Monthly Archives: June 2013

Reaction to the Fed

Weekly Market Commentary

June 24, 2013 

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.

 

Data as of 6/21/13

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

-2.1%

11.7%

20.1%

12.7%

3.9%

5.0%

10-year Treasury Note (Yield Only)

2.5

N/A

1.6

3.2

4.2

3.4

Gold (per ounce)

-6.9

-23.5

-18.1

1.1

8.0

13.8

DJ-UBS Commodity Index

-2.4

-8.5

-0.4

-0.3

-11.2

0.9

DJ Equity All REIT TR Index

-5.1

1.5

10.0

13.4

6.2

10.8

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.

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.

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

Best regards,

John Raudat

Canoga Wealth Management

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 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://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

 

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Are emerging countries leading the way in renewable energy?

Weekly Market Commentary

June 17, 2013

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.

 

Data as of 6/14/13

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

-1.0%

14.1%

22.4%

14.3%

3.7%

4.9%

10-year Treasury Note (Yield Only)

2.1

N/A

1.6

3.3

4.2

3.2

Gold (per ounce)

0.4

-17.9

-13.8

4.4

9.4

14.5

DJ-UBS Commodity Index

-0.7

-6.3

1.2

0.8

-10.6

1.1

DJ Equity All REIT TR Index

-0.8

7.0

16.1

15.6

5.8

11.0

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.

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.

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

 

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 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://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

 

 

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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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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.

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Weekly Market Commentary – June 10, 2013

 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.

 

Data as of 6/7/13

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

0.8%

15.2%

25.0%

16.1%

3.8%

5.4%

10-year Treasury Note (Yield Only)

2.2

N/A

1.7

3.2

4.0

3.3

Gold (per ounce)

-0.6

-18.2

-12.6

4.5

9.1

14.4

DJ-UBS Commodity Index

0.5

-5.6

1.6

2.4

-9.9

0.9

DJ Equity All REIT TR Index

-0.1

7.9

18.5

19.5

6.6

11.2

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.

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 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

 

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 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://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

 

 

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The Fed will taper….the Fed will not…

Weekly Market Commentary

June 3, 2013

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.

   

Data as of 5/31/13

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

-1.1%

14.3%

24.5%

15.1%

3.3%

5.4%

10-year Treasury Note (Yield Only)

2.2

N/A

1.6

3.3

4.0

3.4

Gold (per ounce)

0.3

-17.7

-10.5

4.3

9.4

14.4

DJ-UBS Commodity Index

-1.0

-6.1

1.8

1.8

-9.5

0.8

DJ Equity All REIT TR Index

-5.2

8.0

19.1

17.7

6.0

11.4

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.

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.

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

 

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 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://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

 

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