Weekly Market Commentary

The Markets

After last week’s rally, the U.S. stock market is now higher than it was before the triple tragedy in Japan, according to Bloomberg.

It’s really quite remarkable how quickly the stock market shrugged off the problems in Japan, the unrest in the Middle East and North Africa, the rising price of oil and other commodities, and the continuing sovereign debt problems in Europe. What’s helping the market stay firm? Once again, it looks like strength in corporate earnings.

Bloomberg noted that higher-than-estimated profit forecasts helped drive stock prices higher last week. Sean Kraus, the chief investment officer at Citizens Business Bank in Pasadena, California was quoted in Bloomberg as saying this (last) week’s earnings reports were “very, very positive, and a lot of the commentary coming out of the companies was also positive.”  

In addition to the positive earnings, some of the fear in the market is going away. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 18 last week, according to CNBC. That’s a decline of 39.1% in just the past seven days.

So, there are a number of positives supporting the market right now. Will things turn soft once the Federal Reserve starts pulling the plug on its support programs like QE2? Possibly, but either way, we’ll do our best to help you profit.

Data as of 3/25/11	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor's 500 (Domestic Stocks)	2.7%	4.5%	12.6%	-1.0%	0.2%	1.3%
DJ Global ex US (Foreign Stocks)	3.5	1.6	12.1	-3.0	1.3	5.2
10-year Treasury Note (Yield Only)	3.4	N/A	3.9	3.5	4.7	4.9
Gold (per ounce)	1.1	1.8	31.4	15.7	17.0	18.5
DJ-UBS Commodity Index	2.4	3.9	30.0	-6.0	0.7	4.5
DJ Equity All REIT TR Index	0.6	4.1	19.1	0.4	1.6	11.3

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 or not available.

WHAT ARE THE SECRET FEARS OF THE SUPER RICH? Since 1970, Boston College’s Center on Wealth and Philanthropy has been publishing various studies of the wealthy. The Center’s recent study titled, “The Joys and Dilemmas of Wealth,” asked the super rich to “write freely about how prosperity has shaped their lives and those of their children.” The average net worth of the roughly 165 households who responded to the survey was $78 million. Here are some highlights of the survey as published in an article by Graeme Wood in the April 2011 issue of The Atlantic.

·         “The survey responses make a compelling case that being fantastically wealthy -- especially when the wealth is inherited rather than earned -- is not a great deal more fulfilling than being merely prosperous. Among other woes, the survey respondents report feeling that they have lost the right to complain about anything, for fear of sounding -- or being -- ungrateful. Those with children worry that their children will become trust-fund brats if their inheritances are too large -- or will be forever resentful if those inheritances (or parts of them) are instead bequeathed to charity. The respondents also confide that they feel their outside relationships have been altered by, and have in some cases become contingent on, their wealth.”

·         According to Robert A. Kenny, one of the survey’s architects, “Sometimes I think that the only people in this country who worry more about money than the poor are the very wealthy. They worry about losing it, they worry about how it’s invested, they worry about the effect it’s going to have. And, as the zeroes increase, the dilemmas get bigger.”

·         “But the overwhelming concern of the super-rich -- mentioned by nearly every parent who participated in the survey -- is their children. Many express relief that their kids’ education was assured, but are concerned that money might rob them of ambition.”

·         The survey’s authors said that, “Eventually most wealthy people discover the satisfactions of philanthropy.”

·         “If anything, the rich stare into the abyss a bit more starkly than the rest of us. We can always indulge in the thought that a little more money would make our lives happier -- and in many cases it’s true. But the truly wealthy know that appetites for material indulgence are rarely sated. No yacht is so super, nor any wine so expensive, that it can soothe the soul or guarantee one’s children won’t grow up to be creeps.”

The survey results support the idea that money (at least extreme money) can’t buy happiness. Apparently, while extreme wealth can solve some problems that many other people struggle with (like paying the bills), it trades them for a new set of problems that the less well off don’t have to worry about.

Weekly Focus – Think About It

“Having only riches enough to be able to gratify reasonable desires, and yet make their gratifications always a novelty and a pleasure, the family occupied that just mean in life which is so rarely attained, and still more rarely enjoyed without discontent.”

--The Gilded Age, Mark Twain and Charles Dudley Warner

Best regards,

Jeff Sorensen

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 Triad Advisors, Member FINRA/SIPC.

* This newsletter was prepared by Peak Advisor Alliance.

* 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.

Weekly Market Commentary

Update on World Events

The enormity of the unfolding tragedy in Japan has saddened the world. We have never seen a triple tragedy like this with an earthquake, a tsunami, and a nuclear disaster all hitting one country at the same time. Like many others, we are hoping and praying for the Japanese people that their situation will improve soon.

As your advisor, we wanted to share with you a few thoughts about the current state of the world and how recent events in Japan, Libya, and elsewhere are affecting our thinking.

It seems like our world has been hit with an unusually large number of “black swan” events over the past few years. Black swan events are negative events that were once thought to be highly improbable, but actually turn out to happen every few years.

Here’s a list of events in just the past 15 years that might qualify as “black swans:”

• The late 1990s internet bubble and resulting crash
• The 2001 terrorist attacks
• The early 2000s real estate bubble and resulting crash
• The 2004 Indian Ocean earthquake and resulting tsunami that killed over 200,000 people
• The 2007-2009 Great Recession, subprime crisis, and related economic problems
• The ongoing rebellion in the Middle East and North Africa
• The ongoing triple tragedy in Japan

With today’s interconnected world and global communication system, we see these events unfold in near real-time and that amplifies their effect on our psyche. As a result, we have a tendency to think “this is the big one” that will takeout the world economy. However, unless the world is coming to an end -- which we don’t think is happening -- then the latest situation in Japan, which is very tragic on a human level, will probably not cause a worldwide recession.

Whenever these black swan events occur, it’s important to remember that while we can’t predict when they will occur or what the event will be, we do know that they will happen and we try to plan for that in how we manage your account.

It’s interesting to note that when you get to the core of what “the market” is, it’s an assemblage of people. When disasters happen, such as in Japan, Haiti, Indonesia, or the terrorist attacks, “the market” tends to react almost in sympathy with the external tragedy. Over time, as the external tragedy heals, “the market” tends to heal as well. This symmetry adds an almost human element to what many consider to be a cold and calculating “market.”

Today, we have our hands full with the evolving situations in Japan, Libya, and the Middle East. On top of that, we still have the simmering sovereign debt issues in Europe and the economic malaise in the U.S. The uncertainty and the day-to-day developments surrounding these situations are affecting the markets and causing volatility to spike.

Over time, though, as these situations move from crisis to closure, we expect the world will continue its march toward progress and that the markets will eventually resume their positive momentum. Japan’s own history of recovering from World War II gives us an example of their resilience. For example, The Wall Street Journal stated that, “…from 1950 to 1960, in the heyday of the “economic miracle” that followed World War II, Japanese stocks returned an annual average of 27% after inflation.” We’re not predicting that type of return over the next 10 years; rather, it just shows that Japan has bounced back from severe devastation in the past.

As humans, we are keenly aware of the pain and suffering that these tragic world events inflict upon our collective community. As advisors, we try to ensure that this pain and suffering doesn’t spill over to your portfolio.

Data as of 3/18/11	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor's 500 (Domestic Stocks)	-1.9%	1.7%	10.3%	-1.3%	-0.4%	0.9%
DJ Global ex US (Foreign Stocks)	-2.1	-1.8	7.5	-3.4	0.5	5.1
10-year Treasury Note (Yield Only)	3.3	N/A	3.7	3.5	4.7	4.8
Gold (per ounce)	0.6	0.7	26.5	12.1	20.6	18.5
DJ-UBS Commodity Index	0.9	1.5	23.4	-7.8	0.6	4.5
DJ Equity All REIT TR Index	-1.3	3.5	19.3	1.9	1.1	11.2

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 or not available.

Weekly Focus – Think About It

“Perhaps they are not stars, but rather openings in heaven where the love of our lost ones pours through and shines down upon us to let us know they are happy.” --Eskimo Proverb

Best regards,

Jeff Sorensen

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 Triad Advisors, Member FINRA/SIPC.

* This newsletter was prepared by Peak Advisor Alliance.

* 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.

What do you know about St. Patrick?

The rich Irish tradition of storytelling has left us with a wealth of mythology about the patron saint of Ireland and his many accomplishments. We’ve heard that he drove the snakes out of Ireland, and used a shamrock to explain the Holy Trinity. See what you know about St. Patrick’s life by taking this brief quiz.

1. At age 16, St. Patrick was captured by raiders who attacked his parents’ estate. He was taken from Britain to Ireland. How many years did he spend in captivity?

1. Four
2. Fifteen
3. Six
4. Ten

2. What did Patrick do while he was imprisoned?

1. He was a houseboy
2. He was a shepherd
3. He was a shipbuilder
4. He was a musician

3. What do historians believe the circle that St. Patrick reportedly superimposed on the Christian cross (to create the Celtic cross) represented?

1. Eternity
2. The sun
3. The moon
4. Any of the above

4. St. Patrick’s lore says that he drove all of the snakes out of Ireland. Some believe there is a different explanation for the lack of snakes in Ireland. What is it?

1. The acidity of Irish soil
2. The last ice age
3. Grasses that secrete an oil snakes dislike
4. Very aggressive birds

If you need help with the answers – or would like to discuss the stories you’re hearing about the economy – please give us a call.

Answers:

1. C.  Six years
2. B.  He was a shepherd and spent most of his time alone in the wild.
3. D.  Any of the above. No one is sure why the circle was put there, although many believe it represented a powerful pagan symbol which might have been either the moon or the sun.
4. B.  Scientists believe that the most recent ice age and the lack of a land bridge to Ireland, once the land had thawed, explain the lack of snakes in Ireland.

Sources:

www.history.com/topics/who-was-saint-patrick

www.news.nationalgeographic.com/news/2008/03/080313-snakes-ireland.html

www.celtarts.com/celtic.htm

The above material was prepared by Peak Advisor Alliance.

Securities offered through Triad Advisors, member FINRA/SIPC.