Schwartz Financial Weekly Commentary 4/14/14

Schwartz Financial Weekly Commentary

April 14, 2014


The Markets


If you’re feeling whiplashed from the mid-week collision of good and bad economic news, you’re not alone.


On Wednesday, the Federal Reserve’s Open Market Committee (FOMC) meeting minutes were released and investors were reassured by what they read. Although the Fed lowered its Gross Domestic Product (GDP) growth projections for the first half of 2014, the minutes indicated real GDP is expected to grow faster over the next few years than it did last year (FOMC Meeting Minutes, Staff Economic Outlook, paragraph 1). In addition, “to support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy remains appropriate” (FOMC Meeting Minutes, Committee Policy Action, paragraph 2). Reassurance the Fed would not increase the federal funds rate sooner than expected was received with gusto and all three major U.S. stock indices raced ahead finishing the day up more than 1 percent.


On Thursday, good news about the world’s largest economy (United States) ran right into not-so-good news about the world’s second largest economy (China). Economic indicators suggested China’s economy might be slowing faster than anyone expected. MarketWatch reported, “[China’s] Exports fell 6.6% from a year earlier, slower than the more-than-18% tumble in the previous month, but widely missing a Dow Jones survey consensus for a 4.2% gain. Imports were even uglier, plunging 11.3% – more than the 10.1% drop in February – and trailing far behind an expected 2.8% gain.” When trading ended on Friday, the Standard & Poor’s 500 was down 1.8 percent for the year, the Dow was off 3.3 percent, and the NASDAQ had lost 4.2 percent of its value.


When markets get dramatic, it may be a good idea to stay calm and remember one of the most basic tenets of investing: Buy low, sell high.


Data as of 4/11/14
Standard & Poor’s 500 (Domestic Stocks)
10-year Treasury Note (Yield Only)
Gold (per ounce)
DJ-UBS Commodity Index
DJ Equity All REIT TR Index

S&P 500, Gold, DJ-UBS 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 TR 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.


there’s a new index in town… About five years ago, the World Economic Forum’s Global Agenda Council proposed a new index be developed, one that would “increase the impact that social entrepreneurs, business leaders, and policy makers can have in the world.” The general idea was the new index would measure social progress and spur competition between nations to improve the environment for social innovation in much the way the Global Competitiveness Index assesses the drivers of economic productivity and prosperity and identifies nations that are most competitive.


Just 48 months later, the Social Progress Index (SPI) was born. The beta version of the index debuted in 2013 and focused on measuring the extent to which 50 countries met the non-economic needs of their citizens. The 2014 SPI gauged 54 social, health, and environmental factors across 132 countries, considering only outputs (like literacy) and not inputs (like spending on education). When the numbers were tallied, New Zealand was number one – even though it’s in 25thplace when measured by GDP per person (SPI, pg 62).


According to The Economist, when the results of the SPI are compared with a country’s GDP per person, its value truly becomes apparent. The publication quoted Michael Porter, a professor at Harvard Business School, who said, “There is a view that economic development and social progress go hand in hand. That’s true on average, but not in particular.” For example, Costa Rica and Iran have similar GDPs, but Iran falls far lower on the scale of social progress. Brazil and Kuwait are about equal in terms of social progress, although Kuwait’s GDP per person is multiples greater than that of Brazil.


So, how did the United States do? We’re in 2nd place for GDP per person and 16th for social progress (SPI, pg 63). A New York Times Op Ed piece summarized the scores like this, “In the Social Progress Index, the United States excels in access to advanced education but ranks 70th in health, 69th in ecosystem sustainability, 39th in basic education, 34th in access to water and sanitation, and 31st in personal safety. Even in access to cellphones and the Internet, the United States ranks a disappointing 23rd, partly because one American in five lacks Internet access.”


Will the United States respond by improving the environment for social innovation as the developers of the index had hoped? Stay tuned. The results of the 2015 SPI will be out in just another year.


Weekly Focus – Think About It


The price of success is hard work, dedication to the job at hand, and the determination that whether we win or lose, we have applied the best of ourselves to the task at hand.”

–Vince Lombardi, former Coach of the Green Bay Packers


Office Notes:


What Does Wealth Mean to You?


George Giguere, who teaches a course on entrepreneurship at Brown University, recently asked this question to a group of students.  Not surprisingly, wealth meant different things to everyone. However, all wanted to be philanthropic at some point in their life and did not believe money would buy them happiness.


How much money would it take to make you wealthy?


While responses ranged from $1 to $10 million, the students were challenged to think further.  Giguere, a successful entrepreneur, has seen more people make it and then lose it, than make it and keep it. He teaches students the importance of keeping their word in business and treating people right.  “In creating wealth, you develop relationships along the way.  If you don’t treat these relationships well, there is a probability that there is going to be a time to cash in on those relationships again and it is not going to be there for you when you need it,” says Giguere.


“You create a history in your life, and if you don’t treat people with respect, you will pay the price for it one day.”  


Serious factors in determining whether someone is wealthy or not include how much he or she wants to spend, how the money will be used, and what needs are not being met. Real estate tycoon Donald Trump, who may seem to have unlimited needs, requires a lot of money to be wealthy by his own terms. Someone else with limited needs may be wealthy in his own right.  


Giguere notes the origin of wealth is important to mindset. People who win the lottery but have no concept of money tend to lose it right away. People who inherit money through a trust or earn it themselves but feel they were lucky tend to be more cautious in spending it.  People who deal best with wealth are those who gain it with confidence, did it themselves and know they can recreate themselves if things turn sour.


The words “success” and “wealth” are often used interchangeably. “It takes persistence and patience to achieve success. One does not work with the other,” says Giguere.  It is important to set goals even at a young age. Doing so will help make you successful within your own definition.


Notes Mark Eisenson, author of Invest in Yourself: Six Secrets to a Rich Life,

“Once we become adults, we often lose track of life’s simple pleasures and of our own personal goals. We take a wrong turn or two, and spend a good part of our lives doing things we’d rather not – while not doing many things we’d enjoy. Although we may obsess about how unhappy we are, we don’t focus clearly on what we can do to change the situation, how we can invest our time and energy, and, yes, our money to consciously create the life we want.” 


So, what does wealth mean to you? 




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 “”.

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