The Markets
Politicians may struggle to work together, but at least the world’s central bankers can.
At 8:00 a.m. EST on November 30, the Federal Reserve released a statement that sent worldwide financial markets skyrocketing. Here’s the first paragraph of the statement:
The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.
The U.S. Federal Reserve went on to say that should liquidity conditions continue to deteriorate, it has “a range of tools available” and “is prepared to use these tools as needed.” For many investors, this move meant world central banks “get it” and are ready to pull out “the big guns” to keep the worldwide economy from grinding to a halt.
Investors rejoiced and, by the end of the day, stocks had soared as the Dow Jones Industrial Average rose 4.2 percent, according to The Wall Street Journal.
While the central banks’ moves were welcome, they don’t solve the economy’s underlying problem. Certain European countries (and the U.S.
The cure likely won’t happen until European politicians agree on a credible and enforceable, “long-term regime of fiscal discipline,” according to The Wall Street Journal. While European leaders meet frequently to discuss policy solutions, they unfortunately suffer from the old truism, “When it’s all said and done, a lot more gets said than gets done.”
Data as of 12/2/11 | 1-Week | Y-T-D | 1-Year | 3-Year | 5-Year | 10-Year |
| Standard & Poor's 500 (Domestic Stocks) | 7.4% | -1.1% | 1.6% | 13.6% | -2.5% | 1.0% |
| DJ Global ex US (Foreign Stocks) | 8.7 | -14.4 | -10.9 | 13.6 | -4.2 | 4.9 |
| 10-year Treasury Note (Yield Only) | 2.0 | N/A | 3.0 | 2.7 | 4.4 | 4.7 |
| Gold (per ounce) | 3.5 | 23.9 | 25.8 | 30.8 | 22.0 | 20.3 |
| DJ-UBS Commodity Index | 3.2 | -9.9 | -3.6 | 7.9 | -3.1 | 4.9 |
| DJ Equity All REIT TR Index | 6.1 | 1.8 | 4.0 | 28.6 | -3.0 | 9.9 |
Notes: S&P 500, DJ Global ex US, 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.
WHO WANTS TO BE A BILLIONAIRE? Ever wonder how billionaires got to that level? Here are 10 success tips shared by four billionaires on a recent episode of the news show “20/20:”
1. Figure out what you're so passionate about that you'd be happy doing it for 10 years, even if you never made any money from it. That's what you should be doing.
2. Always be true to yourself.
3. Figure out what your values are and live by them, in business and in life.
4. Rather than focus on work-life separation, focus on work-life integration.
5. Don't network. Focus on building real relationships and friendships where the relationship itself is its own reward, instead of trying to get something out of the relationship to benefit your business or yourself.
6. Remember to maximize for happiness, not money or status.
7. Get ready for rejection.
8. Success unshared is failure. Give back -- share your wealth.
9. The truth is cold and hard, but it's the first point on the path to hope and salvation.
10. Successful people do all the things unsuccessful people don't want to do.
Even if you’re not focused on becoming a billionaire, these are some pretty good tips to live by. Which ones resonate with you?
Weekly Focus – Fun With Math
It’s been said that compound interest is the eighth wonder of the world. Compound interest simply means that you get “interest on your interest” instead of just interest on your original principal. Here are a couple math questions that display the power of compounding.
A typical piece of copy paper is 0.004 inches thick. If you were able to fold this piece of paper in half everyday for 10 days (i.e., double the thickness each day), how thick would your paper be after 10 days?
Taking this a step further, how many times would you have to fold your paper in half in order for your piece of paper to be as thick as the average distance between the earth and the moon? Here’s a hint: the average distance between the earth and moon is 238,857 miles.
Are you ready for the answers? After 10 days, your paper would be 4.1 inches thick. And, to reach the moon, you’d have to fold your paper in half each day for just 42 days. Surprised?
The power of compounding also makes a good case for reinvesting your dividends so you can get a “return on your return.”
Value vs. Growth Investing (12/2/11)
| 7.64 | 0.53 | 0.72 | 6.55 | 3.69 | 17.55 | 0.40 | |
| 7.38 | 1.23 | 0.82 | 6.56 | 4.39 | 15.09 | -0.15 | |
| 6.83 | 1.63 | 1.54 | 7.27 | 4.30 | 14.10 | 1.23 | |
| 7.30 | 2.22 | 0.24 | 6.41 | 4.89 | 21.12 | 1.72 | |
| 8.23 | -0.75 | 0.57 | 5.80 | 3.41 | 10.36 | -3.71 | |
| 7.99 | -0.68 | 0.41 | 6.15 | 2.28 | 24.30 | 1.62 | |
| 7.96 | 1.27 | 0.68 | 8.21 | 4.72 | 26.37 | 2.17 | |
| 8.51 | 0.89 | -0.11 | 4.87 | 2.88 | 26.03 | 3.13 | |
| 7.48 | -4.35 | 0.67 | 5.27 | -0.93 | 20.34 | -0.75 | |
| 9.43 | -3.59 | 0.45 | 7.74 | 0.08 | 24.32 | 1.74 | |
| 9.82 | -5.91 | 0.10 | 5.37 | -2.44 | 24.05 | 0.40 | |
| 9.85 | -0.71 | 0.46 | 8.47 | 2.74 | 25.13 | 2.94 | |
| 8.60 | -3.98 | 0.79 | 9.62 | 0.05 | 23.70 | 1.58 | |
| 7.21 | 1.08 | 1.29 | 7.32 | 3.97 | 17.09 | 1.52 | |
| 7.70 | 1.88 | 0.18 | 6.24 | 4.47 | 22.46 | 2.16 | |
| 8.10 | -1.73 | 0.60 | 5.96 | 2.26 | 13.21 | -2.72 |
©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:
Social Security Disability
More and more I am encountering clients or perspective clients who are either receiving, or asking about, Social Security disability benefits. This portion of the Social Security program is so big and so complex that there are law firms that specialize in helping clients navigate their way through it. Although it is beyond the scope of my Social Security Planning, I have decided to provide this information so you can have a working knowledge of disability basics.
There are two forms of disability benefits. One falls under the SSI (Supplemental Security Income) program, which is need-based for people with less than $2,000 in assets. The other is part of the regular Social Security program: anyone who has worked in a Social Security-covered job at least 10 years may become eligible for disability benefits if he finds himself unable to work because of an illness or condition that meets Social Security's definition of disability. We will refer to this as SSDI (Social Security Disability Insurance), but it is not to be confused with the disability portion of SSI.
For those who qualify, SSDI may be a way to avoid taking a permanently reduced retirement benefit. Let's say you are 62, and have a Primary Insurance Amount (PIA) of $2,200, and have stopped working because of some physical limitation. You may decide it's time to go ahead and apply for early retirement benefits. If you do this, you'll receive a monthly benefit of $1,650 (75% of $2,200). But if you can qualify for disability benefits, you'll receive a monthly benefit equal to your PIA, or $2,200. Then when you turn full retirement age, your disability benefit will convert to a retirement benefit in the same amount (plus COLAs).
The biggest drawback is that it's a hassle. And the income doesn't start right away—there's at least a five-month waiting period after the onset of the disability, during which time no benefits are paid. Most disability claims are denied at first, which is why lawyers have their work cut out for them helping appeal their disability rulings. But if you are under full retirement age and have a legitimate disability claim, it may be worth it to file in order to avoid taking a permanently reduced retirement benefit.
Keep in mind that SSDI is only for those who are under full retirement age (after FRA they would receive their regular retirement benefit). And as someone who takes advantage of SSDI while under FRA you may be prohibited from pursuing certain spousal strategies after FRA. For example, you would not be able to restrict your application to your spousal benefit under the claim-now-claim-more-later strategy because you would already have an active application for his retirement benefit due to the automatic conversion from disability at FRA. You could, however, suspend the benefit and earn delayed credits from age 66 to 70.
Here are some commonly asked questions about SSDI:
There are two forms of disability benefits. One falls under the SSI (Supplemental Security Income) program, which is need-based for people with less than $2,000 in assets. The other is part of the regular Social Security program: anyone who has worked in a Social Security-covered job at least 10 years may become eligible for disability benefits if he finds himself unable to work because of an illness or condition that meets Social Security's definition of disability. We will refer to this as SSDI (Social Security Disability Insurance), but it is not to be confused with the disability portion of SSI.
For those who qualify, SSDI may be a way to avoid taking a permanently reduced retirement benefit. Let's say you are 62, and have a Primary Insurance Amount (PIA) of $2,200, and have stopped working because of some physical limitation. You may decide it's time to go ahead and apply for early retirement benefits. If you do this, you'll receive a monthly benefit of $1,650 (75% of $2,200). But if you can qualify for disability benefits, you'll receive a monthly benefit equal to your PIA, or $2,200. Then when you turn full retirement age, your disability benefit will convert to a retirement benefit in the same amount (plus COLAs).
The biggest drawback is that it's a hassle. And the income doesn't start right away—there's at least a five-month waiting period after the onset of the disability, during which time no benefits are paid. Most disability claims are denied at first, which is why lawyers have their work cut out for them helping appeal their disability rulings. But if you are under full retirement age and have a legitimate disability claim, it may be worth it to file in order to avoid taking a permanently reduced retirement benefit.
Keep in mind that SSDI is only for those who are under full retirement age (after FRA they would receive their regular retirement benefit). And as someone who takes advantage of SSDI while under FRA you may be prohibited from pursuing certain spousal strategies after FRA. For example, you would not be able to restrict your application to your spousal benefit under the claim-now-claim-more-later strategy because you would already have an active application for his retirement benefit due to the automatic conversion from disability at FRA. You could, however, suspend the benefit and earn delayed credits from age 66 to 70.
Here are some commonly asked questions about SSDI:
Who is eligible for SSDI?
You may be eligible to receive SSDI if you:
You may be eligible to receive SSDI if you:
- Have worked in jobs covered by Social Security
- Have a medical condition that meets Social Security's definition of a disability
To receive SSDI, your disability must be expected to last at least one year or result in death. You will not receive benefits for partial or for short-term disability (less than a year). For more information about work credits for disability benefits, see Work Credits Needed for Disability Benefits.
Why is there a five-month waiting period to receive SSDI benefits?
The waiting period is long enough to permit most disabilities to be corrected or for you to show signs of probable recovery within less than 12 months after the onset of disability.
What does Social Security consider a disability?
Disability under Social Security is based on a person's inability to work. You will be considered disabled if you cannot perform at the same working capacity as you did before, and Social Security decides that you cannot adjust to other work because of your medical condition(s). Your disability must also last or be expected to last for at least one year or to result in death.
Where can I get a list of disabling impairments for Social Security Disability?
You can get a copy of Disability Evaluation Under Social Security ("The Blue Book" 5/02; SSA Publication No. 64-039), which contains the medical criteria Social Security uses to determine disability. It is intended primarily for physicians and other health professionals.
What information do you need to provide in order to apply for SSDI benefits?
You may need to provide the following information to apply for SSDI benefits:
Why is there a five-month waiting period to receive SSDI benefits?
The waiting period is long enough to permit most disabilities to be corrected or for you to show signs of probable recovery within less than 12 months after the onset of disability.
What does Social Security consider a disability?
Disability under Social Security is based on a person's inability to work. You will be considered disabled if you cannot perform at the same working capacity as you did before, and Social Security decides that you cannot adjust to other work because of your medical condition(s). Your disability must also last or be expected to last for at least one year or to result in death.
Where can I get a list of disabling impairments for Social Security Disability?
You can get a copy of Disability Evaluation Under Social Security ("The Blue Book" 5/02; SSA Publication No. 64-039), which contains the medical criteria Social Security uses to determine disability. It is intended primarily for physicians and other health professionals.
What information do you need to provide in order to apply for SSDI benefits?
You may need to provide the following information to apply for SSDI benefits:
- Social Security number
- Birth certificate or other proof of age
- Names, addresses, and phone numbers of doctors, hospitals, clinics, and institutions that treated the client, and the dates of treatment
- Names of all medications being taken
How do you apply for SSDI?
You can apply for disability benefits online at www.socialsecurity.gov/disability, or by calling toll-free, 1-800-772-1213. Social Security representatives can make an appointment for your application to be taken over the telephone or at a local Social Security office.
What is the typical time period to apply for SSDI?
Social Security considers the application filing date to be the day you make an appointment to apply for SSDI. It generally takes approximately 90 days to process a claim for disability benefits. The time may be shorter or longer depending on the amount of information required to make a decision on your claim.
Once you are eligible for SSDI, how long will you be enrolled?
You will continue to receive SSDI benefits as long as you continue to be disabled and meets other eligibility requirements. However, Social Security will periodically review your case to see whether you are still disabled. The frequency of the reviews depends on the expectation of recovery.
You can apply for disability benefits online at www.socialsecurity.gov/disability, or by calling toll-free, 1-800-772-1213. Social Security representatives can make an appointment for your application to be taken over the telephone or at a local Social Security office.
What is the typical time period to apply for SSDI?
Social Security considers the application filing date to be the day you make an appointment to apply for SSDI. It generally takes approximately 90 days to process a claim for disability benefits. The time may be shorter or longer depending on the amount of information required to make a decision on your claim.
Once you are eligible for SSDI, how long will you be enrolled?
You will continue to receive SSDI benefits as long as you continue to be disabled and meets other eligibility requirements. However, Social Security will periodically review your case to see whether you are still disabled. The frequency of the reviews depends on the expectation of recovery.
- If medical improvement is "expected," your case will be reviewed within six to 18 months.
- If medical improvement is "possible," your case will be reviewed in three years.
- If medical improvement is "not expected," your case will be reviewed in seven years.
What about Medicare?
If you qualify for Medicare through disability, Social Security will automatically sign you up for Parts A and B and mail you Medicare card shortly before benefits become effective. You can decline Part B if you want— for example, if you are covered by employer-sponsored health insurance.
For more information please see the following resources:
If you qualify for Medicare through disability, Social Security will automatically sign you up for Parts A and B and mail you Medicare card shortly before benefits become effective. You can decline Part B if you want— for example, if you are covered by employer-sponsored health insurance.
For more information please see the following resources:
- Social Security Disability
- Social Security Disability Help
- Disabling Conditions
- Social Security Disability Tips
Best regards,
Michael L. Schwartz, RFC®, CWS®, CFS
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Securities and advisory services offered through First Allied Securities, Inc., Member FINRA/SIPC
Schwartz Financial Service, Inc 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 not guarantee future results.
* You cannot invest directly in an index.
* Consult your financial professional before making any investment decision.
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