News & Views



Here is a sampling of our market updates to clients.


We are proud to present our first monthly report from our new offices, and glad to say some of the storm clouds are passing. Risks are still there but on balance appear less so than earlier this year, with the S&P500 eking out a 3.5% YTD total return through May. [Note today’s shockingly weak jobs created report throws some cold water on this]. A second interest rate rise by the Fed is now certainly expected, while who knows what we can expect in the Presidential election(!). Perhaps the best we can say is it makes for good (i.e. very poor) theater.

Many of you have been setting your update appointments where we typically will freshen up your RETIREMENT PROJECTION and address any current issues for you. Please feel free to call Karen to schedule.

Specifically too, we would like to thank you for the referrals that have been coming – we very much appreciate the confidence in us, and of course we will treat your referrals as attentively as we have always treated you.


TO:  MANAGED ACCOUNT CLIENTS                                                                                                                                                June 3, 2016

Reporting to you from our new, larger offices. Feel free to come visit us!!

The month of May brought increased stock market volatility and a continuous downward drift though the first part of the month as traders reacted to disappointing revenue and earnings from notable full-priced retailers (i.e. Macy’s, Nordstrom, Kohl’s etc.), In contrast were solid results from big-box stores and discounters (i.e. Walmart, Home Depot, TJ Maxx etc.), and the relentless growth of online retail sales. Then the following weeks showed an economy suddenly awakening from its winter slumber resulting in a string of healthy economic reports covering industrial production, orders for durable goods, new and existing home sales, retail sales, and leading economic indicators. The stock market responded with a rally, the S&P 500 index rising 1.53% to close the month and increased the year-to-date total return (including dividends) to 3.50%.

Given this improvement in the economic outlook the Federal Reserve immediately started to prepare the markets for another 0.25% rate increase in June or July. In a series of speeches several board members, including the chairwoman, Dr. Yellen, indicated at least two increases prior to year-end 2016, contingent on continued growth in the economy. In contrast to prior announcements, the markets seemed to accept the increases with no “hissy fits”. We believe that normalizing interest rates is overdue. First, the Fed needs to restock its arsenal in advance of its next economic downturn whenever that might occur. Second, the benefits of QE and monetary easing have long since waned and have created distortions and unintended consequences that must be rectified. Think of the millions of risk-averse investors and retirees that can, once again, look forward to bank CD’s as viable saving. Think of the insurers, banks and other financial entities whose earnings have been impaired by the minimal bond returns and interest rate spreads in the past 9 years – which suppressed their earnings and stock prices. 

There are reasons that we now look for an upturn in the economy, earnings and stock prices in the months ahead. Among the hopeful signs that make us more optimistic are the following:

  • Over the past year, the economy created 224,000 new jobs/month, pushing the unemployment rate down to 5% and increasing hourly earnings to a 2.5% annualized rate, presaging future growth in consumer spending.
  • Consumers have whittled their debt burden way down. In fact, consumers’ monthly debt service as a percentage of take-home pay is now at the lowest level since 1980! Recessions are exacerbated when households build up more debt than they can handle on their current income. We are nowhere near that point today.
  • The two factors that have put the most severe downward pressure on corporate earnings are abating. Since 2014, plummeting oil prices killed the energy sector’s profits, while the surging values of the dollar lowered the results of US-based multinational companies. More recently, though, oil has bounced off its lows (reaching $50/barrel) and the dollar has slipped off its highs. We are hopeful that during the second half of 2016, these factors will stop pushing profits down – and may actually start to increase corporate bottom lines again.

Nothing significant occurred on the international economic front this past month that merits any discussion.

First quarter earnings reports have largely come to an end. With the bulk of S&P 500 companies having reported, earnings are down some 6% on a year-over-year basis, a bit better than the low initial expectations. In spite of the high P/E levels, the stock market, being anticipatory by nature, can move high as we enter the second half of the year. It remains essential that earnings growth improve to justify the current valuation levels, however. Of course the Presidential election and its impact on the markets is a wild card.

There are no changes to our recommendation for a full equity allocation consistent with your risk tolerance. In view of the forthcoming rate increases, near term investments in bonds are not recommended. If your circumstances have changed and/or you are feeling uneasy, please call us to discuss your concerns or make portfolio changes.


Dusan C. Pecka, PhD, CFP®                                                                                                         Mark Greenberg, JD, CFP®

Certified Financial Planners

Facts and figures believed reliable, are from Wall Street Journal, North American Edition, and Yahoo Finance.


TO:  MANAGED ACCOUNT CLIENTS                                                  November 2, 2015


October has been an interesting month – starting out with the market dropping and re-testing the August 25th lows (which was the first sizeable stock market correction since 2011), and then having a monster rally in which the S&P 500 Index gained 8.3% for the month and a year-to-date total return of 2.62%, basically following the script we laid out in our August & September letters.

What caused the sudden change in market sentiment?

After almost two months of volatility and over-selling, the stock market was ready for a rebound. The spark was the Fed unwillingness to raise rates in September, citing global economic weakness and stock market concerns. This is leading many to believe that the Fed is unlikely to raise rates perhaps until 2016. We remain mixed on that prediction and wouldn't be surprised to see a December raise.

Now our concern is the continued global flood of money that is pushing the stock market, not economic growth or earnings strength, which are the real engines of market gains -- a) The European Central Bank indicated that the current quantitative easing (QE) program could be increased and extended past October 2016, b) China cut interest rates for a sixth time since last November, and c) Japan's Central Bank continues their bond buying program.

The distortion in financial asset prices is not healthy in normally functioning economies and highlights the failure of these Central Bank policies to raise GDP growth and inflation despite seven years of trying the same thing. Additional concerns that weighed on the markets the past two months are still in the backdrop, their status is summarized below:


  1. Oil prices continued to fluctuate between $40 to $45/barrel capped by the glut of oil (Saudi Arabia and Russia continue to produce at full tilt) but have not collapsed as some predicted. The search for supply/demand equilibrium will take more time.
  2. China reported a 6.9% GDP in the 3rd quarter (below their 7.5% goal) but their economy appears to be stabilizing. The Shanghai stock market is also recovering somewhat from its collapse earlier in the year.
  3. The Federal Reserve, as expected, did not increase rates at their October 28 meeting but signaled that a rate hike is possible at its December meeting if it sees “progress toward maximum employment and inflation rising toward its 2% target” – a direct quote. Its been 9 years since the last rate increase(!).

After a terrific 3rd quarter, the economic indicators for October show the economy decelerating once again, and a mixed picture:

  • The first reading of 3rd quarter GDP was up only 1.5% - disappointing!
  • Unemployment remained at 5.1% in September but new jobs creation dipped to only 142,000. Weekly unemployment claims stayed below 260,000 at a 42-year low, however.
  • New home sales dropped 11.5% while existing home sales rose 4.7% in September
  • Personal income and spending were lower in September at 0.1% and 0.1%               respectively. 
  • Consumer Confidence retrenched to 97.6 but sentiment rose to 90.0 in October.

All-important 3rd quarter S&P 500 earnings reports are underway. For the first time since the recession, companies are experiencing a decline in both earnings and revenue. The combined effects of moribund emerging markets, a slowing China, the high US dollar, and the collapse of commodity (oil) prices is impacting the industrial sector, particularly manufacturers, railroads and energy producers. In contrast, strong growth is being delivered in technology, aerospace and automotive, healthcare and consumer services.

It is estimated that overall S&P 500 earnings will decline 2.8% in the 3rd qtr. on a year-over-year basis and revenues will fall 4%. With forward price-to-earnings (P/E) ratios near the top of their historical range, corporate earnings (the “E”) must grow in order for stock prices (the “P”) to go up. Until the current trend reverses, investors need to lower expectations for the S&P 500 Index growth in 2016 to perhaps a mid-single digit range.


Still, despite an uneven economy and valuations on the high side, since the Fed remains accommodative, and bonds aren't very attractive and the stock correction is largely over, we recommend no changes in investment allocations unless your risk tolerance or circumstances have changed. Please be sure to call us with any concerns, or if you wish to make changes or simply discuss your financial goals.                        



Dusan C. Pecka, PhD, CFP®                                                 Mark Greenberg, JD, CFP®

Certified Financial Planners

Facts and figures believed reliable, are from Wall Street Journal, North American Edition, and Yahoo Finance.

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March 3, 2015



Like a brief summer storm, the January turmoil in oil prices, currencies, interest rates, and stock markets subsided in February! The laws of supply and demand responded to actions by the oil industry to curtail production (decreasing the number of exploration rigs, cutting back capital investments, etc.) and triggered a 15% rebound rally in oil prices and the stock market which posted several new all-time closing highs during the month. This, in spite of flare-ups in Ukraine, new barbaric acts by the Islamist ISIS terrorists and, once again, the potential of Greece defaulting on its debts to the Eurozone. The S&P 500 index rose steadily during the month closing up 5.49%.


Oil prices are in a bottoming process. No one knows where prices will eventually settle and it will take many months for supply/demand to come into equilibrium. Analysts guess around $70/barrel, which is still $35/barrel less than prices paid in the past 4 years. Domestic supplies are still growing, while production is decreasing in Venezuela, Libya, and even Russia, resulting in a higher Brent (World) benchmark (by $10/barrel) than the West Texas (U.S.) prices. This remains a huge plus for the U.S. consumer and economy.


The economy is drifting back down to a 2.5% GDP growth trend line after a quarter or two of better growth, as has been the case the past four years. The Federal Reserve has done all it can with its monetary policies. Government fiscal policies could accelerate growth but would require legislation on a number of fronts -- taxes, entitlements, immigration, etc. -- which is unlikely to happen with the current administration and Congress.


The deceleration in the economy continued in February, partially a result of the severe winter weather on the East Coast and the slowdown and layoffs in the energy sector. The indicators shown below are by no means suggestive of a recession and hopefully will perk up in the quarters ahead:


  • While January unemployment rate was only 5.7%, with 257,000 jobs created, with the average hourly wage increasing 0.5%, the weekly unemployment claims ticked up over 300,000 twice in February.
  • The second reading of 4th quarter GDP was 2.2%, slightly better than expected but still down from the initial estimate.  However, personal consumption was up, a good sign.
  • Existing homes sales shrank 4.9%, and new home sales were flat in February.
  • Consumer Confidence and Sentiment were mixed in February, with the former contracting to 96.4 and the latter ticking up to 95.4.
  • The Index of Leading Economic Indicators (LEI) pulled back to a 0.2% growth rate in January, down from 0.5% in December.
  • Durable goods orders jumped 2.8% in January, much better than expected and a nice reversal of the December decrease. This indicator is very volatile and heavily affected by aircraft sales.


Fourth quarter earnings for the S&P500 index increased about 4% year-over-year, exceeding the greatly reduced analyst expectations from estimates made in late 2014. Even with these higher earnings, the recent run-up in stock prices makes the S&P500 Index now a bit pricey, trading at a forward P/E of 17.5. This is roughly10-15% above long term averages. The distortion of zero interest rates produced by the Federal Reserve have also inflated the value of bonds and real estate, but driven down their yields. Investors thus continue to face the conundrum of somewhat high stock prices (on a long-term basis) but still the best bargain short-term when compared to zero percent on cash and 2% on long-term bonds.


As we sit on the eve of the start of the 7th bull market year, with the extended valuations, the question arises whether a “Bear” market is in the future?? Bear markets (loosely defined as a 20% or greater drop in indexes) are notoriously difficult to predict. Reason: over 70% of the time the market is moving sideways or upward.


We believe one would be swimming against a strong tide if you project a bear market this year for the following reasons.


Historically, virtually all bear markets follow a period of credit tightening by the Federal Reserve. In the current cycle the Fed hasn't yet taken any steps to tighten credit. The Fed chairman and her colleagues are talking bravely about the strong U.S. economy and plan to start “normalizing” interest rates later this year. In light of the current slowdown in business activity over the past few months, and extended stock market valuations, we think this is unlikely based on their inherent caution and awareness that large increases could trigger a recession.

Also, bank lending is up while overall leverage is at the lowest levels of the past 40 years. The odds of a banking collapse have been reduced to almost zero. The economy is far less volatile and far less prone to crisis than at any point in the last decade.

However, because of current bullish investor sentiment (Investors Intelligence, American Association of Individual Investors) and increasing speculation (margin debt hovering near all-time highs) another market pullback (less than 10% retreat) is more probable. This pullback may resemble others since 2010, which can relieve (at least temporarily) the market overvaluation and permit the resumption of the advance.


Thus, without stronger, real evidence of higher risk in the stock markets, we re-affirm our investment advice -- remain invested in the allocation consistent with your risk tolerance.


Please be sure to call us with any concerns, or if you wish to make changes.


Dusan C. Pecka, PhD, CFP®                                                 Mark Greenberg, JD, CFP®

Certified Financial Planners

Facts and figures believed reliable, are from Wall Street Journal, North American Edition, and Yahoo Finance.



June 3, 2014




May has been a dull month for the markets overall. After a dismal 1st quarter -1% GDP (2nd revision), stronger economic indicators (with a few notable exceptions) the past few weeks are suggesting a healthy rebound in 2nd quarter GDP. This and a calmer situation in Ukraine helped to reduce volatility, with the market continuing its slow uptrend, closing the month up 1.02% on the S&P500 to a new record high!

Many cross-currents this year are confounding economists and pundits alike. We see the issue as one of having “hiccups rather than a heart attack”. Rather than highlighting individual indicators, we want to briefly discuss some of the more important emerging trends affecting the economy and markets.

After the winter hiatus and spring rebound, the economy looks to resume growth at an annualized slowish rate of 2.5%. While the unemployment rate dropped to 6.3% in April, and the economy has created over 200,000 new jobs/mo. in the past six months, the labor participation rate is down to an abysmal 62.8%. People are taking disability or choosing to retain public benefits in lieu of undesirable job openings, and ever increasing number of baby boomers are choosing to retire. This powerful demographic trend will pose a headwind to higher GDP growth rates for some time to come.

The long-awaited move in inflation may finally be arriving. Producer prices surged 0.6% in April, the largest monthly gain in more than four years, and are up at a 4.1% annual rate in the past three months. This suggests the Federal Reserve should be tapering quantitative easing (QE) even faster. Bonds surprisingly have rallied in 2014, which is contrary to a strengthening economy, though some say this is due to massive liquidity injections by Global Central banks that lowers other countries bond yields (German 10-yr bonds at 1.4%) making U.S. treasuries very attractive in comparison.

After a stellar 2012-13, housing is stalling. Housing starts and existing home sales have turned down in the past few months. Because (a) smaller numbers of first-time homebuyers with fewer household formations and younger families burdened with student loans and other debt, making it difficult to take on a mortgage, (b) tighter credit rules and almost no income growth, and (c) millions of underwater homeowners still have no discernible equity to use for a new home purchase.

Overseas is a mixed picture. Japan's economy is doing well despite a new sales tax. India, Latin America, and the Middle East are improving. China continues to struggle and Europe, while out of recession, is experiencing anemic growth.

As for our stock market, we have stated many times a 10% correction can happen anytime for any reason. Corrections of 10 - 20% or more need a catalyst like a recession, debt crisis, a war or a sudden change in central bank monetary policy. We do not see any of these storm clouds at the moment, and any market correction might be moderate. The market as represented by the S&P500 is up 4.1% for these first 5 months…right in line with our start of year “best guess” of 8% - 10% for 2014.  Current stock valuations are still well within long term averages, leaving room for growth, but we shall see.

All in all the current environment continues to favor the stock market. We maintain our recommendation of a full allocation to equities consistent with risk tolerance and individual circumstances. Please call us with any questions or concerns.


Dusan C. Pecka, PhD, CFP®                                         Mark Greenberg, JD, CFP®

Certified Financial Planners

Facts and figures believed reliable, are from Wall Street Journal, North American Edition, and Yahoo Finance.


Fun fact – Last week the Dow Jones Industrial Average turned 118-years old. Only 12 stocks were used in the index's original calculation on May 26, 1896 and only 1 stock in that group remains in the index today. The Dow Jones Industrial Average is a popular indicator of the stock market based on the average closing prices of 30 active U.S. stocks representative of the overall economy (source: Dow Jones).


November 4, 2013




The past month of October was a “Two-act play”. The first half was the dreadful “political passion play” consisting of a two-week government shutdown and threats of default if the debt ceiling was not raised. The endless nattering from government officials, economists and gurus proved, once again, to be irrelevant, even nonsensical. As expected, an agreement was reached an hour before the stroke of midnight, just averting a debt default. The agreement merely funded the government until January 15, and suspended the debt ceiling until February 7.

While this “kick the can” approach insures the combatants (the Administration and Congress) will resume battle in a month or so, the “Second Act” unfolded with a strong stock market rally. The stock indices reached new highs almost daily, and the S&P 500 closed the month up a strong 4.46%.  Investors now believe that the Federal Reserve will delay any taper in the Quantitative Easing bond purchase program (QE) until stronger economic data overcomes any economic drag from the government shutdown (not before December, likely much later).

Fundamental factors also contributed to the market gains, with corporate earnings for the 3rd quarter running at approximately 3% growth year-over year, and 60% of companies beating greatly reduced estimates. Companies continue to squeeze good profits because they have extremely low financing rates / low-labor costs / minimal raises / and strong cash balances. This is an absolutely ideal environment for stocks.

Tempering our outlook are the economic indicators belowwhich highlight a decidedly mixed economy and sluggish growth – further reason for the delay in the Federal taper until December, at least.

  • September unemployment inched down to 7.2% (tortuous government rounding from 7.278 to 7.235).
  • September payrolls grew just 148,000 versus the expected 180,000 but the number of part-timers fell significantly.
  • The Washington paralysis drove October consumer confidence and sentiment down to 71.2 and 75.2, respectively.
  • Retail sales were flat in September at -0.1% change for the month.
  • The ISM manufacturing index rose to 56.2, but the services side retrenched to 54.4.
  • The Case-Shiller index of home prices rose 12.8% in August, but other housing activity slowed further in September with pending home sales down 5.6%, and existing home sales were down 1.9%.


Globally, Japan was a strong contributor to growth worldwide. Encouraging export activity in Spain, and better growth in the U.K., offer hope for the future. Though the overall rate of growth outside the U.S. is currently very small, it is positive, and growing just a bit now.

In the end, our stock market has benefited greatly from years of easy money policies of the Federal Reserve. While it is becoming more dubious whether quantitative easing has been successful in promoting economic growth, or just increasing the debt and getting the market dependent upon the extraordinary money flow, it certainly has inflated the value of financial assets (stocks). The S&P 500 now trades at forward P/E's of 15, which is not low. However, we think this multiple could increase (up to 17 perhaps?), and stocks rise further, as long as we stay in this slow-growth / low inflation environment.

Given this environment, and the continued easy money from the Fed, we recommend maintaining full equity allocations consistent with your risk tolerance level until further notice. As always we advise being on the lookout for a 10% or so temporary pull back at any time. Please call us if you have any questions or concerns.



Dusan C. Pecka, PhD, CFP®                                       Mark Greenberg, JD, CFP®

Certified Financial Planners


Facts and Figures, believed reliable, are from Wall Street Journal, North American Edition, and Yahoo Finance.


January 4, 2012




First, our best wishes to you and your family for a happy and healthy 2012…and a hope for a quieter world and less volatile market than last year!


Our economy and stock markets in 2011 were driven almost entirely by geopolitical events and macroeconomic factors outside our own economy  which had a profoundly negative impact. Re-capping the sequence of events:


  • The unrest in the Middle East, dubbed “The Arab Spring”, involving Tunisia, Egypt, Libya, and now Syria, caused a surge in oil prices, putting pressure on consumers and re-igniting inflationary fears.
  • The catastrophic earthquake/tsunami in Japan badly disrupted the world's supply-chain, and crimped our manufacturing output in mid-2011.
  • Inflationary pressures in emerging economics (i.e. China & Brazil) caused their governments to increase interest rates/bank reserves, markedly slowing their economies and hampering our exports.


These actions alone subtracted at least 1% from potential 2011 GDPwhich economists were predicting in early 2011 would be 2.5%-3.0%. All told, the year will close with only about 1.6% growth. As if this weren't enough, starting in about May 2011 the “European Sovereign Debt Crisis”, which began with Greece and propagated to Italy and Spain, drove down a very promising U.S. stock market.


The S&P500 index started the year very well, riding its 2010 momentum to a high in April, up some 8.4%, driven by excellent corporate earnings. Caught up in Europe's kabuki dance of debt, we then experienced extreme volatility (frequent daily movements of +/-2%!), and a scary 19% correction (similar to 2010), followed by a moderate drift upward to close out  2011 with a meager total return of +2.1%...again despite very strong corporate profits and improving economic indicators. Were it nor for the fear instilled by the Euro crisis, the market could have easily risen 10-15% for 2011 (as we guessed in January).

The difficulties in Europe and the emerging markets, normally an excellent source of diversification, lowering of risk, and add-on performance, made those markets worse than our own, as indicated by the indexes for International Stocks (-14.6%) and Emerging Markets (-19.7%). The negative impact was too large to be countered by the positive performance of Bonds (the Barclay's Aggregate Bond Index returned 8.2% for the year). Thus, many asset allocation portfolios turned in a slightly negative performance for 2011, depending on one's mixture of bonds and international stock positions.


Moving forward into 2012, the European debt problem continues to pose the greatest threat to the world economy and the banking system. Not only does it appear several Euro zone countries are now falling into recession (hopefully short), but ultimately the inability of their political leadership to enact a comprehensive solution threatens the viability of the Euro. Their endless meetings with half-measures and great promises have not fully reassured the credit markets on which they depend. Permanent solutions require very painful reforms affecting labor policy, pensions, and austerity, which politicians, ever short-sighted, are loathe to enact.


Not to be outdone, our own political class in WashingtonDChas continued to mismanage our fiscal affairs. From the theatrics of raising the debt ceiling last June, to the failure of the “Congressional Super Committee" to agree on tax and spending cuts, and the more recent threatened closure of government, this dysfunctional behavior only exacerbates the fears and lack of confidence -- and hence unwillingness to invest -- that corporations and individuals have been exhibiting since the recession began in 2008.



All of course is not bleak, and most fearful scenarios never do come to pass. In spite of the world turmoil and our own budget problems, the U.S.economy is showing some very hopeful signs! Specifically:


  1. The U.S. economy has grown for 9 straight quarters (albeit slowly) since the National Bureau of Economic Research declared the recession over.
  2. Inflationary pressures are abating – core CPI slowed down to 0.2% in November.
  3. Both consumer confidence and sentiment have risen markedly, and, surprise surprise, consumer spending has increased!
  4. Weekly unemployment claims have dropped to well below 400,000. The unemployment rate dropped to 8.6% in November (yet 24 million people are either unemployed or under-employed).
  5. The Index of Leading Economic indicators (LEI) has risen 2.8% in the past six months.
  6. The Federal Reserve is likely to continue an accommodative monetary policy (a Fed Funds rate of 0% – 0.25%) into 2013 in order to support the still struggling housing sector. Low interest rates also support stocks.
  7. Because of the record level earnings for S&P500 companies (through 3rdqr up 17.8% vs. last year), and no rise in stock prices in 2011, we enter 2012 with a very low P/E of 13 (based on trailing earnings) vs. the historical average of 17-18 over the past 20 years.


Stocks are quite undervalued now!


Balancing the above positives, with the aforementioned negative factors, and assuming no catastrophic global events, we believe that U.S.GDPgrowth will be in the 1-2% range in 2012. And while the torrid pace of corporate earnings will certainly slow (to perhaps 8-10%), there is ample room for the S&P 500 index to rise 8-10% in 2012, making us cautiously optimistic.


One of our favorite market strategists sees the Bulls as being shaken up by 2011, and the Bears too numerous now, both positive factors from a contrarian standpoint pointing the way to a good 2012.


Market volatility will continue, but we feel the equity portion of your portfolio should be fully invested. The alternatives all appear less attractive – real estate is moribund, bonds yield historic lows, cash gives virtually nothing, and commodities are somewhat overpriced.


As the New Year begins, be sure to call us with any concerns, or if you wish to make changes to your risk tolerance or portfolio positioning. As always, thanks for your continued confidence in us. We would appreciate it if you spread the word to your friends and associates!



Dusan C. Pecka, PhD, CFP                                         Mark Greenberg, JD, CFP    


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