Solis Wealth Management Report – December 23, 2013

The Markets
To borrow a word from the legendary Gomer Pyle: G-O-L-L-Y!
In 1955, just five years before The Andy Griffith Show became a big hit, William McChesney Martin, Jr., then Chairman of the Board of Governors of the Federal Reserve System, made an often-quoted speech in which he said, “The Federal Reserve, as one writer put it, after the recent increase in the discount rate, is in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming up.”
Last week, Fed Chairman Ben Bernanke didn’t confiscate the punch. He simply modified the recipe by adding a lower proof of spirits when he announced the Fed would begin to taper its bond buying program. Starting in January, the Fed will spend $10 billion a month less on bonds (the amount will be evenly split between Treasuries and mortgage-backed securities). Taking away the punch bowl would have entailed ending all bond purchases and increasing the discount rate. The Fed has indicated it will not change the discount rate for some time.
After an initial dip on the news of impending tapering, many markets around the world moved higher. The Dow Jones Industrial Average and the Standard & Poor’s 500 Indices pushed to record highs. Britain’s FTSE 100, Germany’s Dax, and France’s CAC indices all pushed higher on Wednesday, as did Japan’s Nikkei 225 Index. In the bond market, U.S. Treasury yields rose and then fell on the day of the announcement.
The beginning of the end of quantitative easing wasn’t the only news that drove markets higher last week. On Friday, the U.S. Commerce Department reported that U.S. gross domestic product (GDP) – a measure of our nation’s productivity – accelerated faster than originally thought during the third quarter. The reasons for the upward revision were increased consumer and business spending.
Life may have been simpler in fictional Mayberry R.F.D. – and they certainly had fewer choices as consumers – but economics and the responsibilities of the Federal Reserve weren’t any less complicated.

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.
IN THE EARLY DAYS OF BANKING IN THE WILD WEST, THERE WEREN’T too many rules about what banks could and couldn’t do. According to The New York Times, in the early1900s:
“…Commercial banks established security affiliates that floated bond issues and underwrote corporate stock issues. (In underwriting, a bank guarantees to furnish a definite sum of money by a definite date to a business or government entity in return for an issue of bonds or stock.) The expansion of commercial banks into securities underwriting was substantial until the 1929 stock market crash and the subsequent Depression.”
After the crash, thousands of banks failed.
In 1933, Congress passed the Glass-Steagall Act (a.k.a. the Banking Act). The Act defined the difference between commercial and investment banking activities. Commercial banks primarily took deposits and made loans while investment banks helped companies issue stock and invested in securities. The Act prohibited commercial banks from participating in investment banking activities. It also created the Federal Deposit Insurance Corporation (FDIC) whose job was to protect commercial banks’ clients’ deposits up to a certain amount.
In 1999, after years of financial prosperity, Congress changed its mind and passed the Gramm-Leach-Bliley Act (GLBA) which effectively repealed the parts of Glass-Steagall that prevented commercial banks from participating in investment banking activities. Some believe the change in rules played a significant role in the global credit crisis during which commercial banks suffered billions of dollars in losses because of their investment banking activities.
In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed in response to the global credit crisis and subsequent government bailout. The 953-page Volcker Rule is part of the Act and was passed by regulators in December of this year. It establishes a set of rules that are intended to prevent FDIC-insured banks from making risky bets with customers’ deposits. In particular, banks that rely on taxpayer guarantees are largely prohibited from proprietary trading and hedge fund investments. We’ll know more when regulators decide how the rules will apply and who will enforce them.
George Bernard Shaw said, “We are made wise not by the recollection of our past, but by the responsibility for our future.” Let’s hope when it comes to U.S. banking law, he proves to be right.
Weekly Focus – Think About It
“As a child my family’s menu consisted of two choices: take it or leave it.”

–Buddy Hackett, American comedian

What’s happening at Solis Wealth Management?
Please enjoy this week’s commentary from ~ Greg Solis
2013 has turned out to be a great year in every way.  At Solis Wealth Management, we had our best year ever!  I am privileged to work with a team that I truly enjoy being with everyday. I believe that we are synergistically working together to have a positive impact on the world around us.
There was a time in my journey when I became aware of how easily we can get sucked into chasing the things of this world, and my desire to have a “successful” career is a good reminder of how vulnerable I am to the “rat race”.  After a lot of soul searching, coaching and prayer, I began to see Solis Wealth Management for what it really is.  It is a platform to not only help my clients accomplish the things they value, but to also provide for my family and positively impact my staff, the community, and ministries we serve.  I realize that outside of my commitment to God, my wife and my children, Solis Wealth Management is very high on my priority list because of the lives that are being changed.  I’m truly humbled and honored to be able to lead Solis Wealth Management.
On the home front, the kids are doing great.  Jack began high school this year and it’s amazing to watch him transform into a young man.  He is doing well in school, loves playing golf and basketball on the high school team.  He can’t get enough surfing and wake boarding and he still utilizes his amazing singing skills.  Earlier this year he was asked to sing “Amazing Grace” at the Desert Christian Academy School Auction Gala in front of 450 donors.  Karl Rove was in the audience as our keynote speaker, as well as other dignitaries, and Jack stayed as cool as a cucumber.  This year he’s already been asked to sing at another Gala hosted by Old Town Artisan Studio.  Jack is so much fun to be around and he never ceases to amaze me.
Nicole has grown into a tall, beautiful young woman and is mature beyond her years.  She has so much wisdom and discernment for her age I sometimes forget she’s only 12.  She’s in 6thgrade and dominates in sports.  As a 5th grader last year she was asked to play on the 8thgrade “A” basketball team and she did great.  This year, she’s playing on the 8th grade “A” volleyball team and still doing amazing.  In soccer, she’s very strong and powerful.  Although she writes with her left hand, she’s ambidextrous in sports.  She kicks equally hard with both legs, shoots basketball with her left hand, dribbles with her right hand, etc.  I used to think she was just real uncoordinated; little did I know how gifted she is.  As fun as it has been to watch her play sports, I am in awe over her inner beauty.  Nicole is one of the most loving and compassionate people I know.  Words cannot describe how proud I am of her.
Emily is our last elementary schooler.  Emily’s mind (and mouth J) never stops. She has so much going on in her head and when she makes up her mind to do something, it will get done!  Emily has always cracked me up.  She is enthusiastic about life, loves others, and is passionate about God, family and friends.  She does great in school and soccer, but has an unquenchable thirst for dance.  She’s currently in ballet, jazz, tap, and modern dance classes.  She frequently gets moved up to dance with girls 2-4 years older.  She has an amazing ability to feel the music and create a dance on the spot.  She will literally bring people to tears with her dancing ability. Emily is a precious girl.  I always tell her, “Without you Emily, I might as well shrivel up and die.”
Monica continues to pour her heart and soul into holding us all together, and she does an amazing job.  Her days are fast and furious and she rarely has any down time.  We’ve been very intentional in having a weekly date night and getting away alone.  We had a bucket list trip this year to Europe.  I had never been to Europe, so for Monica’s birthday in June, I booked a cruise that took us to Spain, Italy, and France.  We had a great time and it was a much deserved time away for Monica.  We celebrated our 21st wedding anniversary and as I frequently tell her, we’re going to “fail our way to success”.  God continues to teach me how to be the husband He wants me to be, and I will spend a lifetime trying to get it right.  I love my precious wife and I’m so excited about our journey together.

2013 has truly been amazing, and although we have our challenges like most families and businesses, I feel blessed beyond what I deserve.  When I think about my precious family and friends, the awesome staff I work with, the clients I have the privilege to serve and the community we positively impact, I’m humbled and feel inadequate.  My response is that of deep gratitude and a desire to steward it well and serve God unconditionally.  As you celebrate this Holiday may you experience peace and love, knowing that you’ve been blessed beyond measure.  Merry Christmas! ~ Greg
Best regards,
Greg R. Solis, AIF®
President

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://fraser.stlouisfed.org/docs/historical/martin/martin55_1019.pdf (page 12 of the document)
http://blogs.barrons.com/stockstowatchtoday/2013/12/18/markets-toast-taper-news-send-dow-sp-500-to-record-highs/?mod=BOL_hp_highlight_1
http://online.barrons.com/article/SB50001424053111904399004579262371932942350.html#articleTabs_article%3D1(or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/12-23-13_Barrons-How_the_Market_Learned_to_Love_the_Taper.pdf)
http://www.bbc.co.uk/news/business-25442514
http://blogs.barrons.com/incomeinvesting/2013/12/20/u-s-third-quarter-gdp-growth-accelerates-to-4-1/?mod=BOLBlog
http://topics.nytimes.com/top/reference/timestopics/subjects/g/glass_steagall_act_1933/
http://www.investopedia.com/articles/investing/062513/role-commercial-banks-economy.asp
http://www.investopedia.com/terms/g/glass_steagall_act.asp
http://www.investopedia.com/terms/g/glba.as
http://www.investopedia.com/terms/d/dodd-frank-financial-regulatory-reform-bill.asp
http://economix.blogs.nytimes.com/2013/12/13/a-modest-volcker-rule/
http://www.brainyquote.com/quotes/authors/g/george_bernard_shaw.html
http://www.brainyquote.com/quotes/topics/topic_funny.html#HPdj8ZiBwRJQmmxX.99