Schwartz Financial Weekly Commentary 8/21/17

The Markets

Here, there, and everywhere…

Markets around the world appear to be benefitting from global economic recovery.

After pointing out the United States’ economy is the heart of the global financial system, Barron’s reported:

“The Standard & Poor’s 500 index has tirelessly amassed 30 record closes this year, but is up just 1.2 percent since March 1. Meanwhile, nearly every foreign stock market has sprinted ahead…We wrote on March 25 about how a global recovery should goose smaller, fresher bull markets abroad. By now, it is firmly becoming the consensus view – metals are rallying, with copper up 18 percent this year; the MSCI All Worlds Index has risen for eight straight months.”

Emerging markets haven’t performed too shabbily either. Through the end of last week, the MSCI Emerging Markets Index was up 22.88 percent year-to-date. Franklin Templeton’s Mark Mobius wrote improved performance in emerging markets is the result of “…encouraging economic data in China, investor inflows, and corporate earnings growth.”

So, global stock markets have been delivering relatively robust performance this year.

What have bonds been up to? They’ve gained value year-to-date, too.

Bond markets continue to tell a different story than stock markets. The Federal Reserve raised its benchmark interest rate for the third time in June. In theory, interest rates should be moving higher, yet the yield on 10-year Treasury bonds was lower (2.19 percent) at the end of last week than it was at the start of the year (2.45 percent).

Data as of 8/18/17 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) -0.7% 8.3% 10.9% 7.2% 11.3% 5.3%
Dow Jones Global ex-U.S. 0.3 15.4 12.5 0.2 4.8 -0.1
10-year Treasury Note (Yield Only) 2.2 NA 1.5 2.4 1.8 4.6
Gold (per ounce) 0.8 11.8 -4.0 0.0 -4.3 7.0
Bloomberg Commodity Index -0.6 -4.9 -4.1 -12.7 -10.4 -6.4
DJ Equity All REIT Total Return Index 0.3 4.1 -0.8 7.6 9.5 6.5
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s,, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

Have you tried taco mode? In March, the Harvard Business Review (HBR) offered some ideas about innovation in America. It’s a topic that deserves some attention as “…recent data suggests that innovation is getting harder and the pace of growth is slowing down. A major challenge in business and policy spheres is to understand the environments that are most conducive to innovation.”

One place to look for examples of innovation is the sharing economy where innovations often echo the late 1800s. Back then, according to HBR, innovation primarily occurred outside of companies. In contrast, today, the majority of patents go to inventors who are associated with companies.

Let’s take a look at a couple recent ideas that may or may not gain traction:

  • Taco Mode. Ridesharing – arranging for a ride via an app – has changed transportation and become one of the industry’s fastest growing market segments, according to data from Statista reported by com.

 The latest rideshare innovation is Taco Mode. Hungry passengers can request rides that include stops at a fast food chain drive-throughs. One company executive described the option as ‘inverse delivery.’ The hungry are delivered to the food rather than vice versa.

  • Just-in-time watch rentals. The demand for Swiss watches has fallen off in the United States. The Federation of the Swiss Watch Industry reported exports to the United States dropped steadily (-9.6 percent) between 2015 and June 2017.

 Could the culprit be luxury watch rentals? Barron’s Penta reported luxury watch rentals are a relatively recent sharing-economy innovation. For a monthly membership fee of $149 to $999, watch lovers have opportunities to “…access experiences and embark on journeys otherwise unattainable – without having to spend a major chunk of their savings.”

  • Neighborhood networks. It’s a straightforward concept: A social network that connects neighbors so they can share tools, leftovers, playgroups, and more. It’s big in Brazil, according to Forbes. One company has more than 140,000 registered users across 3,800 cities.

But, anyone who has ever watched Homer Simpson borrow Ned Flanders’ tools and not return them understands why some aspects of this idea may not catch on.

What innovations would you like to see in the sharing economy?

Weekly Focus – Think About It

“One word sums up our country’s achievements: miraculous. From a standing start 240 years ago – a span of time less than triple my days on earth – Americans have combined human ingenuity, a market system, a tide of talented and ambitious immigrants, and the rule of law to deliver abundance beyond any dreams of our forefathers.”

–Warren Buffett, Oracle of Omaha

Value vs. Growth Investing (8/21/17)

Name 1-Week YTD 4-Week 13-Week 1-Year 3-Year 5-Year
US Market -0.61 9.18 -1.50 2.81 13.04 9.01 13.60
US Core -0.57 9.93 -1.42 2.65 13.82 10.07 14.72
US Growth -0.42 16.10 -1.75 3.45 15.28 9.61 13.65
US Large Cap -0.54 10.70 -0.91 3.48 14.19 9.63 13.65
US Large Core -0.47 12.08 -0.74 3.55 16.08 11.20 15.28
US Large Growth -0.44 17.92 -1.39 3.99 16.57 10.48 14.14
US Large Val -0.72 2.76 -0.55 2.82 10.06 7.18 11.61
US Mid Cap -0.67 6.67 -2.63 1.39 10.50 7.68 13.91
US Mid Core -0.66 6.75 -2.68 0.93 8.67 7.60 13.74
US Mid Growth -0.18 12.18 -2.28 2.08 12.14 7.16 12.37
US Mid Val -1.23 1.25 -2.98 1.13 10.70 8.23 15.68
US Small Cap -1.21 1.26 -4.34 0.05 8.68 6.35 12.20
US Small Core -1.30 -0.33 -4.39 -0.94 7.97 6.37 12.40
US Small Growth -0.86 8.57 -4.20 1.56 10.66 7.24 12.06
US Small Val -1.48 -4.17 -4.43 -0.51 7.08 5.36 12.04
US Value -0.87 1.98 -1.30 2.25 10.03 7.29 12.4

©2004 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) is not warranted to be accurate, complete or timely. Morningstar is not responsible for any damages or losses arising from any use of this information and has not granted its consent to be considered or deemed an “expert” under the Securities Act of 1933. Past performance is no guarantee of future results.  Indices are unmanaged and while these indices can be invested in directly, this is neither a recommendation nor an offer to purchase.  This can only be done by prospectus and should be on the recommendation of a licensed professional.

Office Happenings:

When Was The Last Time You Stress Tested Your 401k

Your 401k plan at work probably has the most money you have besides your home, but yet, when was the last time you looked at it besides the quarterly statements you receive.  Better yet, how did you pick your investments that you currently hold in your 401k.  How much thought did you actually put into deciding which investments to choose?  Probably like people going to the racetrack who pick horses to bet based on the color of the silks the jockey wears or simply the name of the horse, people pick investments just based on the name of the funds themselves.

So why, in nearly every case, do investors do almost no research as they put their money into their 401-k plan? It is a simple answer; everyone is busy living their lives.  If they wanted to spend their free time digging into the standard deviations, alpha, fund objective vs the current economic environment, tenure of the portfolio manager, consistency of the fund company and a hundred other arcane things, they would be working in the financial field.

One of the tools we have available is a software program that in about five minutes gives a remarkably accurate picture of an investors risk tolerance.  Fortunately the program also has a database with the risk scores of most of the securities that are offered in 401-k plans.  So we are able to see the estimated risk in an investor’s current portfolio and compare it to his or her actual risk tolerance.  We can then suggest ways to adjust the current portfolio to better reflect what our investor’s comfort level.  We can also run Monte Carlo simulations to predict the performance of the new portfolio and how well it should meet your retirement needs.

Give our office a call at 215-886-2122 and we will be happy to stress test your investments and let you know if your investments are in line with your risk tolerance.


Michael L. Schwartz, RFC®, CWS®, CFS

P.S.  Please feel free to forward this commentary to family, friends, or colleagues.  If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

Michael L. Schwartz, RFC, CWS, CFS, a registered principal offering securities and advisory services through Independent Financial Group, LLC., a registered broker-dealer and investment advisor.  Member FINRA-SIPC. Schwartz Financial and Independent Financial Group are unaffiliated entities.


This information is provided for informational purposes only and is not a solicitation or recommendation that any particular investor should purchase or sell any security. The information contained herein is obtained from sources believed to be reliable but its accuracy or completeness is not guaranteed.  Any opinions expressed herein are subject to change without notice.  An Index is a composite of securities that provides a performance benchmark.  Returns are presented for illustrative purposes only and are not intended to project the performance of any specific investment.  Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly.  Past performance is not a guarantee of future results.


* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.


* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices. 


* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.


* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.


* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.


* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.


* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.


* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.


* Past performance does not guarantee future results.


* You cannot invest directly in an index.


* Consult your financial professional before making any investment decision.


* To unsubscribe from our “market commentary” please reply to this e-mail with    “Unsubscribe” in the subject line, or write us at “”.

Best French Onion Soup I Have Ever Had

French onion soup

5 # onions sliced thin

2 heads garlic sliced paper thin

1 gallon beef stock

1 bunch thyme, leaves picked

2 cups port wine

1 cup dry sherry

1 cup madiera




In a large pot cook the onions over low heat until they start to caramelize. Allow this step to take as much time as it can. After a while the onions will begin to darken. Season with salt and be careful not to burn. Add sliced garlic and cook 5 minutes more. Add port, sherry and madiera. Allow reduce until all liquid has been absorbed by onions and cooked out. Add 1 quart of the beef stock. Repeat the same step, allowing the stock to reduce. After this step add the remainder of beef stock and thyme. Allow to come to a simmer and cook for about 45 minutes longer

Season with salt and pepper

This key to this soup is to deeply caremalize the onions, while balancing the salt with the sweetness of the wine and natural sugar in the onions. Feel free to experiment with different kinds of onions throughout the year as they have different sugar contents depending on the season. At Stake we start this soup first thing in the morning and usually it is ready no sooner than 3pm. Have fun!

Basic Investment Wisdom

Some things never change. One of them is the need to invest for the long term.

We know what we don’t know. We have no idea what nominal returns or inflation or interest rates will be during the rest of our investing lifetime. We also know what we do know. Historically stocks have earned returns that are higher than bonds.

Investing in common stock gives you a share in the ownership of a business. When you invest in bonds you’re a loaner to businesses. All of our common sense and life experience tells us that owners of good businesses make more money than do their lenders, if only because owners take more risk.

Still, many investors have trouble staying the course, especially when markets turn volatile. “The challenge that investors face is that every day they read or hear what is going on in the world, and there is really nothing they can do about it,” says Ron Baron, president of Baron Capital.

Baron says the media predicts a lot more recessions than ever occur, and that when the stock market goes down many investors believe the media may be right and that they need to get out before the market crashes.  Baron thinks this is ridiculous.

“Inflation is what people should be thinking about and how everything is going to cost twice as much every 15 to 20 years. People have to think about the money they saved becoming less valuable all the time and most businesses becoming more valuable all the time,” he adds.

I believe the single biggest reason why people fail to achieve wealth and equity as investors – bigger than all other reasons combined – is that they never understand risk.

First, people generally overestimate the term risk when owning stocks.  Second, people  underestimate the long-term risk of not owning stocks, if suitable for their personal situation.

One of the best things investors can do is to understand history, including the Great Depression of the 1930s and other volatile periods such as 2001 – 2002 and 2008 -2009.  History tells us such declines are quite common.

Baron believes investment opportunities abound in today’s world – in health care, education and alternative energy, to name a few industries.

“In America we have under-invested in infrastructure, bridges, tunnels, sewers and roads, which provides opportunities for companies,” says Baron. “Our stock market is worth $19 or $20 trillion, and there is $4 trillion sitting offshore just waiting to invest in America…and you could just see it happen,” he adds.

Although your experience may differ, Baron started investing in equities as a teenager and is a billionaire today.  He strongly believes that we need to invest for the long term.

All investments involve risk and may not be suitable for all investors.  The return and principal value of stocks fluctuate with changes in market conditions.  Shares, when sold, may be worth more or less than their original cost.  Past performance in not a guarantee of future results.  Actual results will vary.

Why I Became a Financial Advisor

This is a question that I have been asked over and over again since I started in this business in 1977.  I can only answer this question for myself. Why I do this can be traced back to my childhood. A few weeks before my sixth birthday, tragedy hit my family. One morning, I awoke to find that my father had unexpectedly passed away. At the time, my parents had the minimal insurance, very little savings, and we struggled to make ends meet. My mother tried to keep the family afloat after the passing of my father, but eventually, we had to sell the house and move in with my grandparents. Through this experience, I decided I didn’t want anyone to struggle financially should they be faced with already difficult times. I started working in the life insurance industry many years ago and then branched into comprehensive financial planning.

My goal has been and remains helping people be prepared should a catastrophic incident happen to them and their family. We are committed to helping our clients lead what we believe are better lives through wealth management, retirement planning and estate planning.