Sammamish Chamber of Commerce: Ask The Expert

Wood Facts
By Joseph Flores, Renew Wood Restoration Co.

All unprotected wood exposed to exterior weathering is susceptible to erosion and biological attack. This natural weathering process results in wood changing its appearance from the beauty of new wood to various shades of gray and eventually to black. Left unprotected, new wood's durability, beauty and natural coloration is under constant attack. The enemies of your exterior wood surfaces are:

Sunlight. Solar radiation is the most damaging component of the outdoor environment affecting every exposed surface. The first change you will notice in your exterior wood will be the damage inflicted by sunlight. This will be seen by an initial color change from its beautiful golden, orange-brown color to gray.

Water Absorption by the Wood. Sun and rain cycles cause moisture fluctuations in the wood. The shrinking and swelling stresses the wood causing checks and splits to develop. Hydrolysis (as in acid rain attack) is also a contributor to this degradation of your wood.

Fungi, Mold and Mildew. Wood's natural protectants leach out in a relatively short time and allow colonization by wood-inhabiting fungi. Once established, and aided by favorable climatic conditions, these microorganisms can have a rapid, devastating effect causing your wood to become soft, stringy, pitted, cracked or even to crumble.

Depletion of Old Growth Timber. Another important consideration is that the majority of today's cedar and redwood lumber is being processed from younger, less decay resistant trees. These young redwood and cedars harvested today may need protection earlier than the premium hard woods that were once widely available. These factors, coupled with an increased awareness of various environmental issues in recent years to protect what remains of our old growth timber, are further reducing the supply of high quality wood.

HOW FAST WOOD WEATHERS IS DEPENDENT ON SEVERAL FACTORS:

Slope - Verticals and horizontals will reach different shades as they are exposed to different levels of sun, dirt and moisture. The more horizontal wood is, the more likely it is to suffer decay from fungi.

Direction - South-facing wood suffers because it experiences the greatest swings in temperature and humidity, leading to more splits and other degradation.

Shading - Wood shaded by trees is more likely to develop mold, mildew, and decay than unshaded wood.

DON'T GIVE UP!
In spite of the relentless enemies our exterior wood surfaces face, not only can they be restored, in most cases, to look like new, but they can also be easily maintained! The transformation process involves repair, mold and mildew removal, wood surface preparation; and application of a protective coating.

Renew Wood Restoration Co.
425-463-6951
Renewwrc(at)gmail.com

*ALWAYS FREE ESTIMATES!

Federal Reserve: Improving Transparency
By Bob Toomey, CFA

On January 25, the Federal Reserve, for the first time, provided guidance on interest rates and an official estimate of inflation as part of its regular FOMC meeting. The Fed announced that, given its expectations for continued sluggish economic recovery and elevated unemployment, it does not expect to raise interest rates until 2014. The Fed also provided for the first time a specific inflation target of 2%.

There are a few important messages in this announcement. From a purely economic perspective, it is clear the Fed remains concerned about the pace of economic recovery and, at least for now, it does not view inflation as a problem. From the perspective of “communications”, there are also a couple of important messages.. The Fed is trying to provide improved “transparency” to investors which, in turn, it believes will increase confidence in businesses’ willingness to make capital investments and hire new employees. Improved transparency should foster a higher level of trust in the Fed, or at least reduce the level of conjecture and uncertainty surrounding Fed policy which has greatly added to market volatility over the years. The idea here is improved transparency may reduce systematic risk to some degree.

So if the Fed is correct in its forecast for interest rates, there are number of issues that come up from a financial planning perspective. Sustained low interest rates reduce returns available from bonds which hurts individuals who may need higher levels of bonds in their portfolios. Lower returns may also force investors to rely more on certain equities for income, which could increase portfolio risk.

As financial planners we can mitigate these risks in a number of ways. Investing in bonds issued by certain foreign countries can be a source of higher yields. For example, bonds issued by certain emerging market countries offer good credit quality at significantly higher yields than investment grade U.S. bonds or Treasury bonds. Certain categories of corporate bonds can also offer higher yields than U.S. Treasury or agency bonds. Investing in certain sectors of the equity market, such as preferred stocks, utility stocks, REITs, and quality high dividend-paying equities can also be a way to enhance portfolio cash flow or meet portfolio income requirements in the situation of very low bond yields, which we are experiencing now.

Striving for improved transparency has implications for financial planning as well as Federal Reserve policy. Greater transparency of things like plan goals and objectives, investment strategies, custodial relationships, financial statements, and accessibility, goes a long way to enhancing trust between client and financial planner. Given the headlines of the past few years, we can understand why people would be looking for greater transparency from their financial advisors. As the Fed is realizing, improved communication with important constituencies can not only increase trust, but also reduce risk.

Bob Toomey is Vice President, Research for S.R. Schill & Associates, a registered investment advisor located on Mercer Island. Visit our blog at: http://thecascadeview.blogspot.com/

Bob Toomey, CFA
Vice President, Research
S.R. Schill & Associates
2448 76th Ave SE, Suite 107 Mercer Island, WA 98040
Tel: 206-275-2700 - Mobile: 425-221-7975
email: bob(at)srschill.com