Monthly Archives: January 2013

Market Commentary, January 14th

The Markets

Last week investors were turning to stocks. Was it the generally strong performance of stock market indices during 2012 or something else? Theories were abundant. Some speculated that the surge signaled:

  • Renewed confidence in the American economy
  • Relief that capital gains and dividend taxes remained constant for middle income Americans
  • Faith in the ability of the American government to get things done
  • Lack of attractive investment alternatives as the average yield on high-yield bonds fell below 6% for the first time ever

There also was much discussion during the week about the contradictory messages coming from the Federal Reserve. The Evan’s Rule, which was named after the head of the Chicago Federal Reserve Bank, was established late in 2012. It ties interest rate guidance to employment and inflation targets rather than calendar dates; a change many had interpreted to mean that monetary policy would remain accommodative into 2014.

Interest rates are just one tool the Fed has been using to encourage economic growth. It also has been engaging in quantitative easing (QE) which is purchasing Treasuries on the open market to inject capital into the economy and encourage growth. Last week’s Federal Open Market Committee meeting notes indicated there was discussion among Fed members about ending quantitative easing earlier than expected, possibly before 2014.

So, which is it? Will policy remain accommodative or will it start to tighten? We may not know for sure for some time. The good news, according to Barron’s, is that tightening monetary policy would not be all bad news. “The end of quantitative easing would mean that the Fed sees sustainable economic growth in the U.S. – and globally.”

Data as of 1/11/13

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

0.4%

3.2%

13.9%

8.7%

1.0%

4.7%

DJ Global ex US (Foreign Stocks)

1.0

3.0

19.0

4.3

-0.9

10.6

10-year Treasury Note (Yield Only)

1.9

NA

1.9

3.8

3.8

4.1

Gold (per ounce)

0.6

-2.1

1.4

12.9

13.2

16.7

DJ-UBS Commodity Index

0.6

-0.4

-3.2

-0.8

-6.1

2.0

DJ Equity All REIT TR Index

0.7

2.4

20.6

18.7

7.8

12.2

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.

Sage investment advice… Almost two decades ago, the CFA Institute published an article that included a letter from a father who was a financial professional to his daughter. His missive included some timeless and practical advice about investing. Among the thoughts he shared with his daughter were the following principles for investing:

·         A fool and his money are soon parted. Pay close attention to financial matters because investment capital is a perishable commodity when not managed properly. 

·         There is no free lunch. Risk and return are interrelated. Generally, the greater the risk, the greater the potential return and vice versa.

·         Know thyself. Be honest in assessing your risk tolerance because it’s easy to underestimate the stress of a high-risk portfolio when markets move south. 

·         Don’t put all your eggs in one basket. Diversification helps determine potential rates of return and manage exposure to risk. Make sure you have a well-diversified and well-allocated portfolio. 

·         Take the long view. Make a plan and stay with it. Don’t let short-term market fluctuation or media-fueled frenzies cause you to panic. Investment decisions should result from a rational trade-off of risk and return. Unfortunately, those decisions often reflect fear and anxiety about current events.

·         Remember the value of common sense. Investing is not a competitive sport. It should be an effort to achieve a pre-determined financial goal within a specific risk-tolerance framework. No system works all of the time and you should not expect it to.

Sound financial advice may prove particularly important during 2013. During the fourth quarter of 2012, markets were volatile as Congress argued fiscal cliff issues. The solution – The American Taxpayer Relief Act of 2012 – resolved matters related to taxation, but left spending issues to be hammered out in the future. As a result, we may see additional volatility during the first few months of this year. If you begin to experience fear and anxiety when listening to news reports or checking market performance, just review the principles above!

Weekly Focus – Think About It

If you want to be successful, it’s just this simple. Know what you are doing. Love what you are doing. And believe in what you are doing.

–Will Rogers, humorist and social commentator

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.

* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with    “Unsubscribe” in the subject line.

Sources:

http://finance.yahoo.com/news/analysis-big-flows-u-stocks-120819805.html

http://www.reuters.com/article/2013/01/11/us-investing-fundflows-lipper-idUSBRE90A0VP20130111

http://www.washingtonpost.com/business/fiscal-cliff-deal-helps-fuel-biggest-weekly-flow-of-cash-into-stock-mutual-funds-since-2001/2013/01/11/c1c24f3e-5c12-11e2-b8b2-0d18a64c8dfa_story.html

http://www.businessinsider.com/upcoming-federal-reserve-speeches-schedule-2013-1#ixzz2HsZsmVUP

http://www.investopedia.com/terms/a/accomodativemonetarypolicy.asp#ixzz2HseAL1ne

http://online.barrons.com/article/SB50001424052748703792204578219750527526218.html?mod=BOL_twm_col

http://www.cfainstitute.org/about/investor/Documents/managing_your_portfolio.pdf

http://www.brainyquote.com/quotes/quotes/w/willrogers393804.html#lQdmqobl2KE0FLMk.99

1-132415

John Raudat
Canoga Wealth Management LLC
9 North Main Street
P.O. Box 375
Chester, CT  06412
860-526-5000

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

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Market Commentary, January 7th

The Markets

Global markets celebrated the New Year on Wednesday with a rally in appreciation of the U.S. fiscal cliff agreement, now known as The American Taxpayer Relief Act of 2012 (ATRA). Many European, Asian, and American markets closed the day sharply higher. The FTSE 100 was up 2.2 percent, Hong Kong’s Hang Seng was up 2.9 percent, Brazil’s Bovespa was up 2.6 percent, and the Dow Jones Industrials Index was up 2.4 percent for the day.

While markets embraced ATRA with unabashed enthusiasm, pundits were less keen on the new law. They greeted the changes with the excitement – or lack thereof – many readers reserve for books with cliffhanger endings. That’s because ATRA failed to resolve key issues related to the fiscal cliff, including automatic spending cuts and the debt ceiling limit. As a result, Americans can soon expect new additions to the fiscal cliff series. The next, which may be called the Debt Ceiling Debacle, will undoubtedly be accompanied by considerable melodrama and bipartisan bickering.

On Thursday, U.S. stock markets faltered after the minutes of the Federal Reserve Open Market Committee meeting were released. The Fed has promised to continue quantitative easing indefinitely; however, the minutes included considerable discussion about ending the program during 2013. That notion spooked Treasury investors and the yield on 10-year Treasuries rose to 1.9 percent.

On Friday, the unemployment report showed the jobless rate unchanged at 7.8 percent. Stock markets bounced higher as investors appeared to interpret the news as an indication the U.S. economy is not yet strong enough for the Fed to end quantitative easing. However, the news that some at the Fed thought easing should end caused gold to drop to its lowest in two weeks.

For the week, the S&P 500 was up 4.6 percent, the Dow Jones Industrials were up 3.8 percent, and the NASDAQ rose by 4.8 percent.

Data as of 1/4/13

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

4.6%

2.8%

14.8%

9.0%

0.77%

4.9%

DJ Global ex US (Foreign Stocks)

1.9

1.9

17.1

4.6

-1.6

10.4

10-year Treasury Note (Yield Only)

1.9

N/A

2.0

3.8

3.9

4.0

Gold (per ounce)

-0.6

-2.7

2.2

13.7

14.0

16.7

DJ-UBS Commodity Index

-1.0

-1.0

-4.7

-1.1

-6.2

2.0

DJ Equity All REIT TR Index

2.9

1.7

22.7

18.8

7.7

11.7

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, 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.

The Year in Review

2012 was a surprising year. Although many of the most notable events reflected ongoing economic and fiscal issues – including crises in the European Union, slowing growth in China, growing debt in the United States, government intervention in Brazil, and worries about fiscal cliff – investors remained optimistic and many global stock markets delivered rather attractive performance for the year. Here are a few of the headline events which caught our attention during 2012:

  • China became an economic power, officially

All debate about when China’s economic importance would rival that of the United States was put to rest when The Economist added a section devoted entirely to China. The last time the publication introduced a new country was 1942. It was devoted to The United States. 

  • It’s all relative: the U.S. and global recovery

China’s growing importance did not diminish the role of the United States. U.S. economic growth may have been modest during 2012, but it was positively robust relative to that of other developed nations. In fact, the U.S. was called the sole bright spot in global economic recovery.

  • Greece? Really?

Greece’s ATHEX composite index was the top-performing stock market in Europe during 2012. Despite five years of recession and record unemployment, it closed about 33 percent higher at year’s end, beating Germany’s DAX. The ATHEX remained significantly below its previous highs.

  • “For Euro Crisis Relief Bang Head Here”

Bloomberg BusinessWeek’s tongue-in-cheek headline reflected ongoing frustration with events in Europe. While Europe faces complicated issues that are likely to take time to resolve, there are reasons for optimism including the region’s pursuit of a banking union.

  • The Supreme Court did what?

Offering headlines that rivaled the memorable ‘Dewey Beats Truman,’ both CNN and Fox News misreported the Supreme Court’s ruling on the Affordable Care Act. The Act remains controversial.

  • Like a phoenix, Bank of America rose from the ashes

After delivering the worst performance in the Dow Jones Industrial Average during 2011, Bank of America became the best performer for 2012. One of the biggest beneficiaries was Warren Buffet who stepped in when no one else would. He invested $5 billion in preferred shares and received 700 million in warrants.

  • Not ready for prime time: NFL replacement officials

Early in the season, pundits tried to identify the biggest blunders made by the NFL’s temporary referees each week. It wasn’t easy. From cheap shots to reviews for teams that had no time outs to the infamous simultaneous catch call, the temporary refs made fans appreciate the real thing.

  • Australian police said Apple Maps can kill you

Apple maps were called a lot of things during 2012, but accurate was not one of them. San Francisco had a French Quarter, Stratford-on-Avon disappeared, and the town of Mildura moved to the middle of Australia’s Murray Sunset National Park. Since the park has no water supply, Australian police issued a warning.

Weekly Focus – Think About It

Don’t tell people how to do things, tell them what to do and let them surprise you with their results.

–George S. Patton, U.S. Army general

Happy New Year!

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.

* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with  “Unsubscribe” in the subject line.

Sources:

http://money.cnn.com/data/world_markets/asia/

http://finance.yahoo.com/news/hey-market-chill-feds-not-182352319.html

http://blogs.barrons.com/incomeinvesting/2013/01/03/treasury-yields-spike-as-fed-divided-on-bond-purchases/?mod=BOLBlog

http://www.cnbc.com/id/100354384?__source=yahoo|instory|&par=yahoo

http://news.yahoo.com/gold-slips-1-pct-fed-minutes-firm-dollar-064603521–sector.html

http://finance.yahoo.com/news/fed-minutes-short-circuit-wall-004318573.html

http://www.economist.com/node/21543537

http://www.economist.com/news/finance-and-economics/21568742-long-road-recovery

http://www.brookings.edu/research/opinions/2012/10/07-global-recovery-prasad

http://money.cnn.com/2012/12/31/investing/stocks-greece/

http://coverjunkie.tumblr.com/post/23674487481/bloomberg-businessweek-us-wooha-best-cover-of

http://www.economist.com/blogs/schumpeter/2012/12/europes-banking-union

http://www.washingtonpost.com/blogs/the-fix/post/networks-jump-the-gun-mistakenly-report-that-supreme-court-struck-down-mandate/2012/06/28/gJQAmsa98V_blog.html

http://www.efinancialnews.com/story/2013-01-02/time-for-bofa-to-bid-buffet-adieu?mod=promos

http://www.businessinsider.com/worst-nfl-replacement-ref-calls-2012-9?op=1#ixzz2H88t1FtY

http://www.sfgate.com/travel/article/THE-2012-GEO-QUIZ-Trivia-from-all-4-corners-of-4138422.php

http://news.yahoo.com/apple-ios-maps-app-bad-kill-australian-police-141041414.html

http://www.brainyquote.com/quotes/keywords/surprise.html#h6FdTdjcWd1qztRV.99

1-130254

John Raudat

Canoga Wealth Management LLC

9 North Main Street

P.O. Box 375

Chester, CT  06412

860-526-5000

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

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Market Commentary, December 31st

The Markets

“This too shall pass.”

–Ancient proverb

Like getting emotionally involved with your favorite sports team, it’s easy to get caught up in the drama surrounding the fiscal cliff. Combining politics, money, power, gamesmanship, and national impact makes for a compelling story line. But you know what? “This too shall pass.”

As Reuters reported, “One way or another, Washington will come to an agreement to offset some effects of the cliff. The result will not be entirely satisfying, but it will be enough to satisfy investors.”  Unfortunately, we have to go through a totally avoidable wailing and gnashing of teeth before we get the Democrats and Republicans to do what ordinary Americans do when faced with opposing issues—compromise.

Up until last week, the stock market seemed undeterred by the circus in Washington. However, as it became clear that a deal would come down to the wire, investors got nervous and stocks experienced five days of declining prices.

Unfortunately, this partisan bickering could create an unintended consequence.

Back in 2011, wrangling over the debt ceiling triggered the first-ever U.S. credit downgrade. Even though the debt ceiling was raised and the U.S. did not default, credit ratings agency Standard & Poor’s nonetheless lowered the U.S. credit rating stating, “the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges.” If the continued discord in Washington leads to another downgrade, it would not be good for the financial markets, according to Jonathan Golub, chief U.S. equity strategist at UBS Equity Research.

Outside of the fiscal cliff, one thing we know for sure will pass this week is the end of one year and the beginning of a new one. And to that we say…may the New Year bring you health, happiness, and family closeness.

Data as of 12/28/12

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

-1.9%

11.5%

12.2%

7.5%

-1.1%

4.8%

DJ Global ex US (Foreign Stocks)

0.3

13.6

15.3

1.6

-5.3

7.6

10-year Treasury Note (Yield Only)

1.7

N/A

1.9

3.8

4.1

3.8

Gold (per ounce)

0.4

5.3

5.5

14.4

14.7

16.9

DJ-UBS Commodity Index

-0.1

-1.1

-1.1

-0.2

-5.5

2.3

DJ Equity All REIT TR Index

-0.7

18.2

18.8

16.3

5.6

11.7

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, 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.

NORTH DAKOTA IS A SHINING EXAMPLE of why things are not always what they seem.

Back in 2009, PIMCO coined the term, “New Normal” to reflect their view that the U.S. had entered a multi-year period of balance sheet de-levering and restructuring that would stunt economic growth and keep stock market returns low. So far, they’re half right. Economic growth has been moderate as predicted but the stock market has performed well since the beginning of 2009 as it bounced off the bear market lows.

Implicit in PIMCO’s view is the idea that economic growth comes from three factors.

1)      Growth in the workforce (demographics is key)

2)      Growth in productivity (helped by improvements in technology)

3)      Growth in physical capital (e.g., plant, equipment, machinery)

Source: University of Colorado

Here’s where it gets tricky—trying to predict changes in those three variables is not easy. 

For example, let’s turn the clock back to July 1, 2011. On that day, if we asked you to guess which state would have the highest percentage growth in population over the next 12 months, what would you have answered? Would North Dakota have come to mind? Probably not, yet, the Census Bureau recently reported The Peace Garden State topped the list in the past year.

This achievement is even more remarkable considering North Dakota was only the 37th fastest grower between 2000 and 2010. In other words, it essentially came out of nowhere to become a fast grower all thanks to new technology which enabled the rapid development of an oil- and gas-rich shale formation.

Today, fiscal cliff issues, massive deficits, unsustainable government spending, Eurozone problems, and the Middle East powder keg are just a few of the many reasons to be negative on the markets and the economy. Yet, we need to remember North Dakota.

Nobody knows where the next “North Dakota” will come from, but it will likely come. So, while things may be tense in the markets and the economy, chances are our American ingenuity will rise to the occasion and eventually restore us to a position of economic strength.

As that unfolds in 2013 and beyond, we’ll keep doing what we do which is manage your investments according to your goals and doing our best to achieve solid risk-adjusted returns.

Weekly Focus – Think About It…

“Year’s end is neither an end nor a beginning but a going on, with all the wisdom that experience can instill in us. Cheers to a new year and another chance for us to get it right.”

— Oprah Winfrey, talk show host, media mogul.

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.

* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject line.

Sources:

1)      http://www.reuters.com/article/2012/12/28/us-usa-fiscal-marketjitters-idUSBRE8BR0J120121228

2)      http://www.reuters.com/article/2012/12/28/us-markets-global-idUSBRE88901C20121228

3)      http://www.standardandpoors.com/ratings/articles/en/us/?assetID=1245316529563

4)      http://www.pimco.com/EN/Insights/Pages/Restoring-Trust-in-the-New-Normal.aspx

5)      http://www.colorado.edu/economics/courses/econ2020/section14/section14.html

6)      http://www.census.gov/newsroom/releases/archives/population/cb12-250.html

7)      http://www.forbes.com/sites/morganbrennan/2012/12/20/north-dakota-leads-list-of-americas-fastest-growing-states/

8)      http://www.beliefnet.com/Love-Family/Holidays/New-Year/New-Year-Quotes.aspx?p=2

1-1-128750

John Raudat

Canoga Wealth Management LLC

9 North Main Street

P.O. Box 375

Chester, CT  06412

860-526-5000

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

Leave a comment

Filed under Uncategorized