Mon07282014

News

Downtown green park pops up again in August

Downtown green park pops up again in August


Ellie Van Houtte/Town Crier
The Third Street Green debuts Aug. 3 on the 300 block of State Street in downtown Los Altos.

Another temporary park is poised to pop up in downtown Los Altos this summer.

According to Brooke Ray Smith, community devel...

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Schools

MVLA rolls out laptop integration this fall

MVLA rolls out laptop integration this fall


Town Crier File Photo
Starting in the fall, daily use of laptops in the classroom will be standard operating procedure for students at Los Altos and Mountain View high schools as the Mountain View Los Altos Union High School District launches a pil...

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Community

Generations blend behind the scenes at 'Wizard of Oz'

Generations blend behind the scenes at 'Wizard of Oz'


Altos Youth Theatre and Los Altos Stage Company rehearse a scene from “The Wizard of Oz.” ELIZA RIDGEWAY/ TOWN CRIER

A massive troupe of young people and grownups gathered in Los Altos this summer to stage the latest iteration of a childhood sta...

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Sports

Football in July

Football in July


Town Crier file photo
Mountain View High’s Anthony Avery is among the nine local players slated to play in tonight’s Silicon Valley Youth Classic.

Tonight’s 40th annual Silicon Valley Youth Classic – also known as the Charlie...

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Comment

Pools should be included: Editorial

Los Altos residents should be receiving calls this week from city representatives conducting a survey to determine priorities for a revamped Hillview Community Center.

Notice that we did not say “civic center” – chastened by a lack of public support...

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Special Sections

Looking for life without lows, local diabetic tests artificial pancreas

Looking for life without lows, local diabetic tests artificial pancreas


Photo by Ellie Van Houtte/Town Crier
Dr. Trang Ly, left, reviews blood sugar readings on a smartphone with Los Altos resident Tia Geri, right, and fellow participant Noa Simon during a closed-loop artificial pancreas study for Type 1 diabetics.
...

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Business

Palo Alto law firm coming to 400 Main

Palo Alto law firm coming to 400 Main


Ellie Van Houtte/ Town Crier
Longtime Palo Alto law firm Thoits, Love, Hershberger & McClean plans to open an office at 400 Main St. in Los Altos after construction is complete in November.

A longtime Palo Alto law firm plans to expand int...

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Books

"Frozen in Time" chronicles harrowing WWII rescue attempts


Many readers can’t resist a true-life adventure story, especially those that shine a spotlight on people who exhibit supreme courage in the face of adversity and end up surviving – or not – against the odds.

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People

RICHARD PATRICK BRENNAN

RICHARD PATRICK BRENNAN

Resident of Palo Alto

Richard Patrick Brennan, journalist, editor, author, adventurer, died at his Palo Alto home on July 4, 2014 at age 92. He led a full life, professionally and personally. He was born and raised in San Francisco, joined the Arm...

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Travel

Travel Tidbit: Ritz-Carlton, Lake Tahoe offers spa getaway

Travel Tidbit: Ritz-Carlton, Lake Tahoe offers spa getaway


Courtesy of Ritz-Carlton
The Ritz-Carlton in Lake Tahoe offers fall getaway packages that include spa treatments and yoga classes.

Fall in North Lake Tahoe boasts crisp mornings and opportunities to spend quality time in the mountains. Specially ...

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Stepping Out

PYT stages 'Shrek'

PYT stages 'Shrek'


Lyn Healy/Spotlight Moments Photography
Dana Cullinane plays Fiona in Peninsula Youth Theatre’s “Shrek The Musical.”

Peninsula Youth Theatre presents “Shrek The Musical” Saturday through Aug. 3 at the Mountain View Center for the Performing Arts...

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Spiritual Life

Foothills Congregational: 100 years and counting

Foothills Congregational: 100 years and counting


Courtesy of Carolyn Barnes
The newly built Los Altos church in 1914 featured a bell tower and an arched front window. Both continue as elements of the building as it stands today.

Foothills Congregational Church – the oldest church building in L...

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Magazine

Festival features fun for everyone

Festival features fun for everyone


TOWN CRIER FILE PHOTO
The Los Altos Arts & Wine Festival boasts more than 375 craft and arts booths.

This weekend’s 35th annual Los Altos Arts & Wine Festival promises to be jam-packed with fun activities for just about everyone. The eve...

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How to prevent future economic crises

Author and economist Horace “Woody” Brock, Ph.D., is founder and president of Strategic Economic Decisions Inc., an economic think tank. He believes that the growth of “bubbles”– such as the real estate bubble that had such a devastating effect on world economies in 2008 – can easily be controlled.

In a recent interview with Bob Veres, a financial services writer and commentator, Brock explained how the economic crises we’ve encountered over the past 20 years – the housing downturn, the tech bubble, etc. – have been caused not by normal manufacturing cycles such as companies overproducing products and laying off workers, but by leverage and speculation in asset prices. Brock asserts that financial bubbles have replaced inventory bubbles as the primary cause of economic recessions.

Unfortunately, if that is true, then the primary monetary policy lever the federal government uses to regulate booms and busts in the manufacturing sector is too blunt to work effectively on asset bubbles. Take the housing sector prior to 2007, for example. If the Federal Reserve had decided that it wanted to discourage thousands of Americans from flipping homes or buying them with zero money down, it could have dramatically raised interest rates.

There is, according to Brock, a better way to control excesses in asset pricing without clobbering the corporate/manufacturing sector: Simply raise margin requirements on any financial asset – stocks, real estate, etc. – as its price increases beyond its average historical valuation. In other words, reduce the amount of permissible leverage in proportion to the degree of deviation from the mean.

Deflating the housing bubble

Take last decade’s housing bubble. Using this methodology, as housing prices continued to climb, the government would have increased the minimum down payment required for a mortgage. Imagine in 2007 having to put down 25 or 30 percent of the price of a home in cash. That certainly would have discouraged most of the speculators who were buying fully leveraged properties at the time, and would very likely have deflated the bubble.

The same requirement would have prevented Lehman Brothers and other investment banks from buying and selling stocks and other assets with margins leveraged as high as 50 to 1. They might even have avoided bankruptcy, not to mention contributing to the economic wreckage that resulted.

Although the details of such a methodology need to be worked out, there is no shortage of historical data on most asset classes for someone to come up with an appropriate mean value and trigger point for decreasing leverage requirements. In the case of the S&P 500, the average price-earnings ratio (P/E) has totaled approximately 15 for the past century. So when stock prices rise to the point where the market P/E ratio becomes 20, then you have to put more down if you want to buy stocks.

Interestingly, there is even historical precedent for this proposal. A review of margin requirements shows that investors who could put virtually nothing down to buy shares of stocks before the 1929 crash were later required to limit their margin accounts as high as 55 percent, with the number moving around as the markets did. According to Brock, in January 1958, when the Dow was at 440, an investor could buy stock with 50 percent down. By December, when the Dow was trading around 580, the requirement had grown to 90 percent.

Unfortunately, the Dodd-Frank Wall Street Reform and Consumer Protection Act includes none of this. If you believe that it’s the government’s role to prevent manufacturers from polluting rivers and poisoning citizens, why not additionally prevent financial institutions from making huge gains and avoiding huge losses during asset bubbles that cause millions of people to lose their jobs?

Los Altos resident Artie Green is a Certified Financial Planner with Cognizant Wealth Advisors. For more information, call 209-4062.

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