Sat11222014

News

LA council votes to delay community center update

LA council votes to delay community center update


Ellie Van Houtte/ Town Crier
The Los Altos City Council voted to delay adoption of a community center conceptual design plan last week. The plan includes elements from a design charette held earlier this fall, left.

The Los Altos City Council last...

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Schools

Scientists bring experiments into MV classrooms

Scientists bring experiments into MV classrooms


Ellie Van Houtte/Town Crier
During a Science is Learning geology lesson, Theuerkauf Elementary School students learn about igneous rocks by observing how sugar changes form when heated.

Hundreds of local elementary students perform experiments w...

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Community

Local actors star in PYT's 'Oklahoma!'

Local actors star in PYT's 'Oklahoma!'


Courtesy of Peninsula Youth Theatre
PYT’s “Oklahoma!” features, from left, David Peters of Mountain View, Jenna Levere of Los Altos and Kai Wessel of Mountain View.

Time is running out to catch Peninsula Youth Theatre’s production of “Oklahoma!”...

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Sports

Eagles advance

Eagles advance


Ellie Van Houtte/Town Crier
Los Altos High’s Carmen Annevelink, left, and Kristen Liu put up a block against Mountain View. Annevelink totaled 20 kills.

Mountain View High’s out-of-the-gate energy could last for only so long against rival and he...

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Comment

Coping with addictions: Haugh About That?

Preparing to deal with my lifelong addiction, I stood in front of the mirror ready to confess the shame I’d been hiding. The first step to healing, I reminded myself, is to admit something is wrong.

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Special Sections

NASA, Google agreement preserves Hangar One

NASA, Google agreement preserves Hangar One


Bruce Barton/Town Crier
Hangar One, pictured here last January, will be restored under an agreement between Google and NASA.

NASA and Google Inc. forged an agreement last week that allows Google to lease a portion of NASA’s historic Moffett Fede...

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Business

State Street science center closing Nov. 30

State Street science center closing Nov. 30


Ellie Van Houtte/
Helix at 316 State St. is closing after the completion of a one-year grant from Passerelle Investment Co. The science center became a popular destination because of its various exhibits. Town Crier

A popular downtown destination...

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Books

Children's author signs books at Linden Tree

Children's author signs books at Linden Tree


Author Tiffany Papageorge is scheduled to sign copies of new her book 11 a.m. Dec. 6 at Linden Tree Books, 265 State St., Los Altos.

Papageorge’s “My Yellow Balloon” (Minoan Moon, 2014) is a Mom’s Choice “Gold” winner. In the book, the Los Gat...

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People

JAMES WINDELL SMITH

JAMES WINDELL SMITH

January 11, 1939 – November 6, 2014
Resident of Mountain View

James Windell Smith, a 40 year resident of Los Altos, passed away from complications after a post-surgery stroke November 6th, 2014 in Los Gatos, California.

Born on January 11, 1939 on...

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Travel

Olive Sonoma: There's more to the quaint town than wine

Olive Sonoma: There's more to the quaint town than wine


Eren Göknar/ Special to the Town Crier
While many day-trippers may think that Sonoma is all about the grapes, the region boasts other delights. Try a biplane ride over the patchwork landscape.

Sonoma, a scenic two-hour drive from Los Altos, boa...

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Stepping Out

LA Stage Company opens 'Fairway'

The Los Altos Stage Company production of Ken Ludwig’s new comedy “The Fox on the Fairway” is slated to run Thursday through Dec. 14 at Bus Barn Theater, 97 Hillview Ave.

A tribute to the English farces of the 1930s and 1940s, “Fox” is a romp that p...

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Spiritual Life

Author of Jewish historical novel slated at Congregation Beth Am

Author of Jewish historical novel slated at Congregation Beth Am


The Beth Am Women have scheduled “A Conversation with Author Maggie Anton” 7:30 p.m. Nov. 20 at Congregation Beth Am, 26790 Arastradero Road, Los Altos Hills.

Anton, winner of the 2012 National Jewish Book Award for Fiction, will discu...

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Magazine

Christmas At Our House home tour celebrates 26 years

Christmas At Our House home tour celebrates 26 years


Courtesy of Christopher Stark
Homes on the St. Francis High School Women’s Club’s Christmas at Our House Holiday Home Tour showcase a variety of architectural styles.

The days grow short on sunshine but long on nostalgia as the holidays approach...

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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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