Solis Wealth Management Report – August 12, 2014

The Markets

During the dog days of summer, a triple dip – three melting scoops of frozen goodness perched precariously on a waffle cone – can be delicious. There are other kinds of triple dips that are a lot less welcome, though. Just look at Italy.

Last week, the Italian National Institute of Statistics released its preliminary estimate of productivity in the third largest Eurozone economy. It showed Italy’s economy contracted (again) during the second quarter of 2014. That puts Italy firmly in triple-dip territory, according to The Washington Post:

“The greatest trick the devil ever pulled was convincing Italy to join the euro. It hasn’t grown since. After its GDP fell 0.2 percent, Italy is stuck in a triple-dip recession. Yes, triple: its economy started shrinking in 2008, relapsed in 2011, and now again in 2014. Although, at this point, it’s probably more accurate to just call this a depression. After all, Italy’s economy has contracted 11 of the previous 12 quarters. It’s been enough to wipe out almost all its growth the past 14 years.”

Much of the rest of Europe is faring somewhat better than Italy, but growth is not robust. Reutersreported Germany’s economy, the largest in Europe, is expected to show stagnant growth during the second quarter of 2014 as the crisis in Ukraine and sanctions on Russia take their toll. German exports to Russia have fallen and German business leaders have said tens of thousands of jobs may be at risk.

All eyes will be on Europe during the next few weeks as second-quarter preliminary growth numbers are released. Experts may have their fingers crossed, hoping the unprecedented package of stimulus measures announced by the European Central Bank (ECB) a couple of months ago will offset the negative effects of geopolitical tensions. However, Bloomberg opined that policy changes often take a while to make a difference. In the meantime, European economies may bevulnerable to risks like geopolitical unrest in Ukraine and the Middle East.

Data as of 8/8/14 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 0.3% 4.5% 13.8% 19.9% 13.9% 6.1%
10-year Treasury Note (Yield Only) 2.4 NA 2.6 2.3 3.8 4.2
Gold (per ounce) 1.4 9.0 0.9 -8.2 6.8 12.6
Bloomberg Commodity Index 0.2 1.3 1.9 -6.0 -0.4 -1.3
DJ Equity All REIT Total Return Index 0.7 16.8 14.7 20.1 18.0 9.6

S&P 500, Gold, Bloomberg 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 Total Return 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.

QUICK! WHAT’S THE FASTEST GROWING COUNTRY IN LATIN AMERICA? Nope, it’s not Brazil. The gross domestic product (GDP) growth forecast for Brazil was lowered from 2.2 percent in January 2014 to 1.8 percent in June 2014, according to The Economist. That means Brazil is expected to grow more slowly than the United States this year.

It’s not Peru, “a country that has enjoyed Asian-style growth averaging 6.4 percent a year in 2003-13.” Peru’s growth has benefited from the country’s role as a major producer of gold and copper. During 2014, Peru dropped to second place in Latin America’s economic growth contest.

So, who’s in first? Here are a few hints:

  • It’s between Ecuador and Venezuela
  • It has a coastline on both the Pacific Ocean and the Caribbean Sea
  • It’s the second most bio diverse country in the world (In addition to having lots of butterflies, orchids, and amphibians, it has more bird species than Europe and North America combined.)
  • Americans of a certain age may remember it as the epicenter of the 1980s war on drugs (Think cartels and FARC guerillas.)

That’s right. Colombia’s economy is expected to deliver the fastest growth in Latin America during 2014 – and its vibrancy is unrelated to drugs. Like Peru, Colombia is a beneficiary of the commodity lottery. Its main exports are oil and coal whose prices have held up better than those of gold and copper in recent years. In addition, The Economist reported the country has benefitted from a variety of reforms and development efforts including:

“A law in 2012 cut onerous payroll taxes (while raising income tax on the better-off). The result is that formal-sector jobs are growing at 8 percent a year, while the large informal sector has started to shrink, which ought to boost productivity. Ambitious, albeit delayed, private-public partnerships in roads and railways should see investment of up to $25 billion by 2018.”

The country’s leaders also implemented a fiscal rule that has reduced the public-sector deficit to less than 1 percent of GDP.

Colombia’s economic growth potential is mitigated by the risks of its ongoing civil conflict. President Juan Manuel Santos was re-elected after campaigning on a promise to negotiate peace with FARC guerillas.

Weekly Focus – Think About It

“Positive anything is better than negative nothing.”

–Elbert Hubbard, American writer

What’s happening at Solis Wealth Management?

Please enjoy this week’s commentary from ~ Tiffany Valentine, Director of Operations/Associate Wealth Advisor

It’s hard to believe that in just over a week, Avery will be in 1st grade and this time next year, Travis will be in Pre-Kindergarten! We’ve had an amazing summer.  Early in July, Avery was able to take a special vacation with her grandma “grammy” and great aunt “aunt gammy”.  They managed to make her feel like a special princess for 3 days: they stayed on the Queen Mary, took a boat to Catalina and spent another day at Knott’s Berry Farm.  Her week ended on a very high note at the Medieval Times dinner in Buena Park where she was crowned Queen for the evening.  She came home with a sparkle in her eyes (along with a new tiara)!  While she was gone, Chris and I had a great opportunity to spend a few evenings with Travis alone, doing “boy stuff” and watching “boy movies”.  By the end of the week, Travis was really starting to miss his sister a lot and gave her a GIANT hug when she got home.  As soon as she walked in the door, they played with each other and talked for hours; it was so sweet!

A week later, Avery loaded up again, this time with us to take our annual family vacation down to MoonlightBeach in Encinitas (San Diego).  We were a little worried because last year it was cold out; sweater weather almost every day.  This year was a completely different story! We couldn’t have asked for a better week at the beach.  It was a sunny 80 degrees every day and the water was really warm at 70 degrees.  I can honestly say I haven’t actually swum in the ocean since I was a child, but this year, I was out for 2 days with the kids splashing and jumping waves.  Avery took her first stab at body boarding and loved it (until the next day when her stomach muscles ached).  Travis actually walked on the sand and ran in and out of the water to ankle deep, which is a HUGE improvement over last year!  We took a day off from the beach to enjoy Sea World and then another day, road the train down to SeaportVillage.  The kids slept well the entire time we were away and got along with each other fabulously!  Chris and I were even able to sneak away for an hour to sit on the patio, talk and read a book while watching the wave’s crash on the shore.  It was just perfect.  I feel so blessed that we are able to escape the heat each year. We’ve been going to the same place for about 5 years now, so it’s fun that we are able to make this a family tradition each year and make lasting memories for kids.

This week, I am attending the LPL annual conference in San Diego and am excited to see what we will be able to implement into our practice so that we are able to better serve all of you.  As always, I am available if you need anything.  Enjoy the end of your summer! ~Tiffany

Best regards,

Greg R. Solis, AIF®
President

78-075 Main Street
Suite 204
La Quinta, CA 92253
Office: (760) 771-3339
Fax: (760) 771-3181

www.soliswealth.com
E-Mail: greg.solis@lpl.com

CA Insurance License #0795867

The Wealth Advisors of Solis Wealth Management are also Registered Representatives with and securities and advisory services are offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC

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* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.

*Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

* 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.

*The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* 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. Investing involves risk, including loss of principal.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* Stock investing involves risk including loss of principal.

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Sources:

http://www.nytimes.com/2014/08/07/business/international/italy-falls-back-into-recession-raising-concern-for-eurozone-economy.html?_r=0

http://www.istat.it/en/archive/130067

http://www.washingtonpost.com/blogs/wonkblog/wp/2014/08/07/italys-triple-dip-recession-has-wiped-out-all-its-growth-since-2000/

http://www.reuters.com/article/2014/08/02/us-ukraine-crisis-germany-economy-idUSKBN0G20JH20140802

http://www.bloomberg.com/news/2014-08-06/geopolitical-risks-weigh-on-germany-s-factory-orders.html

http://www.economist.com/blogs/americasview/2014/07/latin-americas-economies?zid=305&ah=417bd5664dc76da5d98af4f7a640fd8a (or go tohttp://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/08-11-14_The_Economist-The_Wrong_Way-Footnote_6.pdf)

http://www.economist.com/news/finance-and-economics/21610305-colombia-overtakes-peru-become-regions-fastest-growing-big-economy-passing (or go tohttp://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/08-11-14_The_Economist-Passing_the_Baton-Footnote_7.pdf)

http://www.sciencekids.co.nz/sciencefacts/countries/colombia.html

http://www.theguardian.com/global-development-professionals-network/2014/feb/03/us-war-on-drugs-impact-in-latin-american

http://www.washingtonpost.com/opinions/an-interview-with-colombian-presidentjuan-manuel-santos/2014/08/07/3eaff428-1ced-11e4-82f9-2cd6fa8da5c4_story.html

http://www.brainyquote.com/quotes/quotes/e/elberthubb122772.html