Schwartz Financial Weekly Commentary 10/13/14

Schwartz Financial Weekly Commentary

October 13, 2014


The Markets


Keep Calm and Carry On.


The slogan comes from a United Kingdom Ministry of Information propaganda poster designed to boost morale if the United Kingdom was invaded during World War II. Despite its current popularity, the poster was never distributed.


The slogan offers some sound advice for anyone who was unnerved by last week’s stock market volatility. Investor optimism caught fire when Federal Open Market Committee meeting minutes indicated economic growth might not proceed quickly:


“Most viewed the risks to the outlook for economic activity and the labor market as broadly balanced. However, a number of participants noted that economic growth over the medium term might be slower than they expected if foreign economic growth came in weaker than anticipated, structural productivity continued to increase only slowly, or the recovery in residential construction continued to lag.”


Slower economic growth could translate into delayed monetary policy tightening (lower interest rates for a longer period of time), and that notion sparked the biggest rally of the year on Wednesday with U.S. stock markets making significant gains.


What goes up must come down. For every action, there is an equal and opposite reaction. Okay, the laws of physics generally don’t apply to stock markets. That said, a lot of folks saw Wednesday’s market highs as an opportunity to take gains off the table, according to Barron’s. Consequently, we saw steep stock market declines on Thursday with major U.S. markets losing 2 percent or more.


Yields on longer-term Treasuries also fell last week. Reutersreported weak economic data in Germany, which raised concerns about growth in the Eurozone, and revised forecasts from the International Monetary Fund indicating global growth may be lower than expected, caused investors to seek the safety of U.S. Treasuries.


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

S&P 500, 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.


collaborative consumption is causing creative destruction! Back in 1942, economist Joseph Schumpeter said creative destruction is the way of the free market. It’s messy but as an entry in The Concise Encyclopedia of Economics explained:


“Lost jobs, ruined companies, and vanishing industries are inherent parts of the growth system. The saving grace comes from recognizing the good that comes from the turmoil. Over time, societies that allow creative destruction to operate grow more productive and richer; their citizens see the benefits of new and better products, shorter work weeks, better jobs, and higher living standards. Herein lies the paradox of progress. A society cannot reap the rewards of creative destruction without accepting that some individuals might be worse off, not just in the short term, but perhaps forever.”


At first, the collaborative or sharing economy was thought to be a response to the Great Recession. Some people needed to reduce costs and others needed to make money, so they found ways to use resources more efficiently by making the most of available time and assets. This is affecting companies in a variety of industries:


·         Transportation: Ride-sharing apps connect people who want rides with people who are willing to use their personal cars to provide rides. (If you’ve wondered about autos sporting big pink mustaches, they belong to a particular app’s drivers.) These apps are taking money out of the pockets of cab companies.

·         Hotels: You can reduce travel costs by renting someone’s spare bedroom, castle, or villa through an online community marketplace. The downside, according to one study in Texas, is traditional hotels have lost revenue as these communities have gained popularity.

·         Finance: When banks and traditional lenders made borrowing a challenge, peer-to-peer lending and crowdfunding platforms provided individuals and entrepreneurs with a new way to source capital. A report from the Cleveland Fed found, “Since the second quarter of 2007, the total amount of money lent through bank-originated consumer-finance loans has been declining on average 2 percent per quarter… Meanwhile peer-to-peer lending has been growing rapidly at an average pace of 84 percent a quarter.”


Whether you want to provide or consume goods or services – cooking meals or eating them, running errands or having them run, hosting a pet or leaving one behind while you vacation – there is probably someone out there who is willing to share their resources.


Weekly Focus – Think About It


“Always remember that you are absolutely unique. Just like everyone else.”

–Margaret Mead, American cultural anthropologist


Value vs. Growth Investing (10/3/14)



 ©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:


Take No Social Security payments

Until You’ve Learned How to Maximize Them

Over the past few months, I’ve posted several articles about some of the critical mistakes people can make in retirement.  Another one of those mistakes is failing to maximize your Social Security benefits.

Why is this a mistake?  After all, you may have heard that Social Security is broken, or that it won’t be around by the time you retire.  But the truth is that Social Security is nothing less than a guaranteed stream of income, something no retiree should ever neglect.  Even better?  There are ways to maximize your Social Security benefits.  In other words, you may have the ability to increase your post-retirement income.  For these reasons, Social Security should and will play a large part in your retirement plan.  Failing to give your Social Security benefits the attention they deserve is basically just a way of denying yourself money for retirement. 

To help you avoid this mistake, here are …

Three Ways to Potentially Increase Your Social Security Benefits

1.   Delay collecting your benefits

Too many people rush to collect their Social Security benefits as soon as they retire.  This is sometimes a mistake, especially if you retire early.  Technically, you can begin receiving benefits as early as age 62, but if you do so; your benefits will be reduced significantly.  For example, if you were born between 1943 and 1954, your payouts would be reduced by 25%.  And the reduction isn’t temporary.  It’s permanent.


Waiting till your “full retirement age” is probably a better option—it means you won’t face any reduction.  What is your “full retirement age?”  It’s the age at which a person may first become entitled to “full” or “unreduced” retirement benefits.  The following chart gives you the specifics:

Year of Birth
Full Retirement Age
66 and 2 months
66 and 4 months
66 and 6 months
66 and 8 months
66 and 10 months
1960 and later

The latest you can begin collecting benefits is at age 70, and there’s good reason to hold off until then if you can afford it.  Benefit payments go up 8% for every year you wait after you reach your full retirement age up to age 70.  In other words, the longer you can keep your hand out of the cookie jar, the more sweets you’ll eventually receive. 

2.   Claim spousal benefits

This topic is very intricate—too intricate for a single letter.  So for now, it’s more important that you simply be aware of your options.  Another way to potentially maximize your Social Security is to claim a spousal benefit.  Married individuals can claim Social Security based on either their personal earnings record (in other words, their own work history) or on their spouse’s earnings record.  If a married individual chooses the latter, they would receive up to 50% of their spouse’s benefit. 

Why would you choose to claim Social Security based on 50% of your spouse’s earnings record rather than your own?  It’s simple: because you can claim whichever number is higher.  Be aware, however, that you cannot claim a spousal benefit until your spouse has filed their own claim. 

3.   Claim survivor benefits

Imagine a hypothetical couple, John and Mary.  Let’s say that both claimed Social Security based on their own earnings records.  Now let’s say that John dies of a heart attack, leaving Mary behind.  Under certain circumstances, Mary can file to receive John’s benefit, or increase her own benefit to the same amount that John enjoyed, if John’s number is greater. 

There are other ways to potentially maximize your Social Security benefits, too.  To learn about these, or more about the methods listed here, please feel free to give my office a call at 215-886-2122, or e-mail me at  I’d be happy to speak with you about your options.

Whatever you do, remember: Social Security is a guaranteed stream of income, and should figure highly into your retirement plan.  Don’t deny yourself the chance to earn more money for retirement!  




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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