Solis Wealth Management Report – October 7, 2013

The Markets

For Sturm und Drang enthusiasts, the third quarter of 2013 held plenty of mayhem and emotion. It began with an overthrow of Egypt’s democratically-elected government and ended with the United States government at risk of defaulting on Treasury and government obligations. In between:

Fed officials had a lot to say. Like background music that manipulates your emotions, the U.S. Federal Reserve’s ongoing commentary about potential changes to U.S. monetary policy affected global stock and bond markets throughout much of the year, and third quarter was no exception. When the Fed didn’t adjust quantitative easing in September, markets celebrated. Apparently, they’d lost sight of the fact that the Fed could decide to taper at its next meeting in October. When reminded of that fact, markets retreated a bit.

Emerging market currencies bounced. Changing expectations for U.S. monetary policy had a profound effect on emerging markets. Many saw their currencies lose value relative to the U.S. dollar early in the quarter; some regained it as the quarter progressed. The most spectacular performance may have been delivered by the Indian rupee which went from being Asia’s worst performing currency to one of the world’s best in just five days.

Shibor Shock startled investors. During the second quarter, China’s GDP grew at the slowest pace in more than two decades. As curtains opened on the third quarter, the world saw Chinese banks staggering as the Shanghai Interbank Offered Rate (Shibor), China’s benchmark interest rate for an overnight bank lending, exceeded 25 percent. Shibor was about 2.5 percent early in 2013. The ensuing cash crunch created concern China’s economy might be in trouble. Apprehension increased when the country’s finance minister, Lou Jiwei, confounded analysts and investors by suggesting China’s Gross Domestic Product (GDP) growth rate for 2013 might be 6.5 or 7 percent rather than the official target of 7.5 percent.

Europe may have turned the corner. In mid-August, the Eurozone’s GDP grew by 1.1 percent annualized. Markets breathed a sigh of relief on the tentative hope positive growth signaled a turning point for the region’s lagging economy which had been in recession for 18-months up to that point.

As the quarter ended, the world’s attention turned to U.S. fiscal policy as Congress battled over budgets and debt ceilings. Last week, Congress reached an impasse and the government shutdown partially. If they are unable to resolve differences, the U.S. government is at risk of defaulting on its debt; an occurrence experts say could send shockwaves through the global economy. Needless to say, the new quarter holds endless potential for storm and stress.

Data as of 10/4/13

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

-0.1%

18.5%

15.7%

14.1%

9.9%

5.0%

10-year Treasury Note (Yield Only)

2.7

NA

1.7

2.5

3.4

4.2

Gold (per ounce)

-2.3

-22.7

-27.0

-0.1

8.4

13.4

DJ-UBS Commodity Index

-0.6

-8.5

-14.5

-2.8

-3.4

0.4

DJ Equity All REIT TR Index

-1.8

2.5

5.5

11.8

9.5

9.2

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.

IF YOU’VE BEEN LAMENTING THE STATE OF AMERICA, TAKE HEART… We’re still really good at some things. For example, we have more entrepreneurs – people who organize and operate businesses – than any other country in the world. About one of every 13 Americans is an entrepreneur, according to The Economist. That’s almost 7.5 percent of our population! The Netherlands isn’t too far behind us in the ratio of entrepreneurs to population at large (about 6.5 percent). However, less than 4 percent of Brits are entrepreneurs and less than 3 percent of the citizens of France, Sweden, and Germany are so inclined.

Forbes.com postulates entrepreneurship in America can be attributed, in part, to the fact that our country is a magnet for venture capital. During 2012, the U.S. ranked second overall – ahead of Sweden and behind Israel – in venture-backed capital as a percentage of GDP, according to The Organization for Economic Cooperation and Development (OECD). Also, we value the entrepreneurial spirit. Let’s face it, Americans love the underdog. We don’t see failure as failure when risk-taking is involved. We see it more as daring. As Teddy Roosevelt once said:

“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.”

The Forbes article also pointed to the influence younger generations, specifically Millennials, are having on our economy. According to CMO.com, Millennials buy fewer cars, prefer renting to owning, and eat less fast food. They want transparent workplaces and collaborative work environments. In response to their preferences, car sharing, media sharing, home and vacation sharing, and other types of collaborative businesses have been born. Millennials are creating opportunities for entrepreneurs everywhere!

Weekly Focus – Think About It

“After a storm comes a calm.”

–Matthew Henry, English commentator on the Bible

What’s happening at Solis Wealth Management?

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

Welcome to fall (finally)!!

The crisp morning air and being able to play outside with the kids after dinner is a welcomed break from the heat and humidity this summer.  We’ve gone on family bike rides around our development and it’s just been blissful.  This time of year, we finally get to see our neighbors again as people go outside for the first time in 4 months, coming out of summer hibernation. You know you’re from the desert when 85 degrees is suddenly cool enough to go for a jog!  In fact, I opened the windows the other morning and it was a “freezing” 70 degrees and my kids jumped on the couch with blankets, shivering like it was the middle of winter.  I wish I had a chance to video tape that and email to my Dad in Michigan (who wears shorts until it drops below 50 degrees back home).

All in all, we have gotten into a great routine now that school’s back in session. Avery’s doing better in kindergarten and not fighting me on her homework as much as she did in the beginning.  It still amazes me the amount of work that they already do at this age.  I’m pretty sure I was still playing house and finger painting when I was in kindergarten. She’s super smart and genuinely cares about her friends.

Travis is doing fantastic.  When I watch him, it just amazes me how absolutely different he and Avery are.  While I am so thankful for Avery’s persistence and feisty attitude, I am so grateful over how easy and calm Travis has been.  Just the other night, he was upset that we wouldn’t give him what he wanted for dinner so he pouted, stood up and stomped to his room and gently shut his door.  When I peaked in, he was sitting on his bed looking angry.  He basically put himself into a quiet time to calm down! I had to walk to another room to keep from laughing over the situation. Avery was always more the type to share her tantrums with us (and the rest of the neighborhood).  I’m guessing Travis is just learning what NOT to do from what Avery does and gets in trouble for. J

I’m looking forward to knowing that the holidays are quickly approaching.  Stores are putting up decorations for Christmas already and I’m excited to start planning for our allergen free holiday baking.  I hope all of you enjoy the season and I look forward to seeing some of you soon!

Have a wonderful October! ~ Tiffany

Best regards,

Greg R. Solis, AIF®
President

Solis Wealth Management
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.

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Sources:

http://www.economist.com/news/leaders/21580462-muhammad-morsi-was-incompetent-his-ouster-should-be-cause-regret-not-celebration-egypts

http://online.barrons.com/article/SB50001424053111903320604579107383630972324.html?mod=BOL_hpp_dc

http://www.bloomberg.com/news/2013-06-28/fed-s-lacker-says-he-doubts-more-monetary-stimulus-effective.html

http://www.theguardian.com/business/2013/sep/19/world-markets-federal-reserve-stimulus-feelgood-factor

http://www.bloomberg.com/news/2013-09-20/bullard-says-weaker-data-prompted-borderline-fomc-taper-delay.html

http://www.indianexpress.com/news/us-easing-hits-many-emerging-market-currencies-but-rupee-the-worst/1157884/

http://articles.economictimes.indiatimes.com/2013-09-11/news/41971517_1_mecklai-financial-rupee-harihar-krishnamoorthy

http://www.reuters.com/article/2013/07/15/us-china-economy-gdp-idUSBRE96E01M20130715

http://www.economist.com/news/finance-and-economics/21580501-how-will-chinas-lenders-respond-shibor-shock-ten-days-june

http://www.economist.com/blogs/economist-explains/2013/07/economist-explains-2

http://www.economist.com/news/china/21582048-are-chinas-economic-goals-odds-its-growth-targets-missing-mat

http://www.economist.com/news/finance-and-economics/21583650-recovery-last-no-revelation-mirabile-dictu

http://finance.yahoo.com/blogs/the-exchange/ready-washington-quadruple-witching-hour-204821773.html

http://finance.yahoo.com/news/stocks-see-more-volatility-shutdown-212343593.html

http://articles.washingtonpost.com/2013-09-29/business/42510768_1_government-shutdown-default-debt-limit

http://www.economist.com/blogs/graphicdetail/2013/10/daily-chart-3

http://www.forbes.com/sites/mikemaddock/2013/09/25/why-americans-make-the-best-entrepreneurs-for-now/

http://www.oecd-ilibrary.org/sites/entrepreneur_aag-2013-en/06/03/index.html?contentType=&itemId=/content/chapter/entrepreneur_aag-2013-27-en&containerItemId=/content/serial/22266941&accessItemIds=/content/book/entrepreneur_aag-2013-en&mimeType=text/html

http://www.theodore-roosevelt.com/trsorbonnespeech.html

http://www.cmo.com/content/cmo-com/home/articles/2013/9/5/expert_interview_the.frame.html

http://www.brainyquote.com/quotes/authors/m/matthew_henry.html