Schwartz Financial ­Weekly Commentary 2/27/17

The Markets

Once upon a time, five blind men discovered an elephant. Each man examined a different part of the elephant and formed a unique impression about the animal. One believed an elephant was like a pillar, while another decided an elephant was like a snake.

In recent weeks, stock and bond markets have been telling different stories, too.

Following a rally on Friday, the Dow Jones Industrial Average finished at a record high for the 11th time last week. Reuters reported major U.S. benchmark indices have been driven higher by optimism about tax reform, eased regulation, and increased infrastructure spending.

Both Reuters and Financial Times wrote some investors have become more cautious amidst growing doubts about the pace at which the new administration’s economic policies may be achieved, as well as concerns about the outcome of European elections. These concerns are reflected in the bond market. Barron’s reported:

“The market’s recent advance has taken place on expectations of the reflationary impact of the Trump administration’s policies…the action in global bond markets suggests something else. The 10-year U.S. Treasury yield ended the week at 2.317 percent, the lowest since late November, despite the reflation trade in stocks and expectations of a Fed hike by June, if not May. Even more startling was the slide in the German two-year yield, to minus 0.95 percent, by week’s end, close to a record low, amid growing concern about France’s coming presidential election. While stock investors are smiling at daily Dow records, the bond crowd seems to be hunkering down.”

Who is correct? As with the folk tale about the elephant, both stock and bond markets may be right. Fiscal stimulus could boost economic growth, supporting higher stock values. However, the positive effects of a potential stimulus package are unlikely to be felt before 2018, according to Treasury Secretary Mnuchin. In the meantime, uncertainty about governments and policies at home and abroad may have investors opting for investments they perceive to be lower risk, such as U.S. Treasuries, and that could keep bond yields lower than some had expected.

Data as of 2/24/17 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 0.7% 5.7% 22.7% 8.6% 11.6% 5.0%
Dow Jones Global ex-U.S. -0.2 5.4 18.5 -1.9 1.5 -1.3
10-year Treasury Note (Yield Only) 2.3 NA 1.7 2.8 2.0 4.6
Gold (per ounce) 1.3 8.2 0.2 -2.1 -6.7 6.2
Bloomberg Commodity Index -0.7 0.0 15.4 -13.2 -10.2 -6.6
DJ Equity All REIT Total Return Index 2.1 4.2 19.5 11.7 11.5 4.6

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.

the best inventions of 2016. Late last year, Time Magazine selected 25 inventions that “are making the world better, smarter, and – in some cases – a little more fun.” Past editions have included underground parks, gluten sniffers, and the desktop DNA lab. For 2016, the list included:

  • Spherical tires. Intended for self-driving cars, spherical tires move in every direction, allowing cars to maneuver in new and unexpected ways. For example, a car can slide sideways into a parallel parking space. A critical difference between current tires and spherical tires is magnetic levitation. That’s right. The tires hover beneath the car instead of being bolted on.
  • Levitating lightbulbs. This wireless floating lightbulb “relies on electromagnetism to levitate and spin, and on resonant inductive coupling – a technical term for wireless power transmission – to shine.” The bulbs were so popular, the company created levitating clocks (with custom orbits that can be set for one minute or one year) and planters.
  • Smarter toothbrushes. The war on gum disease is never over. Dental hygiene slackers may find using these electric toothbrushes, which vibrate every 30 seconds to remind users to switch brush position, more rewarding. Next up: a more satisfying flossing experience.
  • Assistive tableware. If you have a loved one with a cognitive disability, assistive tableware may provide a mealtime solution, helping users eat more and maintain their dignity. The trick is in the design – bright colors, wide rubber bases, and easy-to-hold cups and flatware.
  • Playful prosthetics. A new prosthetic arm for children encourages play and is likely to make siblings and friends jealous. “When they need a hand, they have one. But they can replace it with any number of toy-like attachments, all of which are compatible with” a famous brand of building blocks.

It’s always impressive to discover what a well-leavened blend of technology and cleverness will produce.

Weekly Focus – Think About It

“Their conclusion: more gender diverse companies offer similar return with lower volatility. In other words: More gender diversity, particularly in corporate settings, can translate to increased productivity, greater innovation, better decision-making, and higher employee retention and satisfaction.”

–Morgan Stanley, An Investor’s Guide to Gender Diversity

Value vs. Growth Investing (2/24/17)

Name 1-Week YTD 4-Week 13-Week 1-Year 3-Year 5-Year
US Market 0.61 6.02 3.86 7.73 26.67 10.37 13.85
US Core 0.95 6.60 4.76 8.58 28.96 11.56 15.03
US Growth 0.41 7.62 3.56 7.38 21.17 8.90 12.83
US Large Cap 0.80 6.22 4.28 8.35 25.02 10.92 13.94
US Large Core 1.18 6.97 5.30 9.26 28.69 12.34 15.54
US Large Growth 0.58 7.89 3.77 8.06 19.08 10.00 13.42
US Large Val 0.63 4.02 3.79 7.84 27.61 10.42 12.91
US Mid Cap 0.29 6.03 3.09 6.52 29.60 9.16 13.84
US Mid Core 0.56 6.65 3.97 7.82 27.79 9.76 13.91
US Mid Growth 0.17 7.32 3.21 5.88 26.29 5.99 11.13
US Mid Val 0.08 4.07 1.96 5.60 35.04 11.92 16.54
US Small Cap -0.29 4.04 1.95 5.06 36.37 8.05 12.87
US Small Core -0.05 3.22 2.15 4.59 34.63 8.97 13.08
US Small Growth -0.61 5.70 2.41 4.82 32.25 5.43 11.46
US Small Val -0.19 3.28 1.20 5.75 42.49 9.73 14.06
US Value 0.47 3.97 3.25 7.22 30.05 10.69 13.73

©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:

This letter doesn’t have anything to do with your investments.  That is, unless it arouses your appe­tite for, say, pork-belly options?  (Just kidding; enjoy the letter!)

Oven-Barbecued Ribs

Prologue & Disclaimer

This recipe has been passed along to generation after generation of Schwartz’s.  As with all oral history, it may contain some historical inaccuracies.  The finished culinary product, however, is certain to endure throughout time.

The History

This second chapter takes place a few years after the Civil War.  (Anyone who missed Chapter I, which introduced our characters and recounted the invention of Southern Chicken-Fried Steak, should call in for a copy.)

We find our hero, Col. Beaureguard Symington Schwartz, CSA (retired) living in Richmond, Virginia, happily married to the very beautiful Camellia Jane deSaltine Schwartz and pre­par­ing for a visit from several of his fellow officers in the famous 9th Virginia Cavalry.  They were gathering for the dedication of the new stable at Miss Pankey’s Riding Academy (later to be merged into La Petite Academy, OTC symbol LPAI), where as mere boys most of them had learned to ride.

That late fall afternoon, B.S. (or “Beau,” as his wife insisted he be called) was gazing out a window, his view of Richmond distorted by the raindrops rolling down its glass, and cursing the weather, for it seemed certain to crimp his barbecue plans for the evening’s festivities!  The famous military tactician needed to come up with “Plan B,” and quickly.

As was his habit when deep in thought, Beau took several turns across the floor of his study, stumbling only once in the ruts worn in the soft pine flooring by years of his pacing.  He really must consider inventing some kind of protective covering, he mused, something that could be easily placed over wood floors and as easily replaced.  Perhaps he could get together with the duPont boy, who seemed a sharp young man.  But the further history of E.I. duPont de Nemours (NYSE symbol DD) must await another letter, for after another turn across the study, Beau realized that he could use the capacious ovens of Papa deSaltine’s bakery!

The Recipe (Each Side Serves 4)

For each side of pork ribs to be served, take

1¼ cup French’s Cattlemen’s Barbecue Sauce (Smoky Flavor) 1½ Tablespoons finely chopped green onion (about 3 stalks)
2 Tablespoons Knott’s or other fine Orange Marmalade ½ Tablespoon Grey Poupon Dijon Mustard
1 Tablespoon Lea & Perrins Worcestershire Sauce (accept no substitutes!)

In a bowl, stir all ingredients well, to blend into a sauce.

Divide each side into two racks. Wash each rack and place it in an 8²×12²×1½² cooking dish. Sprinkle both surfaces of the meat with three dry seasonings: Adolph’s 100% Natural Tenderizer (unseasoned), Lawry’s Lemon Pepper Seasoning, and Lawry’s Garlic Salt.  Spoon the sauce onto the inside of each rack, then turn it meaty side up in its dish and spoon more sauce over it, being careful to cover all the meat so that it will have a uniform glaze.

Now, with his customary Schwartz brilliance, Beau had developed a method of determining whether the the bakery ovens had reached proper temperatures:  He had placed cookie sheets in each, and now observed how high a drop of water bounced when dropped onto one.  (But such details matter little to modern Schwartz’s, who simply preheat their ovens to 325° before setting their ribs inside for 1 hour and 15 minutes.)

When the ribs were done, Beau set them—still in their dishes—on the bakery counter and cut them apart with a sharp knife, ready to be served with mashed potatoes, lima beans, and several large napkins.

All Beau’s former comrades were delighted with the delicious outcome; and as the rain soaked the green lawns of Richmond, some complimented the Colonel on the inge­nuity of his preparation method.

Outdoor Method.  You can, of course, do your ribs over charcoal instead.  In that case, hold ¼ of the sauce in reserve to brush on after the first few times the ribs are turned.

The sauce will stay on the ribs better if they are first coated once and then refrigerated for about 6 hours prior to cooking.

Enjoy and pass along!


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.


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