Schwartz Financial Weekly Commentary 8/7/17

The Markets

Who’s been buying shares of company stock?

Since the start of the bull market in 2009, U.S. companies have been buying their own stock. Stock buybacks peaked during the first three quarters of 2016 and have dropped off sharply since then, reports Financial Times citing a report from Goldman Sachs.

Companies participate in stock buyback (a.k.a. share repurchase) programs to improve shareholder value. For example, if company management believes a company’s shares are undervalued, it can buy shares on the stock market or offer shareholders a fixed price to purchase their shares. This reduces the number of shares in the marketplace and increases earnings per share, which has the potential to boost the company’s stock price.

The slowdown in stock buybacks hasn’t hurt stock markets. Financial Times reported:

“The slowing pace of companies buying back their own shares has certainly not halted Wall Street’s stellar run so far this year. While there is a reduced tail wind of buybacks helping boost earnings per share via a lower share count, U.S. companies have reported robust year-on-year sales and earnings growth for the recent quarter. That has helped offset the decline in buyback activity, but some warn that the clock is ticking for Wall Street bulls.”

There was no sign of a slowdown in the bull market last week, though. The Department of Labor reported the United States added more new jobs than anyone had expected during July, and the unemployment rate fell to 4.3 percent – the same level as May 2017, which was the lowest in 16 years, according to Barron’s.

Jobs growth was music to many investors’ ears.

Financial Times reported, “U.S. equity indices hovered near record highs – with the Dow Jones Industrial Average touching an all-time peak of 22,089.05 in early trade – with financials bolstered by the rise in yields. European [markets] ended the week on a strong note, helped by a sharp retreat for the euro against the dollar.”

Data as of 8/4/17 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 0.2% 10.6% 14.4% 8.5% 12.2% 5.4%
Dow Jones Global ex-U.S. 0.6 17.0 17.5 0.8 5.4 -0.4
10-year Treasury Note (Yield Only) 2.3 NA 1.5 2.5 1.6 4.7
Gold (per ounce) -0.6 8.5 -7.7 -0.4 -4.8 6.4
Bloomberg Commodity Index -1.4 -4.8 -0.8 -13.3 -10.3 -6.8
DJ Equity All REIT Total Return Index -0.2 6.1 -0.5 9.2 9.6 7.0
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.

Saving Is as Easy As Riding A Bike! If you would like to save more money – for retirement, college tuition, healthcare costs, or some other financial priority – hop on your bike and ride.

As it turns out, riding your bike may help boost your savings. Whether you commute to work on two wheels or cycle around town doing errands, opting for manpower instead of horsepower can help generate some additional savings, according to a source cited by

“The average American household spends over $9,000 a year on transportation, making it the second-largest expense after housing…Many families simply take for granted the two-car, driving-to-work arrangement that’s the norm for American households and often don’t consider alternatives like public transportation, carpooling, or biking…That’s a shame, because its status as a major household cost means cutting transportation can radically cut your overall costs and, potentially, increase your ability to save…”

If you are serious about saving, imagine what your finances would look like if you:

  • Drove less. AAA reported owning a small car costs about $6,600 a year, while rumbling around in an SUV costs more than $10,000 annually. (The estimate includes fuel, insurance, depreciation, maintenance, fees and licensing, finance charges, and tires.) Eliminating a car could significantly improve your ability to save.
  • Cycled more. Not everyone can get by without a car; however, if you bike shorter distances or when the weather is good, then you could qualify for a low mileage discount on your auto insurance.
  • Didn’t go to the gym. If you’re riding a bike to work or to run errands, then you probably don’t need spin class. The average gym membership runs $54 a month or almost $650 a year.
  • Bought less stuff. Impulse purchases are less tempting when you’re cycling because bike baskets and saddlebags have limited storage space. Who knows how much that could help you save?

In addition to saving money, two-wheeled travel options are likely to improve your fitness and reduce the stress of rush hour driving. Cycling may even eliminate the need for dieting and some medications. Here’s an added bonus: If biking improves your longevity, you may have more time to spend the money you save!

Weekly Focus – Think About It

“Life is like a 10-speed bicycle. Most of us have gears we never use.”

–Charles M. Schultz, Cartoonist

Value vs. Growth Investing (8/04/17)

Name 1-Week YTD 4-Week 13-Week 1-Year 3-Year 5-Year
US Market 0.13 11.51 1.87 4.08 16.82 10.50 14.62
US Core 0.52 11.87 1.11 3.74 17.41 11.45 15.70
US Growth -0.49 18.39 3.37 5.23 17.68 11.29 14.68
US Large Cap 0.38 12.73 2.41 4.59 17.53 10.95 14.51
US Large Core 0.84 13.54 1.40 4.46 19.38 12.38 16.08
US Large Growth -0.29 20.06 4.25 5.65 18.58 12.09 15.07
US Large Val 0.66 5.23 1.40 3.59 14.71 8.35 12.46
US Mid Cap -0.39 9.51 0.76 3.02 14.96 9.50 15.24
US Mid Core -0.08 9.55 0.89 2.49 12.19 9.33 15.06
US Mid Growth -0.92 14.59 1.19 3.90 15.32 8.94 13.55
US Mid Val -0.13 4.56 0.14 2.72 17.60 10.19 17.18
US Small Cap -1.00 5.17 -0.43 1.92 14.87 8.70 13.99
US Small Core -0.88 3.58 -1.10 0.55 14.50 8.73 14.23
US Small Growth -1.55 12.08 0.32 4.60 14.85 9.34 13.71
US Small Val -0.55 0.11 -0.49 0.64 14.95 7.95 13.96
US Value 0.42 4.74 1.02 3.21 15.34 8.71 13.53
 ©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:

How to Know if Your Financial Advisor is Working in Your Best Interest

I hope this article finds you well.  Even though I’m not currently your financial advisor, I’ve enjoyed communicating with you in the past and wanted to share some important information about the financial services industry that you may not be aware of.  This topic is a little bit dry, but it’s something all investors should be familiar with.


On June 9 of this year, a new rule went into effect for the financial services industry. Commonly known as the “DOL Fiduciary Rule,” it requires all financial advisors to act in the best interests of their clients when giving advice on retirement accounts.  (A “fiduciary” is someone legally bound to act in another person’s best interest.)

That’s the key word—requires.  Before this rule, most advisors did not have to work under this requirement.

“Now, wait a minute!” you’re probably thinking.  “Are you saying advisors didn’t already have to act in their clients’ best interests?”

Actually, yes.  That’s exactly what I’m saying.  Traditionally, most advisors were not required to put their clients’ interests first.  Instead, advisors were required to follow a simple suitability standardThis means they are only expected to make recommendations considered “suitable” for their clients.  To put it bluntly, this allowed advisors to give advice that was primarily in their best interest, and not the client’s best interest, so long as that advice could still technically be considered “suitable.”

But there’s another, higher standard that some advisors hold to.  It’s called the fiduciary standard.  Advisors who are fiduciaries must put their clients’ interests before their own.  Even if the advice an advisor gives is less good for the advisor, they must give it if that’s what is best for the clients they serve.

Under the Fiduciary Rule, any financial advisor providing advice pertaining to retirement savings, qualified plans, or IRAs is now classified as a fiduciary.1  That meant many advisors who previously followed the “suitability standard” will have to make a major change in how they do business.

Here at Schwartz Financial, we’ve long held ourselves to that type of standard.  But that’s not what this letter is about.

As you can see, there have long been two types of financial advisors: those who put their clients’ best interests first, and those who didn’t.  The question you and every other investor should ask is,

“Which type is my financial advisor?”

Does your financial advisor put your best interests first, or does he or she not?  That’s what you must find out.  Fortunately, there are some simple steps you can take to learn the truth.  Just take this short little test:

  1. Does your current advisor routinely review your current investments with you?
  2. Can your current advisor demonstrate how every investment is designed to help you reach your goals and needs?
  3. Because of the new Fiduciary Rule, many advisors will have to recommend new investments for their clients, because the old investments only fit the suitability standard instead of the fiduciary standard. Has your advisor recommended new investments to comply with the new law?  Can they explain why they were investing in something else before the new law went into place?
  4. Do you understand exactly how your current advisor is being compensated? Have they taken the time to explain it to you?  Could you repeat it to someone else?
  5. Does your current advisor provide the same type of recommendations for non-retirement accounts as he does for retirement accounts? (Remember, the new “best interests” rule only applies to advice given on retirement accounts.)
  6. Do you know if your advisor has any incentives to recommend certain products over others?
  7. Does your current advisor have a plan for how to protect your assets before the next bear market?

If you don’t know the answer to some of these questions or if you don’t like the answers you have, then you may have some work to do.

Compare it to having a car mechanic.  Everyone wants the mechanic who is willing to say, “We’ll keep an eye on this, but I don’t recommend you replace this part on your car right now.  Why spend money when you don’t absolutely have to?”

No one wants a mechanic who is always trying to urge you into buying that high-priced part or upgrade when it’s not absolutely necessary.  That’s because the first mechanic has your best interests in mind.  They’re not trying to wring as much money from their customers as they can; they’re trying to ensure the customers are always on the road, happy and taken care of.

It’s critical that your financial advisor be like the first mechanic.  It’s critical that your financial advisor always have your best interests in mind.  Not just because the law requires them to, but because they’d never work any other way.

As I mentioned, here at Schwartz Financial, we’ve long held ourselves to the fiduciary standard.  Putting our clients’ best interests first is the foundation of our business.  Of course, it’s one thing to say that.  For it to mean anything, we need to prove it.

Here are some of the ways we prove it to our own clients every day:

  1. We are compensated mainly through fees instead of commissions (there are times when commissions come into play, for insurance transactions for example). Instead of being compensated every time we make a trade (which can incentivize advisors to make unnecessary trades to get paid more), we are compensated based on a percentage of the assets we manage.  Thus, we only succeed by helping you succeed, not by trying to wring as much “paying activity” from you as we can.
  2. We offer a financial plan to every one of our clients (in our case we make every plan a living plan updated online each and every day, via your own personal financial website). We believe strongly that all investment recommendations should be made as part of an overall financial plan.  Furthermore, a good plan should encompass a person’s entire financial life, not just retirement.  For us, your plan is the basis for all the recommendations we make, because it ensures that piece of advice leads directly to your financial goals.
  3. We are upfront about the services we provide. We don’t seek compensation for many of those services, but we do them because they need to be done.  From the start, you and every client we serve knows exactly what we do and what we don’t do, so that you always have clear expectations of us.
  4. We contact you regularly. Our goal has always been to send you written messages every month or so, combined with regular phone calls and meetings throughout the year.  You don’t just hear from us when the markets are up and the sun is shining.  We also strive to be there when times are tough.  We’re happy when you’re happy—and we sweat when you do.

Here’s what I recommend.  If you would like more information about the new DOL Fiduciary Rule, or a second opinion on whether your current portfolio is working in your best interests, please contact my assistant.  She will set either a phone appointment or better yet make time for us to meet personally.  Just take a minute to call my office at 215-886-2122.

Whether we ever work together or not, please take the time to ensure your financial advisor is truly working in your best interest.  Your financial goals are too important to risk.

After all, you’d expect nothing less from your mechanic, or your doctor, or your plumber.  Shouldn’t your financial advisor have the same standard?

Please let me know if there’s ever anything my team and I can do for 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 “”.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s