higher than stocks. For the next 50 years, this relationship remained as bonds continued to out-yield stocks.

Then, on November 18, 2008, the relationship reversed as stocks delivered a higher dividend yield than bonds. This was just a brief flirtation and the relationship flipped again shortly thereafter and bonds resumed their usual higher-yielding status.

Now, with the dramatic decline in bond yields, stocks are doing that rare thing and delivering a higher yield than bonds, according to the Financial Times.

Here are several thoughts on the implications of stocks yielding more than bonds.

(1)   Investors are more risk averse. With bond yields extremely low, this suggests investors are more concerned about safety than double-digit returns.

(2)   Bond prices are at an extreme level. With 10-year Treasury yields having recently touched an all-time record low, there may not be much room for them to go lower—since 0 percent is the floor.

(3)   Government intervention may be distorting the normal relationship between bonds and stocks. Heavy bond buying by the Federal Reserve could be artificially depressing bond yields and rendering some of the traditional market relationships moot.

(4)   Investor psychology may change over time. Prior to 1958, investors wanted a higher yield from stocks because stocks were riskier. Then, over the next 50 years, bonds had a higher yield as investors became comfortable with the idea that stocks offered a yield plus a chance for capital appreciation—even with more volatility. And now, we’re back to risk averse investors seeking higher yields from stocks.

Sources: Financial Times, BusinessWeek

From an investment standpoint, seeing a major change in a long-term trend like the yield relationship between bonds and stocks suggests we may be at an extreme level in bonds and stocks. And while nobody knows how long it may take for this relationship to return to a more traditional level, we’ll try to find ways to profit from it on your behalf.

Weekly Focus – Think About It…

“And so with the sunshine and the great bursts of leaves growing on the trees, just as things grow in fast movies, I had that familiar conviction that life was beginning over again with the summer.”

–F. Scott Fitzgerald, author

Best regards,

John Raudat

Canoga Wealth Management, LLC

P.S.  Please feel free to forward this commentary to family, friends, or colleagues.

* Securities offered through LPL Financial, Member FINRA/SIPC.

* 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 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.

Sources:

http://www.bloomberg.com/news/2012-06-10/spain-s-bailout-gives-rajoy-best-chance-to-fix-banks.html

http://online.wsj.com/article/SB10001424052702303768104577458562351966868.html?mod=WSJ_hps_LEFTTopStories

http://www.economist.com/node/21556583

http://federalreserve.gov/newsevents/testimony/bernanke20120607a.htm

http://www.marketwatch.com/story/chinas-economy-continues-to-cool-off-2012-06-09

http://www.businessweek.com/investor/content/aug2010/pi20100831_284999.htm

http://www.ft.com/intl/cms/s/0/d754f94c-a4ba-11e1-9908-00144feabdc0.html#axzz1wIWcUlBO

http://www.goodreads.com/quotes/tag/summer

1-075214

John Raudat is a Registered Representative with, and securities offered through, LPL Financial. Member FINRA/SIPC.

Please remember to contact Private Advisor Group, LLC, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you want to impose, add, to modify any reasonable restrictions to our investment advisory services, or if you wish to direct that Private Advisor Group, LLC effect any specific transactions for your account. Please be advised that there can be no assurance that any email request will be reviewed and/or acted upon on the day it is received-please be guided accordingly. A copy of our current written Disclosure statement discussing our advisory services and fees continues to remain available for your review upon request. Copyright 2011 – LPL Financial. All Rights Reserved.

Leave a comment

Filed under Uncategorized

Weekly Commentary, June 4th

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.

Data as of 6/1/12

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

-3.0%

1.6%

-1.7%

10.7%

-3.6%

2.1%

DJ Global ex US (Foreign Stocks)

-2.3

-5.3

-23.5

1.1

-8.2

3.5

10-year Treasury Note (Yield Only)

1.5

N/A

3.0

3.7

5.0

5.0

Gold (per ounce)

2.3

2.0

4.7

17.8

19.2

17.4

DJ-UBS Commodity Index

-4.4

-9.9

-23.1

-0.6

-6.1

2.7

DJ Equity All REIT TR Index

-2.8

5.7

3.3

25.1

-1.0

9.7

Notes: S&P 500, DJ Global ex US, 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.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly.  N/A means not applicable.

 

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

Best regards,

John Raudat

Canoga Wealth Management LLC

P.S.  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.

Securities offered through LPL Financial, Member FINRA/SIPC.

* 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 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.

Sources:

http://online.wsj.com/documents/print/WSJ_-A001-20120602.pdf?mg=com-wsj

http://online.wsj.com/documents/print/WSJ_-B001-20120602.pdf

http://online.wsj.com/article/SB10001424052702303640104577439701649201524.html?KEYWORDS=eruo-zone+reports+deepen+gloom

http://online.wsj.com/article/SB10001424052702303640104577439103464926734.html?KEYWORDS=asia+weekness+heightens+fear+of+contagion

http://online.wsj.com/article/SB10001424052702304821304577440653246663584.html?KEYWORDS=Brazil+Loses+Steam+As+World+Slows

http://online.wsj.com/article/SB10001424052702303552104577440672679616412.html?KEYWORDS=Raw+Materials+in+a+Free+Fall

http://online.wsj.com/article/SB10001424052702303640104577439661791581418.html?KEYWORDS=Government-Bond+Yields+Sink+to+Record+Lows

http://www.bbc.co.uk/news/world-europe-18016872

http://www.businessweek.com/articles/2012-05-30/alexis-tsiprass-conquest-of-greece

http://greatergood.berkeley.edu/article/item/generation_wii…or_generation_we

1-073330

John Raudat is a Registered Representative with, and securities offered through, LPL Financial. Member FINRA/SIPC.

Please remember to contact Private Advisor Group, LLC, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you want to impose, add, to modify any reasonable restrictions to our investment advisory services, or if you wish to direct that Private Advisor Group, LLC effect any specific transactions for your account. Please be advised that there can be no assurance that any email request will be reviewed and/or acted upon on the day it is received-please be guided accordingly. A copy of our current written Disclosure statement discussing our advisory services and fees continues to remain available for your review upon request. Copyright 2011 – LPL Financial. All Rights Reserved.

Leave a comment

Filed under Uncategorized