Our national debt continues to climb to new heights and recently reached the $15.2 trillion level. The only saving grace for America is the historically low level of the U.S. Treasury yield curve. Moreover, now that the congressional “super committee” failed to enact a plan to cut $1.2 trillion from the deficit over the next decade, automatic spending cuts will begin in January 2013. President Barack Obama has vowed to veto any attempt to undo those scheduled cuts, which include expiration of the Bush tax cuts. And, Democrats oppose reducing entitlement programs such as Medicare and Social Security unless the Republicans agree to larger tax revenue increases. Political gridlock remains very much alive in Washington.

Here’s a list of eye-opening facts courtesy of The American Dream web site article, “Debt Slavery: 30 Facts About Debts in America that Will Blow Your Mind”:

- Credit card debt: Today, 46 percent of all Americans carry credit card balances from month to month. Together, we       are bearing $798 billion in credit card debt. For households with such debt, the average amount owed is nearly $16,000.

One out of every seven Americans has at least 10 credit cards. According to the Federal Reserve’s web site calculator, a $10,000 credit card balance with a 13.10 percent interest rate will take 27 years to pay off if you only make the minimum monthly payments. You will end up repaying a total $21,271.

- Auto loan debt: The length of auto loans inAmericakeeps getting longer. Today, 45 percent of all new car loans are for more than six years. At some point, this will become a massive problem.

- Mortgage debt: Home mortgage debt in the United Statestoday is about five times larger than it was 20 years ago.

Historically, the percentage ofU.S. residential mortgages in foreclosure has hovered between 1 and 1.15 percent. Today, it’s up around 4.5 percent. According to MSNBC TV show host Dylan Ratigan, 46 percent of all mortgage properties in Florida, 50 percent in Arizona, and 63 percent in Nevada are underwater. Overall, nearly 29 percent of all U.S. homes with a mortgage are underwater.

- Medical debt: This is a major problem for a growing number of Americans. One study discovered that 41 percent of all working age Americans either have medical bill problems or are paying off medical debt.

Sadly, the number of Americans who are protected by health insurance continues to decline. An all-time record of 49.9 million Americans do not have health insurance right now, and the percentage of Americans covered by employer-based health plans has fallen for 11 years in a row.

- Student debt loan: The total today is rapidly approaching $1 trillion. About two-thirds of all college students today graduate with student loan debt averaging $25,000.

The key to sustaining the current level of debt in the intermediate term is to maintain low interest rates. Longer term, unsustainable spending is a problem.

Even the smartest guy in the room sometimes makes mistakes.

Jamie Dimon, CEO of the huge U.S. bank JP Morgan, has been called the smartest guy in the room for his ability to effectively steer the bank through the economic crisis. And, while most of the other big U.S. banks have tarnished reputations, Dimon’s firm was the one that stood out from the crowd.

Unfortunately, that all changed last week.

In a hastily arranged conference call with investors, Dimon revealed that the bank lost $2 billion in just the past six weeks on “bets aimed at shielding the bank from the market fallout of Europe’s deepening mess,” according to The Wall Street Journal. These “bets” lost money due to “unusual movements in the relationships between various derivative indexes focused on investment-grade and junk-bond corporate debt, both in the U.S. and Europe,” according to the Journal.

This debacle points to three important investment lessons:

1. Keep it simple. Trading fancy derivatives or using complex black box trading strategies might give you an air of sophistication, but it may also lead to your downfall. As Leonardo da Vinci said, “Simplicity is the ultimate sophistication.”

2. Pick and track your investments closely. In describing the trades that blew up, Dimon said, “The new strategy was flawed, complex, poorly reviewed, poorly executed, and poorly monitored,” according to Bloomberg. Clearly, in this ever-changing world, a “set it and forget it” investment strategy won’t cut it.

3. Be humble. Even a smart guy like Dimon can trip up. One of the biggest errors in investing is self-deception – thinking and acting like you are the smartest guy in the room. It’s better to worry about what could go wrong – and plan for it – than think you’re invincible.

The investment landscape is littered with formerly sharp investors who forgot these three lessons. We plan on keeping them front and center.

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 that a painting sells for $120 million in this economic environment?

You may have seen the recent headline that Edvard Munch’s painting, “The Scream,” sold for a record-breaking $120 million. It made us wonder what the implications are of an anonymous bidder forking over that kind of cash for a pastel on canvas just three years out from a horrible economic crisis. Does this mean happy days are here again?

Placed in broad context, the high sale price for a work of art might be symptomatic of policymakers’ response to the economic crisis, according to The Wall Street Journal. When the economy began collapsing in 2008, governments around the world responded by cutting interest rates and flooding their economies with monetary stimulus. All this money sloshing around had to end up somewhere – and some of it might have found its way into hard assets such as commodities, precious metals, collectibles, and, yes, an Edvard Munch painting.

There’s something called the law of unintended consequences, which means solving one problem might inadvertently create a new one. In this case, the massive stimulus in recent years propped up the economy in the short run, but it may have unintentionally masked the real problem and simply delayed a day of reckoning.

With the following economic and political issues in play, that day of reckoning may be nearing:

• Eleven European countries have experienced two consecutive quarters of economic contraction.
• The unemployment rate across the eurozone has matched a record high.
• Job growth in the U.S. is slowing.
• The Chinese economy is slowing.
• The political situation in Greece is chaotic.
• France has a new Socialist president.

Sources: MarketWatch, The Wall Street Journal

Now, the good news. In any economic environment, there will be winners and losers. As the steward of your financial life, we do everything we can to try and help you land on the winning side regardless of what the economy and markets throw in our way.

Weekly Focus – Think About It

“Nature is pleased with simplicity. And nature is no dummy.”

–Isaac Newton, English physicist, mathematician, astronomer, natural

philosopher, alchemist, theologian… yes, a really smart guy!

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. CA Insurance License No. 0778771

* 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.

The most important news last week may have actually happened this past weekend.

On Sunday, voters went to the polls in France, Greece, and Germany and the results could have a major impact on world markets. French voters sent incumbent president Nicholas Sarkozy packing and, instead, elected Socialist Party candidate Francois Hollande. Hollande “has pledged to shift the burden of economic hardship onto the rich and to resolve the protracted euro sovereign-debt crisis by softening the current prescription of austerity,” according to The Wall Street Journal. While his strategy is debatable, it will likely cause a rift with Germany and add uncertainty to recent eurozone agreements.

Greek voters also went to the polls and “delivered a stinging rejection of the two incumbent parties, with many people casting ballots for smaller, far-left and far-right parties,” according to the The Wall Street Journal. This, too, will likely result in more political and economic uncertainty. And in Germany, incumbent Angela Merkel’s party suffered some setbacks in state elections.

What’s leading to all the angst in Europe? Here are three things:

1. Recession fears – 11 European countries have now experienced two consecutive quarters of economic contraction.

2. Unemployment fears – the unemployment rate across the eurozone is at a record high.

3. Business confidence fears – April’s read on the manufacturing PMI for the eurozone – a measure of confidence among businesses – fell to the lowest since June 2009.

Sources: MarketWatch, The Guardian

The bottom line is citizens are voting for change, but “political realities will complicate even more what is an already delicate economic and financial outlook for Europe, the world’s largest economic area,” according to Mohamed El-Arian, CEO and Co-CIO of PIMCO, as reported by CNBC.

These elections show that the economic crisis that began in 2008 is still rippling throughout the world.

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.

WHAT DO DOTS HAVE TO DO WITH BEING A BETTER INVESTOR? In his fascinating new book, Imagine: How Creativity Works, author Jonah Lehrer describes the creative process and what steps we can all take to be a little more creative. One of those steps is to talk to more people and expose yourself to new situations. By “colliding” more often with people who are not like you and throwing yourself into new environments (like a foreign country), your mind will come up with more new ideas than you could have thought of on your own.

And, while business owners may not like this, Lehrer’s research suggests, “The most important place in every office is not the boardroom, or the lab, or the library. It’s the coffee machine.” It’s those casual conversations with colleagues that generate new interactions and spark ideas.

This leads to an important point about investing.

Brian Uzzi, a professor at the Kellog School of Management, studied the instant messages (IM) sent by traders at a large hedge fund over an eighteen-month period. As reported in Lehrer’s book, these traders sent more than two million messages over that period and the average trader was involved in 16 different IM conversations simultaneously – talk about multitasking! Essentially, these traders were rapidly communicating with each other and trying to make sense of the latest news so they could profitably trade on it.

As summarized by Lehrer, Uzzi concluded, “The best traders were the most connected, and people who carried on more IM conversations and sent more messages also made more money.” Further, Uzzi said, “The act of investing is like solving a difficult puzzle. These traders are trying to connect the dots. Because the traders are listening to their network, they manage to accomplish what they could never have done by themselves.”

In essence, successful investing partly relies on “connecting the dots” of information that bombard us. While we’re not day traders like the people Uzzi studied at the hedge fund, the concept of connecting the dots still applies – albeit on a much longer timeframe. And, to connect the dots, we have a large network of colleagues who can help us separate the daily noise from what’s truly meaningful.

Weekly Focus – Think About It

“Everyone who’s ever taken a shower has had an idea. It’s the person who gets out of the shower, dries off, and does something about it who makes a difference.”

–Nolan Bushnell, founder of Atari, Inc. and Chuck E. Cheese’s Pizza-Time Theaters

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. CA Insurance License No. 0778771

* 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.

What is the costliest fruit?

How about an apple, as in Apple, Inc.? With more than $500 billion in market capitalization, Apple is the world’s most valuable company, according to Reuters. Last week, the company reported quarterly earnings that easily trumped analyst forecasts and this helped propel the S&P 500 to a 1.8 percent weekly gain. But, it’s not just Apple that’s doing well. According to FactSet, a robust 78 percent of the S&P 500 companies that have reported earnings so far this quarter have beaten analysts’ forecasts.

Last week’s gains came despite some disappointing economic news which included the following:

• A weaker than expected reading on U.S. gross domestic product (GDP), the broadest measure of all goods and services produced in our country.
• A downgrade of Spain’s government debt – perhaps not surprising since the country now has a debilitating unemployment rate of 24.4 percent.
• A second consecutive quarter of negative economic growth in the U.K., indicating they have slid back into recession.

Sources: The Wall Street Journal; Yahoo! Finance; Bloomberg

With Apple garnering so much press coverage these days, CNBC ran an interesting story that coincided with the cable channel’s 23^rd anniversary on April 17. CNBC asked this question: Which would have been the better investment – buying Apple or Dell stock on the debut of CNBC 23 years ago and holding it the entire time?

While both companies have performed phenomenally over the past 23 years, it turns out that Dell dramatically outperformed Apple over that period. Dell returned 20,375 percent while Apple was up 6,009 percent, according to CNBC. By comparison, the S&P 500 index rose 360 percent during that period.

Now, this is not a buy or sell recommendation on either stock, it’s merely for illustrative purposes only. And, before we get too excited, remember that for every Apple or Dell, there are other one-time top companies that go bust like Enron and General Motors.

With “apple” already taken, will there be another “fruity” company that rises to the top?

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.

THE HOUSING MARKET STILL HAS THE BLUES, according to a widely followed barometer of home prices in the U.S. The S&P/Case-Shiller Index is designed to show how home prices are performing in the twenty largest cities and last week’s report showed the index is at its lowest point since October 2002.

Since the peak of the index in 2007 through February of this year, home prices have lost one-third of their value – and that’s even with record low interest rates on mortgages. Unfortunately, tough employment conditions have kept many potential homeowners on the sidelines. Adding to that, obtaining a loan from a bank remains difficult without very good credit.

Even though home prices continue to decline, a silver lining might be emerging. According to the National Association of Realtors, an index that measures the number of agreements signed to buy previously owned homes rose in March to its highest level in two years.

The increase in interested home buyers is coming at a time when supply is declining. Inventory levels in many markets are at their lowest level in years. For example, according to The Wall Street Journal, at the current pace of sales, it would take only 1.5 months to sell all the homes in Sacramento, CA. Considering pickings are pretty slim, home builders have also benefited. New home sales in the U.S. are up 16 percent so far this year.

Unfortunately, this recent decline in available homes for sale may prove to be temporary because Fannie Mae, Freddie Mac, and other banks have been slow to list for sale hundreds of thousands of foreclosed homes. In fact, banks and other investors are believed to hold 450,000 foreclosed homes while an additional 2 million are currently in the process of being foreclosed.

Ultimately, the solution to the housing blues may be strong economic growth. And, as last week’s GDP numbers show, that strong growth hasn’t started yet.

Weekly Focus – Think About It

“In order to get a loan you must first prove you don’t need it.”

–Murphy’s Law, Bankers Axiom

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. CA Insurance License No. 0778771

* 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.

Move over European debt headlines, corporate earnings have something to say.

Even though troubles are brewing again across the pond in Europe, corporate earnings season in the U.S. is stealing the spotlight. Why? According to CNBC, more than 100 companies in the S&P 500 have reported earnings and 8 out of 10 have delivered better than expected results – and that’s grabbed investors’ attention.

Each quarter, publically traded companies update investors on how their businesses fared over the previous three months. And, according to the updates we’re seeing, business is still looking okay. The news helped push the S&P 500 higher by 0.6 percent on the week.

Now, like all statistics, there’s more than one way to interpret the earnings numbers. While 8 out of 10 companies have beaten expectations, the “expectation” was pretty low. In fact, earnings increased only 3.7 percent from the year ago quarter, according to Zacks. For the remaining S&P 500 companies that are set to report, Zacks expects those companies to report slightly negative earnings growth compared to the year ago quarter.

Over in Europe, Spain and Italy saw the borrowing rate increase on their government debt, which suggests their debt problem is far from over. And, the International Monetary Fund released a report that stated the obvious – if the European debt crisis can’t be contained, it would negatively impact global economic growth in a severe way.

At the moment, the U.S. markets seem fixated on corporate earnings and have put the European problem on the back burner. But, in this interconnected world, problems overseas may eventually find their way to our shores.

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.

WHEN $1 TRILLION ISN’T ENOUGH… Earlier this year the European Central Bank (ECB), Europe’s equivalent of our U.S. Federal Reserve, responded to the fear surrounding the European debt crisis by offering unlimited three-year loans with a 1.0 percent interest rate to European banks. According to The Wall Street Journal, at least 800 banks across Europe responded to this offer by borrowing over $1.3 trillion. As planned, the banks then took a good portion of that money and bought government securities that paid a higher interest rate. It sounds like a great deal to the banks – borrow money at a 1.0 percent rate then turn around and buy government securities that pay a much higher rate and pocket the difference.

The primary objective of this emergency lending was to indirectly allocate money to European governments who are heavily indebted. The ECB thought that making cheap money available would help lower interest rates in these troubled countries and “buy” them more time to work out their economic problems.

How’s it working?

Initially, interest rates in troubled countries dropped dramatically as banks bought the high-yielding government securities and fears of a collapse eased. Unfortunately, The Wall Street Journal says many of the banks who borrowed money from ECB may have already exhausted most of those funds – leaving little money left to keep pushing interest rates down. As a result of this fear, interest rates are rising again, particularly in Spain and Italy, and, like a leak in a dike, it’s hard to stop a rise once it gets going.

Will the ECB step in again and help European banks and governments avoid a Greek-style default? It’s too early to tell, but either way, we’ll be closely watching this tug-o-war between positive corporate earnings in the U.S. and negative headlines out of Europe.

Stay tuned…

Weekly Focus – Think About It

“There are no shortcuts to any place worth going.”
–Beverly Sills

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. CA Insurance License No. 0778771

* 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.

It’s back. Volatility, that is.

Like a yo-yo, the market bounced around and the S&P 500 index ultimately ended down 2.0 percent for the week and 3.4 percent from this year’s closing high, according to Reuters. Despite the drop, the market is still showing a solid 9.0 percent gain for the year.

Once again, debt issues in Europe made headlines as Spain became the latest problem country. That, along with some disappointing economic growth data from China, helped spark the volatile week. Because of its massive size, any slowdown in China is closely watched by market participants.

As a sign of the big swings this week, the Dow Jones Industrial closed the day up or down by at least 100 points on four out of the five days last week, according to Barron’s.

Highlights from the week included:

• China’s economy expanded at the weakest pace in over three years last quarter, missing consensus economic forecasts.
• Yields on debt in Spain jumped due to a weak debt auction, renewing fears that the European debt crisis could start affecting the global markets again.
• Several U.S. banks reported earnings that underwhelmed investors, resulting in weakness in financial stocks.
• U.S. inflation remained under control which may leave open the possibility for further Federal Reserve intervention should economic data deteriorate.

Sources: The Wall Street Journal, Yahoo! Finance

The quarterly corporate earnings season is now underway so we wouldn’t be surprised to see more market volatility as investors digest the latest read on the health of corporate America.

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.

THE “SHOVE IT” INDICATOR as highlighted by CNBC made a noteworthy gain in February suggesting consumer confidence may be increasing. You’re probably wondering, “What in the world is the ‘shove it’ indicator?” Well, every month the government conducts a Job Openings and Labor Turnover Survey, or “JOLTS” for short. One of the data points in the JOLTS report is the number of workers who quit their job as opposed to being laid off. And, in February, for the first time since September 2008, the quitters were in the majority.

What does this mean? Generally speaking, people who quit their job are typically more confident that there is another job waiting for them when they voluntarily leave a position. Nicholas Colas, chief market strategist at ConvergEx Group says, “Quits go hand-in-hand with consumer confidence.”

This positive JOLTS data point follows a disappointing government jobs report for the month of March where only 120,000 new jobs were created. Also, the preliminary March reading of the University of Michigan’s consumer confidence survey showed a decline from the previous month. Analysts had expected confidence to stay flat, according to International Business Times.

This conflicting economic data gave the bulls and the bears ample ammunition to bolster their respective case. And, conflicting data like this may lead to a continuation of the yo-yo as investors try to predict which direction the economy is headed.

Weekly Focus – Think About It

“Expectation is the root of all heartache.”

–William Shakespeare

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. CA Insurance License No. 0778771

* 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.

When in doubt, blame it on the weather.

It’s human nature to want to ascribe a reason to everything that happens in the world. Rather than feeling like it’s all random, we always want to know why the market went up or why bats hang upside down or why white is the most popular car color.

And, last week’s employment report is no different. The government said the economy added 120,000 new jobs in March, however, that was well below the 210,000 increase expected by economists surveyed by MarketWatch. So, to what did some economists attribute the smaller than expected increase? You guessed it, the weather!

Unseasonably warm winter weather in many parts of the country may have disrupted the normal winter hiring pattern. According to MarketWatch, “Companies kept workers on or hired people in January and February who otherwise would have been added in March or April.”

In addition to hiring, weather was also a key driver behind recent strong retail sales. Bloomberg reported that, “Retailers are benefiting from warm weather that boosted demand for spring products…”

Over time, the effects from weather will likely even out so there’s no need for us to add a meteorologist to the team. But, just so you know, it’s not always dollars and cents behind changes in the markets. Sometimes you just have to stand outside and check out the weather.

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.

DON’T WORRY, BE HAPPY is apparently more than just a cliché. Research over the past 10 years shows there is a direct link between happiness and business outcomes. Author and researcher Shawn Achor says “happiness” raises sales by 37 percent, productivity by 31 percent, and accuracy on tasks by 19 percent. He goes on to say, “The single greatest advantage in the modern economy is a happy and engaged workforce.”

So, how do you become happy at work?

Achor says you have to train yourself and start developing new, positive habits. For example, he challenges his clients to implement one of the following positive exercises everyday for 21 days.

• Write down three new things you are grateful for each day.
• Write for two minutes a day describing one positive experience you had over the past 24 hours.
• Exercise for 10 minutes a day.
• Meditate for two minutes, focusing on your breath going in and out.
• Write one quick e-mail first thing in the morning thanking or praising someone in your social support network (family member, friend, old teacher).

By following one of these exercises, Achor says your happiness will rise and so will your business success.

The tiny Himalayan country of Bhutan has taken this idea of happiness even further. Four years ago, the country launched a “gross national happiness” measure to guide public policy. According to The Guardian, Bhutan’s “constitution mandates that at least 60% of the country remains under forest cover in perpetuity and its stated policy is to be 100% organic in its agricultural production.”

Now, Bhutan’s definition of happiness is a little different than our typical Western definition. The Bhutan government says, “it refers to the deep, abiding happiness that comes from living life in full harmony with the natural world, with our communities and fellow beings, and with our culture and spiritual heritage, in short, from feeling totally connected with our world.”

Well, no matter how you define it, it looks like it “pays” to be “happy.”

Weekly Focus – Think About It

“Rules for Happiness:
something to do,
someone to love,
something to hope for.”
–Immanuel Kant, German philosopher

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. CA Insurance License No. 0778771

* 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.

Last week marked the end of a very strong first quarter for the stock market.

For the quarter, the S&P 500 index rose 12.0 percent, its strongest start to a year since 1998. In fact, the index ended the quarter 3.4 percent above the average year-end projection of strategists surveyed by Bloomberg. In other words, the market gained more in the first quarter than analysts thought it would gain for the whole year.

Looking back on the strong start, analysts pointed to an easing of Europe’s debt woes, a strengthening global economy (at least in some areas), rising consumer sentiment in the U.S., and supportive Federal Reserve policy, according to Bloomberg and CNNMoney.

Speaking to The Wall Street Journal, Bob Doll, chief equity strategist at BlackRock, summarized the quarter nicely when he said, “This year has been all about people coming away from the abyss that the world might end, and putting risk back on.”

Some analysts suspect this year’s strong start may be déjà vu all over again (hat tip to Yogi Berra). Stocks roared out of the gate in 2010 and 2011 only to drop later in the year, “as the U.S. economy faltered and Europe’s crisis worsened,” according to The Wall Street Journal.

Potential spoilers for the market over the next few months include:

• Renewed European debt woes, particularly in Portugal and Spain.
• Renewed weakness in the U.S. economy, possibly due to unseasonably warm weather in some parts of the country that may have “pulled forward” some shopping and construction activity.
• High gasoline prices, which could take a big bite out of consumers’ pocketbooks.
• Slower corporate earnings growth and profit margins that may down from near record levels.
• An economic slowdown in China that exceeds expectations.

Sources: The Wall Street Journal, Financial Times

So far this year, investors have shrugged off the worries and plowed higher. With supportive Federal Reserve policy underpinning the market, that old adage seems to apply – “Don’t fight the Fed.”

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.

WHILE GASOLINE PRICES ARE HITTING RECORD HIGHS for this time of year and oil has shot past $100 per barrel, natural gas prices are plumbing 10-year lows, according to The Wall Street Journal. What are the implications of this large price disparity for America’s long-term energy security?

As indicated below, gasoline, oil, and natural gas are critical to the U.S. energy picture as they account for a large percentage of our energy use.  

Energy Demand by Fuel Source in the U.S. in 2010

• 37 percent petroleum products (includes oil and gasoline)
• 25 percent natural gas
• 21 percent coal
• 9 percent nuclear
• 8 percent renewable

Source: U.S. Energy Information Administration

Oil, in particular, is deeply entwined in our economy as 10 of the past 11 recessions were preceded by an oil price shock, according to Moody’s Analytics. Even the 2008 economic crisis, which on the surface was triggered by the subprime mortgage crisis, was accompanied by a massive spike in U.S. oil prices to a record high of about $145 per barrel in July 2008, according to Reuters. As oil prices rise, gasoline prices are likely to rise, too, because gasoline is a by-product of oil refining. In fact, a 42-gallon barrel of oil yields about 19 gallons of gasoline, according to the U.S. Department of Energy.

So, where does natural gas fit in the U.S. energy story?

Interestingly, new technology including horizontal drilling and hydraulic fracturing (“fracking”) has led to a substantial increase in the supply of natural gas. The Department of Energy has even said we have more than a 90-year supply of natural gas at current consumption rates. This massive supply is one reason why natural gas prices are so low right now.

One plus for natural gas versus oil is that almost all of the natural gas we consume is produced domestically while 45 percent of the oil we consume is imported, according to Financial Times. With natural gas prices low and supply abundant, we’re starting to see more emphasis on using natural gas instead of oil.

As the U.S. continues to regain its economic footing, it’s critical that we have the right mix of energy sources available at a reasonable price. Historically, that’s not always happened and, consequently, it’s an important factor that we monitor on a regular basis. 

Weekly Focus – Think About It

“Worry does not empty tomorrow of its sorrow, it empties today of its strength.”

–Corrie ten Boom, author, Holocaust survivor

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 Registerred Investment Advisor and is not affiliated with Triad Advisors. CA Insurance license No. 0778771

* 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 theLondonafternoon 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.

A trillion here, a trillion there and, pretty soon, you have a nice market rally.

Through a program called quantitative easing, central banks around the world have flooded the world economy with the equivalent of trillions of U.S. dollars. Quantitative easing involves central banks making large-scale purchases of debt – usually government or mortgage debt – and paying for that debt by creating money out of thin air, according to The New York Times. The hope (and remember, hope is not an investment strategy) is that with more money sloshing around the global economy, interest rates will drop and that will stimulate demand and increase economic growth.

If all goes according to plan, the economy will recover and then the central banks will sell the bonds they purchased and “destroy” the money they received for selling the bonds. When the whole cycle is completed, the net effect is no new money is created, according to the BBC. Optimists say this is an appropriate activity for central banks when the economy faces major hurdles. Pessimists say the central banks are unlikely to turn off the spigot and we could end up with runaway inflation.

And, yes, it’s a big spigot. Just between the U.S. and the United Kingdom, more than 2.5 trillion dollars of new money has been created since 2008, according to Reuters and the BBC.

On top of that, the European Central Bank made more than 1 trillion euro available to banks in the form of cheap three-year loans in just the past few months. The hope (there’s that word again) is that banks will use this money to lend and invest, and, thereby, boost the economy, according to Bloomberg.

All this “easy money” has helped fuel a strong start to many of the world’s stock markets this year. The big question is, will this easy money be the bridge that gets the world economy back on a self-sustaining growth path or is it simply keeping the patient addicted to an unsustainable monetary policy?

Effectively answering questions like this keeps our job very interesting!

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.

QUANTITATIVE EASING HAS LED TO A STEALTH “TAX” ON SAVERS in what’s been called “financial repression,” according to Bloomberg. As mentioned above, one goal of quantitative easing is to lower interest rates. On that score, it’s succeeded since interest rates are super low all along the yield curve. Unfortunately, there’s a problem with that – interest rates on many bonds and savings accounts are lower than the rate of inflation. This means savers are losing purchasing power (the stealth tax) while debtors are able to pay back their debts in inflated (i.e., “cheaper”) dollars. Savers are effectively being “financially repressed.”

The public debt of the U.S. is more than $15 trillion, according to the Treasury Department. The annual interest expense on that mountain of debt is more than $400 billion. Not surprisingly, the government wants to keep interest rates low because that will keep their interest payments low. Also, by tolerating some inflation, that debt pile can be paid back in inflated dollars. So, who loses in this deal? It’s the diligent American saver who lives below their means and has to endure very little interest on their savings.

Government policy makers are well aware that their actions are, to some extent, helping debtors at the expense of savers. They also know that in this complicated, global economy, there’s no easy way to make everybody happy and still get us out of the fiscal hole we’re in. Knowing that, we’ll keep doing our best to help you prosper.  

Weekly Focus – Just for Fun

If you could spend one year traveling around the U.S. and Canada, how many different bird species do you think you could see? Well, there’s actually an informal competition that does just that and it’s called a Big Year. Last year, a movie starring Steve Martin, Jack Black, and Owen Wilson chronicled the Big Year exploits of three men who tried to set a new Big Year record in 1998. Sure enough, one of the men set a new record of seeing 748 bird species that year. Check out the movie and you’ll never look at birding quite the same.

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 Registerred Investment Advisor and is not affiliated with Triad Advisors. CA Insurance license No. 0778771

* 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 theLondonafternoon 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.