There wasn’t much to ‘Like’ in the financial markets last week as stocks took a hit on another round of global worries. High on the list of concerns were:

· Continuing anxiety over Greece’s ability to avoid default and remain in the euro.
· Rising borrowing costs for Italy and Spain.
· Ongoing fears of an economic slowdown in China.
· Loss of faith in the banking system due to JPMorgan’s $2 billion (and growing) bad bet.
· A very tepid response to the highly anticipated stock market debut of Facebook.
Source: CNNMoney

Investors are particularly frustrated that the European debt situation keeps popping up like dandelions. After two years and 17 euro zone summits, the issue is still not resolved. In fact, it might be worse than ever as Europe is quickly running out of road to kick the can down, according to BusinessWeek.

Greece is at the epicenter of this worldwide concern despite the fact that its population is less than the state of Ohio. Like the subprime crisis before it, investors are concerned that Greece may be the falling domino that kicks off a series of undesirable effects. If Greece has a disorderly collapse, it could spread to other weak European countries and then ripple out to the rest of the world.

Unfortunately, the time for easy solutions has long passed. Central banks and governments around the world have already added trillions of dollars to their balance sheets so they don’t have much room to maneuver. And, here in the U.S., we have a potentially bruising election and looming tax and fiscal matters to deal with by the end of the year.

When you add it up, 2012 is on track to be another dramatic year in world affairs.

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.

 WOULD YOU GIVE YOUR MONEY TO THE U.S. GOVERNMENT for 10 years and lock in a negative yield? Well, that’s exactly what happened last week as investors handed over $13 billion to the government and, in return, received 10-year Treasury Inflation Protected Securities (TIPS). These securities were sold at a record low negative yield of 0.39 percent, according to The Wall Street Journal.

TIPS are a bit different from traditional government securities because, “The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price Index. When a TIPS matures, you are paid the adjusted principal or original principal, whichever is greater,” according to the Treasury Department.

Now, why would anybody buy a TIPS with a negative yield when they could buy a traditional 10-year government security with a yield of about 1.7 percent last week? The answer lies in the difference between the two yields.

As reported by Bloomberg, the yield difference between a 10-year TIPS and a comparable 10-year Treasury security was 2.04 percentage points on May 17. Analysts call this the “break even inflation rate.” It means investors were expecting inflation to average 2.04 percent over the next 10 years. When you add the 2.04 percent expected inflation rate to the negative 0.39 percent yield of a TIPS, you get close to the yield of a traditional 10-year government security.

From an investment standpoint, if inflation averages more than 2.04 percent over the next 10 years, then owning TIPS might be a better deal than owning the traditional 10-year government security. Likewise, if inflation averages less than 2.04 percent over the next 10 years, then owning the traditional 10-year security might be better, according to The Vanguard Group.

With its built-in inflation protection component, TIPS are traditionally viewed as a hedge against inflation rather than a play on interest income.

As an advisor, it’s important for us to know the break even inflation rate that is embedded in TIPS. Knowing the market’s best estimate of inflation provides data we can use to help us value and analyze other investments that may be affected by changes in investors’ inflation expectations.

Weekly Focus – Did You Know…

There is only one word in the English language with all five vowels in reverse order. Try to guess what it is before reading below for the answer.

The answer is “subcontinental.”

Source: http://www.byfaith.co.uk/paul2028.htm

(Disclosures)

Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA.

* This newsletter was prepared by PEAK.

* 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.

* 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 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.

* 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.

LD43732-05/12

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!

(Disclosures)

Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA.

* This newsletter was prepared by PEAK.

* 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.

* 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 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.

* 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.

LD43669-05/12

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

(Disclosures)

Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA.

* This newsletter was prepared by PEAK.

* 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.

* 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 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.

* 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.

LD43580-05/12

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 23rd 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 benefitted. 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

(Disclosures)

Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA.

* This newsletter was prepared by PEAK.

* 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.

* 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 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.

* 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.

LD43528-4/12

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

(Disclosures)

Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA.

* This newsletter was prepared by PEAK.

* 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.

* 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 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.

* 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.

LD43420-4/12

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 every day 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

(Disclosures)

Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA.

* This newsletter was prepared by PEAK.

* 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.

* 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 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.

* 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.

LD50003-4/12

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 quarterly 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

(Disclosures)

Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA.

* This newsletter was prepared by PEAK.

* 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.

* 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 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.

* 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.

LD43310-4/12

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.

(Disclosures)

Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA.

* This newsletter was prepared by PEAK.

* 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.

* 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 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.

* 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.

LD43235-3/12

It was a busy week on Wall Street with numerous big moves and key milestones hit. Here are a few of the highlights:

· The S&P 500 index and the Dow Jones Industrial Average had their biggest weekly gains since last December.
· The S&P 500 closed at its highest level in nearly four years and the NASDAQ index closed at its highest level in more than 10 years.
· Yields on U.S. government bonds rose substantially on the back of “steady albeit moderate economic expansion,” according to Barron’s.
· Gasoline prices continued to rise and are now up 18 percent since December and pump prices topped $4 a gallon in many parts of the country.
· Employment is looking better as initial claims for U.S. unemployment benefits matched a four-year low.
Sources: Barron’s, The Wall Street Journal, MarketWatch

In addition, the Federal Reserve released a policy statement last week that was well-received by the markets. MarketWatch wrote, “The central bank seems keen on stressing that it will do everything it can to keep rates low and allow the economy time to heal.” Economist Ian Shepherdson commented that the Fed, “is clearly shifting its stance away from blanket gloom to something more realistic.”

And, to add even more bubbly to last week’s rosy news, Apple stock briefly pierced an all-time high of $600 per share on enthusiasm for the new iPad. This isn’t a buy or sell recommendation for the stock, but merely an indication of the market’s recent bullish enthusiasm.

While the market may be in a giving mood now, it can take it away quickly and without ringing a bell. Either way, we remain diligent in doing the best we can on your behalf.

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.

WHY IS MONGOLIA ONE OF THE WORLD’S FASTEST GROWING ECONOMIES and is there a lesson to be learned from them? While the U.S. economy languished at a 1.7 percent growth rate in 2011, Mongolia – a landlocked country sandwiched between China and Russia – grew a staggering 17.3 percent, according to The Wall Street Journal.

Blessed with an abundance of natural resources such as copper, gold, and coal, Mongolia’s growth has been turbocharged by foreign investors seeking to exploit its still largely untapped commodities.

Now, here’s where it gets interesting. The Organization for Economic Co-operation and Development (OECD), just released a study that shows there is, “a significant negative relationship between the money countries extract from national resources and the knowledge and skills of their school population.” Another way of saying this is countries with very few natural resources (think Japan or Hong Kong) tend to have highly educated students.

The OECD said countries with few natural resources tend to realize that “the country must live by its knowledge and skills and that these depend on the quality of education.” By contrast, resource rich countries (with some exceptions), tend to take the path of least resistance and generate wealth through digging up their resources. Often, they then fail to convert this wealth “into the human capital that can generate the economic and social outcomes to sustain their future.”

It remains to be seen if Mongolia will learn from history and turn its resource riches into long-term educational dividends.

The U.S. is fortunate because we have do have abundant natural resources. However, there’s always room for improvement in taking the spoils of these resources and converting them into positive economic and social outcomes that can propel us well into the future.

As the OECD wrote, “Knowledge and skills have become the global currency of 21st century economies. But, there is no central bank that prints this currency, you cannot inherit this currency, and you cannot produce it through speculation, you can only develop it through sustained effort and investment by people and for people.”

Weekly Focus – Think About It

“We do not inherit the earth from our ancestors, we borrow it from our children.”
--Native American proverb

(Disclosures)

Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA.

* This newsletter was prepared by PEAK.

* 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.

* 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 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.

* 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.

 LD43166-3/12

An important key to support the stock market is starting to fall into place.

You may have guessed that key is JOBS. Last week, the Labor Department reported an increase of 227,000 new jobs in February. Over the past six months, 1.2 million new jobs have been created – the highest six-month total since 2006. More jobs could lead to more spending which could boost corporate sales, earnings, and, possibly, stock prices.

While the recent employment numbers look pretty good, leave it to Fed Chairman Ben Bernanke to rain on the parade. In testimony to Congress on February 29, he said, “Notwithstanding the better recent data, the job market remains far from normal: The unemployment rate remains elevated, long-term unemployment is still near record levels, and the number of persons working part-time for economic reasons is very high.”

On a different note, last week marked the three-year anniversary of the March 9, 2009 stock market low. Since the low:

· The S&P 500 index has risen just over 100 percent
· Corporate operating earnings per share have risen just under 100 percent
· Corporate revenue per share has risen a meager 1 percent
Source: Barron’s

So, how can corporate earnings nearly double while corporate revenue barely budges? The answer… cost cutting – and a big chunk of the cost cutting came from whacking jobs. Even though we’ve added over a million jobs in the past six months, we’re still down about six million jobs from the peak, according to Barron’s.

The good news is the recent spurt in job growth may suggest that corporations have about reached the limit of cutting jobs and now have to add staff to support even small gains in revenue growth.

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 AGGREGATE NET WORTH OF U.S. HOUSEHOLDS WAS $58.5 TRILLION at the end of last year, according to data from the Federal Reserve Flow of Funds report. To put that number in context, household net worth peaked at $66.8 trillion in the third quarter of 2007. It hit a five-year low of $50.5 trillion in the first quarter of 2009 – the same quarter as the bear market low, according to Bloomberg.

The aggregate net worth of U.S. households is still $8.3 trillion below the all-time high set back in 2007.

Net worth is the difference between total assets and total liabilities. Investment holdings and real estate typically account for the bulk of households’ assets so any change in the financial or real estate markets can cause big swings in net worth.

Parsing the data a bit further shows these two interesting numbers:

1. Household debt as a percent of disposable income fell to 113 percent at the end of last year. This ratio peaked at 130 percent in 2007 and has been steadily declining. It’s good to see this number drop because it means households are deleveraging and have more income to support their debt level, according to The Wall Street Journal.

2. Debt payments as a percent of households' after-tax income (the debt-service ratio), fell to a 17-year low of 11.1 percent. Again, a lower number is better because this means consumers are allocating less of their monthly income to pay off debts. With more money left over, they can spend it on things that could propel the economy.

Some of the decline in these debt ratios may be due to the debts being written off as opposed to consumers actually having the money to pay them off. Either way, household balance sheets seem to be improving.

We don’t want to get too caught up in numbers here because that can distract from the key point which is this – consumers are deleveraging, they’re spending less of their income paying off debts, and that may bode well for the economy.

Weekly Focus – How to Innovate

Some of the most innovative new ideas are developed by simply connecting an existing idea to something new says author Jonah Lehrer. For example, the Wright Brothers were bicycle manufacturers whose first plane was akin to a bicycle with wings. Johannes Gutenberg used his knowledge of wine presses to create the printing press. And, more recently, the founders of Google took the existing idea of ranking the importance of academic articles by the number of citations and applied it to their search engine algorithm. The result – web pages that have lots of other web pages linking to it tend to score high in a Google search.

The next time you need to come up with a creative solution to a problem, try taking an idea from an unrelated field and apply it to your situation. Who knows, it might become the next billion-dollar idea!

(Disclosures)

Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA.

* This newsletter was prepared by PEAK.

* 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.

* 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 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.

* 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.

LD50001-3/12

It may not feel like it, but the U.S. stock market is off to its best start to the year since 1991, according to CNBC.

With a rise of 8.9 percent for the year, the S&P 500 index has now risen eight of the last nine weeks. Some analysts cite improving economic data, solid corporate earnings, and a stronger job picture for the bubbling stock market, according to Reuters.

But, before we get too carried away, the S&P 500 index would still need to rise about 15 percent to match its all-time record high of 1,565 hit back on October 9, 2007, according to The Wall Street Journal. The gap is not as wide if you reinvested dividends since October 2007. On that score, the S&P would be just 3.5 percent below its all-time high.

If you look at the broad stock market as measured by the Wilshire 5000 index, which tracks more than 3,700 U.S. stocks, we’re at a record high. That index eked out an all-time record high last week assuming reinvested dividends, according to The Wall Street Journal. So, from the market’s peak in October 2007 to the trough in March 2009 and back to the peak in March 2012, it was a long and winding road of about 4½ years.

We talk about the importance of thinking long-term and this market cycle round-trip is a great example of what we mean. Things looked bleak near the bottom in early 2009, but here we are three years later and the market has surged and the economy seems to be healing. Patience is indeed a virtue.

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.

CAN WE LEARN FROM OTHER PEOPLE’S WISDOM? The answer to that question is yes since no one of us is as smart as all of us. With that in mind, here are eight tidbits of investment advice from Jeremy Grantham, the co-founder and chief investment strategist of GMO, a $97 billion global investment management firm.

1. Believe in history. While past performance is no guarantee of future results, we should pay heed to history and avoid using the words “this time is different.” As the old Wall Street saw goes, “history doesn’t repeat itself, but it rhymes.”

 2. “Neither a lender nor a borrower be.” Don’t borrow money to invest. If you do, “it will interfere with your survivability.”

 3. Don’t put all of your treasure in one boat. This is investing 101 and it’s a basic tenet of sound investment practices.

4. Be patient and focus on the long term. Another piece of sound advice that is easier said than done – but it is well worth striving toward.

5. Try to contain natural optimism. While optimism may be a good survival characteristic, it can get in the way of good investment results. How? If you’re too optimistic, you may dismiss bearish news and go down with a sinking ship while those who had their eyes and ears open reached out for the lifeboat.

6. But on rare occasions, try hard to be brave. There may be times when it makes sense to be bolder than normal. If the odds look stacked in your favor, Grantham says it might make sense to be brave.

7. Resist the crowd: cherish numbers only. It’s easy to get caught up in the euphoria of a crowd – that’s how manias get rolling. But, as an investor, you have to put your analytical hat on, ignore the crowd, and sharpen your pencil (or calculator or computer!).

8. “This above all: to thine own self be true.” In order to succeed as an investor Grantham says, “It is utterly imperative that you know your limitations as well as your strengths and weaknesses. If you can be patient and ignore the crowd, you will likely win. But to imagine you can, and to then adopt a flawed approach that allows you to be seduced or intimidated by the crowd into jumping in late or getting out early is to guarantee a pure disaster. You must know your pain and patience thresholds accurately and not play over your head.”

While there are many top 10 lists of how to be a better investor, these eight from Grantham are a nice place to start.

Weekly Focus – Think About It

“Risks must be taken because the greatest hazard in life is to risk nothing.”
--Leo Buscaglia, Ph.D., professor, New York Times bestselling author

(Disclosures)

Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA.

* This newsletter was prepared by PEAK.

* 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.

* 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 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.

* 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.

LD43033-3/12

It’s been rather calm in the stock market lately.

For the past couple years, the euro zone debt problems and the “will we or won’t we relapse into a recession” worry have been on center stage. Now, Europe’s immediate liquidity issue has been patched and the U.S. economy seems to be on firmer footing. Accordingly, the stock market has responded to these developments and, last week, the S&P 500 index closed at its highest level in more than 3½ years, according to The New York Times.

Fear has declined, too. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, ended last week at about 17. That’s down from 48 reached last August and well below the 22-year average of 20.6, according to CNBC and Bloomberg. A low VIX suggests investors are less fearful of near-term market volatility.

Are there any worries on the horizon that could upset this calm?

Oil prices are one thing to keep an eye on. They rose 6 percent last week and closed at nearly $110 per barrel. Geopolitical tensions in the Middle East contributed to the rise as Iran is reportedly within sight of creating a nuclear bomb. That, of course, creates major headaches not only for the Middle East, but for the world in general.

On top of that, “There's also an oil pipeline dispute between Sudan and South Sudan in northeastern Africa; unrest in Syria, Yemen, and Nigeria; varying levels of tribal infighting in Iraq and Libya; and the possibility of leadership issues in Venezuela, where the president is undergoing his third surgery for an undisclosed type of cancer,” according to The Milwaukee Journal Sentinel.

So far, the stock market hasn’t flinched in the face of these flashpoints. However, an unexpected turn for the worse in any of these areas could trip the markets. And, since the S&P 500 index has more than doubled in value since the March 9, 2009 low, according to The New York Times, it might not take much to trigger a market correction.

As a financial advisor, we know that there is always something to worry about. Frankly, it’s our job to worry about what could go wrong so you don’t have to. The good news is, as a country we always seem to find a way to overcome whatever obstacle is thrown our way.

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.

INVESTORS TEND TO GET CAUGHT UP IN THE DAY-TO-DAY NOISE of the financial markets even though the markets often move in long secular cycles that can last more than a decade. For example, let’s look at interest rates.

At the end of 1964, the 10-year U.S. Treasury note yielded 4.2 percent. Over the following nearly 17 years, the yield rose until it peaked at 15.8 percent in September 1981, according to Bloomberg. During that span, the yield fluctuated significantly (the noise), but the long-term secular trend was a rising interest rate environment.

Since that peak in September 1981, the yield on the 10-year Treasury has been in a more than 30-year long-term secular decline. In fact, the yield was a slim 2.0 percent last week – well below 1964’s 4.2 percent. This decline was interrupted by numerous interest rate increases along the way (the noise), but the long-term trend was a decline in rates.

Turning to the stock market, it also exhibited significant moves during these two interest rate cycles.

From the end of 1964 to the end of 1981, the Dow Jones Industrial Average rose from 874 to 875. That’s no misprint. Over that 17-year period, the Dow rose exactly 1 point. In other words, it went nowhere. However, during that period, it rose as high as 1,052 and dropped as low as 578, according to Bloomberg. Here, the long-term secular trend in the equity market was to move sideways with lots of noise in between.

Fast forward to 1982. From its low in August that year, the Dow Jones Industrial Average took off on a 17+ year secular bull market that saw the Dow rise 15-fold, according to Bloomberg. And, yes, there was lots of noise during that 17-year bull run including the 22 percent decline – in one day on Black Monday – October 19, 1987.

Here’s the takeaway – markets are very noisy. While we monitor what happens in the short-term, we want you to focus on the long-term. Day-to-day fluctuations may top the headlines, but it’s the long-term trends that you should pay attention to.

Weekly Focus – Think About It

“Only put off until tomorrow what you are willing to die having left undone.”
--Pablo Picasso, Spanish painter, draughtsman, and sculptor

(Disclosures)

Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA.

* This newsletter was prepared by PEAK.

* 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.

* 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 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.

* 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.

LD42955-2/12

The Markets

Valentine’s Day is over, but there’s still a “whole lotta love” swirling around the stock market these days.

The Dow Jones Industrial Average closed last week at its highest level since May 2008 while the S&P 500 is knocking on the door of its highest close in almost four years, according to The Wall Street Journal. The gains were driven by optimism that Greece will get another bailout and better-than-estimated data on jobless claims, manufacturing, and housing, according to Bloomberg.

Even though the market has been rising, potential party spoilers abound.

You may have noticed the last time you filled your car gas prices are on the rise again. In fact, CNBC reported gas prices are at a record high for this time of year. The report says gas prices could hit an all-time record high this spring.

Gas prices aren’t the only thing on the rise. Tensions in Iran and the Middle East are stoking a rise in oil prices. Together, higher gas and oil prices could take a bite out of consumer and corporate wallets.

Over the weekend in Asia, China announced a change in its banking system reserve ratio in an effort to spur lending and economic growth. This monetary easing comes on the heels of a report that shows housing prices declined in 47 out of 70 major Chinese cities in January. Housing has been a strong economic engine for China for years and any slowdown there could cause problems.

Across the pond, new numbers show that Italy, Greece, Portugal, the Netherlands, and Belgium are now officially in recession, according to The Wall Street Journal. Even mighty Germany saw its economy slightly contract in the fourth quarter of 2011 compared to the third quarter.

Despite these negatives, the market seems to be climbing the proverbial “wall of worry.” Whether it will scale this wall and stay on top or fail to reach the top and retreat remains to be seen.

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.

HOW MUCH INCOME WOULD YOU NEED to feel “rich?” Gallup recently conducted a poll and discovered that the median income needed by Americans to feel rich was $150,000. That is three times the roughly $50,000 median annual household income of Americans.

Probing a little deeper, the survey results revealed the following interesting points:

1) 15 percent of the respondents said they needed to earn $1 million or more to feel rich while 30 percent said $100,000 or less would make them feel rich.

2) Women said they needed $100,000 per year to feel rich while men needed $150,000.

3) College graduates needed $200,000 to feel rich while non-college graduates needed $100,000.

In a separate question, Gallup asked Americans how much net worth they would need to feel rich. The median response was $1 million.

So there you have it – to feel rich in America the average American needs either $150,000 in annual income or $1 million in net worth.

Now, let’s contrast that with our tax laws. The highest marginal tax rate starts when single filers or married couples filing jointly reach $379,150 in taxable income. That’s quite a bit above the median $150,000 number that was reported by Americans to make them feel rich.

According to Gallup, “The question of the point at which someone becomes rich certainly has policy implications in the United States. Gallup finds Americans now about evenly divided on whether the rich, broadly speaking, should be heavily taxed.”

You can expect to hear a lot more about tax policy during the upcoming elections later this year.

Weekly Focus – Think About It

Did you ever notice that when you put the words “The” and “IRS” together, it spells “THEIRS?”
--Author Unknown

(Disclosures)

Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA.

* This newsletter was prepared by PEAK.

* 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.

* 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 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.

* 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.

LD42927-02/12

The Markets

Who should you believe, Warren Buffett or Bill Gross?

Buffett and Gross are generally recognized as two of the world’s greatest investors. Buffett made his name in equities while Gross made his name in bonds as the head of Pimco, a trillion-dollar money management company. Both have outstanding multi-decade track records and both are billionaires.

Yet, today, they disagree on the merits of investing in “currency-based investments” such as money-market funds, bonds, mortgages, bank deposits, and other instruments.

Buffett says these investments “are among the most dangerous of assets. Their beta may be zero, but their risk is huge.” Further, he says, “Right now bonds should come with a warning label,” according to a February 9 Fortune magazine article.

His beef with currency-based investments is they do not protect you from the risk of inflation. You may get your principal back plus interest, but, in times of high inflation, your “real” return may not keep up with inflation and you could lose purchasing power.

Gross, on the other hand, has piled into bonds in a big way.

After dumping all of his U.S. government debt securities in early 2010, Gross has steadily built it back up and now holds about 38 percent of his flagship fund’s assets in U.S. government and Treasury debt, according to Bloomberg.

Gross favors government securities in the 5- to 7-year maturity range because of the Federal Reserve’s pledge to keep short-term rates low.

Okay, how do you reconcile the divergent views of two outstanding investors? Quite likely it’s a matter of timing. Buffett is probably looking at a 7- to 10-year time horizon and, in that scenario, bonds might lose purchasing power and could experience capital losses if interest rates rise and bond prices decline.

Gross, though, is probably thinking shorter term. With the Fed’s pledge to keep interest rates low for the next couple years and the economy still stuck in slow motion, the risk of bond prices declining and inflation rising rapidly in the short term may be manageable.

Bottom line, it’s not just your outlook that matters, it’s also important to know the timeframe for your outlook. 

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 IF the keepers of the Dow Jones Industrial Average added Apple to the index in 2009 instead of Cisco Systems? This is not just a hypothetical exercise; rather, it makes an important point about using index funds to measure overall market performance.

In June 2009, General Motors and Citigroup were removed from the Dow 30 average and replaced by Cisco and Travelers Cos, according to Bloomberg. At the time, Cisco was trading at about $19.50 per share. Last week, Cisco traded at about $20.00 per share – essentially no change in nearly three years. By contrast, Apple was trading at about $143 per share in June 2009 and closed last week near $500 per share.

Unlike most other market indexes, the Dow Jones Industrial Average is a “price weighted” index, which means stocks with a higher price (e.g., Apple) have greater impact than lower-priced stocks (e.g., Cisco).

So, taking a look at the woulda, shoulda, coulda, Bespoke Investment Group recalculated where the Dow would be if Apple was added to the index in 2009 instead of Cisco. They discovered that instead of the Dow being in the 12,800 range last week, it hypothetically would have been near 14,600 – an all-time record high.

Notice how one stock could have made nearly a 2,000 point difference in the Dow index in less than three years. Of course, the reverse is also true. A stock could have been added to the Dow in 2009 and gone down the last couple years and taken the Dow down with it.

Here’s the point. We tend to think of indexes are representing “the market,” but, in reality, they represent the keepers of the indexes representation of the market. There’s human intervention in some of these indexes and that could greatly influence their performance.

In the end, the only index that matters is your index – the one that measures your progress toward reaching your goals. That’s the index we try to beat.

Weekly Focus – Think About It

“One must maintain a little bit of summer, even in the middle of winter.”
-- Henry David Thoreau, author, poet, philosopher

(Disclosures)

Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA.

* This newsletter was prepared by PEAK.

* 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.

* 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 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.

* 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.

LD33254-08/09

The Markets

How do you spell market rally? How about “Jobs.”

A much higher than expected 243,000 jobs were added to our economy in January and that helped push the Dow Jones Industrial Average to its highest close since May 2008, according to Bloomberg. On top of that, the unemployment rate dropped to 8.3 percent – the lowest since February 2009.

More good economic news came from the services sector as the pace of growth in January accelerated to its highest level in nearly a year, according to the widely followed index from The Institute of Supply Management and reported by CNBC.

While the overall economy has gained some momentum lately, the housing market is still stuck in the gutter. According to data released last week, the S&P/Case-Shiller index of home prices in 20 major cities declined 3.7 percent in the 12 months ending November 2011. Since its 2006 peak, average homes prices in the index have dropped 33 percent and prices are now back to where they were in mid-2003.

On the bright side, if you’re looking to buy a house or refinance, now is a great time. The average rate on a 30-year fixed-rate mortgage fell to 3.87 percent last week. That’s an all-time record low, according to Market Watch.

Overall, after a scare back in the fall of 2011, the economy seems to be gaining steam and stock prices have reflected that. The big question remains… is this sustainable growth or is it temporarily driven by government stimulus and intervention?

Data as of 2/3/12                        1-Week    Y-T-D    1-Year   3-Year    5-Year    10-Year

S&P's (Domestic Stocks)...................2.2%........6.9%......2.6%......17.1%.......-1.5%.........2.1%

DJ Global ex US (Foreign Stocks)....2.5%.......10.1%....-10.3%....15.9%......-3.7%..........5.9%

10-Yr Treasury Note (Yield Only)....2.0%........N/A........3.5%.......2.8%........4.8%...........4.9%

Gold (per ounce)...............................0.5%........10.1%....30.6%.....24.2%......21.7%........19.7%

DJ-UBS Commodity Index..............-0.7%.........3.5%.....-11.4%......9.9%.......-2.5%..........5.0%

DJ Equity All REIT TR Index...........2.1%.........9.0%.....12.5%......32.1%.....-1.5%..........11.1%

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

CAN THE INTERSECTION OF TWO MOVING AVERAGES foretell the future direction of the stock market? Chart watchers like to follow what’s called the 50-day moving average (50 DMA) and the 200-day moving average (200 DMA). These are lines which plot the closing price of the S&P 500 index for the last 50 and 200 days. When a new day is added, the oldest day is dropped off, hence the term “moving” average. 

The 200 DMA is supposed to reflect the longer-term “wave” or trend in the market while the shorter 50 DMA captures the shorter-term trend or momentum. How these two lines move relative to each other is what gets chart watchers excited.

Last week, the 50 DMA crossed above the slower moving 200 DMA. Market technicians refer to this as a “golden cross.” In layman’s terms it’s considered a bullish market signal, according to CNBC. In fact, Birinyi Associates said that in the 26 instances since 1962 when the 50 DMA crossed above the 200 DMA, the market was higher six months later 81 percent of the time.

Not surprisingly, when the 50 DMA crosses below the 200 DMA, there’s a name for that, too. It’s called a “death cross” and it’s supposed to signal bad times ahead. However, the last two “death crosses,” which occurred on August 15, 2011 and July 2, 2010, were not very prescient, according to The Wall Street Journal.

And, we can get further carried away with the funny technical names by throwing in the “Hindenburg Omen.” By its very name you can tell it’s not something you want to see in the markets, and, we’re happy to report, it is not being signaled right now.

Okay, does all this technical stuff really matter? It matters to the extent that some serious market participants invest based on these technical signals and their buying and selling based on these signals may affect the markets.

So, whether you believe in this type of market analysis or not, it may be helpful to at least be aware of it.

Weekly Focus – Does this make sense?

Of our five senses, which one do you think is most important? Interestingly, if brain space indicates the importance of a sense, then vision is the most important. According to The National Geographic Society, roughly 30 percent of neurons in the brain's cortex are devoted to vision. By contrast, just 8 percent are devoted for touch and 2 percent for hearing.

 (Disclosures)

Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA.

* This newsletter was prepared by PEAK.

* 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.

* 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 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.

* 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 Markets

At its most basic level, a trade takes place when a buyer is willing to buy at a certain price and a seller is willing to sell at that price. Both parties could be smart, experienced, and looking at the same data, yet somehow one party thinks it’s a good price to buy and the other thinks it’s a good price to sell.

Last week, several news items represented good examples of how investors could look at the same data and draw different conclusions. Consider these:

1.      Gross domestic product rose at a 2.8 percent pace in the October through December period.

Bullish investors say that’s up from 1.8 percent the previous quarter and the fastest pace in a year and a half.

Bearish investors say it’s less than the 3.0 percent growth expected by economists and most of the growth was due to inventory accumulation.

Source: MarketWatch

2.      The International Monetary Fund (IMF) cut its forecast for global economic growth in 2012 and 2013.

Bullish investors say fears are overblown as private-sector economic activity in the 17-nation euro zone showed small, but unexpected, growth in January and durable-goods orders were up a strong 3.0 percent in December in the U.S. – the third straight increase.

Bearish investors say just heed the IMF’s warning, “Global growth prospects dimmed and risks sharply escalated during the fourth quarter of 2011, as the euro-area crisis entered a perilous new phase.”

Source: MarketWatch

3.      Spanish and Italian bond yields dropped dramatically lately.

Bullish investors say the drop in yields and the strong demand in January’s bond auctions suggest the euro zone crisis is easing.

Bearish investors say the Portuguese bond market is now imploding, the Greek restructuring could fall apart, and the European Central Bank's December offer of unlimited three-year loans to banks has simply delayed the inevitable day of reckoning.

Source: The Wall Street Journal

It’s differences of opinion like this that make markets. Thanks to the free market, there always seems to be a buyer for every seller – at a price.

Like Joni Mitchell who sang, “I’ve looked at life from both sides now,” we look at the markets from both the bullish and bearish sides and, ultimately, make decisions which we think will best position you to meet your long-term goals and objectives.

Data as of 1/27/2012               1-Week     Y-T-D     1-Year    3-Year    5-Year    10-Year

S&Ps 500 (Domestic Stocks)            0.1%          4.7%          3.1%        15.9%        -1.5%         1.5%

DJ Global ex US (Foreign Stocks)   1.9%          7.4%        -12.2%       14.5%       -3.8%         5.5%

10-year Treasury Note (Yield Only) 1.9%          N/A            3.4%         2.5%         4.9%         5.1%

Gold (Per Ounce)                              4.4%          9.6%         29.3%      24.4%       21.8%        20.0%

DJ-UBS Commodity Index               3.8%         4.2%          -8.1%        9.9%        -1.8%          5.2%

DJ Equity All REIT TR Index          3.0%         6.8%          10.3%      29.7%        -1.5%        10.9%

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 WORRIES AMERICANS THE MOST about the national economy? Here’s the top 10 answers and the percentage who said it, according to an early January Gallup survey.

1. Jobs/unemployment - 26%
2. National debt/Federal budget deficit - 16%
3. Continuing economic decline/economic instability - 10%
4. Outsourcing of jobs overseas/creating jobs in U.S. - 6%
5. Obama not doing a good job/no plan/lack of leadership - 5%
6. Political bickering/Congress - 4%
7. Healthcare/Medicaid - 3%
8. Corporate corruption/corporations run the government - 3%
9. Housing crisis - 3%
10. The future of our children  -2%
11. Eight other responses also checked in at 2 percent

The top two items are not really a surprise, but what’s revealing is how low some “important” issues ranked. Taxes, recession, social security, gas prices, education affordability, and the divide between rich and poor (think Occupy Wall Street) all pulled just 2 percent. The stock market and interest rates barely made the list at 1 percent each and ranking 21st and 25th, respectively, out of 26 on the full list.

Interestingly, if we can resolve the two biggest items on the list – the jobs and debt situations – it would most likely also resolve the third item on the list – continuing economic decline.

Do you think the politicians are listening?

(Note: responses total more than 100 percent due to multiple answers.)

Weekly Focus – Just for fun: How to Turn a Watch into a Compass

Let’s assume that you are lost in the wilderness, but you have a watch that still works. You can easily find the cardinal points by pointing the hour hand at the sun. Then form an imaginary line directly through the center of the “wedge” that is created between the hour hand and 12 o’clock. This is your south–north line. The height of the sun in the sky and the time of day will then show you which end of the line is north and which is south, remembering that the sun sets in the west and rises in the east. Try this at home first!
--Bear Grylls, survivalist, TV host, adapted from his 2008 book, “Man vs. Wild”

(Disclosures)

Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA.

* This newsletter was prepared by PEAK.

* 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.

* 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 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.

* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Past performance does not guarantee future results.

* You cannot invest directly in an index.

The Markets

We’re only three weeks into the New Year and already some very interesting trends have developed in the markets. Consider these four:

1.      The worst performing stocks in 2011 have been the best performing in 2012. Bespoke Investment Group did an analysis and discovered that the 50 worst performing stocks in the S&P 500 in 2011 were up a whopping 11.2 percent YTD 2012 as of last Wednesday. By contrast, the 50 best performing stocks in 2011 were up only 2.1 percent so far in 2012. What a difference a “turn of the calendar” makes!

2.      U.S. Treasury securities are off to their worst start in nine years. With improvements in the employment situation, housing sales hitting an 11-month high and a reprieve in the European debt problem, investors have less need for conservative treasuries and a bigger appetite for riskier stocks, according to Bloomberg and CNBC. At the moment, investors seem to be saying, “risk on.”

3.      U.S. stocks rose for the third consecutive week and are near a six-month high. Despite a decidedly mixed start to the 4^th quarter earnings season, stocks have roared out of the gate this year and are now up 20 percent from the October 2011 low, according to Reuters. Of course, too much euphoria could lead to disappointment later.

4.      The CBOE Volatility Index (VIX) declined nearly 22 percent in the first three weeks of this year. The big decline in the VIX suggests investors are less fearful about near-term market volatility, according to CNBC. In fact, the VIX is down to a seven-month low, according to Reuters. While the markets may be calm now, we’re not complacent.

Trends come and go in the market, but one thing that stays constant is our diligence in helping you reach your goals.

WHY IS IT THAT CONSERVATIVES TEND TO WATCH FOX NEWS and those with more liberal leanings tend to watch MSNBC ? Psychologists would tell us it’s because of what they call “confirmation bias.” Confirmation bias is the tendency of humans to seek information that confirms an already held belief or opinion and to avoid or discount information that might contradict an existing belief or opinion.

This concept also applies to investing and it’s very important to avoid it as much as possible.

For example, let’s say we’re really bullish on the U.S. stock market. If we let confirmation bias cloud our judgment, then during our research, we would tend to read the reports that support our bullish view of the market and let that reinforce our decision to be bullish. By contrast, we would tend to avoid reading the reports that are bearish, or, if we do read them, we would come up with reasons why they were wrong.

When we’re under the spell of confirmation bias, it’s easy to miss turning points because we’re stuck on our current belief or opinion and won’t change even when we see contradicting evidence. That, of course, would be bad for your long-term wealth.

How strong is the confirmation bias pull?

A 2009 meta study published by the American Psychological Association reviewed 91 studies in the area of confirmation bias and concluded that people were nearly two times as likely to seek information which supported their existing view than to seek information which contradicted their current view. That’s a strong pull!

How do we overcome this pull?

Here are two keys that could help:

1. Acknowledge that confirmation bias exists. Knowing that it exists helps us try to avoid falling into its trap.
2. Actively seek contradictory opinions. This is another way of asking what could go wrong with an investment and then doing our best to ensure we understand the “other side of the coin.”

So, in addition to making a “rational” case for an investment, we have to make sure we avoid letting psychological biases get in the way.

Weekly Focus – Think About It

“If you take emotion – would be, could be, should be – out of it, and look at what is, and quantify it, I think you have a big advantage over most human beings.”
--John W. Henry, trading advisor, principal owner of Boston Red Sox

(Disclosures)

Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA.

* This newsletter was prepared by PEAK.

* 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.

* 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 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.

* 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 Markets

The U.S. became a member last August and, now, so has most of the eurozone. Unfortunately, it’s not a club you want to join.

Late last week, Standard and Poor’s (S&P) announced it was downgrading the credit rating of nine of the eurozone’s 16 members including behemoths France and Spain. In addition, 14 of the 16 members have “negative outlooks” which means S&P believes, “that there is at least a one-in-three chance that the rating will be lowered in 2012 or 2013.” The only two countries with stable credit outlooks are Germany (no surprise) and Slovakia, a former Communist country that became an independent state in 1993 after the dissolution of Czechoslovakia.

What does this mean for the future of Europe and the economy?

The New York Times called it, “A move that may have more symbolic than fundamental financial impact, but served as a reminder that Europe’s economic woes were far from over.” Underscoring that, the U.S. downgrade, has – so far – not caused much of a problem. The 10-year U.S. Treasury bond yielded a slim 1.85 percent last Friday, an indication that investors still view the U.S. as a safe haven. The bottom line is everybody knows Europe has problems and the downgrade, while not helpful, simply puts an exclamation point on the obvious.

Back in the U.S., investors seemed more interested last week in tracking our economic momentum which included an eight-month high in consumer sentiment and an improved assessment of the economy from the Fed’s Beige Book. Econoday summed it up nicely when they wrote, “Traders and investors have been moving toward the position that European problems deserve less weight than they have been given in recent months.” That may be true in the short term, but if Europe craters because of their sovereign debt problems, it’s unlikely the U.S. will escape unscathed.

Unlike Las Vegas, what happens in Europe may not stay in Europe.

THE ANNUAL CONSUMER ELECTRONICS SHOW (CES) just wrapped up in Las Vegas and, as usual, it featured a dazzling array of must-have new gizmos and gadgets that will likely show up in your hand or in your family room sometime down the road. With 2,700 exhibitors and 150,000 total attendees, it’s the showcase event for everything electronic.

We thought it’d be fun to take a look at some of today’s commonplace gadgets that were introduced at CES and have you guess the year of their debut. So, here goes…

What year did these devices debut at CES?

· Digital video discs (DVDs)
· Satellite radio
· Videocassette recorder (VCR)
· CD player
· Blu-ray disc
· High-definition television
· Camcorder

It’s not all fun and games at a show like CES. As you can see from the list above, these devices have spawned major industries that generated tremendous economic activity. Innovation is vital for economic growth, and a show like CES helps spotlight the latest electronic advances and, perhaps, the next driver of the economy.

One of the big highlights at the just concluded show was the unveiling of LG's 55-inch OLED TV packed with 3D bells and smart TV whistles. So, what in the world is an OLED TV? It’s a TV that uses a new display technology called OLED (Organic Light Emitting Diodes). OLED televisions are brighter, more efficient, thinner, and feature better refresh rates and contrast than either LCD or Plasma TVs. And boy is it thin. The LG 55-inch OLED TV is only 0.2 inches deep at its thinnest point and weighs a measly 16.5 pounds. If you’re an early adopter, you’ll want one of these beauties in your home theater later this year.

Okay, here are the answers to the “device debut” question, according to CNBC.

Digital video discs (1996), Satellite radio (2000), Videocassette recorder (1970), CD player (1981), Blu-ray disc (2003), High-definition television (1998), and Camcorder (1981).

How many did you correctly answer?

Weekly Focus – Think About It

“It's easy to come up with new ideas; the hard part is letting go of what worked for you two years ago, but will soon be out of date.” --Roger von Oech, author, inventor, consultant

(Disclosures)

Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA.

* This newsletter was prepared by PEAK.

* 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.

* 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 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.

* 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.

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The Markets

Which stock characteristic most impacted the S&P 500’s performance in 2011?

To answer that question, Bespoke Investment Group performed a decile analysis and concluded that having a high dividend yield was the most important factor affecting stock prices in 2011.

In their analysis, they discovered that the three deciles with the highest dividend yield were the only ones to experience a positive return for the year. In fact, while the S&P 500 index was unchanged for the year, the top three highest-yielding deciles rose 10.4 percent, 6.4 percent, and 8.7 percent, respectively. The remaining seven deciles all experienced a loss for the year.

Now, it won’t always turn out that the highest dividend yielding stocks are the best performers. Some years, investors will be more adventurous and bid up the riskier stocks that tend to pay low or no dividends.

Will the tide turn in 2012 and see the outperformance of the low or no dividend stocks? A lot will depend on how the economy shakes out.

Based on last week’s unemployment report, it looks like we ended 2011 with some economic momentum. The U.S. economy added 200,000 jobs in December and the unemployment rate dropped to 8.5 percent, the lowest in almost three years, according to BusinessWeek.

This week marks the beginning of another quarterly earnings season so the next 30 days or so should give us a good indication of the strength of the underlying economy.

WERE THE “NIFTY-FIFTY” REALLY THAT NIFTY? Back in the early 1970s, pundits fawned over some of the era’s fastest growing, industry-leading companies who seemed to defy the sluggish overall economy. Dubbed the Nifty-Fifty, these glamour stocks were well-known “one-decision” stocks that institutional investors clamored to own. So, how well did these stocks do over the last 40 years? Were they truly “one-decision” stocks?

While there was no official list of the Nifty-Fifty, two competing lists of 50 stocks are commonly cited, according to a research report titled, “The Nifty-Fifty Re-Revisited,” by Jeff Fesenmaier and Gary Smith of Pomona College. For today’s purpose, we’ll look at the 24 stocks that made both lists and were dubbed the “Terrific 24” by Fesenmaier and Smith.

Some of the household names on the Terrific 24 list include: McDonald’s, Walt Disney, Avon, Johnson and Johnson, and Coca-Cola. These companies are still doing well. However, some other household names on the Terrific 24 list performed poorly. Consider the following:

Xerox: It’s still around, but is a shadow of its former self and trades for about $8 per share.

MGIC Investment Corp: It went through various corporate restructurings throughout the years, but is still around as a private mortgage insurer. However, it got battered in the mortgage insurance meltdown of recent years and trades for about $4 per share.

Polaroid: The inventor of instant film couldn’t make the transition to a new world and filed for bankruptcy in 2001.

Eastman Kodak: Perhaps the saddest story of the bunch, Kodak has struggled for years to make the transition to a digital world and is now rumored to have filed for bankruptcy as early as this month, according to Reuters. Its stock sold for less than 50 cents per share last week. Ironically, Kodak invented the digital camera in 1975, but was never able to capitalize on it.

With 40 years of history, here are three key lessons we can learn from the Nifty-Fifty story:

1. Some “glamour” stocks do remain glamorous for many years, e.g, McDonald’s, Walt Disney, and Coca-Cola (although each had its “rough periods” over the past 40 years).

2. Promoting “one-decision” stocks is more of a headline-grabbing marketing strategy than a sound investment strategy.

3. Even the “best” stocks can fall to zero so it’s important to have a sell discipline.

As the British statesman and philosopher Edmund Burke said, “Those who don’t know history are destined to repeat it.”

Weekly Focus – Think About It

“The supreme purpose of history is a better world.” --Herbert Hoover, U.S. President

(Disclosures)
Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA.

* This newsletter was prepared by PEAK.

* 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.

* 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 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.

* 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.

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“Much Ado About Nothing” is one of Shakespeare’s famous comedies and, surprisingly, the title succinctly summarizes the U.S. stock market in 2011.

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There was “much ado” during 2011 as we experienced one of the most volatile years on record. For example, regarding the S&P 500 index stocks, Bloomberg said, “Individual stocks were more volatile than in 2009 and 2010, with 55 losing more than 30 percent this year compared with a total of 13 in the prior two.”

On top of that, “Stocks swung at a daily rate of twice the 50-year average after the S&P 500 reached a three-year high in April.” After hitting that high in April, the S&P 500 then plunged 19 percent over the next five months. Continuing the whiplash, the market staged a remarkable comeback and that’s where the “about nothing” comes in to play.

By the time the final trades were placed on December 30, the S&P 500 ended the year exactly where it started – and we mean exactly! It started the year at 1,257.6 and it ended the year at 1,257.6. Yet, during that time, it moved up or down a total of 3,240 points when you sum the absolute daily changes on a closing basis, according to The Chart Store via Ritholtz.com. So, after all the volatility, after all the worrying, the market ended the year right where it began. Whew!

Despite the year ending in a push, here are 10 newsworthy items that hit the headlines.

Europe reached crisis mode. Several European countries experienced severe budget problems including Greece and Italy while the dithering of European politicians kept markets on edge. The three main causes of the crisis were 1) excessive government spending leading to 2) excessive government debt coupled with 3) slow economic growth. Source: Anthony Sanders, Professor of Real Estate Finance at George Mason University, December 15, 2011

Interest rates continued to fall. The 10-year Treasury ended the year yielding below 2 percent and the 30-year yielded below 3 percent. On a total return basis, the 30-year Treasury jumped 35 percent in 2011, which is higher than every stock in the Dow Jones Industrial Average!Sources: The Wall Street Journal; Barron’s

The Middle East rose in protest. Mass protests swept the Middle East, governments were overthrown, and the political landscape was dramatically reshaped. The reverberations will last for years.Source: The Economist

Apple and Steve Jobs were everywhere. Apple was 90 days away from bankruptcy in the late 1990s, but through the magic of Steve Jobs, the company briefly became the world’s most valuable company in 2011 – surpassing Exxon! The iPhone was the #1 most searched term on Yahoo! for the year. And, yes, Steve Jobs passed away from cancer at the much too young age of 56.Sources: Bloomberg; Yahoo! News

Japan was rocked with a massive earthquake and tsunami. The devastating power of Mother Nature claimed more than 15,000 lives, shocked financial markets, and disrupted business around the world. The pain and scars of this tragedy will remain for many years.Source: Bloomberg

The U.S. credit rating got “dinged.” In August, Standard & Poor’s downgraded the AAA credit rating of the United States due to political bickering and unsustainable budget deficits. The stock market promptly fell yet, surprisingly, interest rates ended the year at extremely low levels. Source: Bloomberg

Gold kept its luster. Despite weakness at the end of the year, gold prices finished the year in positive territory for the 11th consecutive year. In times of uncertainty, investors have shown a preference for the yellow metal.Source: The Economic Times

Foreign stock markets took it on the chin. Unchanged in the U.S. looks good compared to China, which fell 22 percent; Hong Kong, down 20 percent; Brazil, down 18 percent; Germany, down 14.7 percent; and Britain, down 5.6 percent. There’s no place like home!Sources: Associated Press via Yahoo! News; Bloomberg

Burgers and banks were bookends. The best performing stock in the Dow Jones Industrial Average in 2011 was McDonald’s, which rose 31 percent. At the other extreme, Bank of America was the worst performer dropping 58 percent. Looks like a lot of people ordered an extra fry with that Big Mac.Source: Associated Press via Yahoo! News

10. “Planking” became a worldwide phenomenon. Traced back to a 20-something Australian, planking involves lying face down on the ground with your arms at your side. The “trick” is to do it in unusual places or atop peculiar objects. The unrelated “fitness” version of planking also made headlines in 2011 when a 71-year-old Wisconsinite named Betty Lou Sweeney set a new Guinness World Record by holding an abdominal plank for an incredible 36 minutes and 58 seconds. What’s even more incredible is in 2009 she was “severely overweight and nearly died from complications from an infection that went septic and shut down her kidneys.” Two years later and 100 pounds lighter, she set the world record. Yes, there’s hope for all of us!
Source: Yahoo! News

Weekly Focus – Think About It

“The bad news is time flies. The good news is you’re the pilot.”
--Michael Altshuler, speaker, entrepreneur

Happy New Year!

(DISCLOSURES)
Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA.
* This newsletter was prepared by PEAK.
* 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.
* 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 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.
* 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.
LD42487-1/12

If it feels like the stock market has been volatile this year, you’re right. Here are a few examples:

Three-month historic volatility for the “fear” gauge known as the VIX hit a record on October 31, surpassing the prior peak from December 2008.Intraday swings in the Dow Jones Industrial Average have averaged 261 points since August 1, an exceptionally large number.On four consecutive days back in August, the Dow Jones Industrial Average alternated between gains and losses of more than 400 points, the longest streak ever.Source: Bloomberg

All this volatility and the lack of a clear, sustained direction in the market have frustrated many investors.

Even hedge fund managers are struggling. Overall, they’ve declined an average of 4.4 percent this year through November, according to Hedge Fund Research. As Mustafa Jama, chief investment officer at Morgan Stanley Alternative Investment Partners recently said to Bloomberg, “What we’re seeing now is a sustained period of high volatility that’s proving very challenging for a lot of hedge fund managers.”

The problems in Europe and the budget wrangling in the U.S. have kept investors in a risk-on, risk-off mode throughout much of this year. As a result, many stocks have traded in herd-like fashion without much regard to individual company fundamentals, according to investment manager Duke Buchan, III.

At times like this, it’s important to have patience and as Warren Buffett says, wait for that “fat pitch.”

WHAT IS THE PRICE OF ECONOMIC GROWTH in China and how does it affect us in the U.S.? Ever since 1978 when Chinese leader Deng Xiaoping laid out a vision of economic reform, China has been on a growth spurt of massive proportion. However, that growth comes with a huge price in the form of limited freedom. Last week, Chinese leaders clamped down again on freedom of speech in an effort to control the spread of social unrest.

In China, the government blocks access to the microblog service “Twitter” and, instead, a Chinese version called “Weibo” has become popular. In total, more than 300 million Chinese people use microblogs, with Weibo the most popular, according to Bloomberg.

Regarding last week’s clampdown, Chinese officials announced that users of Weibo in Beijing will have to register their real names and be verified by government authorities before posting on the service. In addition, users are banned from posting anything that could lead to disrupting the social order, according to The Wall Street Journal.

This isn’t the first government crackdown on freedom of speech. Earlier in the year, the government blocked citizens’ access to searches on the “Arab Spring” that was rumbling through the Middle East. Prior to that, the government blocked access to Facebook, YouTube, and Google.

What’s the government’s problem with freedom of speech?

As the “Arab Spring” uprising in the Middle East demonstrated, social media can enable millions of people to communicate and mobilize in short order. China seems to be very afraid of letting its citizens have this capability for fear that a popular uprising could lead to chaos in a sprawling country of 1.3 billion people.

With China still a major growth engine for the world economy, we have to pay close attention to any social trends affecting the country. If the government clamps down too hard and its citizens rise up, it could quickly morph from a social/political movement to one that has major worldwide economic implications. On top of that, China is gearing up for a once in a decade leadership change in 2012 and, given the country’s history, a smooth transition is not guaranteed.

When investing money, you have to consider possible “black swan” events that have a low probability of occurring, but, if they do occur, could wreak havoc. A Chinese uprising could be one of those and we want you to know that it’s on our radar.

Weekly Focus – Think About It

“If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter.” --George Washington, U.S. President

(DISCLOSURES)
Investment Advisor Representative with and Securities and Investment Advisory Services offered through Transamerica Financial Advisors, Inc. (TFA) member FINRA, SIPC and a Registered Investment Advisor. Non-Security products and services are not offered through TFA.
* This newsletter was prepared by PEAK.
* 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.
* 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 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.
* 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.
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