Pacific Wealth Management Market Comment

by Jim Kuntz on May 15, 2013

The financial markets have been showing signs of increasing volatility over the last month.  This is hardly surprising, given the near vertical five-month rally in stocks since mid-November. The run-up in stock prices is directly attributable to the continuing and unprecedented levels of government bond purchases by the central banks of the developed countries around the world.  The stock market rise is despite the International Monetary Fund’s recent reduction in their growth estimates for just about every major region on the planet.  The European Union remains stagnant, as their ongoing recession, bailouts and forced austerity become increasingly challenging for a growing list of Mediterranean countries. While China’s pace of growth is no longer quite as robust, the U.S. economy’s momentum is also slowing and possibly illusory.  We firmly believe the large scale financial market manipulation, through massive bond purchase programs, has artificially inflated security values and will ultimately lead to an increase in future volatility for these same markets.

Last month gold declined dramatically and gave back some of the appreciation from recent years . We still believe gold has a viable role in in our diversified portfolios. As the central bankers continue their extraordinary amount of bond purchases and further debase their currencies in the process, we anticipate  the emerging countries of the world will view gold as a currency alternative to their investments in U.S. $ denominated Government bonds and the European Union’s € denominated bonds.  This hedge offers  China, India, South Korea, Brazil, and the other emerging economies with trade surpluses, some insulation to the depreciating $ and €. These ongoing policies of the big central banks will likely stoke demand for gold as long as the Ben Bernanke’s of the world continue their extraordinary amount of  money creation. In addition, demand for physical gold appears strong in all markets of the world and seems to have even increased since the price decline.

Our recent investments  into energy infrastructure and an absolute return fund are performing well.  Rather than Sell in May and Go Away, often embraced by much of Wall Street, we will continue managing risk through prudent diversification.

James C. Kuntz, CIMA

Market Comment from Pacific Wealth Management

by Jim Kuntz on March 22, 2013

As 2012 fades into the memory banks, the financial markets of 2013 are beginning the year in a very similar fashion to last year.  Despite estimates for the U.S. economy to grow at a tepid 2% pace, along with a deepening European recession, stock markets around the world are off to a very optimistic start in the new year.

These strong markets are being driven by the “developed world’s” central banks unending policy of money creation.  Essentially, the USA, UK, Switzerland, Europe and Japan are attempting to inflate their economies out of their economic malaise.  Domestically, Ben Bernanke and the U.S. Federal Reserve Bank are printing $85 billion every month and then purchasing that same amount of U.S. Government and Government Agency bonds.  This ongoing effort of financial market manipulation, to keep interest rates low, encourages investment capital to move out of the safety of money markets, treasury bills and C.D.’s and into the riskier investments of stocks and real estate.  Unfortunately, the central bank’s bond-buying-strategy cannot continue indefinitely and must end at some point.  Like an addiction, the longer the market manipulation, the more reliant the financial markets become on it and the more vulnerable these markets are to future volatility.  We do not expect the Federal Reserve Bank to change their levels of bond purchases any time soon, but as the “when to reduce and/or stop the policy” debate continues, the markets are likely to become increasingly nervous. Until our U.S. Congress and President come to a long-term resolution on the budget deficit, the markets will move in fits and starts.

In recent months, we have been shifting more investments into inflation sensitive securities, while reducing our bond holdings.  Pacific Wealth Management believes these extraordinary times continue to make prudent diversification an essential part of our wealth preservation strategy.

What to make of the markets in 2013?

February 11, 2013

Despite tepid GDP growth in the U.S. of around 2% (compared to the long-term average of around 3 ½%), along with a recession in the UK and most of Europe, this year’s stock markets have rallied to multiyear highs. We believe these strong markets are being driven by the U.S. Federal Reserve Bank’s continuing policy [...]

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The Taxpayer Relief Act of 2012

January 4, 2013

The fiscal cliff compromise extends the majority of tax cuts that were scheduled to expire at the end of 2012, in addition to retroactively reinstating some rules that had expired in 2011. The legislation also introduces a number of changes including a new top tax bracket of 39.6%, and an increase in the top long-term [...]

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Pacific Wealth Management Market Comment

November 20, 2012

The long awaited elections are now behind us and, as we expected, nothing has changed in Washington D.C.  An equally divided American electorate has chosen to maintain the political status quo.  Our government leaders, unfortunately, do not inspire confidence and last week’s “post-election” stock market decline underscored the financial market nervousness regarding our economic prospects, [...]

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When Should I Take Social Security Retirement Benefits?

October 23, 2012

The Social Security Administration announced the annual Cost-of-Living Adjustment to benefits in pay status and adjustments to the wage base last week so we thought it a good time for a Social Security themed segment that we will write in multiple parts titled simply “When Should I Take Social Security Retirement Benefits”. Deciding when to [...]

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Quarterly Market Comment from Pacific Wealth Management

September 28, 2012

Pacific Wealth Management has maintained a conservative posture to our portfolios this year as an extraordinarily long list of complex challenges continue to increase the probability of financial market volatility.  The United States, Europe and Japan’s policy response to these challenges, and resulting tepid global economy, is focused on a strategy of government bond purchase [...]

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“More to Life” – Petco Park Tour

August 2, 2012

Pacific Wealth Management® is proud to announce another well attended More to Life event last Saturday morning.  The sunny day was pristine and everybody enjoyed the informative “Behind the Scenes” tour of Petco Park, one of Major League Baseball’s most beautiful ballparks. The More to Life series of events is designed to bring the company’s [...]

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Market Comment from Pacific Wealth Management

June 18, 2012

This year’s financial markets are imitating the volatile roller coaster ride we experienced in 2011. Like last year, the large majority of forecasts for the 2012 economy were optimistic, as most of Wall Street believed the worst of the global banking crisis was behind us.  As we saw in 2011, U.S. stocks moved higher in [...]

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Quarterly Market Comment from Pacific Wealth Management

March 20, 2012

The financial markets in 2012 are behaving in a very similar fashion to the early months of 2011.   Optimistic outlooks abound and many on Wall Street believe the worst of the global banking crisis is behind us.  After an initial surge of optimism last year, US stocks rode a roller coaster with dramatic dips and [...]

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