Sun02012015

News

Foothill to offer four-year degree: Foothill aims to launch dental hygiene degree in fall 2016

Foothill to offer four-year degree: Foothill aims to launch dental hygiene degree in fall 2016


Ellie Van Houtte/Town Crier
Students enrolled in Foothill College’s two-year dental hygiene program, above, can soon earn a four-year bachelor’s degree for approximately $10,000.

Foothill-De Anza Community College District Chancellor Linda M. Th...

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Schools

Freestyle hosts exhibition at Computer Science Museum

Freestyle hosts exhibition at Computer Science Museum


Traci Newell/Town Crier
Mountain View High junior and Freestyle Academy student Radika Gupta, right, works with a fellow student during a WebAudio course this month.

For three periods a day, a small subset of students from Los Altos and Mountain Vi...

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Community

Museum explores Stanford, Valley connection

Museum explores Stanford, Valley connection


Courtesy of Julie Rose
The Los Altos History Museum’s “Symbiotic Superstars” event drew a crowd including, from left, “The Lure & the Legends” creator Nan Geschke, Stanford President John L. Hennessy, historian Leslie Berlin and Adobe Systems c...

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Comment

Good compromise on PE exemptions: Editorial

While “Deflategate” captures the national sports headlines, the local issue of physical education class exemptions for freshmen seems a much worthier sports topic for discussion.

The Mountain View Los Altos Union High School District Board of Truste...

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Special Sections

Your Home Brief

Filoli hosts bird exhibition

Filoli kicks off the 2015 season of art exhibitions in its Visitor and Education Center with “The Birds of America: Audubon Collection,” a selection of prints from Filoli’s Permanent Collection, Feb. 10...

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Business

Wine & beer lounge coming to First Street

Wine & beer lounge coming to First Street


Ellie Van Houtte/Town Crier
The new wine and beer lounge Honcho heads to First Street, with a spring opening anticipated.

A cocktail lounge proposed for First Street has cleared its first hurdle – the Los Altos Planning and Transportation Comm...

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Books

"Fearless Genius" photos chart Silicon Valleys brain trust


Not every book needs pages and pages of words to tell a story – some do it through pictures.

“Fearless Genius: The Digital Revolution in Silicon Valley, 1985-2000” (Atria Books, 2014) by Doug Menuez features more than 100 photographs Menuez to...

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People

RUBY DOSHIM LAI

Ruby Doshim Lai was born on July 26, 1929 and passed away at home on January 10, 2015. A resident of Los Altos for over 50 years, Ruby is survived by her husband Bill; children Gwen, Tracy and Allyn; and grandchildren Kiyoshi and Misa.

Born on Mott ...

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Travel

Cuban photographer slated to appear at Foothill

Cuban photographer slated to appear at Foothill


Courtesy of Raúl Cañibano
Cuban photographer Raúl Cañibano is set to appear at Foothill College tonight. His work – including the image “Series: Guajira’s Land, Viñales, 2007,” right – is on display at the KCI Gallery t...

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Stepping Out

'Betrayal' at Pear

'Betrayal' at Pear


Ray Renati/Special to the Town Crier
The cast of Pear Avenue Theatre’s “Betrayal” includes Maryssa Wanlass, from left, Fred Pitts and William J. Brown III.

The Pear Avenue Theatre presents Harold Pinter’s investigation of modern relationships, “...

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Magazine

Tracing history on foot: Hidden Villa’s long hike

Tracing history on foot: Hidden Villa’s long hike


Campers on Hidden Villa’s Sierra Backpacking Trip study historical photos to measure how the land has changed and alternate serving as student leaders who guide the route of their three-week trek.

Amid the high-tech camps and programs of a Bay Area ...

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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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