The Markets
Investors appeared to be as optimistic as a newly-engaged
couple last week. Strong housing data, a positive labor report, temporary
easing of debt ceiling pressures, and some stronger-than-expected earnings
results helped the Standard & Poor’s 500 and the Dow Jones Industrials indices
close at five-year highs.
Commerce Department data showed housing starts climbed by
12.1 percent in December, on an annualized basis, exceeding economists’ expectations.
Home construction is expected to continue to rebound, as long as mortgage rates
remain low, and experts anticipate sales of new and existing homes will show
improvement this week. This continued improvement in the housing market may
have contributed to a more positive investor outlook.
The possibility of a debt ceiling compromise also
encouraged markets higher. Unlike down-to-the-wire fiscal cliff negotiations,
which caused investors to hold back at the end of 2012, discussions of
temporary debt ceiling extensions by House Republicans soothed investors’ concerns.
Several companies, including several high-profile Wall
Street banks, reported strong results last week, and several companies reported
earnings that beat lowered expectations. This helped drive bank, transportation,
and housing indices to historic or multi-year highs. Since the Transportation
sector includes many highly cyclical and economically sensitive stocks, which tend to
underperform when investors anticipate recession, this was seen as positive
news for the economy.
According to
Barron’s, a secular
bull market begins when both transportation companies and the Dow Jones
Industrial Average hit new highs. The Dow Jones Transportation Average reached
a new high last week, but the Industrials index remains 4 percent below its highest
close which was reached back in October 2007. Are we headed for a bull market?
Only time will tell.
Data as of 1/18/13
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard
& Poor's 500 (Domestic Stocks)
|
0.9%
|
4.2%
|
13.6%
|
9.0%
|
2.3%
|
5.3%
|
|
10-year
Treasury Note (Yield Only)
|
1.8
|
N/A
|
1.9
|
3.7
|
3.7
|
4.0
|
|
Gold (per
ounce)
|
1.9
|
-0.3
|
2.5
|
14.2
|
13.9
|
16.8
|
|
DJ-UBS
Commodity Index
|
2.1
|
1.7
|
0.2
|
0.7
|
-5.5
|
2.0
|
|
DJ Equity
All REIT TR Index
|
1.2
|
3.6
|
20.7
|
18.6
|
8.9
|
12.6
|
Notes: S&P 500, Gold, DJ-UBS Commodity
Index returns exclude reinvested dividends (gold does not pay a dividend) and
the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT
TR Index does include reinvested dividends and the three-, five-, and 10-year
returns are annualized; and the 10-year Treasury Note is simply the yield at
the close of the day on each of the historical time periods.
Sources: Yahoo!
Finance, Barron’s, 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.
What’s the difference between America’s deficit and its debt, and
how do they relate to the debt ceiling? The terms deficit, debt, and debt ceiling
are likely to be bandied about by politicians and the media frequently in
coming months. It’s important for all Americans to understand these terms.
The
deficit
America’s deficit is its annual budget
shortfall. Any year the government’s spending exceeds its revenue (the amount
of money taken in through taxes and other means), it has a deficit. When the
government spends less than it takes in, it is called a surplus. Deficits are
controversial and have been for many years. Keynesian economics states deficits
can be used to stimulate economies and help countries rise out of recession.
Other experts argue governments should not incur deficits because the money
paid in interest could be better spent elsewhere.
The
debt
The national debt is the full amount the American
government owes – all of its deficits and surpluses added together. If the
government runs at a deficit of $10 million for five years, then its debt will
be $50 million. Every year that a country runs at a deficit, its debt increases.
The
debt ceiling
When a government runs at a deficit, it
must borrow money to keep operating. The U.S. government generally borrows by
selling securities such as Treasury bills, notes, bonds, and savings bonds. The
amount it can borrow this way is limited by the debt ceiling, which was
established under the Second Liberty Bond Act of 1917.
The
United States hit its current debt ceiling, which is about $16.4 trillion, on
December 31, 2012. Before it can issue
additional debt, Congress will need to raise the debt ceiling. This may make
the debt ceiling a popular topic in political conversation during the next few
months!
Weekly Focus – Think About It
Compromise: n. Such an
adjustment of conflicting interests as gives each adversary the satisfaction of
thinking he has got what he ought not to have, and is deprived of nothing
except what was justly his due.
--Ambrose
Bierce, American journalist
Value
vs. Growth Investing (1/11/13)
|
0.99
|
4.42
|
3.19
|
3.28
|
16.39
|
12.19
|
5.31
|
|
|
0.73
|
4.10
|
2.63
|
2.04
|
16.11
|
11.30
|
4.33
|
|
|
1.33
|
4.65
|
2.90
|
3.66
|
18.44
|
12.25
|
5.40
|
|
|
0.13
|
3.35
|
2.12
|
1.66
|
16.24
|
11.47
|
5.60
|
|
|
0.80
|
4.40
|
2.90
|
0.87
|
14.00
|
10.19
|
1.79
|
|
|
1.68
|
5.27
|
4.56
|
6.71
|
17.20
|
14.37
|
7.39
|
|
|
1.85
|
5.43
|
4.57
|
7.80
|
18.20
|
16.22
|
9.05
|
|
|
1.19
|
4.52
|
4.03
|
5.26
|
14.59
|
14.26
|
5.66
|
|
|
2.01
|
5.88
|
5.08
|
7.19
|
18.95
|
12.56
|
7.35
|
|
|
1.72
|
5.25
|
5.22
|
7.07
|
16.95
|
14.46
|
9.05
|
|
|
1.84
|
5.08
|
5.44
|
8.26
|
16.78
|
13.29
|
8.85
|
|
|
1.44
|
5.26
|
5.19
|
5.88
|
14.64
|
15.76
|
7.47
|
|
|
1.86
|
5.44
|
5.03
|
7.08
|
19.49
|
14.37
|
10.85
|
|
|
1.48
|
4.85
|
3.43
|
4.79
|
18.36
|
13.22
|
6.46
|
|
|
0.42
|
3.70
|
2.69
|
2.62
|
15.75
|
12.42
|
5.79
|
|
|
1.12
|
4.76
|
3.48
|
2.53
|
15.35
|
10.95
|
3.51
|
©2004
Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is
proprietary to Morningstar; (2) is not warranted to be accurate, complete or
timely. Morningstar is not responsible for any damages or losses arising from
any use of this information and has not granted its consent to be considered or
deemed an “expert” under the Securities Act of 1933. Past performance is no guarantee
of future results. Indices are unmanaged
and while these indices can be invested in directly, this is neither a
recommendation nor an offer to purchase.
This can only be done by prospectus and should be on the recommendation
of a licensed professional.
Office Notes:
The Greatest Achiever
I
was thinking about goals and New Year’s resolutions when I came upon the story
of John Goddard—an adventurer, lecturer, and perhaps “the world’s greatest goal
achiever.”
If
you’ve ever read the book Chicken Soup
for the Soul, you might be familiar with Goddard’s name. (His story was included in the book.) But in case you don’t know who he is, prepare
to be amazed. He was the first man in
history to explore the entire length of the Nile. Still thirsty for more, he also was the first
man to ever explore the length of the Congo.
He’s climbed the Matterhorn, lived among native tribes in Brazil,
Borneo, and New Guinea (among others), and somehow found the time to learn how
to fence, fly a jet, and play the violin.
How
did he manage to do all these things?
It
all started like this. One rainy
afternoon, when he was 15 years old, he sat down at his kitchen table and wrote
three words:
“My
Life List”
His list consisted
of 127 goals. Climb Mt. Kilimanjaro, Fuji,
and Vesuvius. Visit every country in the
world. (He has 30 to go.) Photograph Victoria Falls in Rhodesia (where
he was chased by a warthog). Dive
underwater to explore the Great Barrier Reef.
Visit everywhere from the Great Wall of China to the Taj Mahal, and 119
other goals in between.
Half a century
later, Goddard has completed 109 of the goals on his amazing list. You can see the entire list, and which he has
achieved, by visiting his website at www.johngoddard.info/life_list.htm. Or, just Google his name.
Looking at his
list, I’m struck by how it mixes the grandiose (explore the Amazon) to the
romantic (swim in Lake Victoria) to, well ... the normal. Goddard didn’t just
want to travel, he wanted to accomplish. That’s why he set (and met) goals like
“Become an Eagle Scout,” “Type 50 words a minute,” “Learn to play Clair de Lune on the piano,” or “Teach a
college course.”
It goes without
saying that Goddard is inspiring, but I think he’s a great example as
well. While not all of us may “study
native medicines,” like he did, or even want to, we all can sit down and decide what we really want in life. There
are two things about Goddard that I think contribute to his success:
·
He
wrote down his goals and kept that
list with him. His original list still
exists today.
I think writing
your goals down is important. If it’s
just in your head, it’s a fantasy. But
if it exists on paper, it’s a plan. You can always have it with you to look at,
so at any given moment you can study your list and decide if what you’re doing
is really what you want … or if you’re giving up what you want the most for
what you only want right now.
·
Once
he wrote his list, he stuck to
it.
Often when we set
our New Year’s resolutions, or any goals for that matter, we change them before
we ever meet them. Maybe that’s because
we too often choose goals we think we should
achieve, rather than ones we actually care about. Goddard wrote down goals that actually meant something to him. Maybe some were small, or even a bit
eccentric (“light a match with a .22 rifle”), but he wrote them down because he
wanted them. Not because he needed them. That way, achieving his goals was never
work.
This year, I think
it would be good to look at John Goddard’s amazing list, and then write your
own. The list doesn’t have to be long,
but it should be yours. The dreams of your childhood self. A Christmas List for life. Because if your New Year’s resolutions
consist of what you truly want, well …
Why wouldn’t you
achieve them?
So start
today. Grab a yellow pad and write the
words, “My Life List.” Then fill it
up. And as you go through life, whether
you’re nine or ninety, remember:
Don’t give up the
things you want most for the things you only want right now.
Happy New Year!
Happy Living!
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, offers securities through First Allied
Securities, Inc., A Registered Broker/Dealer, Member FINRA-SIPC. Advisory Services offered through First
Allied Advisory Services, A Registered Investment Advisor.
Schwartz Financial
Service is not an affiliate of First Allied Securities, Inc.
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
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