Monday, March 26, 2012

update and by the numbers from MMG the best source for market updates

The new Italian Prime Minister Mario Monti is warning that Spain could reignite the European debt crisis.  We agree.  Early evidence of the growing problem was Spain's new Prime Minister Mariano Rajoy recently telling the ECB that not only will the country have a larger than expected budget deficit in 2011, but that the country will not meet relaxed targets for 2012 either.  And of course, this is while the country's GDP is currently contracting by levels much worse than expectations.
Offsetting these concerning comments is news that the Eurozone will boost their own bailout fund at a Euro area Finance Minister's meeting on March 30.  As expected, the only way the European Monetary Union can contain the crisis in the short-to-intermediate term is to print a lot of money.  And they have certainly done that, when you consider the 1Trillion Euros from the Long-Term Refinance Operations, as well as some of the direct ECB Bond buying.  More monetary accommodation is comingand that is one reason why Gold is up near $20 an ounce so far today.
Speaking of "accommodation” …Fed Chairman Ben Bernanke was up early this morning and already gave a speech on the labor markets.  He said that while he is encouraged by the Unemployment Rate declining to 8.3%, "continued accommodative monetary policy will be needed to make further progress."  Translation:  low rates for a long time and maybe even QE3.  
If you don't understand why the Unemployment Rate has come down in the face of tepid economic growth, don’t feel stupid, as even Mr. Bernanke admitted he has no clear answer for it, and that the recent decline in the Unemployment Rate is "out of sync" with pace of economic growth, calling it "something of a puzzle".  Obviously, the big decline in the size of the labor force – via “discouraged” workers and the like – has played a role in supporting the decline in the unemployment rate.  
Mr. Bernanke expressed concern about the high levels of the long-term unemployed, and said if those lofty levels are not brought lower (ie: people getting back to work), a likely result is that worker skills will atrophy further, making it even more difficult for those long-term unemployed people to find jobs.   
Finally, our buddy Bill Gross was out over the weekend saying the Fed will hint at QE3 at the April 25 Fed Meeting.  Based on the recent housing numbers, which have not been all that great, we agree with Bill on this one and will stick to our belief that the Fed will do a QE3 under the guise of helping housing. 
Technically, the Bond remains on a "step" of the Down Escalator.  Short-term, clients should lock on any price improvements, as the Bond at best has moved sideways over the past couple weeks.  But longer-term, we can try and float, watching to see if the Bond can step off the Down Escalator and move higher.  In order for us to be more bullish we must see the Bond break convincingly above resistance at the 100-day Moving Average.
Pay close attention to the potential of more QE3 rumorsthat could help push the Bond higher.  But when a official announcement is made – Bonds could actually suffer, much like they did when QE2 was rolled out.
Enjoy today's issue of By The Number$, and use a few of these talking points with your clients and referral partners throughout the week.
1.     TWELVE - In the last 12 weeks, the S&P 500 has gained +11.6% on a total return basis, i.e., the YTD performance of the stock index from 1/03/12 to the close of trading last Friday 3/23/12.  In the previous 12 years (i.e., 2000-11), the S&P 500 gained +6.8% (in aggregate, not per year).  The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the US stock market (source: BTN Research).        
2.     DROPS HAPPEN - Since the S&P 500 bottomed on 3/09/09, the stock index has gained +106.5% through the close of trading last Friday 3/23/12 (change of the raw index not counting the impact of reinvested dividends).  Even though the index has more than doubled there have been 11 different pullbacks of 5% or more since the 3/09/09 bottom.  The average depth of the pullbacks has been 8.8% over an average of 18 days.  The deepest tumble was a 17.2% drop over the 24 days that ended on 8/10/11 (source: BTN Research).     
3.     FROM EUROPE - 14% of the revenue produced by companies in the S&P 500 is derived from sales to European customers (source: S&P).   
4.     PENSION PLANS - 78% of American union workers participate in a defined benefit pension plan.  19% of nonunion American workers participate in a defined benefit pension plan (source: Bureau of Labor Statistics).   
5.     RETIREMENT - Only 59% of American workers (both union and nonunion) have access to any type of retirement plan, e.g., pension plan or 401(k) plan (source: National Institute on Retirement Security).   
6.     UP JUST ONE YEAR - The normal retirement age (NRA) in 2012 to be eligible for full Social Security benefits is 66 years.  The NRA in 1950 to be eligible for full Social Security benefits was 65 years (source: Social Security Administration).     
7.     WHAT THEY PAID - The top 1% of US taxpayers paid an average tax rate (i.e., federal income taxes paid as a percentage of adjusted gross income) of 24.0% in 2009 vs. an average tax rate of 1.9% for the bottom 50% of taxpayers (source: Internal Revenue Service).   
8.     DOWN FOUR IN FOUR - The value of Americans’ equity in their real estate dropped by more than $4 trillion over the last 4 years, falling from $10.3 trillion as of 12/31/07 to $6.1 trillion as of 12/31/11 (source: Federal Reserve).   
9.     FOREIGN HOLDERS OF DEBT - The total debt of the US government as of 2/29/12 was $15.5 trillion, consisting of $10.7 trillion of “debt held by the public” and another $4.8 trillion of “intergovernmental debt.”  21% of the “debt held by the public” is owned by foreign investors in China and Japan (source: Treasury Department).   
10.   FEELING GENEROUS? - The total debt of the US government has more than doubled since the end of 2004, rising from $7.6 trillion as of 12/31/04 to $15.5 trillion as of 2/29/12.  Taxpayers can make a credit card donation to pay down the national debt at the website www.pay.gov/paygov/forms/formInstance.html?agencyFormId=23779454 (source: Treasury Department).       
11.   INACTIVE ACTIVITY - Only 1 in 9 investors (11%) made asset allocation changes to their pre-tax 401(k) retirement accounts in calendar year 2011 (source: Fidelity).   
12.   IT’S ALL MATH - Low interest rates are problematic for pension-accounting calculations, contributing to higher cash contribution requirements. Thediscount rate” used to calculate the present value of pension liabilities is oftentimes benchmarked to high-quality corporate bond yields.  The largest public pension fund in the United States (the California Public Employees’ Retirement System) voted earlier this month to reduce its discount rate from 7.75% to 7.50%, a move that is projected to force the pension fund to contribute an extra $303 million a year (source: CalPERS).   
13.   DOUBLE-DIGIT - The average interest rate nationwide on a 30-year fixed rate mortgage was at least 10% for the 12 consecutive years of 1979-1990 (source: Freddie Mac).     
14.   GONE DIGITAL - US newspaper advertising revenue has fallen from $49 billion in 2000 to just $21 billion in 2011, a drop of 57% (source: Newspaper Association of America).   
15.   STAR PITCHER - Sandy Koufax was just 36 years old when he was inducted in Baseball’s Hall of Fame in 1972.  Koufax, a Los Angeles Dodgers pitcher for 12 years with a 165-87 career record, is the youngest player ever inducted into the Hall of Fame.  Koufax, 76 years old today, was an investor with Ponzi schemer Bernie Madoff (source: Baseball Almanac).   

Sunday, March 25, 2012

Cupcakes and more from Carolyn Jung the Food Gal

SusieCakes Opens First Peninsula Location, Porchetta Time & More

Tuesday, 13. March 2012 5:25 | Author:foodgal

Get ready for cupcakes galore at SusieCakes in Menlo Park. (Photo courtesy of the bakery)

SusieCakes Comes to Menlo Park

SusieCakes, which started in Southern California but has spread to these northern parts, is opening its newest location at 642 Santa Cruz Ave. in downtown Menlo Park.
The bakery, know in particular for its old-fashioned cakes and cupcakes, already has two other Bay Area locations: San Francisco and Marin County.
Join in the grand opening ceremony at the Menlo Park bakery, 1 p.m. to 4 p.m. March 24. Dust off your favorite poodle skirt for an old-fashioned sock hop with 50’s tunes. Best costume wins a prize. There will be plenty of cupcakes, cookies and bars to sample, too.
Get a gander at this porchetta at Brassica. (Photo by Sean Knight)

Porchetta Sundays at Brassica in the Napa Valley

After a weekend of wine tasting, there’s nothing better than a big hunk of  juicy, slow-cooked pork to go along with it.
Every Sunday night now at Chef Cindy Pawlcyn’s Brassica in St. Helena, they’re serving up porchetta — a whole loin of pork stuffed with garlic, rosemary, fennel fronds and fennel pollen, then roasted in a Caja China charcoal oven for 3 1/2 hours.
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I asked Dawn Thomas about the importance of square footage good reading

Square Footage Myth: De-Mystified!

by The Dawn Thomas Team on March 12, 2012
Post image for Square Footage Myth: De-Mystified! In the past week, during negotiations, the issue of square footage to determine fair market value kept popping up, so I thought I would share with you some excerpts from a recent blog written by Alain Pinel. As many are  aware, Alain came on board with Intero early in the year and is focused on building the luxury brand.
Here are some of Alain’s thoughts on square footage: “I never ceased to be amazed at the fact that many Realtors are judging the value of a luxury home on the basis of its square footage. For a bank appraiser or a home builder to think that way, I can understand, it can indeed be part of the valuation methodology, but for Realtors?
In the high end, not two homes are the same, even when they are….or they appear to be. Take two identical penthouses in New York, both brand new; same top floor, same square footage, same layout, and same amenities. I guarantee that one is worth more than the other, often a lot more. Perhaps one has a better sun exposure, or a nicer view, or sits next to another beautiful residential building while the other one has a service station for a neighbor, or one is further away from a noisy school yard, etc. Are these two properties identical? Of course not.
Square footage is largely irrelevant in the high end. Buyers buy benefits, real or perceived. Bigger is not necessarily better. Depends what you really want, or what you really need. It’s OK to want to live in a 20,000 square foot  home. It might even be pleasurable. But please understand that if & when you decide to sell it, it may fetch only what a nearby property of similar quality but smaller size will obtain in the open market. Size usually needs to serve a purpose to be worth the money it costs to build. For example, you can get your money back and sometimes make a little more if you put a home theater in your home, or a library, or a wine cellar, or an indoor pool, or a racket-ball court and perhaps even a ballroom, why not? However, if you have a huge house just to have huge rooms, square footage could be more a handicap than an added value.”
For more insight from an industry leader, you can check out his blog on the Intero blog site.
This blog is courtesy of The Dawn Thomas Team who is an award-winning Real Estate Agent team at Intero Real Estate Services in Los Altos 650-947-4661. We help nice people with selling and buying homes from Palo Alto to West San Jose!

cbs market watch money moves by 5 who are doomsayers


By Wallace Witkowski, MarketWatch
Unemployed men wait outside a soup kitchen in Chicago in February 1931.
SAN FRANCISCO (MarketWatch) — They are sentries at the stock market’s wall of worry, warning investors to prepare for another epic crash for debt-laden economies.
Yet with U.S. equity markets on a tear since early October, hitting levels not touched in several years, most of Wall Street isn’t seeing much cause for alarm.
But investors should be very afraid, the doomsayers caution.
“Hold cash, and keep it safe,” said Robert Prechter, head of market forecasting firm Elliott Wave International. “There will be another buying opportunity, probably about four years from now.”

Spain is the worry, not Portugal

Markets have been preoccupied with Portugal, but the real linchpin to the success of the euro project in the short term is Spain. Vincent Cignarella explains why on Markets Hub. (AP Photo/Manu Fernandez)
Instead, increasingly optimistic buyers have pushed the Dow Jones Industrial Average /quotes/zigman/627449 DJIA +0.27%  above 13,000; the Nasdaq Composite Index /quotes/zigman/123127 COMP +0.15%  over 3,000, and the Standard & Poor’s 500 Index /quotes/zigman/3870025 SPX +0.31%  past 1,400.
The gains extend beyond stocks. Gold /quotes/zigman/660065 GCJ2 +0.28% may be off its September 2011 high of $1,907 an ounce, but is still in the respectable mid $1,600s, and oil /quotes/zigman/2203141 CLK2 -0.02%  remains above $100 a barrel. Meanwhile, yields on both the 10-year Treasury note /quotes/zigman/4868283/delayed 10_YEAR 0.00% and the 30-year bond /quotes/zigman/4868063/delayed 30_YEAR 0.00%  are around a percentage point lower from a year ago, boosting bond values.
Also, the greenback is rising. The U.S. Dollar Index /quotes/zigman/1652083 DXY -0.02% , a measure of the dollar against six other major currencies, is up sharply over the past 12 months.
It’s enough to make a confirmed pessimist downright gloomy.
After all, what’s a doomsayer to do when it seems everything — even Europe — is rallying? Do you stand your ground in cash, or join the crowd and closely eye the exit?

Party like it’s 2007

Of the five prominent market skeptics interviewed for this article, four are reluctantly going along for the ride.

/quotes/zigman/627449 DJIA 13,080.73, +34.59, +0.27% /quotes/zigman/3870025 SPX 1,397.11, +4.33, +0.31% /quotes/zigman/123127 COMP 3,067.92, +4.60, +0.15%
Climbing the wall of worry


40%
20%
0%
-20%
O
N
12
F
M

The consensus among this group is that the rally is not sustainable — just another big party before an even bigger hangover. They see stock prices as being artificially inflated by Federal Reserve policies of quantitative easing and low interest rates, and that to put out the fires in Europe, the European Central Bank has gotten in on the act.
But, these strategists say, while these monetary drugs are palliative to markets, they require bigger doses for progressively dwindling results and will eventually fail.
Also, they believe the market’s valuation is stretched beyond what the fundamentals justify. Government policies are encouraging leveraged institutional investors and hedge funds to go long on stocks, they maintain, while cash-flush companies buy back outstanding shares from cash-strapped individual investors.
Individual investors, not incidentally, are engulfed by debt, the doomsayers point out. As they see it, consumers struggling to unwind debt are getting squeezed by higher food and energy costs. Accordingly, they’ll have even less disposable income to sustain corporate profits, the pessimists say. And one outcome these forecasters can all agree on is that the stage is being set for a big, ugly global stock-market crash.

Five shades of gray

1. Peter Schiff

Peter Schiff, chief executive of Euro Pacific Capital, said the worst investment now is bonds, because it’s the one asset that hasn’t been crushed. The second-worst option is cash, because the Fed insists that inflation is not a threat, he said.
Peter Schiff
Schiff is known for having called the 2007 financial crisis, and has been a vocal critic of artificially low interest rates set by the Fed.
Among stocks, Schiff said he’s focusing on multinationals and exporters, areas that have some insulation to a U.S. economy that he believes is heading for a crisis.
Earlier in the month, Euro Pacific’s asset management arm launched its EP Strategic U.S. Equity Fund /quotes/zigman/9020258 EPUSX +0.10% , which focuses on U.S. businesses that stand to benefit from increasing sales in overseas markets.
Schiff said the Fed can be in denial about inflation for only so long, and eventually will have to raise interest rates.
“They’ll keep [rates] low until the market forces them,” Schiff said. “It’s like trying to hide it when you’re pregnant, you can only do it for so long.”
He added: “If we get to 2014 and we don’t have a crisis, the Fed will keep rates low but at some point it won’t matter because we won’t have any money because we’ll be paying $30 for a carton of milk.”
/
 
 
 
quotes/zigman/627449

13,080.73
+34.59 +0.27%
Volume: 129.93M
March 23, 2012 4:30p


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/quotes/zigman/123127

3,067.92
+4.60 +0.15%
Volume: 0.00
March 23, 2012 5:30p


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/quotes/zigman/3870025

1,397.11
+4.33 +0.31%
Volume: 570.17M
March 23, 2012 4:32p


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/quotes/zigman/660065

$ 1,667.10
+4.70 +0.28%
Volume: 1,758
March 25, 2012 6:50p


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/quotes/zigman/2203141

$ 106.85
-0.02 -0.02%
Volume: 988.00
March 25, 2012 6:49p


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/quotes/zigman/4868283/delayed

2.24
0.00 0.00%
Volume: 0.00
March 23, 2012 5:29p


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/quotes/zigman/4868063/delayed

3.31
0.00 0.00%
Volume: 0.00
March 23, 2012 5:29p


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/quotes/zigman/1652083

79.30
-0.02 -0.02%
Volume: 0.00
March 25, 2012 6:50p


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/quotes/zigman/9020258

$ 10.02
+0.01 +0.10%
Volume: 0.00
March 25, 2012


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