Community

If it were possible to gather all the people and families that Bob Roninger has helped in Scotts Valley and the San Lorenzo Valley into a single place, it would probably require a stadium the size of Levi Stadium in Santa Clara.

Santa Cruz Moose Lodge 545

When Scotts Valley Market lowers the price of ice cream, shoppers will buy more ice cream. When the price is raised, shoppers buy less.That’s how it works in most parts of the economy, but not in the stock market – especially nowadays, as passively managed index funds have become overwhelmingly popular.An index fund is a mutual fund or exchange-traded fund (ETF) that aims to replicate the movements of an index, like the Standard & Poor’s 500, which is composed of the 500 largest U.S. companies. Index funds now account for 31-percent of fund assets, up from 14-percent in 2004.Two factors have caused this popularity:  Low cost: Essentially, an index fund is managed by a computer. This is much less expensive than paying a professional manager to research companies and seek out growth and value, as actively managed funds do. Fees for passively managed funds are just 0.2-percent per year compared with 0.79-percent for actively managed funds, according to Morningstar.   Better performance: Index funds have provided better investment results recently. Over five years up to the end of last year, 88.7-percent of fund managers investing in large companies underperformed the S&P 500.So, what’s the problem?My goal has always been to buy low and sell high. But that’s exactly the opposite of what index funds do.Index funds are “market capitalization weighted.” Market capitalization is the total value of the shares outstanding. If a company has 1 million shares outstanding and its shares sell for $10 each, then its market cap is $10 million.The bigger a company’s market cap, the more weighting that company has in an index. The more a company’s stock price goes up, the more shares of that stock an index fund has to buy. Stocks that go down in price see their market cap drop, so index funds have to reduce their weighting.In other words, index funds are required to buy high and sell low.The strategy has been working as more investors and advisors accept the idea that index investing is superior to actively managed funds or individual stock picking. The stampede of money into index funds drives them higher as they bid up the prices of a narrow group of richly valued companies.Instead of tried-and-true method of investing in companies with stock prices that are low relative to their current or expected profits, index funds invest in stocks simply because they have been going up.“When you buy index funds, you’re looking to the future through a rearview mirror,” said legendary investor Leon Cooperman last month on the TV show “Wall Street Week.”I’m not opposed to index funds, and many of my clients own them. They offer diversification for low fees. But low fees do not necessarily equal low cost. If a fund is buying stocks at inflated prices, then it’s not really a low-cost investment, even if the management fees are low.Maybe index funds will continue to outperform other investment strategies. But my experience has been that when a trend continues for years and gets too popular, and everyone accepts that what is happening now is the way it will always be, it’s time to think about alternate strategies.Mark Rosenberg is a financial adviser with Financial West Group in Scotts Valley, a member of FINRA and SIPC. He can be reached at 831-439-9910 or [email protected].

1887. From the porch of “Hillside,” his aptly-named summer estate, timber baron James P. Pierce could literally oversee his domain. Away to the north were redwood-covered slopes, awaiting harvest. In the foreground, just across the San Lorenzo River, was the site of his new Pacific Mill, a railroad station, and what one visitor referred to as “quite a little village.”Pierce had made a fortune washing gold off hillsides with powerful hoses. After investing in the San Lorenzo flume and railroad in the 1870s, he purchased 2000 acres of uncut timberland in the heart of the valley. The original Pacific Mill at the mouth of Love Creek worked up lumber along the river to what is now Glen Arbor, relying on the flume for transportation. When the Felton and Pescadero railroad was completed in 1885, Pierce quickly recognized a different opportunity for profit and relocated his operation across the river.The new Pacific Mill was thoroughly up-to-date, containing machinery for the manufacture of all sorts of finished lumber. In addition to the usual circular saws, it housed a band saw, the first in the area, allowing finer processing. “Every part of the log is worked up and nothing wasted,” the Pacific Rural Press reported in 1887, “Even all the spare sawdust is sold to a San Jose brewery at $25 a carload. More could be sold there, but it is used at the mill to fire the boilers.”The water of San Lorenzo was also utilized, brought into a large mill pond on the low ground where the river looped around the site. “A dam is being built, noted a reporter, “and a pond constructed where the logs will be floated for more convenient selection before sawing. A railway is in process of construction…on both sides of the pond, where the logs will be unloaded directly into the water.” Although there had been sawmills in the area since pioneer days, much of the old-growth forest on the difficult local slopes had survived. Pierce’s lumber-cutting campaign relied on transportation. The railroad depot became a hub that linked the new bridges to the surrounding region and the spur tracks that led to the sawmill. In cooperation with the Ben Lomond Wine Company, located on Empire Grade, what is now called Alba Road was cleared and graded, providing access to the trees on the side of Ben Lomond Mountain. On the other side of the river, the timber in the upper reaches of Love Creek would be taken out by his company’s own train, running three miles up its corporate track. To support the mill and its workforce, Pierce and his superintendant, Thomas L. Bell, provided a variety of other buildings on the river bank across from the mill — a general store, warehouses for grain and hay, a boarding house for the men, cottages for families and a large amount of stabling. “The finest of water” was brought in from Marshall’s creek, through over 1500 feet of pipe.More than the usual amenities were provided. The company store offered both telegraph and telephone service and a Wells Fargo Express office. “The Post Office, “observed the Santa Cruz Surf, “will doubtless be established in the same place.” This prediction proved true in April 1887. Federal authorities, however, rejected the name “Pacific Mills,” so the appellation “Ben Lomond” was borrowed from the nearby mountain and winery.While train and mill whistles signaled a rush of industrial activity, Pierce planned a different sort of future for Ben Lomond as a place “of residence and resort.” His ideas were up-scale — this was not to be a “stump town” like Boulder Creek. His own residence, “Hillside,” which featured a large reception room and a “baronial” fireplace, was designed to convince other affluent businessmen to move to the neighborhood.In the fall of 1887, the land around the mill and railroad depot was subdivided into town lots. The Sentinel approved, noting that “Mr. Pierce, by these sales, is proving himself a benefactor to the neighborhood – new people are moving to that locality, houses are being erected, homes established, grounds cultivated, orchards set out and a population of sterling, thrifty citizens secured.”To further the goal of attracting high-class summer visitors, Pierce and Bell planned a luxurious resort. “One of the prettiest locations in the village,” advertised the Surf, “has been reserved for a hotel site. It is a roomy, wooded knoll, sloping downward to the San Lorenzo on one side, quite convenient to its railroad station and commanding picturesque mountain and valley views.” The site would also feature “an abundance of water.”(To Be Continued)Randall C. Brown is a local historian and is a member of the San Lorenzo Valley Board of Directors

A self-proclaimed renaissance man, Felton’s Marc Shargel is a name many have come to know and appreciate.  Shargel has long had a calling to and interest in all things marine-based, and his years of underwater photography have resulted in three volumes of coffee table books...

After early season proposals to remove the iconic “Mile Buoy” from Santa Cruz, it appears it has been replaced with a new model and is here to stay.