Solis Wealth Management Report – November 18, 2013

The Markets

If you found holiday songs or Beatles tunes humming through your head last week, it may have been your subconscious processing world and market events.

Over the river and through the woods/To Grandmother’s house we go… Janet Yellen, current Vice Chairman and nominee to be the next Chairman of the Federal Reserve System, testified at her confirmation hearing before the U.S. Senate’s Committee on Banking, Housing, and Urban Affairs on Thursday. Her comments were widely interpreted as indicating that current stimulus measures will remain in place. This made investors happy and helped push global stock markets higher.

In the United States, the Dow Jones, S&P 500, and NASDAQ, all appear to be headed toward milestones. The Dow is nearing 16,000, the S&P is closing in on 1,800, and the NASDAQ is approaching 4,000.

You say you want a revolution/Well you know/We all want to change the world… China’s third plenum of the 18th Central Committee, which also is being referred to as a blueprint for reform, a reform manifesto, and the Decision on Major Issues Concerning Comprehensively Deepening Reforms, is ambiguously phrased, according to The Economist. However, it appears to encourage:

“…Experimentation in everything from trading rural land to the freeing of controls on interest rates. Barriers to migration will be further broken down and the one-child policy relaxed. A widely resented system of extra-judicial detention, known as laojiao (re-education through labor), will be scrapped.”

China’s leaders also promised to elevate the role of markets in the economy. That news helped push Shanghai Composite Index higher last week.

Data as of 11/15/13

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

1.6%

26.1%

32.9%

14.5%

16.2%

5.6%

10-year Treasury Note (Yield Only)

2.7

NA

1.6

2.9

3.7

4.2

Gold (per ounce)

0.1

-24.0

-24.7

-2.0

11.9

12.6

DJ-UBS Commodity Index

0.0

-11.4

-12.4

-6.1

0.0

-0.4

DJ Equity All REIT TR Index

1.3

5.0

12.9

12.0

21.9

9.3

Notes: S&P 500, 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.

HAVE YOU BEEN OFFERED A LUMP SUM DISTRIBUTION? Not too many employers offer pension plans anymore. You know, pension plans. The kind of retirement plans that employers used to offer; the type where employees generally didn’t contribute and the benefits they received in retirement were determined by their salaries, length of employment, and other factors.

If you’ve ever worked for a company that had one, it’s possible that the offer of a lump sum distribution may be headed your way. If you accept a lump sum distribution, you’re choosing to receive a pile of cash today instead of monthly or annual pension payments in retirement. Basically, you’re agreeing to take responsibility for investing the money and generating a stream of income during retirement so your employer doesn’t have to do those things.

Why are companies offering lump sum distributions? The Pension Protection Act of 2006 (PPA) established new accounting rules. Companies with pension plans must recognize their plans’ funded status on their balance sheets each year. Since balance sheets are scrutinized by analysts and investors, and lots of pension plans are underfunded, companies decided it was time to take action.

How underfunded are these plans? A Wilshire Associates report cited by Reuters found the difference between the amount that S&P 500 companies will owe to retired workers and the amount those companies have set aside to pay retirees is more than $1.5 trillion. How much is that? Well, if you took one trillion one-dollar bills and strung them end-to-end, the chain would stretch further than the distance from the earth to the sun!

Anyway, having an underfunded plan became a corporate finance headache. Two-thirds of companies that have pension plans are trying to limit the effect of those plans on their financial statements (69 percent) and cash flows (58 percent), as well as reduce the overall cost of their plans (41 percent), according to a recent Towers Watson survey. CFO Research in collaboration with Mercer said employers plan to do this by:

·         Adopting more conservative investment strategies

·         Transferring pension obligations to insurance companies by purchasing annuities

·         Offering lump-sum payouts to retired and current employees

In many cases, accepting a lump sum payout rather than having income from a pension may have a significant impact on your retirement.

Weekly Focus – Think About It

“The average 401(k) account balance fell 34.8 percent in 2008, then rose from 2009 to 2011. Overall, the average account balance increased at a compound annual average growth rate of 5.4 percent over the 2007-2011 period, to $94,482 at year-end 2011… The median 401(k) account balance (half above, half below) increased at a compound annual average growth rate of 11.5 percent over the period, to $42,082 at year-end 2011.”

— Employee Benefit Research Institute, June 2013 [12]

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 a few short weeks, it will be Christmas and we will be getting ready to ring in 2014!

The kids are doing great and very excited for the holidays.  Travis found a Mater car at Wal-Mart a while back (he loves the Disney movie “Cars”) and hasn’t stopped talking about what he wants for Christmas.  Avery still wants all things princess and if you ask her, it’s preparation for what she will be when she grows up: “a real princess like Princess Kate.” J

This past week, it was Avery’s turn to be “Star of the Week” in her Kindergarten class.  Usually the star week coincides with a child’s birthday, but since Avery has a summer birthday, the teacher picks a mid-year week so that no child is left out during the year.  I can guarantee going back to school last Tuesday was the easiest day of the year.  She was so excited to be able to share special toys and be the center of attention for an entire week.  On Friday, I took the day off so I could bake and bring special allergen free chocolate chip cookies and a gluten/dairy free pizza for lunch (and treat the rest of her class to pizza and cookies as well).  It was such a special time for Avery.

It’s safe to say that Thanksgiving and mealtime preparations are in full swing at the Valentine household.  This week, the school celebrates Pilgrim/Grandparent’s Day with tons of food so I’ll be making gluten/dairy free pumpkin bread, corn muffins and pudding for Avery to eat with the stew they are making.  Each year, the holiday baking chaos that ensues gets a little bit easier as I learn to plan in advance and get more familiar with allergen free baking.  The best news is the “Paleo Diet” is sweeping the nation, which means there are an abundance of recipes to choose from.

During the month of November, it’s refreshing to see so many positive and uplifting messages on social media as people really take the time to recognize their blessings.  My hope and prayer every year is that it will continue beyond the holiday season.  Each day is a gift from above and even in my darkest days, I try to find at least 1 thing to be thankful for each day; intentionally approaching my day with an attitude of gratitude.  I encourage you to continue in the spirit of thankfulness throughout the rest of 2013 and into the New Year.  You might be surprised to see the impact it has on your life, family and relationships.  I am beyond grateful for my family, children and our team at Solis Wealth Management.  We really are a family and truly care about each other’s needs and the needs of those around us (including you!).  Please know that we are always here for you and if you ever need to talk or have a prayer request, we are available.

Have a blessed and wonderful Thanksgiving! ~ Tiffany

Best regards,

Greg R. Solis, AIF®
President

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

* 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.

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

Sources:

http://www.reuters.com/article/2013/11/15/us-markets-global-idUSBRE96S00E20131115

http://www.usatoday.com/story/money/markets/2013/11/17/stock-market-in-milestone-heaven/3576739/

http://www.economist.com/news/china/21589869-communist-party-calls-wide-ranging-economic-reforms-and-gives-itself-new-tools-implement

http://www.economist.com/blogs/analects/2013/11/reform-china

http://www.bloomberg.com/news/2013-11-15/china-s-stock-index-futures-rise-as-oil-refiners-may-move.html

http://www.investopedia.com/terms/d/definedbenefitpensionplan.asp

http://ww2.cfo.com/retirement-plans/2013/04/the-great-pension-derisking/

http://www.reuters.com/article/2013/04/07/us-corporate-pensions-wilshire-idUSBRE9360CC20130407

http://www.marketwatch.com/story/more-us-companies-formalizing-plans-to-de-risk-defined-benefit-pension-plans-towers-watson-survey-finds-2013-11-12?reflink=MW_news_stmp

http://www.ehd.org/science_technology_largenumbers.php

http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/11-18-13_CFO_Research_and_Mercer-Evolving_Pension_Risk_Strategies-June_2013.pdf

http://www.ebri.org/publications/ib/index.cfm?fa=ibDisp&content_id=5283