Schwartz
Financial Weekly Commentary
March 2, 2015
The Markets
“Well, I never heard it before,” said the Mock Turtle;
“but it sounds uncommon nonsense.”
It was an Alice in Wonderland week. European
countries, companies, and entrepreneurs were getting paid to borrow money, and
ordinary Joes with money in some European banks got letters saying the banks
would be charging to hold their money. The
New York Times reported:
“The most profound changes are taking place in
Europe’s bond market which has been turned into something of a charity, at
least for certain borrowers. The latest example came on Wednesday when Germany
issued a five-year bond worth nearly $4 billion with a negative interest rate.
Investors were essentially agreeing to be paid back slightly less money than
they lent.
Bonds issued by Switzerland, the Netherlands, France,
Belgium, Finland, and even fiscally challenged Italy also have negative yields.
Right now, roughly $1.75 trillion in bonds issued by countries in the eurozone
are trading with negative yields which are equivalent to more than a quarter of
the total government bonds…”
At the end of February, many European stock markets
were showing high single-digit to low double-digit gains for the year.
Meanwhile, back in the United States, the background
report that supported Fed Chair Janet Yellen’s semi-annual testimony before
Congress highlighted the effects of the Fed’s EAT ME cake – also known as quantitative
easing – which left its balance sheet at about $4.5 trillion (up from about $1
trillion in 2008). Barron’s
speculated the effect of an unexpected rise in interest rates could negatively
affect the Fed’s bond holdings with maturities greater than 10-years. “If
long-term rates do rise faster than anyone now anticipates, the Fed may run
into difficulties of navigation that could prove a tad destabilizing to the
economy.”
Data as of 2/27/15
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard &
Poor's 500 (Domestic Stocks)
|
-0.3%
|
2.2%
|
13.5%
|
15.5%
|
13.5%
|
5.8%
|
|
10-year Treasury
Note (Yield Only)
|
2.0
|
NA
|
2.6
|
1.9
|
3.6
|
4.4
|
|
Gold (per ounce)
|
0.5
|
1.2
|
-8.9
|
-11.8
|
1.7
|
10.8
|
|
Bloomberg
Commodity Index
|
0.7
|
-0.9
|
-22.4
|
-11.5
|
-4.9
|
-4.1
|
|
DJ Equity All REIT
Total Return Index
|
-1.2
|
2.9
|
22.8
|
15.0
|
17.2
|
9.2
|
S&P 500, Gold, Bloomberg Commodity Index returns
exclude reinvested dividends (gold does not pay a dividend) and the three-,
five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return
Index does include reinvested dividends and the three-, five-, and 10-year
returns are annualized; and the 10-year Treasury Note is simply the yield at
the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, 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.
A manufacturing renaissance in america... really? In the 1950s, manufacturing accounted for 30 percent
of America’s gross domestic product (GDP), which is the value of all goods and
services produced in the United States. Today, it comprises about 12 percent of
GDP. That’s a big change and it was accompanied by a big shift in employment.
In its heyday, manufacturing companies employed about 20 million people in America.
Today, that number has fallen to about 12 million.
For decades, companies moved
production facilities away from the United States to countries like China which
offered lower manufacturing costs. Now, the trend is beginning to reverse. Lower
energy prices and rising wages in emerging countries have companies moving
manufacturing back to the United States. However, they’re running into a stumbling
block – a shortage of skilled labor. A BBC
report asked:
“…will
Americans really contemplate going back to work on the factory floor? The
companies all worried about a shortage of skilled workers. So, I went to meet
students from the University of Tennessee. They told me they didn't see their
future in manufacturing. Some wanted to finance those plants while others said
that they weren't good enough at mathematics to work in advanced industries.”
The 2015 Manufacturing Institute and Deloitte Skills Gap study
confirmed the shortage of skilled manufacturing labor here in the United States
and reported little is expected to change during the next decade. Through 2025,
close to 3.5 million manufacturing jobs are likely to open but just 1.4 million
will be filled because there are not enough workers with the right skill sets. The
study found:
·
60 percent of available skilled production positions remain
open
·
80 percent of
manufacturing companies are willing to
pay more than the going rates to attract skilled workers
·
82 percent of
executives believe the skilled labor shortage will affect their ability to meet
customers’ needs
The Economist
was skeptical about a renaissance in U.S. manufacturing. It reported for the
industry to flourish, America needs investment in research and development,
improved schools and colleges, and changes to the tax system.
Weekly Focus –
Think About It
“Learn from yesterday, live for today, hope for tomorrow. The important
thing is not to stop questioning.”
--Albert Einstein, Theoretical physicist
Value
vs. Growth Investing (2/27/15)
|
|
|
|
|
|
|
|
|
|
|
-0.27
|
2.89
|
5.77
|
2.76
|
14.47
|
17.97
|
16.43
|
|
|
-0.25
|
2.54
|
5.75
|
2.16
|
15.54
|
17.79
|
15.93
|
|
|
-0.06
|
0.87
|
5.30
|
0.74
|
17.35
|
19.80
|
16.90
|
|
|
-0.18
|
6.18
|
6.63
|
4.95
|
18.58
|
18.85
|
17.53
|
|
|
-0.53
|
0.39
|
5.23
|
0.61
|
10.61
|
14.78
|
13.39
|
|
|
-0.45
|
4.08
|
5.78
|
4.34
|
12.72
|
18.79
|
17.91
|
|
|
-0.71
|
3.89
|
5.70
|
4.36
|
15.39
|
19.29
|
19.22
|
|
|
-0.07
|
6.11
|
6.87
|
5.43
|
11.30
|
16.88
|
17.44
|
|
|
-0.57
|
2.20
|
4.73
|
3.22
|
11.71
|
20.23
|
17.03
|
|
|
-0.04
|
3.07
|
5.96
|
4.70
|
8.12
|
17.18
|
16.87
|
|
|
-0.03
|
2.76
|
5.65
|
4.02
|
8.75
|
16.82
|
16.23
|
|
|
0.00
|
5.31
|
7.10
|
7.11
|
6.04
|
16.81
|
17.83
|
|
|
-0.09
|
1.27
|
5.18
|
3.09
|
9.48
|
17.91
|
16.55
|
|
|
-0.20
|
1.61
|
5.41
|
1.69
|
16.36
|
19.50
|
17.37
|
|
|
-0.15
|
6.11
|
6.70
|
5.18
|
16.25
|
18.31
|
17.60
|
|
|
-0.50
|
0.83
|
5.12
|
1.32
|
10.78
|
16.10
|
14.35
|
©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 Protect Yourself—and Your Money—From Hackers
Do you remember these headlines?
40 Million Target® Customers Affected by Data Breach1
Michaels® Breach Exposed Nearly 3 Million Cards2
Home Depot® Breach Hit 56 Million Credit and Debit Cards3
Staples® Hack Exposes 1.2
Million Credit Cards4
It seems that we have become more vulnerable than ever to hackers able
to steal millions of debit and credit card numbers and other information quite
easily. In fact, a Homeland Security
advisory issued on August 22, 2014 estimated that over 1,000 businesses have
been affected by cyber attacks similar to the one that hit Target in 2013.5
27% of Americans say they or another household member have had
information from a credit card stolen by hackers. Fortunately, there are ways to protect
yourself from joining that number.
What
can you do to protect yourself?
I have put together several suggestions you can implement that will
dramatically reduce the risk of a bankcard breach affecting you. Of course, it’s impossible to protect
yourself against every scenario; however, you can reduce the risk of being affected by taking several
precautions.
1. Choose a different way to
pay. – Many merchants accept alternative ways to
pay for goods and services, including Google® Wallet, Apple Pay®,
or PayPal®. These services
provide an extra layer of protection because they keep your credit card
information stored but do not actually provide it to retailers when you
pay. “Any technology that avoids you
having your credit card in your hand in a store is safer,” states Craig Young,
a security researcher for Tripwire®.
2. Don’t use your bank cards
online unless the site is secure and reputable. – Make sure you are purchasing from a reputable company and
website. Don’t trust a site just because
it claims to be secure. Use credit cards
so you can dispute the charges if something goes wrong. You can still be reimbursed for fraud on a
debit card but the process often takes longer and your money is already gone.
3. Avoid being skimmed. – Skimming occurs when thieves place an electronic device on an ATM
or other card reader to gather bank card information. The specific device used is often a realistic-looking
card reader placed over the factory-installed card reader. To avoid being skimmed you should examine the
card reader for suspicious, loose or damaged equipment, avoid using your PIN
number at the gas station (see #4 below), and use ATMs at an inside location.
4. Protect your PIN number. – Your PIN is tied to your debit card. When using your debit card simply ask the
cashier to run the transaction as a credit or select credit on the PIN
pad. If you don’t enter your PIN it
reduces the chances that a hacker can steal that information as well.
5. Delete your saved payment
methods from online shopping sites. – You will
have to reenter your billing information each time you make a purchase, but it
will protect your payment information if your account is breached or someone
gains access to your login.
6. Review statements and credit
reports regularly. – Look for
unauthorized charges or small amounts appearing on statements. Check your credit report regularly. Federal law allows you to get a free credit
report every 12 months to review. Make
sure all information is correct.
In 2015, there is a major change in card technology coming to the U.S.
that has been used in Europe for years.
This is the shift to EMV chip technology. EMV, which stands for “Europay, MasterCard®,
and Visa®,” is a global standard for credit cards equipped with
computer chips and the related technology used to accept and authenticate
chip-card transactions. EMV technology
will not stop hackers, but it will make the
information they steal more difficult to use.
Although the implementation date for EMV card technology is October
20156 there may be many merchants that will not comply by that
date. It’s a surety that we will need to
continue doing all we can to protect our personal information and
finances. The ongoing battle between the
good guys and the bad guys will continue.
This information is designed to help protect the good guys. I encourage you to protect yourself and your
money by implementing the suggestions above.
However, as always, if you have any questions please feel free to give
me a call.
Sources:
1 Kelly Clay, “40 Million
Target Customers Affected By Data Breach,” Forbes.com, December 18, 2013
2 Bill Hardekopf, “Michaels Breach Exposed
Nearly 3 Million Cards,” LowCards.com, April 18, 2014
3 Bill Hardekopf, “Home Depot Breach Hit 56
Million Credit and Debit Cards,” LowCards.com, September 19, 2014
4 Jose Pagliery, “Staples Hack Exposes 1.2
Million Credit Cards,” CNN.com, December 20, 2014
5 Alert (TA14-212A),
“Backoff Point-of-Sale Malware,” us-cert.gov, July 31, 2014, revised August 27,
2014
6 Jeff Carelli, “Will
Retailers be Ready for EMV by Oct 2015?,” paymentsleader.com, October 16, 2014
Joseph Pisani, “5 ways
to protect yourself from data breaches,” USAToday.com, September 21, 2014
Kim Zetter, “How to
Protect Yourself From Big Bank-Card Hacks,” Wired.com, September 10, 2014
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.
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