The Independent Market Observer

Happy Father’s Day!

June 18, 2012

I hope all you fathers out there had a great day. I had a wonderful time playing with my son, Jackson, who is 4 years old. We brought him home from Viet Nam about three and a half years ago, and he is a great kid.

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Low Volatility in a High-Volatility World

June 15, 2012

There was more in the papers today about Europe, as the situation continues to evolve amid lots of hand-wringing about what can be done to save the region. The problem is not going away. We are facing a continuing series of what will be perceived as crises—a “hurricane season”—that will result from each country’s decision about whether to remain in the eurozone, and give up much or all of its budgetary and fiscal sovereignty, or go independent. Some, like Greece, might not end up with the luxury of being able to make the decision for themselves.

Right now, we are seeing Hurricane Spain, which will be followed shortly by others. The UK is putting flood walls in place—to extend the metaphor—and reports are that central banks around the world are readying rescue operations in case the Greek elections result in even more political and financial turmoil. What we have learned at this point is that volatility will certainly continue.

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Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets.

The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. All indices are unmanaged and investors cannot invest directly in an index.

The MSCI EAFE (Europe, Australia, Far East) Index is a free float‐adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI EAFE Index consists of 21 developed market country indices.

One basis point (bp) is equal to 1/100th of 1 percent, or 0.01 percent.

The VIX (CBOE Volatility Index) measures the market’s expectation of 30-day volatility across a wide range of S&P 500 options.

The forward price-to-earnings (P/E) ratio divides the current share price of the index by its estimated future earnings.

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