Solis Wealth Management Report – July 14, 2014

The Markets

Germany may have clobbered Brazil in the World Cup quarterfinals last week, earning a chance to become the first European team to win the event in Latin America, but things back home in Europe weren’t quite so rosy.

First, a sizeable Portuguese bank startled investors when it failed to make an interest payment on its short-term debt. Investigators have found financial irregularities at the bank’s parent company and don’t believe the problem is systemic, according to Barron’s.

“…but jittery investors didn’t hang around to find out the true picture. The missed bond payment sparked an indiscriminate selloff among financials across Europe. Banks in countries at the periphery of the euro zone were particularly hard hit, but the ripples washed over markets at the core, too.”

In addition, Reuters reported a Spanish bank cancelled its bond offering and Greece was only able to place one-half of its debt issue as a wake of uncertainty about Europe’s financial system buffeted investors.

Worries in Europe intensified when industrial production numbers came in below expectation. In Germany, production fell by 1.8 percent. In France, it was off by 1.7 percent, in Britain by 1.3 percent, and in Italy by 1.2 percent. Weak industrial production is a sign the European economy is struggling to find solid footing. By the end of last week, European financial companies had lost 3.7 percent of their value and the Stoxx Europe 600 Index was down 3.2 percent.

U.S. markets moved lower last week, too, as reminders of Europe’s banking crisis renewed investor fear. Barron’s suggested investors’ skittishness also had something to do with the fact that Standard & Poor’s 500 Index has not experienced a 10 percent correction for more than two years. Corrections typically occur about every 25 months helping to, “…wipe out some of the frothy sentiment, reset expectations, and prepare the way for another move higher.”

Data as of 7/11/14 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) -0.9% 6.5% 17.5% 14.3% 16.9% 5.9%
10-year Treasury Note (Yield Only) 2.5 NA 2.6 2.9 3.4 4.4
Gold (per ounce) 1.3 11.1 3.9 -5.0 8.0 12.6
Bloomberg Commodity Index -3.0 3.5 1.2 -6.6 2.7 -1.1
DJ Equity All REIT Total Return Index 0.9 17.1 9.3 11.2 24.6 9.5

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.

WHAT IS THE VALUE OF HIGHER EDUCATION? DOES IT JUSTIFY THE COST? It appears the value of education is in the eye of the beholder. Aristotle thought education was about learning to think. He said, “It is the mark of an educated mind to entertain a thought without accepting it.” Nelson Mandela, who helped lead South Africa out of apartheid, said, “Education is the most powerful weapon you can use to change the world.” Ben Franklin wrote, “An investment in knowledge pays the best interest.” On the other hand, Abe Lincoln was self-educated and Mark Twain belittled school boards.

The cost and value of higher education have become issues for debate in recent years. During the 2013-14 school year, the average cost of tuition, room and board, and fees at a four-year public, in-state university was more than $18,000 per year or about $72,000 for four years. At a four-year private non-profit university, the cost was almost $41,000 per year or about $164,000 over four years. That’s a hefty chunk of change even without adding the interest owed on student loans and it has left some parents and students wondering whether it was money well spent.

James Altucher, a venture capitalist, Cornell graduate, and father of two young children, wrote an article questioning the value of college. He suggested young people choose not to attend college and instead start businesses, travel the world, and create art, among other things. He has since become one of the leaders of the ‘anti-college’ crusade, said New York Magazine. When asked about his stance on higher education, he told the publication he was trying to reduce demand for college so costs would go down.

Skipping college may not be the best idea. As it turns out, more than 98 percent of the world’s millionaires went to college, according to a 2013 study from Spear’s magazine and WealthInsight, a consultancy group. Just over one percent took a pass on higher education or dropped out before graduating. The dozen colleges and universities with the most millionaire alumni are:

  • Harvard University
  • Harvard BusinessSchool
  • Stanford University
  • University of California
  • Columbia University
  • University of Oxford
  • Massachusetts Institute of Technology
  • New York University
  • University of Cambridge
  • University of Pennsylvania
  • Cornell University
  • University of Michigan

Millionaires who participated in the survey typically studied engineering, business, economics, and law, although many did not pursue careers in their fields of study. According to a Spear’s editor, “Entrepreneurs, who ultimately end up being the wealthiest in the world, are innovators, and the top subjects are those which encourage new and smart thinking, whether technical or financial.”

Weekly Focus – Think About It

It had long since come to my attention that people of accomplishment rarely sat back and let things happen to them. They went out and happened to things.

Leonardo da Vinci, Italian inventor

What’s happening at Solis Wealth Management?

Please enjoy this week’s commentary from ~ Kris Placencia, Director of Client Relations

When I last wrote to you in early June, my daughter Hannah was preparing to leave to Bolivia for a month to work in a hospital and orphanage.   As I write this today, she (and I!) are preparing for her to arrive home (tomorrow from LAX!)   I’ve have been able to talk with her several times over the month and she and her teammates have shared some great pictures of their time there.  She has absolutely loved her time there and told me just the other day she’d like to stay longer.  She has been able to spend a lot of time with the interns at the hospital (many of which don’t even speak English…she said her Spanish is getting better, by default), as well shadow some of the doctors and even watch surgeries.  Given the fact that both her parents have pretty weak stomachs (and she was one of those babies that couldn’t keep much down!), I really didn’t know how well she would do but the other day when referring to surgery she said, “Bring on the blood!” It takes a special person to be in the medical field and I know she will do great!  I’ve attached a picture of her “in action”.  To say I am proud of my daughter is an understatement.

Psalm 127:3 (Living) “Children are a gift from God; they are His reward.”

The month passed quickly for me partly because I was able to take some time off and enjoyed 10 days away in MammothLakes.    I love being in the mountains and to experience the beauty of this area was such a blessing!  Although I came down with a cold before I left, it forced me to take some much needed “do nothing” time.  That doesn’t happen often for me, even on vacation, but definitely needed and appreciated.  One of my favorite places in the Mammoth Area is JuneLake. Every time I turn off of Hwy. 395 to 158 and come up over the hill to the view of JuneLake, my breath gets taken away.  It never gets old and I hope to return for many years to come. I’ve attached a picture so that you can get a glimpse of this amazing part of God’s creation.

Psalms 72:3 (Living) “The mountains will bring peace to the people…”

Until next time, I trust you are enjoying your summer where ever you are. ~Kris

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.

* To unsubscribe from the Solis Wealth Management Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject line.

Sources:

http://bleacherreport.com/articles/2125144-why-history-says-argentina-will-defeat-germany-in-american-world-cup-final

http://online.barrons.com/news/articles/SB50001424053111903684104580015250374084756?mod=BOL_hp_we_columns (or go tohttp://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/07-14-14_Barrons-Espirito_Santo_Staggers-Footnote_2.pdf)

http://in.reuters.com/article/2014/07/13/economy-global-idINL6N0PM3CM20140713

http://www.economist.com/blogs/buttonwood/2014/07/european-economy (or go tohttp://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/07-14-14_The_Economist-Four_is_a_Trend-Footnote_4.pdf)

http://uk.reuters.com/article/2014/07/10/uk-france-economy-idUKKBN0FF0OK20140710

http://www.reuters.com/article/2014/07/10/us-markets-stocks-idUSKBN0FF18H20140710

http://online.barrons.com/news/articles/SB50001424053111903684104580015201127411496?mod=BOL_hp_we_columns (or go tohttp://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/07-14-14_Barrons-Climbing_a_Staircase_of_Fear-Footnote_7.pdf)

http://www.brainyquote.com/quotes/quotes/a/aristotle100584.html

http://www.brainyquote.com/quotes/quotes/n/nelsonmand157855.html

http://www.brainyquote.com/quotes/quotes/b/benjaminfr141119.html

https://trends.collegeboard.org/college-pricing/figures-tables/average-published-undergraduate-charges-sector-2013-14

http://www.jamesaltucher.com/2011/01/8-alternatives-to-college/

http://nymag.com/news/features/college-education-2011-5/

http://www.spearswms.com/spears-intelligence/lists/smarter-money-how-the-wealthy-have-been-educated#.U8BxIhZN1Zg

http://www.brainyquote.com/quotes/quotes/l/leonardoda120920.html