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

In our weekly market commentary, it is noted that 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

Best regards,

Ron Dickinson, CPA, CFP^®, MPA-Tax

P.S.  Securities offered through Charles Schwab & Co., Inc., Member FINRA/SIPC.

* This newsletter was prepared by Peak Advisor Alliance.  Peak Advisor Alliance is not affiliated with Charles Schwab & Co., Inc.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public.  Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market.  The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

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

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

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

* Past performance does not guarantee future results.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

Sources:

http://online.wsj.com/article/SB10001424052970204880404577228740704517980.html?mod=WSJ_hp_LEFTWhatsNewsCollection

http://www.marketwatch.com/story/us-stocks-mostly-up-on-greece-optimism-2012-02-17

http://www.bloomberg.com/news/2012-02-17/u-s-stocks-advance-as-s-p-500-nears-highest-level-since-2008.html

http://www.cnbc.com/id/46439046

http://www.bloomberg.com/news/2012-02-18/china-cuts-banks-reserve-ratios-a-second-time-as-europe-threatens-growth.html

http://online.wsj.com/article/SB10001424052970204880404577224363238679298.html?KEYWORDS=euro+zone+in+recession

http://www.gallup.com/poll/151427/Americans-Set-Rich-Threshold-150-000-Annual-Income.aspx

http://www.irs.gov/pub/irs-pdf/i1040tt.pdf

http://www.quotegarden.com/taxes.html

What are the most critical pieces of personal information for you to compile and organize?  For our client event on February 7 and 9, Jennifer Carlson, an estate planning attorney in Council Bluffs, presented as our guest speaker.

One of the most caring things you can do for your loved ones is to prepare a portfolio of your important documents. This is an often overlooked part of estate planning.  Portfolio preparation consists of organizing all of your important documents in one location with user names, passwords, and verification information.

At the time of one’s passing, family members are grieving, and it is often difficult for them to identify the assets you own, locate passwords/keys, and retrieve necessary documents.  Because none of us knows when our portfolio will be needed, compiling your portfolio information is a task that cannot “wait until later.”

While each person’s portfolio will be different, following is a list that covers the most common documents.  This list can prompt you to consider additional items that need to be part of your personal portfolio as well.

Personal Data:

• Marriage license
• Divorce/Separation documents
• Social Security information
• Military service information
• Tax returns (including tax information to prepare current tax return)
• List of advisors
• Safety deposit box information
• Prepaid funeral arrangements/Cemetery plot documents
• User names, passwords, verification questions

Assets:

• Real estate deeds
• Vehicle/Motor home titles
• Stocks, bonds, investments
• Cyber assets (web page, domain name, blog)
• LLC, partnership, corporate documents
• Installment contract, promissory notes
• Bank and/or credit union accounts
• College savings plans
• Life insurance policies
• 401(k) and similar accounts
• Individual retirement accounts
• Pension documents
• Annuity contracts
• Job-related benefits
• Fraternal benefits

Estate Planning Documents:

• Will
• Trusts
• Letter of instructions

Medical:

• Medical history
• Health insurance information
• Long-term care insurance policy
• Medical power of attorney
• Living will/Do Not Resuscitate order

General Power of Attorney

You may choose to keep hard copies organized in files, or you can make use of a virtual vault such as is provided through “eMoney.”  Available through Dickinson Investment Advisors, “eMoney” is a secure online system for you to be able to view, organize, monitor, and store the combining of all your financial information in one place.  You can note in the eMoney system where your original documents are stored because, for example, your original will is filed with the court.

Regarding our guest speaker, Jennifer A. Carlson is an attorney with Stuart Tinley Law Firm LLP in Council Bluffs.  She practices primarily in estate planning, probate, wills, and trusts, and can be reached at 712-322-4033.  Stuart Tinley Law Firm LLP and its predecessor partnerships have been practicing in Council Bluffs for 150 years.  The firm is a full service multidisciplinary law office serving the Council Bluffs/Omaha metro area, southwest Iowa, regional, and national clients.

[Disclaimer:  The information contained in this article is of a general nature and is not legal advice.  Anyone seeking legal advice or assistance should contact an attorney.]

The strategic partnership between Dickinson Investment Advisors and Dickinson & Clark CPAs, PC provides the value of making one stop for your tax guidance and retirement planning.

Check out the 1040 Tax Calculator (Tax Year 2011) as an available tool on our website as you prepare your documentation during this tax season.

Also, Ron explains in his website video and his book the vital importance of integrating your tax and investment planning.

In using this tax calculator tool, enter your filing status, income, deductions and credits, then the calculator will estimate your total taxes for 2011.  Based on your projected withholdings for the year, the calculator can also estimate your tax refund or amount you may owe the IRS in April.

To access this helpful tool for assisting you in your decision-making, click on the “Tools” tab, then the “Financial Calculators” link. This page contains a number of other financial calculators as well, with tools related to:

1. Home Financing
2. Retirement Finance
3. Business Finance
4. Personal Finance
5. Savings Finance
6. Tax Estimators

This weekly market commentary contrasts the views of Warren Buffett and Bill Gross, who 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 (referring to volatility) 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 that 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, he has steadily built it back up, according to Bloomberg.  He 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 indexes 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, 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 as 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.

Best
regards,

Ron Dickinson, CPA, CFP^®, MPA-Tax

P.S.  Securities offered through Charles Schwab & Co., Inc., Member FINRA/SIPC.

* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Charles Schwab & Co., Inc.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public.  Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

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

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

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

* Past performance does not guarantee future results.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

Sources:

http://finance.fortune.cnn.com/2012/02/09/warren-buffett-berkshire-shareholder-letter/

http://mobile.reuters.com/article/vbcSmallBusiness/idUSTRE77S67420110830

http://www.bloomberg.com/news/2012-02-10/pimco-s-gross-buys-treasuries-while-buffett-says-bonds-are-dangerous-.html

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aY8XF5XAOngs

http://www.bespokeinvest.com/thinkbig/2012/2/8/aapl-vs-csco-woulda-shoulda-coulda.html

http://www.goodreads.com/quotes/tag/inspiration

It wouldn’t be the New Year without resolutions.  But whether it’s trimming your waistline or firming your financial profile, the key isn’t making the list, it’s sticking with it!

Dickinson Investment Advisors provide planning and investment services that are tailored to our clients’ unique needs and life circumstances, with a goal of achieving wise financial stewardship of their resources in retirement.

Through working with us, our clients can experience the benefits of trust, wisdom, results, regular communication, time savings, and peace of mind.

Here are five steps to get you started on the road to financial fitness.  You don’t have to do everything at once.  But get started.  We believe that as you take one step, then move to another, you’ll feel more confident.  Each step will move you closer to achieving your goals.  And remember, we are willing to come alongside you to help.

Many individuals overestimate what they can accomplish in a month or even a year, and then become discouraged with their rate of progress.   Similarly, they also substantially underestimate what they can accomplish over multiple years, and then fail to set goals or make any progress at all.  The key to achieving astonishing results is not from a big flurry of activity.  Rather, lasting success comes from small intentional steps made steadily over a long period of time, all working toward a well thought out vision for your life.

Here is a good test for decision-making:  The longer term you think, the more successful you will be.  For example, a twenty-year-old’s decision to spend a dollar today may well cost him three to four dollars out of his retirement assets.

Resolution#1:  Create a budget for life

Financially speaking, life can be viewed as a series of cash inflows and outflows.  Saving and investing during your working years should hopefully lead to a rising net worth over time, enabling you to achieve many of your most important goals, like funding your retirement.  Creating your own budget and net worth statement can help you build your road map and stay on track, even during tough times.

Create a budget.

• Track your spending for at least 30 days.
• Separate out essential and non-essential expenses.
• Designate savings in your budget first, starting with high-priority goals such as preparing for retirement.
• Our retirement savings rule of thumb:  Save 10%-15% of pre-tax income starting in your 20s, then add 10% for every decade thereafter.  If you don’t start in your 20s, substantially more savings may be required later.  A good retirement plan projection can help you make plans for a successful life.
• Consider the impact of taxes – it’s what you keep that counts.

Calculate your personal net worth annually.  (This step is so critical, yet only a fraction of folks actually undertake this task.)

• It doesn’t have to be complicated.  Make a list of your assets (what you own) and subtract your liabilities (what you owe) to determine your personal net worth.
• While your net worth may temporarily decline during tough market periods, it should generally be rising during your earning years.
• If you are retired, you will want to plan a drawdown strategy to make your money last as long as you do.

Identify your goals and create a plan to achieve them.

• With your budget and net worth statement in hand, prioritize your goals.  Give them a ranking, time frame and target savings rate.
• Revisit your plan annually to check your progress.

Project the cost of near-term, must-have, big-ticket items.

• Think tuition, property taxes, and vital maintenance (e.g. the roof or major car repairs).
• Treat that money as if it is already spent.  Keep it in liquid, safe investments like FDIC-insured certificates of deposit (CDs).

If you are retired, invest your living-expense money conservatively.

• Keep any money needed for the next twelve months in liquid, relatively safe investments like short-term CDs or money market funds.
• Keep another one- to four-years’ worth of spending laddered in short-term bonds as part of your portfolio’s fixed income allocation.
• Money in excess of these amounts should be invested to offset inflation over your retirement years.  Don’t be too conservative, as inflation is a risk in itself.

Prepare for emergencies.

• If you aren’t yet retired, keep at least three-to-six months’ worth of essential living expenses in liquid, relatively safe investments like savings accounts and short-term CDs.  That way, you can avoid having to sell when the market is down or incurring penalties by withdrawing from tax-deferred accounts.

Resolution #2:  Manage your debt

Debt is, more than anything else, the enemy of wealth.  While taking on some debt is a near certainty in everyone’s life – not many of us can afford to pay cash for a house, after all – debt is something that can be managed, reduced, and eventually eliminated from our financial lives.  Problems arise when debt becomes the master of the borrower.  Here’s how to stay in charge:

Keep your total debt load manageable.

• Don’t confuse what you can borrow with what you should borrow.  Keep the monthly costs of owning a home (principal, interest, taxes, and insurance) to no more than 28% of your gross income.  Your total debt service should not exceed 36% of your gross income.  If you exceed these guidelines, warning bells should go off for you.  Furthermore, do not use these percentages as a license to spend up to these limits.  The most successful individuals have no debt; the reason they have a high net worth is because they did not overspend to the point that debt was necessary.

Eliminate high-cost, non-deductible consumer debt.

• Try to avoid borrowing to buy depreciating assets, such as cars.  After you pay off your first car, keep driving it and then save the amount of your monthly payment for your next car.  The amount saved by not paying interest and instead receiving interest can become over your entire lifetime a small retirement nest egg by itself.
• Pay off your credit card debt.  No excuses.  You simply have to develop this discipline if you ever want to get ahead.

Match repayment terms to your time horizons.

• If you are likely to move within five to seven years, consider a shorter-maturity loan or an adjustable-rate mortgage (ARM), as long as you can live with upward mortgage payment resets if your plans change.
• Don’t borrow assuming your home will automatically increase in value.  Historically, long-term home appreciation has significantly lagged behind the total return of a diversified stock portfolio.
• Don’t buy into the conventional wisdom that claims your house is an investment.  In fact, it is a place to live.
  When you sign on the dotted line for a mortgage, you have given up a substantial claim on your future income.  If there is a risk that this income will be interrupted (such as if it would take both incomes for a couple to make the payment), you are placing your long-term well-being at risk.  Yes, it’s true that your house may go up in value, but so are all your other costs of living.

Resolution #3:  Invest with a plan

Getting better investment results is a goal we all share.  But investing is a means to an end, not an end unto itself.  So stay focused on your goals.  Create a plan that will help you stay disciplined in all kinds of markets.  Follow it and adjust it as needed.  Here’s how:

Focus first and foremost on your overall investment mix.

• Revisit your asset allocation – the overall mix of stocks, bonds and cash in your portfolio – and make sure it’s still in sync with your long-term goals, risk tolerance and time frame.  To establish asset allocation targets for your investments, you will reap the benefits of working with an experienced financial advisor.

Diversify across and within asset classes.

• Diversification is the second most important factor in helping you reach your goals.  Mutual funds and exchange-traded funds (ETFs) are great ways to own a diversified basket of securities in just about any asset class.

Consider the impact of taxes on your investments.

• Place relatively tax-efficient investments in taxable accounts and relatively tax-inefficient investments in tax-advantaged accounts.  For making these decisions, you will experience the benefits of working with a wealth advisor who also is a CPA with advanced education and experience in taxation.
• To the extent you can, use tax-advantaged accounts to rebalance and harvest losses in taxable accounts when practical.

Monitor and rebalance your portfolio to stay on track.

• Evaluate your portfolio’s performance using the right benchmarks.  For example, use the S&P 500^® Index forU.S. large-caps.
• Remember, the long-term progress that you make toward your goals is more important than short-term portfolio performance.
• A financial advisor will monitor your portfolio and periodically rebalance it back to its target asset allocation to stay on track with your plans.

Resolution #4:  Prepare for the unexpected

Risk is a fact of life.  Your financial life can be upended by all kinds of nasty surprises – an illness, job loss, disability, death, natural disasters, or lawsuits.  If you don’t have enough assets to self-insure against major risks, resolve to get your insurance in shape.  Too many people presume that bad things will not happen to them and incorrectly assume that they don’t need the proper amount of insurance.

Protect against large medical expenses with health insurance.

• Get a health care policy that matches your needs in areas such as coverage, deductibles, copayments and choice of medical providers.

Purchase life insurance to cover those people who are counting on you.

• If you have liabilities that will continue after your death for which you cannot self-insure, you will need life insurance.  If you have family members who are counting on you to provide for them, be a good steward by buying enough life insurance to cover their needs.
• Using costly insurance contracts as investment vehicles (like whole life and cash value policies) is usually not as cost effective as purchasing low-cost, term life policies and investing the difference yourself.
• Take advantage of the policy offered by your employer, but secure outside coverage if the policy is not transferable or if you need additional life insurance.

Protect your earning power with long-term disability insurance.

• The odds of your becoming disabled are greater than the odds of your dying young.  If you can’t get adequate short- and long-term coverage through work, consider an individual policy.

Protect your physical assets with property-casualty insurance.

• Check your homeowner and auto policies to make sure your coverage and deductibles are still right for you.

Obtain additional liability coverage if needed.  This type of insurance is cheap but is often overlooked.

• A personal liability “umbrella” policy is a cost-effective way to increase your liability coverage by $1 million or more.
• Obtain business or professional liability insurance if needed, as umbrella policies don’t cover business-related liabilities.

Consider the pros and cons of long-term care insurance.

• Most people would not even consider going without homeowners insurance, yet the odds of your house burning down are 1 in 1,250.  In contrast, the odds for you having a nursing home stay are nearly 1 in 2, yet many people choose to be under- insured for a cost that can amount to hundreds of thousands of dollars.
• About 59% of people over 65 do not spend any time in a nursing home.  However, for those who do, the average stay is 2.5 years.¹
• Look for a policy that is guaranteed renewable with locked-in premium rates.
• Find out such things as what type of care is covered (skilled nursing, custodial care, home-assisted living), eligibility criteria, benefit period, elimination period, maximum daily benefit, whether there is inflation coverage and how solid the insurer is.
• Seek out independent sources of information such as your state insurance commissioner.

Create a disaster plan for your safety and peace of mind.

• Review your homeowner’s or renter’s policy to see what’s covered and what’s not.  Talk to your agent about flood or earthquake insurance if either is a concern for your area.
• Keep an updated video inventory of valuable household items and possessions along with any professional appraisals
  and estimates of replacement values in a safe place away from your home (e.g. a safe-deposit box or with an out-of-town relative).
• If you have to evacuate immediately, it’s a good idea to have copies of birth certificates, passports, wills, trust documents, records of home improvements and insurance policies in a small “evacuation box” (the fireproof, waterproof kind you can lock is best) that you can grab in a hurry on your way out the door.  If you’re tech-savvy, consider scanning your important documents into a computer file you can store online or on a CD, along with a backup of your personal computer files (again, kept in a safe place away from your home).
• Keep some petty cash on hand for emergencies.  Local ATMs might be out of commission for quite some time.  You don’t want to keep too much cash on hand, but enough to get by for a few days is a good idea.  If you can’t get back to work for an extended period, having an emergency fund in your bank or brokerage accounts can help.  A standby home equity line of credit you can tap in an emergency will also be handy.

Resolution #5:  Protect your estate

Without an estate plan, the fate of your assets or minor children may be decided by attorneys, government bureaucrats and tax agencies.  Taxes and attorneys’ fees can eat away at your estate, and delay the distribution of assets just when your heirs need those assets most.  Here’s how to protect your estate – and your loved ones.

Update your will so your final wishes are fulfilled.

• A will can provide for support and care of your dependents, and help you avoid the costs and delays associated with dying without one.

Coordinate asset titling with the rest of your estate plan.

• The titling of your property and non-retirement account can affect the ultimate disposition and taxation of your assets.
• Keep information on beneficiaries up-to-date to ensure the proceeds of life insurance policies and retirement accounts get to your heirs quickly, without having to pass through the probate process.

Have in place durable powers of attorney and health care advance directives.  In these documents, appoint trusted and competent confidants to make decisions on your behalf if you become incapacitated.

Consider creating a revocable living trust.  This is especially important if your estate is large and complex.

Take care of important estate documents.  Make sure a trusted and competent family member or close friend knows the location of your important estate documents.

Finally, remember you don’t have to do everything at once.  Take one step at a time.  As you do, you can make some real progress toward fine-tuning your financial figure this year.

1. Source: National Association of Insurance Commissioners.

[Reference:  “Get Your Finances in Shape for 2011.”  Rande Spiegelman CPA, CFP^®, Vice President of Financial Planning, Schwab Center for Financial Research.  December 22, 2010.]

Important Disclosures

Investors should consider carefully information contained in the prospectus, including investment objectives, risks, charges and expenses. You can request a prospectus by calling Schwab at 800-435-4000.

Please read the prospectus carefully before investing.

Past performance is no guarantee of future results and your investment value and return will fluctuate such that shares, when redeemed, may be worth more or less than original cost.

An investment in a money market fund is neither insured nor guaranteed by the FDIC or any other government agency. Although the fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in the fund.

Some specialized exchange-traded funds can be subject to additional market risks. Investment returns will fluctuate and are subject to market volatility, so that an investor’s shares, when redeemed or sold, may be worth more or less than their original cost.

Diversification and asset allocation strategies do not assure a profit and do not protect against losses in declining markets.

The S&P 500 Index is an index of widely traded stocks. Indexes are unmanaged, do not incur fees or expenses and cannot be invested in directly.

Certificates of deposit offer a fixed rate of return and are FDIC-insured.  Penalty for early withdrawal may apply.

Fixed income investments are subject to various risks, including changes in interest rates, credit quality, market valuations, liquidity, prepayments, corporate events, tax ramifications and other factors.

This report is for informational purposes only and is not an offer, solicitation or recommendation that any particular investor should purchase or sell any particular security or pursue a particular investment strategy. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Examples provided are for illustrative purposes only and are not representative of intended results that a client should expect to achieve.

This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner or investment manager.

The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.

“Where There’s a Will, There’s a Way”  is an informational meeting for the public which will be held on February 7 and then again on February 9.  Jennifer Carlson, an estate planning attorney in Council Bluffs, will be our guest speaker.

Do you know about the most effective vehicle for carrying out your estate planning goals?  How will you decide between a will and a trust?  What happens if you do nothing regarding your estate?  What happens if your will or trust is out of date?  What do you need to know about power of attorney?  What is there to know beyond just traditional estate planning?

For answers, we invite you to our seminar, “Where There’s a Will, There’s a Way,” sponsored by Dickinson Investment Advisors.

We will offer the seminar during two different time slots:

                   Tuesday, February 7, 3:00-4:30 pm

                   Thursday, February 9, 7:00-8:30 pm

The seminar will be held in our new conference room at our expanded offices at 533 S. Main St., Council Bluffs, Iowa.

Our guest speaker will be Jennifer A. Carlson, an attorney with Stuart Tinley Law Firm, LLP in Council Bluffs.
She practices primarily in Estate Planning, Probate, Wills, and Trusts.  Ms. Carlson’s background includes:

Education:

Buena Vista University – B.A., Magna Cum Laude, 1978

Southern Illinois University School of Law – J.D., Summa Cum Laude, 1982

Biography:

Ms. Carlson graduated first in her law school class receiving outstanding achievement awards in Trusts and Estates, Property, and Commercial Law.  She served as Editor-in-Chief of the Southern Illinois University Law Journal and has been inducted into The Honor Society of Phi Kappa Phi.  In addition to her law practice, Ms. Carlson also has experience in federal income taxation and is a member of the Iowa State Bar Association, the Nebraska State Bar Association, the Pottawattamie County Bar Association, and the Council Bluffs Estate Planning Council.

Ms. Carlson and her family are dedicated community volunteers.  She has served nonprofit organizations throughout the Council Bluffs and Omaha metro area for more than 25 years.  Heartland Family Services, the Omaha Symphony Guild, the Knights of Aksarben Foundation, and the Cystic Fibrosis Foundation, among others, have recognized the Carlson family for commitment to community.  She is a current member of Leadership Council Bluffs.

Stuart Tinley Law Firm LLP and its predecessor partnerships have been practicing in Council Bluffs for 150 years.  The firm is a full service multidisciplinary law office serving the Council Bluffs/Omaha metro area, southwest Iowa, regional, and national clients.

Please come and join in with an informative time of learning.  Who do you know and want to bring along that could benefit from this excellent learning experience as well?

RSVP to our office at 712-256-4856.  As you have any questions regarding this client event, please ask for Tom Sperling.

How do you spell market rally?  How about “j-o-b-s.”

This week’s market commentary discloses that 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 MarketWatch.

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?

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 indicative of foresight about what was to happen with market conditions, 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.

Best regards,

Ron Dickinson, CPA, CFP^®, MPA-Tax

P.S.  Securities offered through Charles Schwab & Co., Inc., Member FINRA/SIPC.

* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Charles Schwab & Co., Inc.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

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

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

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

* Past performance does not guarantee future results.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

Sources:

http://www.bloomberg.com/news/2012-02-03/u-s-stocks-rise-a-fifth-week-on-employment-manufacturing-data.html

http://www.marketwatch.com/story/30-year-mortgage-rate-falls-to-record-low-387-2012-02-02-103240

http://www.cnbc.com/id/46251738/

http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldocumentfile&blobtable=SPComSecureDocument&blobheadervalue2=inline%3B+filename%3Ddownload.pdf&blobheadername2=Content-Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-type&blobwhere=1245328085685&blobheadervalue3=abinary%3B+charset%3DUTF-8&blobnocache=true

http://www.cnbc.com/id/46203721

http://online.wsj.com/article/BT-CO-20120201-707123.html

http://www.cnbc.com/id/38690976/?Time_to_Fear_the_Hindenburg_Omen_%C2%A0

http://channel.nationalgeographic.com/channel/brain-games/watch-this-perception-facts/

This weekly market commentary explains how 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 theU.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 is 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.

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%

(Eight other responses also checked in at 2 percent.  Responses total more than 100 percent due to multiple answers.)  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, ranking 21^st and 25^th, respectively, out of 26 on the complete 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?

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”

Best regards,

Ron Dickinson, CPA, CFP^®, MPA-Tax

P.S.  Securities offered through Charles Schwab & Co., Inc., Member FINRA/SIPC.

* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Charles Schwab & Co., Inc.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

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

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

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

* Past performance does not guarantee future results.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

Sources:

http://www.marketwatch.com/story/economy-expands-28-in-fourth-quarter-2012-01-27

http://www.marketwatch.com/story/imf-cuts-global-growth-outlook-cites-euro-fears-2012-01-24

http://www.marketwatch.com/story/euro-zone-pmi-shows-unexpected-january-growth-2012-01-24

http://www.marketwatch.com/story/durable-goods-orders-up-strong-30-in-december-2012-01-26-92200?link=MW_story_insert

http://online.wsj.com/article/SB10001424052970203363504577186832680553296.html?mod=WSJ_Markets_section_Heard

http://www.gallup.com/poll/152009/Americans-Economic-Worries-Jobs-Debt-Politicians.aspx

http://www.mensjournal.com/bear-grylls

We’re only three weeks into the new year, and already some very interesting trends have developed in the markets.  In this weekly market commentary, consider these four trends:

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.

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 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

Best regards,

Ron Dickinson, CPA, CFP^®, MPA-Tax

P.S.  Securities offered through Charles Schwab & Co., Inc., Member FINRA/SIPC.

* This newsletter was prepared by Peak Advisor Alliance.  Peak Advisor Alliance is not affiliated with Charles Schwab & Co., Inc.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public.  Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market.  The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

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

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

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

* Past performance does not guarantee future results.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

Sources:

http://www.bespokeinvest.com/thinkbig/2012/1/18/losers-become-big-winners.html

http://www.bloomberg.com/news/2012-01-21/treasuries-off-to-worst-start-since-2003-on-strengthening-global-economy.html

http://www.reuters.com/article/2012/01/21/us-usa-stocks-weekahead-idUSTRE80K04O20120121

http://www.marketwatch.com/story/us-stocks-start-cautiously-dow-gets-ibm-boost-2012-01-20

http://www.cnbc.com/id/46070779

http://www.apa.org/pubs/journals/releases/bul1354555.pdf

http://trendroom.wordpress.com/2011/02/08/trend-following-quotes/

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.

This weekly market commentary reveals how late last week, Standard & Poor’s (S&P) announced it was downgrading the credit rating of nine of the eurozone’s sixteen members including behemoths France and Spain.  In addition, fourteen of the sixteen 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.

UnlikeLas Vegas, what happens in Europe may not stay inEurope.

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 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

Best regards,

Ron Dickinson, CPA. CFP^®, MPA-Tax

P.S.  Securities offered through Charles Schwab & Co., Inc., Member FINRA/SIPC.

* This newsletter was prepared by Peak Advisor Alliance.  Peak Advisor Alliance is not affiliated with Charles Schwab & Co., Inc.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public.  Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market.  The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

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

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

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

* Past performance does not guarantee future results.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

Sources:

http://www.standardandpoors.com/ratings/articles/en/us/?articleType=HTML&assetID=1245327294763

http://www.nytimes.com/2012/01/14/business/global/euro-zone-downgrades-expected.html?hp

http://www.marketwatch.com/story/consumer-sentiment-highest-since-may-2012-01-13

http://www.marketwatch.com/story/feds-beige-book-more-upbeat-about-economy-2012-01-11

http://barrons.econoday.com/reports/rc/2012/Resource_Center/Archives/SE-Archive/01-16-12/index.html?cust=barrons&year=2012

http://www.cnbc.com/id/45900987?slide=1

http://www.huffingtonpost.com/2012/01/09/lg-oled-tv-55-inch_n_1194326.html

http://www.leadershipnow.com/creativityquotes.html