Monthly Archives: September 2013

Quantitative Easing

Weekly Market Commentary

September 16, 2013

The Markets

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

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

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

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

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

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

Data as of 9/13/13

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

2.0%

18.4%

15.6%

14.6%

7.2%

5.2%

10-year Treasury Note (Yield Only)

2.9

NA

1.8

2.7

3.5

4.2

Gold (per ounce)

-5.0

-22.2

-23.9

2.0

11.2

13.4

DJ-UBS Commodity Index

-1.1

-7.0

-14.1

-1.9

-5.6

0.8

DJ Equity All REIT TR Index

2.3

2.3

1.3

11.8

7.1

9.8

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.

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

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

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

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

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

 

Weekly Focus – Think About It

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

John Steinbeck, American writer

 

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.brainyquote.com/quotes/authors/y/yogi_berra.html

http://www.nytimes.com/reuters/2013/09/10/business/10reuters-usa-fed-preview.html?ref=quantitativeeasing&_r=0

http://www.reuters.com/article/2013/09/13/us-usa-stocks-weekahead-idUSBRE98C0ZC20130913

http://www.ft.com/cms/s/0/ec1b9358-1003-11e3-99e0-00144feabdc0.html#axzz2eySf2Jdt (Go to this link if you are not able to read the Financial Times article: http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/09-16-13_FT_Source_4-Pivotal_Period_Looms_After_Summer_of_QE_Tension.pdf)

http://www.ft.com/cms/s/0/20802e26-1e12-11e3-a40b-00144feab7de.html#axzz2eyyRRTUo

(Go to this link if you are not able to read the Financial Times article: http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/09-16-13_FT_Source_5-Bank_Lending_to_Emerging_Markets_Soars_to_Record.pdf)

http://www.investopedia.com/terms/c/currentaccountdeficit.asp

http://news.nationalgeographic.com/news/2013/08/130830-internet-of-things-technology-rfid-chips-smart/

http://www.digitaltrends.com/social-media/the-man-with-the-gif-in-his-hand/

http://venturebeat.com/2011/06/21/nfc-and-the-internet-of-things/

http://www.psfk.com/2013/09/rfid-subway-card-ring.html

http://www.emvco.com/documents/EMVCo_EMV_Deployment_Stats.pdf

http://www.brainyquote.com/quotes/quotes/j/johnsteinb121626.html

 

 

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10,000…

Weekly Market Commentary

September 9, 2013

The Markets

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

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

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

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

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

We live in interesting times. 

 
Data as of 9/6/13

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

1.4%

16.1%

15.6%

14.9%

5.5%

4.8%

10-year Treasury Note (Yield Only)

2.9

NA

1.7

2.6

3.7

4.4

Gold (per ounce)

-0.6

-18.1

-18.5

3.6

11.4

14.0

DJ-UBS Commodity Index

0.3

-6.0

-10.4

-1.2

-6.1

0.9

DJ Equity All REIT TR Index

0.6

0.0

0.3

11.5

4.4

9.5

Notes: S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

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 1835, in Democracy in America, Alexis de Tocqueville said:

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

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

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

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

 

Weekly Focus – Think About It

“Democracy cannot succeed unless those who express their choice are prepared to choose wisely. The real safeguard of democracy, therefore, is education.

Franklin D. Roosevelt, American President

 

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.

 

 

Sources:

http://www.scialert.net/fulltext/?doi=jas.2012.289.295&org=11

http://test.ourhomeground.com/entries/definition/hole

http://data.bls.gov/timeseries/LNS14000000

http://www.washingtonpost.com/business/economy/economy-added-169k-jobs-in-august-as-the-recovery-grinds-along/2013/09/06/696820dc-16ef-11e3-a2ec-b47e45e6f8ef_story.html

http://www.pbs.org/newshour/businessdesk/2013/08/is-baby-boomer-retirement-behi.html

http://finance.yahoo.com/blogs/the-exchange/ready-washington-quadruple-witching-hour-204821773.html

http://xroads.virginia.edu/~Hyper/DETOC/preface.htm

http://quickfacts.census.gov/qfd/states/35000.html

http://quickfacts.census.gov/qfd/states/06000.html

http://www.economist.com/news/united-states/21584997-some-work-nothing

http://www.brainyquote.com/quotes/keywords/democracy.html

 

 

1-198944

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Data Overload

Weekly Market Commentary

September 3, 2013 

The Markets

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

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

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

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

“Members of the U.S. Federal Reserve open market committee will get their last pieces of information about the labor market before their all-important September meeting, which has been heavily trailed as posing the first real opportunity for the Fed to embark on a taper… The US economy has been recovering at a painfully slow but steady rate for more than two years now and with no sign of any step-up in the pace of improvement, the Fed policy-makers face a finely balanced decision.” 70 percent of New York Stock Exchange stocks closed lower on Friday, and

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

Data as of 8/30/13

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

-1.8%

14.5%

16.7%

15.9%

5.0%

4.8%

10-year Treasury Note (Yield Only)

2.8

NA

1.6

2.6

3.8

4.6

Gold (per ounce)

1.3

-17.7

-16.0

3.9

11.2

14.0

DJ-UBS Commodity Index

0.2

-6.2

-10.1

-0.4

-6.6

0.9

DJ Equity All REIT TR Index

-1.9

-0.6

1.4

13.1

4.9

9.5

Notes: S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

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.

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

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

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

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

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

Weekly Focus – Think About It

“When you are offended at any man’s fault, turn to yourself and study your own failings. Then you will forget your anger.”

Epictetus, Greek Stoic philosopher 

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.

 

*The S&P 500 is an unmanaged inden.  Unmanaged index returns do not reflect fees, expenses, or sales charges.  Index performance is not indicative of the performance of any investment.

 

* Consult your financial professional before making any investment decision.

 

*This newsletter was prepared by Peak Advisor Alliance

 

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

 

* Stock investing involves risk including loss of principal.

 

 

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

 

Sources:

 

[1] http://www.cbssports.com/nfl/eye-on-football/23400230/final-nfl-cuts-teams-trim-rosters-down-to-53-players

[2] http://www.cbssports.com/nfl/writer/pat-kirwan/23434009/five-things-to-know-what-goes-into-finalizing-nfl-rosters-at-53

[3] http://www.nytimes.com/2013/08/31/business/daily-stock-market-activity.html?_r=0

[4] http://www.reuters.com/article/2013/09/02/us-markets-global-idUSBRE96S00E20130902

[5] http://www.ft.com/cms/s/0/f898538c-1166-11e3-a14c-00144feabdc0.html#axzz2dkbb9FMl

[6] http://www.investopedia.com/stock-analysis/053113/investing-global-diabetes-epidemic-mcd-nvo-rvp-wst-bdx-podd-mnkd-dva-lly-sny.aspx

[7] http://www.who.int/healthinfo/global_burden_disease/metrics_daly/en/

[8] http://www.economist.com/blogs/graphicdetail/2013/08/daily-chart-20

[9] http://dash.harvard.edu/handle/1/5345879

[10] http://www.brainyquote.com/quotes/authors/e/epictetus.html#VeJmMsEEgfrbFEyK.99

 

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