Schwartz Financial Weekly Commentary 10/30/17

The Markets

The last full week of October was a box full of surprises.

First, U.S. economic growth exceeded expectations. The devastation wrought by Hurricanes Harvey, Irma, and Maria was widely expected to stifle U.S. quarterly growth, according to NPR. The Atlanta Federal Reserve predicted 2.5 percent gross domestic product (GDP)* growth for third quarter, down from 3.1 percent the previous quarter. Instead, U.S. GDP grew by 3.0 percent.

In fact, productivity has been flourishing around the globe. The Financial Times reported:

 

“…activity has again broken upwards in recent weeks, with growth in the advanced economies close to the highest rates seen since before the Great Financial Crash (GFC), apart from in the immediate recovery phase in 2010. Furthermore, world trade volume has now joined the recovery, and corporate expenditure on jobs and machinery is picking up. Overall, it seems that some of the symptoms of “secular stagnation” are beginning to fade…”

 

Tech companies were a sensation last week, too. Several of the biggest firms beat earnings estimates by wide margins, pushing share values higher, reported CNBC. Despite tech’s strong performance, the Standard & Poor’s 500 Index (S&P 500) has delivered third quarter earnings growth of 4.7 percent with more than half of companies reporting.

 

Earnings are lower than they would have been without the hurricanes, according to FactSet. With insurance industry earnings excluded, the S&P 500’s earnings growth pops from 4.7 percent to 7.4 percent.

 

The final surprise for the week was the doldrums. October is supposed to be the most volatile month of the year, according to Barron’s. Instead, we’ve experienced the calmest October since 1928.

 

The S&P 500 and the NASDAQ both finished last week at new all-time highs.

 

*GDP is the value of all goods and services produced in a region.

 

Data as of 10/27/17 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 0.2% 15.3% 21.0% 9.6% 12.8% 5.3%
Dow Jones Global ex-U.S. -0.2 20.5 20.2 4.4 5.2 -1.2
10-year Treasury Note (Yield Only) 2.4 NA 1.8 2.3 1.7 4.4
Gold (per ounce) -1.2 9.3 0.0 1.0 -5.8 4.9
Bloomberg Commodity Index 0.7 -1.9 -0.4 -9.8 -9.6 -7.2
DJ Equity All REIT Total Return Index -1.4 5.8 9.8 7.5 10.0 6.2

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, djindexes.com, 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.

 

And the leader in biometric identification is India! Remembering passwords, especially if you follow best practices and have unique 12- to15-character passwords for each account, can be challenging.

 

Even when you follow best practices, which many people do not, passwords are vulnerable to data breaches. The Harvard Business Review recently reported password insecurity is one reason businesses have been opting for biometric technology such as:

 

  • Fingerprint readers
  • Eye scanners
  • Voice recognition systems
  • Hand geometry

 

For instance, in Hangzhou, China, a “health-food concept restaurant” belonging to an American fast food chain, relies on facial recognition software to allow diners to pay with a smile, according to c|net.com. It’s a lot to digest.

 

India is a leader in the new technology. Ninety-nine percent of adults in the country have been enrolled in Aadhaar, a biometric identification program that has collected the fingerprints and iris scans of more than a billion people since 2010, according to The Economist.

 

When given permission, Indian government bodies and private businesses can match the fingerprints or irises of individuals to their unique 12-digit numbers, facilitating purchases, payments, and other processes. The system has some glitches, though:

 

“Unlike reading an ID card, checking someone’s identity through Aadhaar requires an internet connection and, often, electricity. Ration-shop owners in out-of-the-way places are known to march their customers to the top of a hill, roof, or tree – wherever a phone signal can be found – to check their identity. Even then, samples seem to show that roughly a third of authentications come back negative, an extraordinarily high failure rate for a technology that people rely on for necessities.”

 

Regardless, Morgan Stanley believes “digitizing its predominantly cash-based economy and reforming its archaic tax system” will help put India on the economic fast track. “The country was already on a strong trajectory, but digitization puts India’s nominal GDP growth on track to compound annually by more than 10 percent in U.S. dollar terms over the coming decade.”

 

Weekly Focus – Think About It

 

“There is probably no pleasure equal to the pleasure of climbing a dangerous Alp; but it is a pleasure which is confined strictly to people who can find pleasure in it.”

Mark Twain, American novelist

 

Value vs. Growth Investing (10/27/17)

Name 1-Week YTD 4-Week 13-Week 1-Year 3-Year 5-Year
US Market 0.19 16.89 2.97 4.81 23.91 11.75 15.20
US Core -0.33 16.65 2.53 4.62 23.49 11.93 16.07
US Growth 1.08 25.13 4.16 5.16 28.41 12.57 15.89
US Large Cap 0.38 18.25 3.28 5.15 24.19 12.12 15.19
US Large Core -0.27 18.22 2.67 4.79 23.89 12.49 16.44
US Large Growth 1.39 26.70 4.51 5.20 28.55 13.22 16.37
US Large Val -0.10 10.44 2.52 5.42 20.24 10.58 12.77
US Mid Cap -0.34 14.15 2.27 3.73 22.58 10.75 15.49
US Mid Core -0.44 14.51 2.56 4.33 22.69 10.62 15.45
US Mid Growth 0.16 20.99 3.19 4.79 26.88 10.28 14.41
US Mid Val -0.80 7.07 0.89 1.85 17.89 11.24 16.59
US Small Cap -0.18 11.28 1.80 4.39 24.69 10.79 14.48
US Small Core -0.53 8.54 1.07 3.71 22.66 10.53 14.61
US Small Growth 0.47 20.87 3.34 5.76 31.00 12.10 14.94
US Small Val -0.51 4.84 0.87 3.63 20.22 9.65 13.77
US Value -0.26 9.38 2.09 4.59 19.82 10.67 13.64

 

 

©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:

Tax Reform First Look

 

I spent 36 hours in Las Vegas last week studying the new tax proposal to be opened in Congress next week.  While nothing is etched in stone there are some very definite things that need to be addressed by year’s end for some.

 

  1. 529 plans will probably go away next year so you will want to fund any current 529 plans fully by years end.  For some that means making a large gift of over $100,000 for couples to children, grandchildren, etc. by December 31st.
  2. If you are contemplating retirement and own company stock in your pension plan and NUA (net unrealized appreciation) makes sense for you and you were thinking about retiring early next year you might want to think about giving notice in the next couple of weeks.  This would mean that you would need to complete the rollout of any pension by years end.  NUA usually takes a month so this is something you should consider in the next few days.
  3. If you have stock options at work, you might want to exercise them this calendar year.
  4. If you make too much money to contribute to a ROTH IRA but want to anyway this may be the final year for a Back Door Roth.  You need to open a non-deductible IRA in the next few weeks.

 

If you are contributing to a 401k at work, the tax deductibility of those contributions are very much at risk.  I would push your elected representatives to not let this go through.

 

These are but a few things that may affect yourself or relatives.  Before doing anything drastic we should have a discussion.

 

Have an enjoyable week.

 

Regards,

,

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 “mike@schwartzfinancial.com”.

 

Schwartz Financial ­Weekly Commentary 10/23/17

The Markets

And the hits just keep on coming.

Last week was the anniversary of Black Monday. On October 19, 1987, the Dow Jones Industrial Average (Dow) lost 508 points, or more than 20 percent of its value, as it fell from the previous trading day’s closing value of 2,247 to 1,739. The culprits behind the historic drop are widely thought to be program trading, high valuations, and market psychology.

The anniversary didn’t put a hitch in the markets’ giddy up last week, though. The Dow closed above 23,000 for the first time ever on Wednesday. That’s the fourth thousand-point milestone the Dow has passed this year, according to Reuters.

The Standard & Poor’s 500 Index also finished the week at a new high. Strong earnings, along with optimism about fiscal and monetary policy, contributed to investors’ optimism. Financial Times wrote:

“U.S. stocks hit record highs yet again and the dollar touched its strongest level against the yen for more than three months as growth bulls applauded news that the Senate had adopted a fiscal 2018 budget resolution, opening the way for tax reform. U.S. Treasuries fell – most sharply at the longer end of the curve – as participants fretted about the prospect of increased federal borrowing and potentially higher inflation.”

It’s interesting to note, despite major U.S. stock markets hitting new highs, bullish sentiment has been below the historical average 36 times this year, including last week. The AAII Investor Sentiment Survey showed bullish sentiment down 1.8 percent, while bearish sentiment gained 1 percent and neutral sentiment was up 0.8 percent. Of course, some consider this survey to be a contrarian indicator.

Data as of 10/20/17 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 0.9% 15.0% 20.3% 10.6% 12.4% 5.5%
Dow Jones Global ex-U.S. -0.4 20.8 19.4 4.6 5.0 -0.6
10-year Treasury Note (Yield Only) 2.4 NA 1.8 2.2 1.8 4.4
Gold (per ounce) -1.4 10.5 0.8 1.0 -5.8 5.5
Bloomberg Commodity Index -0.7 -2.6 -0.9 -9.9 -10.1 -7.1
DJ Equity All REIT Total Return Index -1.0 7.3 7.2 8.9 10.1 6.4
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, djindexes.com, 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.

know what can be really scary? warehouse clubs. Like horror flick fodder (extras and co-stars who ignore their gut instincts and venture into places they shouldn’t), people go into warehouse clubs thinking they’ll be able to buy just the items they need and escape without serious injury to their budgets. In reality, only shoppers with the preternatural ability to avoid impulse purchases manage it, reports AARP Magazine.

That doesn’t mean you won’t find good deals at warehouse clubs. You will, but you have to exercise tremendous self-discipline. AARP Magazine and Kiplinger’s offered insight to some of the better values at warehouse clubs. They include:

  • Wine. Here’s a shocker: One warehouse club is the biggest wine retailer in the country, according to com. Reasonably priced, signature brands of quality wines and alcohol have been helping warehouse clubs attract members and improve sales.
  • Movie tickets. There are some films that should be watched in the theater. If you pick up a packet of discount movie tickets at a warehouse club instead of the theater, the show will cost approximately $8.50 per ticket instead of $13 per ticket.
  • Batteries. With the holidays approaching, you’re going to need batteries for everything from drones to remote controls to digital games. Warehouse clubs often have competitively priced options.

If you’re determined to save money by shopping at warehouse clubs, Fox News suggested a mindset adjustment could help:

“Buying an item you don’t need because it was marked down from $125 to $50 is not saving $75. It’s spending $50. That’s a lesson that, if taken to heart, should save all [warehouse club] members money. That doesn’t seem to be the case for most people, however, so these money-saving memberships probably end up being a drain on people’s finances.”

Here’s another way to avoid impulse purchases: Make your choices online and then choose in-store pick-up or delivery.

Weekly Focus – Think About It

“Today [Amy] starts shopping from her couch by launching a videoconference with her personal concierge at…the retailer where she bought two outfits the previous month. The concierge recommends several items, superimposing photos of them onto Amy’s avatar. Amy rejects a couple of items immediately, toggles to another browser tab to research customer reviews and prices, finds better deals on several items at another retailer, and orders them. She buys one item from [the retailer] online and then drives to the…store near her for the in-stock items she wants to try on. As Amy enters [the retailer], a sales associate greets her by name and walks her to a dressing room stocked with her online selections – plus some matching shoes and a cocktail dress. She likes the shoes, so she scans the bar code into her smartphone and finds the same pair for $30 less at another store. The sales associate quickly offers to match the price…”

–Darrell K. Rigby, The Future of Shopping

Value vs. Growth Investing (10/20/17)

Name 1-Week YTD 4-Week 13-Week 1-Year 3-Year 5-Year
US Market 0.85 16.67 2.89 4.63 22.92 12.78 14.82
US Core 1.14 17.03 2.92 4.39 23.27 13.22 15.83
US Growth 0.44 23.79 2.75 4.00 25.54 13.39 15.34
US Large Cap 0.88 17.81 2.71 4.87 23.49 13.11 14.76
US Large Core 1.20 18.54 2.67 4.45 24.34 13.79 16.15
US Large Growth 0.32 24.96 2.47 3.75 25.75 13.96 15.80
US Large Val 1.19 10.55 3.02 6.53 20.54 11.53 12.37
US Mid Cap 0.84 14.53 3.15 3.98 21.17 11.98 15.23
US Mid Core 1.15 15.02 3.34 4.39 20.67 11.95 15.33
US Mid Growth 0.74 20.79 3.21 4.61 24.48 11.40 13.92
US Mid Val 0.59 7.93 2.88 2.81 18.17 12.50 16.47
US Small Cap 0.57 11.48 4.06 4.10 22.01 11.72 14.24
US Small Core 0.56 9.12 4.18 3.67 21.09 11.60 14.54
US Small Growth 0.81 20.31 4.38 4.82 26.15 12.82 14.42
US Small Val 0.28 5.38 3.57 3.80 18.50 10.67 13.68
US Value 1.01 9.67 3.03 5.60 19.96 11.69 13.31
 ©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:

Does Your 401k Deserve a Second Opinion?

Did you know your retirement depends largely on only three numbers and a letter?  Can you guess what they are?

If you guessed “401(k)” then you’re absolutely right.  For many Americans, a 401(k) is the easiest and most convenient way to save for retirement.  According to one study, nearly 80% of full-time workers have access to an employer-sponsored retirement plan such as a 401(k), and of these, more than 80% participate in their plan.   It’s clear your 401(k) is an invaluable tool when it comes to saving for retirement.

So ask yourself: are you giving your 401(k) the attention it deserves?

Unfortunately, many people aren’t.  Studies have shown that many savers have no idea what’s even in their 401(k), what their options are, which investments they’ve selected, or how much risk they’re taking on.

Those things are all important to know.  Because it’s not enough just to save for retirement.  You have to save intelligently.  To do that, you have to make use of your 401(k) intelligently, too.  Think of your 401(k) as a tool.  It’s big, it’s powerful … and it’s absolutely useless if you don’t really understand it.

It’s just common sense, isn’t it?  If you don’t know what your investments are, or how much risk you’re exposed to, or how much in fees you’re paying, all your hard-earned money—money taken out of your pay check—is at risk.  In fact, a 2012 study reported that only one in five large companies believed their employees were making informed decisions about their retirement savings.  That is a sobering statistic.

If you’ve taken the time to understand what’s in your 401(k), congratulations!  You are part of a truly elite few.  But if you have even the slightest doubt about how your 401(k) is doing or what you’re invested in, it’s time to take action.

My name is Michael Schwartz.  I’m the owner here at Schwartz Financial.  For over 40 years, I’ve helped local retirement savers understand and get the most out of their 401(k).  Fortunately, “getting the most” out of your 401(k)—or any retirement account for that matter—is relatively simple.  It all starts by getting a second opinion!

Why is a second opinion important?  Well, if you’ve ever scrutinized the documents your plan provider has sent you, you know that understanding your 401(k) is difficult and time consuming.  After all, there’s so many details to sift through, so much technical language to decipher.  And that doesn’t even begin to cover understanding the various investment options you have!

That’s where my team and I come in.  With our special “Second Opinion Service,” we can sit down with you and review your 401(k) together.  We can help you:

Ÿ Understand the different investment options available to you so you can choose the right options for your specific needs and goals.

Ÿ Know how much risk you are taking on and how you may be able to decrease it.

Ÿ Decipher the fine print so you will know exactly how much you’re paying in fees.

Ÿ Determine how you can save for retirement with more ease and efficiency.

Best of all, our Second Opinion Service comes with no obligation, takes only a few minutes, and is absolutely FREE!

Now ask yourself another question: “Do I want to retire some day?”

If you answered YES, you need to get the most out of your 401(k).  Don’t let your best saving years go by without giving your plan the attention it deserves.  To schedule your free second opinion, please give us a call at 215-886-2122 or email me at mike@schwartzfinancial.com.  It’s quick, it’s easy … and the benefits last a lifetime.

We look forward to helping you get the most out of your 401(k)!

Regards,

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 “mike@schwartzfinancial.com”.

Schwartz Financial Weekly Commentary 10/16/17

The Markets

There’s a new kid in town: narrative economics.

Last week, Richard Thaler was awarded the Nobel Prize in economics. His work in behavioral economics and finance recognizes not all economic and financial decisions are made after rational reflection. In Nudge, he wrote:

“The workings of the human brain are more than a bit befuddling. How can we be so ingenious at some tasks and so clueless at others?…Many psychologists and neuroscientists have been converging on a description of the brain’s functioning that helps us make sense of these seeming contradictions. The approach involves a distinction between two kinds of thinking, one that is intuitive and automatic, and another that is reflective and rational.”

Yale professor Robert Shiller, another Nobel laureate in economics, is exploring a field of study related to Thaler’s. It’s called narrative economics. Narratives are the stories we share with each other. They are fuel for conversation and popular narratives often become viral. During a presentation at the University of Chicago, Schiller explained narrative economics is “the study of the spread and dynamics of popular narratives, the stories, particularly those of human interest and emotion, and how these change through time, to understand economic fluctuations.”

Today, a popular narrative in financial circles focuses on Professor Shiller’s cyclically-adjusted price-earnings (CAPE) ratio, which suggests the market may be overvalued. Barron’s reported, “The CAPE, which is based on average inflation-adjusted earnings over the trailing 10 years, stands at 31, versus 32.5 in 1929 and 44 in late 1999.”

If stocks are overvalued, why do investors keep buying shares? It’s a question narrative economics hopes to help answer in the future.

Data as of 10/13/17 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 0.2% 14.0% 19.7% 10.8% 12.1% 5.1%
Dow Jones Global ex-U.S. 1.7 21.3 21.8 5.0 5.4 -0.9
10-year Treasury Note (Yield Only) 2.3 NA 1.7 2.3 1.7 4.7
Gold (per ounce) 3.0 12.1 3.1 1.9 -5.6 5.5
Bloomberg Commodity Index 2.4 -1.8 -0.4 -10.3 -10.0 -7.1
DJ Equity All REIT Total Return Index 1.6 8.4 8.8 10.4 10.3 6.1
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, djindexes.com, 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.

self-driving cars, life-like robots, artificial intelligence, and video phones. Millennials and members of Gen Z may find the original Blade Runner movie a bit dated. After all, many of the tech innovations imagined have become a part of our daily lives and others, like mood organs, are in the works.

Mood organs were among the human enhancements imagined by Philip Dick in Do Androids Dream of Electric Sheep? (The book upon which Blade Runner was based.) A recent c|net.com article explained:

“Dick doesn’t describe the design of the mood organ or how it works, only specifying that it can stimulate or sedate the user’s cerebral cortex. Users simply dial up the emotion they want, such as 481 (awareness of the manifold possibilities open in the future) or 594 (pleased acknowledgement of a spouse’s superior wisdom).”

Neural implants are a reality already, although they’re not used to control human emotion. Thousands of people with Parkinson’s have implants to manage tremors and applications to help with epilepsy and depression are being explored, according to IEEE Spectrum.

Medical treatments are not the only applications for neural implants. Elon Musk is developing ‘neural lace,’ a brain-computer interface (BCI) that may be injected into the human body, travel through the bloodstream, and settle over the cerebral cortex. While neural lace someday may be used to treat or diagnose neurological issues, The Economist reports Mr. Musk has argued, “human beings need to embrace brain implants to stay relevant in a world which, he believes, will soon be dominated by artificial intelligence.”

Musk is not the only entrepreneur pursuing brain interfaces. IEEE Spectrum reported Mary Lou Jepsen, an MIT alumnus and tech executive, has founded a company which is working on non-invasive BCIs “for imaging and telepathy (the latter could conceivably be done by reading out thought patterns in the brain).”

It’s possible the idea of humans with superpowers may seem quaint to future generations.

Weekly Focus – Think About It

“The real question is, when will we draft an artificial intelligence bill of rights? What will that consist of? And who will get to decide that?”

–Gray Scott, Futurist philosopher

Value vs. Growth Investing (10/13/17)

Name 1-Week YTD 4-Week 13-Week 1-Year 3-Year 5-Year
US Market 0.12 15.69 2.58 4.89 22.40 13.22 14.72
US Core 0.21 15.70 1.96 4.15 22.18 13.62 15.79
US Growth 0.31 23.25 2.31 5.32 25.82 14.30 14.98
US Large Cap 0.15 16.78 2.28 5.12 22.88 13.31 14.61
US Large Core 0.33 17.13 1.40 4.15 23.08 13.95 16.13
US Large Growth 0.39 24.56 1.93 5.39 26.46 14.70 15.35
US Large Val -0.29 9.25 3.55 5.75 19.25 11.22 12.43
US Mid Cap 0.12 13.58 2.96 4.04 20.89 13.00 15.27
US Mid Core 0.02 13.71 2.87 4.05 19.88 12.91 15.21
US Mid Growth 0.18 19.91 2.98 4.91 23.85 12.79 13.91
US Mid Val 0.15 7.30 3.03 3.04 18.76 13.19 16.71
US Small Cap -0.19 10.85 4.65 4.95 21.72 13.01 14.17
US Small Core -0.35 8.52 4.79 4.36 20.70 12.89 14.49
US Small Growth -0.25 19.34 4.47 5.64 24.65 14.30 14.14
US Small Val 0.05 5.08 4.72 4.88 19.49 11.78 13.83
US Value -0.18 8.57 3.52 5.15 19.21 11.67 13.41
 ©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:

17 Reasons You Should Attend Our “Social Security Planning For Women Event”

  • The triple whammy many women face in retirement
  • Why singling out women for Social Security planning is important?
  • Why women really need Social Security planning—and why men should care?
  • How Social Security benefits women?
  • What all women need to know about Social Security?
  • How a husband’s decisions affect a woman’s Social Security benefits?
  • How to claim benefits from a divorced spouse?
  • How remarriage affects benefits?
  • What women can do now to increase their Social Security benefits?
  • Essential Social Security planning for women of all ages
  • Why Social Security planning inspires people to do comprehensive survivor planning, including insurance, investments, and estate planning?
  • Which is greater: earned benefit or spousal benefit?
  • 4 key questions to answer when projecting benefits
  • 6 possible scenarios to consider
  • Understanding the rules for earned benefits, spousal benefits, divorced-spouse benefits and survivor benefits.
  • What if you divorce in retirement?
  • Why it is important to report all marital events to Social Security

MLS_Women_Retirement+SS-NOV2017email

Regards,

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 “mike@schwartzfinancial.com”.

Schwartz Financial Weekly Commentary 10/9/17

The Markets

Slow and steady…

It has been 332 days since the Standard & Poor’s 500 (S&P 500) Index experienced a 5 percent drop, reported Barron’s. If there isn’t a selloff on Monday or Tuesday, this will become the longest rally without such a drop.

During this period, the Index has gained 33 percent. Think about that for a moment: 33 percent over 332 days. By Barron’s calculations, the market has gained less than 0.1 percent per day. That’s a very slow rate of increase, relatively speaking. The longest-ever rally without a 5 percent drop, which began in November 1994, was accompanied by a gain of 56 percent or 0.17 percent per day.

The most recent issue of The Economist pondered the phenomenon of the slow-as-molasses bull market that has pushed asset prices higher:

“No one would mistake the bloodless run-up in global stock markets, credit, and property over the past eight years for a reprise of the ‘roaring 20s,’ or even an echo of the dotcom mania of the late 1990s. Yet only at the peak of those two bubbles has America’s S&P 500 been higher as a multiple of earnings measured over a ten-year cycle. Rarely have creditors demanded so little insurance against default, even on the riskiest ‘junk’ bonds. And rarely have property prices around the world towered so high…the world is in the throes of a bull market in everything.”

It would be a mistake to assume asset prices will continue to move higher indefinitely. One characteristic that may signal the onset of a bear market is investor euphoria, and we haven’t seen that. The most recent American Association of Individual Investors’ Sentiment Survey showed 2.3 percent more investors were bullish last week, pushing the total to 35.6 percent. That’s still well below the historic average of 38.5 percent.

Last week was punctuated by a senseless shooting. Our hearts and prayers are with the people of Las Vegas.

Data as of 10/6/17 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 1.2% 13.9% 18.0% 9.1% 11.9% 5.1%
Dow Jones Global ex-U.S. 0.5 19.3 17.5 3.3 4.8 -1.0
10-year Treasury Note (Yield Only) 2.4 NA 1.7 2.4 1.8 4.6
Gold (per ounce) -1.7 8.9 0.6 1.8 -6.6 5.6
Bloomberg Commodity Index -0.6 -4.1 -1.9 -11.1 -10.6 -6.9
DJ Equity All REIT Total Return Index 0.5 6.6 8.6 10.2 10.1 5.6
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, djindexes.com, 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.

Zombie tourism and zombie companies. Zombies have a special place in the heart of pop culture. The undead are pivotal characters in books, movies, games, and television shows. The practical can read The Zombie Survival Guide. Thrill seekers can binge on The Walking Dead. Romantics have Pride and Prejudice and Zombies. Anyone looking for a laugh can watch Shaun of the Dead or Zombieland.

If you’re one of those people who just can’t get enough of roamers, rotters, biters, and crawlers, you’re in for a treat: zombie tourism. National Geographic has identified several travel destinations that are steeped in zombie legend:

  1. American zombie culture appears to have origins in Haiti, where slaves believed death would reunite them with their gods and homelands. The exception was suicide. If slaves took their own lives, they “would be forced to remain in their bodies, soulless, and continue to work the plantations.”

 

  1. In Greece and elsewhere, folklore historians have found anyone who died of plague or was cursed, murdered, or born on an inauspicious day, could potentially rise from the dead. Some archeology digs have found graves with skeletons weighted by rocks or millstones.

 

  1. Georgia (in Europe). You won’t find any zombies here – and that’s the point. Apparently, Georgia boasts some of the world’s most promising zombie-proof dwellings. The village of Chazhashi, at the confluence of the lnguri and Black Rivers, has more than 200 nearly impenetrable medieval tower houses.

Zombies aren’t always undead humans. There are zombie companies, too. A zombie company is debt-laden and on the edge of bankruptcy. In fact, the Organization for Economic Co-operation and Development (OECD) thinks zombie firms may be one reason economic growth has been so slow. The Economist reported:

“We know that a few companies are still producing substantial productivity gains but it may be that monetary policy, by keeping rates low, has stymied the forces of creative destruction; ‘zombie’ companies have been kept alive, dragging down the productivity numbers. Whatever the reason, economic growth won’t rebound until productivity perks up.”

 

Perhaps National Geographic should add some quarterly earnings calls to its zombie tourism list.

 

Weekly Focus – Think About It

 

“Fear is the main source of superstition, and one of the main sources of cruelty. To conquer fear is the beginning of wisdom.”

–Bertrand Russell, British philosopher

 

Value vs. Growth Investing (10/6/17)

Name 1-Week YTD 4-Week 13-Week 1-Year 3-Year 5-Year
US Market 1.27 15.55 3.89 6.49 20.58 11.36 14.18
US Core 1.06 15.46 3.38 5.38 20.53 11.89 15.15
US Growth 1.50 22.88 3.02 7.79 23.35 12.10 14.39
US Large Cap 1.32 16.61 3.52 6.63 21.32 11.53 14.06
US Large Core 1.03 16.75 2.62 5.15 21.63 12.36 15.42
US Large Growth 1.47 24.08 2.59 8.00 24.16 12.57 14.74
US Large Val 1.44 9.57 5.46 6.55 18.27 9.61 12.09
US Mid Cap 1.13 13.45 4.28 5.78 18.40 10.74 14.78
US Mid Core 1.17 13.68 4.72 5.92 17.70 10.61 14.74
US Mid Growth 1.53 19.69 3.58 6.75 20.80 10.25 13.32
US Mid Val 0.65 7.14 4.56 4.53 16.48 11.26 16.30
US Small Cap 1.17 11.06 6.69 7.07 19.36 11.39 13.72
US Small Core 0.99 8.90 6.91 5.92 18.65 11.32 14.06
US Small Growth 1.67 19.63 6.09 8.52 22.18 12.33 13.66
US Small Val 0.79 5.03 7.14 6.80 16.90 10.45 13.35
US Value 1.24 8.77 5.40 6.17 17.85 10.01 13.04

©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:

 

“The Three Key Challenges of Retirement”

Planning for your retirement can be challenging. It can be scary, and it can be frustrating. I have seen many clients who felt their plan was a disaster waiting to happen. As an advisor, I am here to say that you can handle it. Planning for retirement doesn’t have to be difficult—in fact, it can be fun! But in order to achieve the retirement of your dreams, you must prepare for three major challenges that every retiree is likely to face.

Challenge #1:

Ensuring a Long Retirement Savings Lifespan

One of the greatest fears people have in retirement is that they will outlive their savings. Fortunately, by taking steps now, you can ensure this doesn’t happen to you.

The first step is to budget your expected expenses based on your normal day-to-day costs and any activities you want to pursue during retirement. Things like travel, hobbies, remodeling your home, etc.

Next, take a hard look at your current savings and level of income. How much are you setting aside for retirement? How much more do you need to be saving or investing in order to meet your expected budget? This is where working with a financial advisor can come in handy, because an advisor can help you determine

  • how much your savings need to grow to meet your needs;
  • how long you can expect your savings to last, based on when you plan on retiring, your general health, and activities;
  • how to maximize your income opportunities after retirement; and
  • what the ideal rate of withdrawal will be from any retirement accounts you have so you don’t run out of

Once you have a plan for your retirement savings, you can move onto the next challenge:

 

Challenge #2:

Planning for Health Care Expenses

As we age, health care becomes a bigger concern, and a more difficult one to deal with. It can be hard to find a plan that provides the coverage you need at a price you can afford. All the politics and legislation affecting the healthcare industry don’t make it easier, either.

The answer, again, is to plan ahead. Here are a few things you can do:

  1. Learn about your various Medicare

If you are one of the lucky few who will have employer-provided health care coverage even after retirement, congratulations. But if not, start familiarizing yourself with the intricacies of Medicare now. The Federal government’s health insurance program for seniors is often referred to as a single plan, but in reality, it’s many types of plans rolled into one. From the basic level of coverage (Part A), to “Medicare medical insurance” (Part B) which covers outpatient hospital care, physical therapy, and home health care, to the more elaborate “Medicare Advantage” plans, most retirees are confronted with too many options, some of which are more appropriate than others. Choosing the best type of coverage for you will be crucial when it comes to paying for your medical expenses.

  1. Look at

Medigap supplemental insurance is sold by private insurance companies, and is designed to help pay those costs not covered by Medicare. Medigap isn’t free, and certain criteria must be met before you can purchase it, but it’s definitely a route to consider.

  1. Consider long-term care

Important disclaimer: not everyone will need long-term care or assisted living in their lives. That said, many people do, and long-term care (LTC) insurance is one of the best ways to pay for it. It can be beneficial to purchase LTC insurance sooner rather than later, as premiums often grow higher as you grow older. However, LTC is expensive in and of itself, so give the subject a lot of careful consideration before making a decision.

As you can see, paying for health care expenses is a huge part of retirement. As you create your retirement plan, make sure you give the subject all the attention it deserves.

Challenge #3:

Planning for Unexpected Expenses

While health concerns are a major source of unexpected costs, there are many other types of expenses that could impact your retirement. For instance

  • Car repairs. You know it will happen one day: the strange clunk-clunk sound you start hearing from your engine ends up being a problem that will cost hundreds, maybe even thousands, to fix. And if it happens more than once …
  • Your bills keep going up. What goes up does not necessarily go down. Anyone who has ever paid for an internet connection or satellite TV knows that prices tend to rise over the years. Your basic utilities are prone to price fluctuation as well. A really cold winter means your gas bill will go up. If you have children in the house who keep leaving the lights on, your electricity bill will go up. You get the picture.
  • Household repairs. When the toilet clogs or the faucet leaks; when a window breaks or the roof starts to degrade; when wood-boring beetles infest the tree in the backyard; unless you really like to DIY, that means paying for a professional … who usually aren’t

The point of all this, is to show that unexpected expenses can come at any time, in many different forms. What’s more, they can really pile up.

So, what’s the solution? Start a rainy-day fund! When most people save, they tend to just throw everything into one savings account and withdraw money whenever they either need or want to. Instead, I suggest creating a separate type of savings account: one that can only be touched whenever the unexpected happens. Every month, devote a set percentage of your income to the rainy-day fund in addition to your regular savings. Then, when your car inevitably breaks down, you won’t have to worry about it interfering with that vacation you’ve been dreaming about for years, because you’ve already set aside the funds to deal with it.

The key to starting a rainy-day fund is to do it now. If you wait until after retirement, you’ll probably have waited too long. Plus, once you’re retired, you’ll likely have less to set aside for those unexpected expenses.

Which brings us to the single most important thing you can do to meet these three key challenges of retirement. Have you guessed what it is yet?

That’s right: plan ahead.

By being proactive, by starting now, you can mitigate these challenges and prevent them from derailing your dream retirement.

As always, if you’d like any assistance with creating a retirement plan, or if you have questions about how to maximize your savings and cover your expenses, feel free to contact me at 215-886-2122.

 

Regards,

,

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 “mike@schwartzfinancial.com”.