Fri04182014

News

City chips in $7,000 for SFMOMA installation

City chips in $7,000 for SFMOMA installation


Town Crier File Photo
The Los Altos City Council earmarked $7,000 for the purchase of Chris Johanson’s artwork.

The city of Los Altos will contribute $7,000 toward the purchase of a $28,000 art installation featured in the San Francisco Museum...

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Schools

LASD students celebrate service learning

LASD students celebrate service learning


Courtesy of Sandra McGonagle
We Day, held March 26 at Oracle Arena in Oakland, exhorts students in the Los Altos School District to effect positive change.

More than 150 Los Altos School District student leaders joined 16,000 Bay Area students to ce...

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Community

Film career launches with Cannes screening

Film career launches with Cannes screening


Courtesy of Zachary Ready
Los Altos native Zachary Ready, front left, and co-director Andrew Cathey, right, celebrate their Campus MovieFest awards.

After learning the art of filmmaking as a child in the front yard of his family’s Los Altos home...

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Sports

Sports on the Side

Pathways Run/Walk slated May 10 in Hills

The 13th annual Pathways Run/Walk is scheduled 9 a.m. May 10 at Westwind Community Barn, 27210 Altamont Road, Los Altos Hills. The course wends through Byrne Preserve and onto the Los Altos Hills Pathways sys...

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Comment

Now is the time to expand parking: Editorial

Just a few short years ago, vacancies dotted downtown Los Altos. Property owners had a hard time attracting businesses because there was a shortage of customers. That is no longer true. Now, the cry is: Where are my customers going to park?

The city...

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Special Sections

Epicurean's Mary Clark Bartlett: Serving sustainability

Epicurean's Mary Clark Bartlett: Serving sustainability


Courtesy of Michael McTighe
Mary Clark Bartlett is founder and CEO of Los Altos-based Epicurean Group.

Labels such as “healthy,” “organic” and “green” are rarely used to describe the meals served in most corporate cafes in Silicon Valley. But on...

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Business

Local realtor honored for volunteer efforts

Local realtor honored for volunteer efforts


Ellie Van Houtte/Town Crier
Coldwell Banker recently recognized realtor Kim Copher, right, for her philanthropic efforts. Copher and colleague Alan Russell, left, volunteer at Reach Potential Movement, where they collect books for its Bookshelf in ...

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Books

Local Author Spotlight

In an effort to support authors from Los Altos, Los Altos Hills and Mountain View, many self-published, Book Buzz periodically spotlights their books and offers information on where to purchase them. Local authors are encouraged to submit brief summa...

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People

Noteworthy

RotaCare honors local volunteer

RotaCare Bay Area honored Jim Cochran of the RotaCare Mountain View Free Medical Clinic with the Outstanding Clinic Volunteer Award April 10 for his commitment to RotaCare’s mission of providing free medical care to t...

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Travel

Sausalito: Explore the historical city with world-class views

Sausalito: Explore the historical city with world-class views


Eren Göknar/ Special to the Town Crier
Sausalito offers panoramic views of the San Francisco Bay. A number of companies schedule boat tours that sail past Angel Island and Alcatraz.

On a clear day, Sausalito offers spectacular views of the San Franc...

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Stepping Out

Western Ballet performs this weekend  at Smithwick Theatre in Los Altos Hills

Western Ballet performs this weekend at Smithwick Theatre in Los Altos Hills


Courtesy of Alexi Zubiria
Western Ballet’s “La Fille Mal Gardée” features Alison Share and Maykel Solas. The production runs Friday and Saturday at Foothill College

Western Ballet is slated to perform “La Fille Mal GardéeR...

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Spiritual Life

Magazine

A yoga class a day keeps the stress away

A yoga class a day keeps the stress away


Van Houtte/Town Crier Yoga of Los Altos hosts a variety of classes, including Strong Flow Vinyasa, above, taught by Doron Hanoch. Yin Yoga instructor Janya Wongsopa guides a student in the practice, below.

It’s nearly 9 a.m. on a Monday mornin...

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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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