Schwartz Financial Weekly Commentary 5/19/14


Schwartz Financial Weekly Commentary

May 19, 2014


The Markets


Americans have long relied on standards and averages to help them gauge the performance of everything from intelligence to athletics to the economy. So far, in 2014, American stock markets have been grinding along without making much progress in either direction and that has left many people looking for guidance about what they can expect in the future.


Last week, a writer at Barron’s enlisted Jeremy Siegel, a finance professor at Wharton, to help explore the question by updating data used in a 2009 article. That piece had looked at the performance of the U.S. stock market over 142 years and found “below-average returns over five- and 10-year periods generally are followed by above-average returns in the next five and 10 years.” In the new article, Siegel and his associates looked at rolling five-, 10-, 20-, and 30-year return periods through the end of 2013 and found:


“For the 60 months ended in April, the compounded annual real return was nearly 17 percent, well above the median 7.17 percent for all five-year periods. (Taxes and investment fees aren’t included.) That suggests the next five years could run below the average.


While that might temper bullishness, in the 120-month period ended April, the compounded annual real return was just 5.58 percent, a full percentage point below the 6.64 percent median 10-year annual return for all the periods measured – again, since 1871.”


Despite the mixed signals provided by long-term averages, Siegel told Barron’s “the odds-on bet” is the Dow Jones Industrial Average will hit 18,000 by the end of the year (although there may be corrections along the way). His expectations are interest rates will remain lower than has been suggested and earnings will experience strong growth.


It’s a good idea to take the esteemed professor’s thoughts with a grain of salt. An eight-year study of market pundits found they were right about 47 percent of the time.


Data as of 5/16/14
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.


the market isn’t the only thing that can put a hitch in your financial plan’s giddy-up. The overall rate of divorce in the United States trended lower between 2000 and 2011 (the latest dates the Centers for Disease Controlhas made available). In 2000, there were about four divorces or annulments per 1,000 Americans (total population). By 2011 that rate had fallen slightly to 3.6 per 1,000. As they often do, Baby Boomers bucked the trend. The divorce rate for Americans over age 50 has trended higher. The New York Times wrote:


“A half-century ago, only 2.8 percent of Americans older than 50 were divorced. By 2000, 11.8 percent were. In 2011, according to the Census Bureau’s American Community Survey, 15.4 percent were divorced and another 2.1 percent were separated. Some 13.5 percent were widowed.


While divorce rates over all have stabilized and even inched downward, the divorce rate among people 50 and older has doubled since 1990, according to an analysis of census data by professors at Bowling Green State University in Bowling Green, Ohio. That’s especially significant because half the married population is older than 50.”


Anytime you experience a significant life change, such as a divorce late in life, it’s important to let us know. We can offer strategies to help compensate for any cash flow disruption and tactics for managing taxes when splitting large assets, such as qualified retirement plans. In addition, we can help with essential (and often forgotten) steps, including reviewing and revising beneficiary designations (on retirement plans, investment accounts, and insurance policies) as well as modifying powers of attorney, named trustees, and other designations. We also can coordinate our efforts with those of your attorney and/or accountant.


Weekly Focus – Think About It


Good judgment comes from experience, and a lot of that comes from bad judgment.”

Will Rogers, American humorist and commentator

Value vs. Growth Investing (5/16/14)


 ©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 Notes:


The Luckiest Man on Earth


Baseball season is upon us.  One of the great things about America’s national pastime is the rich history it has.  When you hear names like Babe Ruth, Jackie Robinson, Dizzy Dean, and Sandy Koufax, you can’t but help to think back to the eras in which they played.  Baseball provides us with a connection to our own past, to the cultures of our parents, grandparents, and even great-grandparents.  While the game has certainly been blighted by various scandals over the years (from racism to performance-enhancing drugs), I think more people remember it for the inspirational stories it has given us: stories of courage, perseverance, endurance, and dedication. 

There are few players who exemplified all those qualities better than Lou Gehrig did.  Most of us have heard Gehrig’s name, but as the years pass and the people who actually saw him play become ever fewer, it’s easy to forget who he was and the example he set for so many people. 

This year is the 75thanniversary of Gehrig’s retirement from baseball.  It was a premature retirement enforced by the symptoms of a cruel disease, but it was also one of the most stirring moments in sports history.  I’m sure the story of it will get a lot of press this year, and for good reason: it deserves to be remembered. 

After the 1938 American League season, Lou Gehrig seemed on top of the world.  He had just won his third consecutive World Series with the New York Yankees.  He was known as not only one of the greatest hitters in the history of baseball (as he still is today) but also as the greatest iron man the sport had ever seen.  He had already set the record of consecutive games played, a stat that wouldn’t be broken until Cal Ripken, Jr. came along decades later.  But a shadow had fallen over his game. 

“I tired mid-season,” Gehrig said.  “I don’t know why, but I just couldn’t get going again.”  While his stats remained stellar, they were well below what he’d become accustomed to. 

Unfortunately, the off-season hadn’t helped him recover.  As spring training began, Gehrig looked worse, not better.  At one point, he even collapsed during the middle of practice.  Things continued to decline, and by April it was clear something was very wrong.  One reporter wrote, “I have seen him time a ball perfectly, swing on it as hard as he can, meet it squarely—and drive a soft, looping fly over the infield.  He is meeting the ball, time after time, and it isn’t going anywhere.”  He was also having trouble running and throwing. 

On April 30th, Gehrig went hitless.  After the game, he approached his manager and said, “I’m benching myself.”  His reason?  “For the good of the team.”  His consecutive games streak ended at 2,130.  It would be the last time he ever played. 

His wife, Eleanor, promptly contacted the Mayo Clinic.  Gehrig was flown out only to receive the worst possible diagnosis: amyotrophic lateral sclerosis, or ALS.  (For years afterwards, most people knew it by the name of its most famous victim: Lou Gehrig’s Disease.)  Eleanor worked hard to keep Gehrig’s spirits up, mainly by shielding him from the truth as long as she could: that most ALS sufferers only live for a few years, lose almost all control of their body, and yet usually remain conscious and alert to the very end. 

Perhaps she needn’t have worried, because even as Gehrig’s body gave out on him, he showed that it was his spirit that was the true driving force behind his success.  He refused to become depressed and refused to indulge in self-pity.  In order to remain productive and useful, he took a job as a parole commissioner, turning down far more profitable job offers.  “Don’t think I am depressed or pessimistic about my condition,” he wrote.  “I intend to hold on as long as possible, and then if the inevitable comes, I will accept it philosophically and hope for the best.  That’s all we can do.” 

When the Yankees held a retirement ceremony for him on July 4th, 1939, he gave perhaps the most famous speech by an athlete of all time. 

Fans, for the past two weeks you have been reading about the bad break I got. Yet today I consider myself the luckiest man on the face of the earth. I have been in ballparks for seventeen years and have never received anything but kindness and encouragement from you fans.

When the New York Giants, a team you would give your right arm to beat, and vice versa, sends you a gift—that’s something. When everybody down to the groundskeepers and those boys in white coats remember you with trophies—that’s something. When you have a wonderful mother-in-law who takes sides with you in squabbles with her own daughter—that’s something. When you have a father and a mother who work all their lives so that you can have an education and build your body—it’s a blessing. When you have a wife who has been a tower of strength and shown more courage than you dreamed existed—that’s the finest I know.

So I close in saying that I might have been given a bad break, but I’ve got an awful lot to live for. Thank you.

Gehrig died in 1941 at the age of 37, but his words, his courage, his example—and of course, his game—lingered long afterwards.  In some ways, Gehrig accomplished more in death than he did in life, for he brought what was previously a little-known disease into greater public awareness.  His case undoubtedly brought more attention to the condition, resulting in more research and better care for those who suffer from ALS today. 

Lou Gehrig was both a great athlete and a great man.  75 years after his speech in Yankee Stadium, his legacy lives on.  Long may it do so. 




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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