The weather in Los Altos is mild, and it feels a little cooler than normal. It’s a good time to crank up the Investor’s Report again after a summer break. July brought the heat out, and it seemed like the entire West Coast suffered in brutal 105-118 degree heat for more than a week.

The financial markets rolled around, and several components hit extremes along with the weather. A barrel of oil neared the $80 level during one of the international crises. Honestly, I can’t remember which one. As of this writing, the black, gooey stuff is trading just below $70 - but remember it’s up from around $35 a barrel a couple of years ago.

Stocks took a dip in July, putting a little hair on the dog, but have recovered because of strong business fundamentals. The S&P 500, a widely used index for measuring domestic stocks, is ahead by nearly 2.6 percent since June 30, the end of the calendar quarter. Bonds, too, have jumped around while we were on our summer yachts, with the 10-year Treasury bond leaping to roughly 5.2 percent in early July and finishing the month of August at a yield of 4.79 percent.

This all took place while the Federal Funds rate moved to what may be its cycle high of 5.2 percent. This bond situation is called an inverted yield curve, which occurs when short rates are higher than long rates. Normal status is when investors get paid a higher yield for holding longer-term bonds. Just think about it: Uncertainties like inflation may affect your return over 10 or 15 years of the life of a bond, so you want more yield. But today’s bond investor gets a higher income for holding short-term bonds. The risk is that short rates will go down, and when you renew your 5 percent, one-year CD, you will be offered 2.5 percent.

Corporate earnings for the current quarter are predicted to be up around 14 percent, and the valuation based on earnings for the S&P 500 is near a five-year low.

Rick Glaze is president of Glaze Capital Management Inc. of Los Altos. You can reach him at rick@glazecapital.com.