Sorensen Wealth Management Blog: November 2011

Monday, November 28, 2011

Weekly Market Commentary

The Markets

“It’s a small world after all.”

Living in an age of jet travel, the internet and mobile communication have its advantages. It makes our world of 7 billion people seem a bit smaller since we’re just one plane ride or “one boot of the computer” away from connecting with anyone in the world.

But, along with the good comes the bad.

Worldwide interconnectedness not only connects us socially, it also connects us economically. What happens in China, for example, doesn’t necessarily stay in China. A collapse of their real estate market or a revolt against the government could have repercussions around the world.

A bit closer to home, the sovereign debt problems in Europe are helping keep a lid on stock prices in the U.S., according to MarketWatch. As the debt problem spreads from the peripheral euro-zone countries to the core in Germany -- which had a failed bond auction last week -- the U.S. is caught in the cross fire.

What’s disappointing about being joined at the hip with Europe is that the U.S. economy is actually performing okay. Consider these positive points:

· Our trade deficit declined for the third month in September, thanks to rising exports.

· Industrial production rose strongly in October.

· Residential building improvements are touching record highs.

· October car sales hit the highest level since February.

· Consumer sentiment in November rose to the highest level since June, according to data from the University of Michigan and Thomson Reuters.

· Personal income in October showed the largest increase since March.

· Black Friday sales rose sharply from a year ago.

Sources: Economist; MarketWatch

Granted, these improvements are coming off a low base and are so fragile that the modest recovery in the U.S. could get derailed if the euro-zone situation continues to deteriorate. Our small world is now focused on Europe and whether it can pull out of its debt debacle. Time to do so is running out for our friends across the pond.

Data as of 11/25/11	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor's 500 (Domestic Stocks)	-4.7%	-7.9%	-2.6%	10.6%	-3.5%	0.0%
DJ Global ex US (Foreign Stocks)	-5.7	-21.2	-17.5	9.7	-5.3	3.8
10-year Treasury Note (Yield Only)	2.0	N/A	2.9	3.1	4.5	5.0
Gold (per ounce)	-1.8	19.7	23.0	27.2	21.5	20.0
DJ-UBS Commodity Index	-2.2	-12.7	-3.2	5.4	-3.8	4.7
DJ Equity All REIT TR Index	-5.7	-4.0	-0.2	23.4	-3.5	9.2

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.

DOES IT MAKE SENSE to invest outside of the United States? The concept of diversification suggests that you own a diverse group of investments that have uncorrelated return characteristics. One of these diverse groups of investments could include non-U.S. stocks. That might make sense because, as the following chart shows, the U.S. stock market captures less than one-third of worldwide stock market value based on market capitalization.

% of World Equity Market Capitalization
Country	5 Years Ago	Mid August 2011	5-Year Change
1. U.S.	36.05%	29.14%	-6.91%
2. China	1.36	7.87	6.52
3. Japan	10.93	7.73	-3.20
4. UK	7.76	6.43	-1.33
5. Hong Kong	2.98	4.88	1.90
6. Canada	3.25	4.20	0.96
7. France	4.95	3.33	-1.62
8. Germany	3.35	2.80	-0.55
9. India	1.43	2.77	1.35
10. Brazil	1.34	2.72	1.37

Source: Bespoke Investment Group, August 22, 2011; New Forces in the World Economy

by Brad Roberts

The above chart shows some interesting trends:

· The U.S. is still, by far, the largest market in the world, but it has declined substantially in the past five years.

China

has catapulted to second place with dramatic growth in the past five years.

Japan

, UK, France, and Germany join the U.S. as developed countries that have lost ground over the past five years.

· Emerging countries such as Hong Kong, India, and Brazil have shown strong relative growth.

· Although not shown on the chart, back in the late 1980s, Japan’s stock market represented 45 percent of world equity market capitalization. Now, it’s less than 8 percent due to a 20-year bear market.

As the world turns from developed countries to emerging ones, we are keeping our eyes open and our pencils sharpened for the investment opportunities that might arise beyond our borders.

Weekly Focus – Think About It

“We live in a wonderful world that is full of beauty, charm and adventure. There is no end to the adventures we can have if only we seek them with our eyes open.”

--Jawaharial Nehru, First prime minister of independent India

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. Advisory services offered through Sorensen Wealth Management (SWM). SWM is a Registered Investment Advisor and is not affiliated with Triad Advisors.

* 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.

Tuesday, November 22, 2011

Grandma's Secret Yam Recipe

This secret yam recipe has been passed on for generations in my family and now I would like to share it with you! If you are like me, yams at Thanksgiving doesn’t sound very good. However, once you try my grandma’s secret yams, you may never go back to the same old boring way that you have prepared them before.

Forget tradition! Surprise your family and start a new one with the secret yam recipe I am going to share with you!

This recipe came over on the Mayflower and very possibly could have been part of the first Thanksgiving dinner!

Have a wonderful Thanksgiving and make sure to give thanks and have gratitude in your heart for this great country we live in, the wonderful family that surrounds your table and the little things that make it all worthwhile.

Grandma’s Yams

4-5 yams

1 cube butter

2 cups brown sugar

2 Tablespoons Light corn Syrup

2-3 Tablespoons Heavy Whipping Cream

Boil yams with the skins on until tender (be careful not to overcook). Remove from boiling water when done and let cool. Remove skin and slice yams about ½ inch thick. Set aside.

In a large saucepan, melt butter and then add sugar and light corn syrup. Over medium heat and stirring continuously, bring the mixture to a rapid boil. Let it boil for a few minutes, being careful not to burn. Then add the whipping cream and mix well.

Add the sliced yams into the large saucepan with the candied mixture, coat well and heat through. Place on plate and serve. It’s best to use a spatula to transfer to the plate so the yams don’t break apart.

Enjoy!

Monday, November 21, 2011

Weekly Market Commentary 11-21-11

The Markets

“Printing money is really just a softer method of default, because it effectively converts the meaning of default from ‘getting less than 100% of the currency you were owed’ to ‘getting all the currency you were owed, but ending up with less than 100 percent of the purchasing power you expected.’”

--John Hussman

They say money doesn’t grow on trees, but, for some governments, it metaphorically does. Earlier this year, the U.S. Federal Reserve completed a $600 billion “quantitative easing” program, which is a fancy way of saying “money printing,” according to Forbes. Similarly, the Bank of England recently announced an additional 75 billion pound sterling quantitative easing program on top of an earlier 200 billion program, according to The Wall Street Journal.

These programs are designed to help reduce long-term interest rates and boost the economy. Critics say they may lead to hyperinflation.

Now, some folks are saying a similar money printing program is the only way to solve the eurozone debt crisis.

As the sovereign debt crisis spreads in Europe, government bond interest rates are rising above what’s considered a sustainable level. Rates are rising because bond buyers are scarce; they’re concerned that certain governments may default on their payments so they demand a higher rate to compensate for the risk of default.

If demand for government bonds drops too much, then some countries may have to default because they won’t have enough money to pay their bills. That’s where the European Central Bank (ECB) may have to step in.

The ECB is the central bank for 11 national central banks, each serving its own country. Those 11 national central banks are the original members of the Eurozone, according to CNBC.

As a highly respected organization, the ECB could step in and say it will back its member countries’ debt and buy that debt in unlimited quantities to keep interest rates down. If it did, then the current crisis would likely abate (at least temporarily) and give the troubled countries some breathing room to implement reforms and restart economic growth, according to Reuters.

So far, though, the ECB has declined to make such a statement for several reasons:

1. It might undermine its independence from politics and its price stability mandate.

2. It could push up eurozone inflation.

3. It would reduce pressure on wayward countries to cut spending and implement growth-boosting structural overhauls.

Sources: Reuters, The Wall Street Journal

In short, it’s “politics as usual” in Europe. Meanwhile, as Europe fiddles, the markets remain unsettled.

Data as of 11/18/11	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor's 500 (Domestic Stocks)	-3.8%	-3.3%	1.3%	12.3%	-2.8%	0.5%
DJ Global ex US (Foreign Stocks)	-3.9	-16.5	-13.8	12.0	-4.0	4.4
10-year Treasury Note (Yield Only)	2.0	N/A	2.9	3.5	4.6	4.8
Gold (per ounce)	-3.0	21.9	27.3	32.6	22.4	20.2
DJ-UBS Commodity Index	-2.7	-10.8	-1.1	5.8	-2.9	4.9
DJ Equity All REIT TR Index	-3.2	1.8	7.6	27.0	-2.3	9.9

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.

HERE ARE A FEW QUOTES from top investors that are worth pondering:

“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.”

--Warren Buffett

“In investing, what is comfortable is rarely profitable.”

--Robert Arnott

“Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.”

--Sir John Templeton

“Your success in investing will depend in part on your character and guts, and in part on your ability to realize at the height of the ebullience and the depth of despair alike that this too shall pass.”

--John Bogle

“You make most of your money in a bear market, you just don’t realize it at the time.”

--Shelby Cullom Davis

“To achieve long-term success over many financial market and economic cycles, observing a few rules is not enough. Too many things change too quickly in the investment world for that approach to succeed. It is necessary instead to understand the rationale behind the rules in order to appreciate why they work when they do and don't when they don't.”

--Seth Klarman